Transcripts For BLOOMBERG Market Makers 20140411

But stocks are down. Worse day for equities in the bull market started back in 2009. The nasdaq in particular selling off quite heavily, down about 3. 5 . Blackrocks chief investment strategist is with us. What are investors thinking . There are a couple of things going on. Veryof these sectors got aggressive valuations. You look at biotech for example. Nearly eight times book value as recently as the end of march, so clearly, you know, stretch valuations have played a part. I think what is exacerbating this anchor to reading and contributed to the seat is were seeing a lot of liquidation by hedge funds. They have done really well with a, but at that moment them has broken down, we are seeing some aggressive liquidation by many of those players. What are those players doing now and what are they buying into . Been a lotthere have of movement into cash, but you are also seeing something below the surface. Take a look at technology. We have all spun this as Technology Selling off. If you look at effects on monday, at the same time as many of the highfliers, some of these use the term now Old Technology companies, intel, cisco are actually up. What you are seeing is a rotation out of the very Aggressive Growth names and into parts of the markets that are perceived as offering value. Russ, what you are saying is the selloff began for fundamental reasons, people began to have concerns over valuations, and once it began, technicals took over and momentum players started to dump the same names. Am i getting that straight . That is exactly it. There were fundamental reasons to line up on these names. It continued us that momentum trade, which really drove a lot of volume in 2013 was broken, not surprisingly you have seen some players sell very aggressively. What do you think is the right way to look at this . Do you believe that those valuations were getting close to nosebleed levels and those stocks did need to sell . I think overall the market looks reasonably valued, but certainly there are parts of the market, and the ones we are talking about, biotechnology, those were very stretched. Seeing is a modest correction, and that correction is accompanied by a rotation out of some of those parts of the market into more valueoriented. That is probably healthy. One example emerging markets. One of the markets everyone hated last year, the one advantage they had is that they are relatively cheap. As biotech has sold off, we have seen somewhat of a rebound in many parts of emerging markets. Socialyou, get out of media come out of biotech into emergency markets. Exactly where . I think the key is value. Where do you see value in the market . One large and mega cap are area. U. S. Cyclical companies are another. European stocks are fairly cheap , and on the relative basis, i think we do see some opportunity in emerging markets, particularly in asia. How vulnerable right now is investor psychology and sentiment . I think sentiment is vulnerable, but i am not overly worried. So far what you have not seen him a which i think is encouraging, if you have not seen any cracked in the credit markets. Portable, look at the vix index. It is only at 15 or 16 with the selloff. The reason volatility has not high yield spreads remain fairly cheap. What that tells me as we are not seeing any fundamental shift in monetary conditions, at least not yet. What makes you say highyield appears cheap . When i look at it, spreads seem so tight. When you look at the corporate bonds, they do not see cheap. High heels arey cheap, i said the spreads ever made in there. To your point, the spreads are at a great value, but it does represent a chance to generate some income, but the point i was trying to races when you are looking at those spreads, youre not seeing reaction from bond market investors. People are not worried yet about a rise in default, so what that tells me is this is mostly sentiment driven, less about a change in the fundamentals. How long before people start pointing fingers at the fed, and instead about fell ua since and Start Talking about taper at the reason for the selloff and wondering when janet yellen is going to figure out when the economy is not going as fast as some i think . That is a thesis, but it seems that will eventually happen. It is hard to blame the fed. We are not in 2012 or 2013. Every time there is a softening, we expect the fed to come to the rescue. Janet yellen has been very clear there is a big onus on the fed reversing the taper. That said, we got fairly dovish news from the fed minutes. The fed is going to take their time, deflation is still low, the fed is worried about inflation, so if you define the monetary environment by low rates, we are likely to have at least by that definition a fairly benign environment for a long period of time. Bottom line. Russ, thank you so much. Blackrocks chief investment strategist Russ Koesterich with us from San Francisco. Time to take you to the top business stories from around the world. Banks. E of two wells fargo reported First Quarter profit that the overall estimates. The leader in home lending said fewer customers missed loan payments. Meanwhile, jpmorgan missed estimates. Lower revenue from fixed income trading as well as mortgages. Now it is bmw officially recalling cars. The worlds bestselling luxury automaker is recalling almost 500,000 vehicles because of a possible engine ball defense. No accidents or injuries have been linked to the fall yet. About an hour from now, president obama will announce his unofficial choice to replace health and Human Services secretary Kathleen Sebelius. Sylvia be budget chief burwell. You can watch the president s the announcement live here on bloomberg tv starting at eastern time. Back to jpmorgan, the apparent downfall of Blake Masters, one of the most powerful women on wall street. Last week, she announced she was leaving the bank, and today we are learning more about reasons why. Bloombergs terry geithner have been looking into the story. This is one of the hottest this morning. Just last week, we were discussing, why would Blake Masters leiby firm . She joined in 1991, the first managing director ever. There seven been years. Why not give her another big job in the bank . I cannot answer why she is leaving other than her official statement, but the thing we she is today is that under investigation by prosecutors here in manhattan. There is a series of events that led us to her resignation that happened with the commodity unit of j. P. Morgan. It is important to keep in mind that this is a complex practice that led up to where we are now, and that includes last year, when jpmorgan, her unit, was fined 410 million by federal regulatory agencies for allegedly rigging the power markets in california and the midwest, and around that same time, they announced that they were selling that unit. The investigation goes into some other things that were happening behind the scenes with the sale of the unit that she ran so well for so many years. Your understanding is because she wasn under investigation by federal prosecutors scum on her options when it came to going with the unit, the new owners were limited. I think it is a twopart issue. From what we have reported is that it looked like she was trying to land a spot with whoever and going with them. That is what it appeared was happening. Bidders asome of the little nervous and became somewhat of a Sticking Point during the negotiation process is that there was this federal investigation. Now, we reported that there was a federal investigation of individuals involved in what they settled with ferc about, but one of those individuals was actually blithe masters b lythe masters. That changes things. And that had an impact on what was going behind the scenes with the whole bidding process. And stephanie raise the question if she was not going to go with the unit to a new owner, why did she not just get a bigger, more important job. Cavanaughs job opened up a week before. It possible that the bank cannot or would have difficulty planting a more senior job level somebody was under investigation by federal prosecutors . That is very possible. It is definitely something to consider that this had an impact on the banks decisionmaking process. If you are jamie dimon these days, you have to walk a very fine line. I guess what though . She has to lead and has had a mixed ordinary run. Keri geiger, to every much him on the latest out of j. P. Morgan. Coming up next on Market Makers, the lawyer that says when it comes to wall street, the agency is mostly talk and not much action. Plus, we will talk to a guy who has a fund that invests only where the bigtime activists who do. This is Market Makers, we are on bloomberg television, streaming on your phone, your tablet, at bloomberg. Com, and apple tv. Onthis is Market Makers bloomberg television. I am Erik Schatzker with Stephanie Ruhle. A top sec lawyer said what so many had been thinking for so long the agency is too timid, too afraid to go after powerful people on wall street. Dans kidney retired this month after three decades as an enforcement lawyer. He worked on one of the biggest cases, the 550 million settlement with Goldman Sachs. On his way out, kidney offered a stinging critique in his goodbye speech. Yesterday, i spoke exclusively to jim kidney. He told us he was trying to be constructive, not better, and that he has nothing but respect for most of his former colleagues. Never the less, kidney has a number of major concerns. The sec spends too much time pursuing the minnows and not the big fish. The sec could manage its resources better by focusing more staff and attention on important cases and less staff and time on cases that have less impact on investors, are less of a message to the corporate boardroom, basically more important cases. That the sec say is going after the wrong people . To some extent they are. They go after the guy who gets his hot stock tip on the golf course and it turns out his hot stock tip was from the brotherinlaw or the sisterinlaw of the secretary who work for a Big Corporation and maybe this guy had some slim reason to know that, he goes out and acts on a hot stock tip, he is a fifth level insider tipee, and we go after the guy because we can. I think that might not be a wise use of resources. Second mainys criticism too many top sec lawyers come from white shoe law firms where their job is to defend the same people they are now being asked to prosecute. From ing people in lawyers in who have done nothing for years except represent wall street interest, and we suddenly expect them to be able to change their stripes overnight. We do not say that about people who come out of the military come along careers in the military, would not fit about people who spent their lives in sales or even their lives and television anchoring, that if you spent a lot of years there it has no effect on you. Yes, we do need the expertise that wall street can bring to the agency. It does not meet that people who work for wall street in one capacity or another for many years, particularly as lawyers defending conduct, should be brought in to make all of the executive decisions about the securities and exchange commission. Now i want to show you what jim kidney had to say about the abacus case, the one Goldman Sachs decided to settle for 550 million. Much more push for a aggressive investigation and eventually was pushed off the case as a result. I felt very strongly that the division of enforcement does not overly investigate the Goldman Sachs case, later brought against one guy and Goldman Sachs. I think that there was a desire on the part of the sec to come up quickly with a case. I think maybe that overwhelmed the what shouldve been a desire to come out a thoroughly investigated case in that instance. In many other instances, the investigations are much more extensive. I have been party to many, many, many cases where that is so. In that sense, i think there was some politics involved in trying to demonstrate to the public that the sec was on the job, so hastycaused an over investigation. I think there are some individuals where further investigation would have warranted bringing to the dock in a civil complaint. People say that the sec would come to a firm like Goldman Sachs and say we are going to prosecute you for a violation, abacus, but if you agree to pay a certain amount of money, we are not going to prosecute you for a bunch of similar infractions. Did you see that happen . Well, by the time the settlement with goldman was reached, i had been pretty much invited off the case, so i did not participate in any of those discussions. N goldman did announce its rather when the sec announced its 550 million settlement was goldman for what actually a 1 billion fraud in my view and in the secs view, the Commission Also or i believe the Division Director announced a dozen orl, half more investigations of Goldman Sachs were going to be closed. Ecause they lead to no action they could not find any actionable conduct. Sachs, andoldman Goldman Sachs, lets concede, is a pretty smart organization, i think i would have difficulty persuading my board of directors, if i were the chairman, to accept the 550 million settlement and not be able to give reasonable assurances that Goldman Sachs was no longer going to be under the secs radar for a while or past conduct. But the Division Director said that the two were not related. You have to draw your own conclusions because i was not present. Jim, do you believe the sec should have gone after john paulson . Do you believe the sec should have gone after more Senior Executives at Goldman Sachs . I believe that the sec stopped its investigation way too early and that some of the people that you mentioned could well have been defendant had the investigation proceeded to its more natural conclusion. Jim kidney, former sec enforcement attorney, reflecting on his almost three decades at the agency. He was a frustrated man. We reached out to the sec for a comment, and it may not surprise you that the commission declined to comment on any of them kidneys jim criticisms, either what he said there or in his advice beach, which was widely circulated. He was there for 30 years. It is sounding like he is talking to the organizations i do not like this word bury often, but it is kind of ironic, his view on the chairman of the sec. He believes of the best chairman of the sec are the people that come from wall street because they need to understand how the top dogs think. The rankandfile lawyers, those are the people who he has a problem with coming from wall street because by the time they get to the sec, they are already too much in the mode of defending their former clients, so they cannot think as prosecutors. Arthur levitt, who once ran the stock is change, once ran the commission, we should point out that he is a board member here at bloomberg. Donaldson out that was one of the greatest commissioners at the sec ever had. Lets not forget that bill dson was one of three republicans on a commission, but ended up voting democratic commissioners that people like jim kidney might have been proud of. Is he saying that the rankandfile have it wrong . That they do not know how to turn the dial . Beta not know how to turn from being defenders of wall street to prosecute of wall street. And they could potentially want to go back to wall street. Of course. If youre arthur levitt, you have made your go. People think of the revolving door in washington as one that simply turns one way, in other words, you are worried about your next job, so you go light on the people you are prosecuting, but he says it works both ways. People come in with the wrong mindset. That it not happen to me. At the sec. Ot work that is true. Please do not go to the sec. Me at the sec . Could you imagine. That was a great interview. When we come back, stocks they are lower again today. I will let erik talk about the. Global tech selloff has resumed. When we come back, bloomberg is going to take you on the market. It is 26 past the hour, which means bloomberg is on the m arkets. There showing you that fellow has resumed. We had a break yesterday. Down, not a way people want to end the week. One of the things that we need to point out to my jpmorgan, jpmorgan is the biggest bank in america, reported earnings this morning, it was a relatively big mess. We are talking about a 12 miss when it comes to analysts expectations. People do not look at as an outlier. And generating revenue with his bank is such a challenge. People worry that it will affect the rest of wall street. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and Stephanie Ruhle. You are watching Market Makers here on bloomberg television. I am Erik Schatzker. And i am Stephanie Ruhle. Activism is everywhere. Bill ackman, carl icahn, and dan loeb are just a few examples of billionaires duking it out in public, taking their case to tv and creating elaborate websites. Our activists getting more active . We are joined by the founder and principal of 13 b monitor, which tracks companies activist are buying, and contribute and bloomberg intervening editor bill cohen. Are these investors going past investing . Is this high drama necessary . Newestlook at dan loeb website sure it is necessary, it is working. It seems well done, but it is spiteful. Dan has that side to him, and it is part of his investment strategy, and it is very effective. He has been a very effective defective investor for the last 10 years and even longer when he has adopted this very aggressive strategy. Now, the great thing is with the web aero, is we can do all this activism online, you can sort of load it all up. All of this use of eternity pages of the wall street journal. This is much more costeffective and you can just go off on a continuous basis. Ken, i would rather put stephanies questions to you this way. Our activists with the bullhorns, the icahns, the loebs, etc. , more effective than the quiet activists . No, it is not. A lot of activism is amicable. Blue harbor, sometimes situations need to be like this because you need to change the culture of a company, just like dan loeb did it yahoo , hurled it at forest labs, bill ackman to the community pacific. When you really go in there do perhapsess to with the activist and more to do with the company. Sometimes. Sometimes the difference between amicable activism and other is the response of the company. I agree with that basically, but i am not sure that dan loeb changed the culture at yahoo he made himself 1 billion and that was bill young for him and then he got out. And he made Marissa Mayer a lot of money, which was great for her. It is unclear if Marissa Mayer has turned the company around. Many people think alibaba is the treasurer, and she had nothing to do with that. Twice before download before dan loeb got on the board, he was influential in getting her there. As far as im leaving, i spoke to a lot of shareholders of yahoo when he sold his up to the company and they were like as far as were concerned, dan can do whatever he wants. He came in here and he really added value test because morales up inside the company wen and the stock is up, because of alibaba as much as anything. Marissa has something to do with the stock being up as well. That is debatable. Still. Controversial some of her acquisitions have been controversial. And really i think she is riding the wave of a higher stock market, alibaba, and just africa, yahoo was so down that it was kind of inevitable that changed increase with a of scenery. That is true, and when dan got involved, it was up over 40, and now it is in the 30s. A lot of that has to do with the stock market and a lot has to do earlyalibaba, but cl it was more relevant with the googles of the world before Marissa Mayer got in. You say it was down so much. When i was on some of these shows back then, people were saying what is dan loeb doing and yahoo . That stock is not going to go anywhere. Now looking back on it, it is easy to say it had nowhere to go. Like they said the same thing about carl icahn getting into netflix. Yes, there are brilliant traits, and these guys are brilliant and then there are stinkers of traits. And ebay,out icahn for example. Yesterday they supposedly settled there truth. Ahn got in, where has the stock gone . Nowhere. It has moved about three dollars. He has not made 6 . It is three months and he has really just got a guy on the board. That is in the very beginning. They all have winners and losers. Our friend bill ackman is struggling with herbalife, but he has made a killing in Canadian Pacific and but what is the key to be one of these brilliant activist investors, or to be one of the investors who tracks them . Look at the amount of money, the tens of millions of dollars they are spending on lobbying efforts, on research, on lawyers. Why not just track them . Maybe bill ackman gets the lowest price, so you buy a five dollars higher tradet is for sure, and is always available, but with you follow the bill ackman shorting herbalife, you would be sorry now, if you follow carl icahns long on netflix, you would be happy now. D activists findda in what we believe are the top activists. That is the key. Who you believe. You are exercising judgment. It is not a passive thing. You are not just follow what they do. No, it is discretion base. We analyze 13d situations and we invest in what we think are the best 13d. Situations. We look at what is his track record, what sector is the investing in, what is his track record in that sector, and most importantly what are his chances of success . Who are the shareholders, and are they likely to support him . You can be one of these wellknown activist investors who we now refer to by name, dan, carl, bill, and can get on any kind of media that you want to pretty much at any time very particular here. It generally speaking, not here, but generally speaking these guys have the ability whether it is tweeting, going on tv, creating a website, they get heard, and frankly when you are an investor and you can top your book, which is why investors do, it moves markets and it is great. Are we being played, then, bill . I think, to a certain extent he loves to say we are getting played. But i dont have any investment in it. In an activist situation, they have just as much opportunity to be heard. It is great tv. They decline, they will decline. I spoke to donahoe, and he had gone on the record several times on television and in print in his battle with carl icahn. He stepped out. Maybe that is one of the reasons that in an effort to reach this truce he did not have to give up so much. That is true. Dan loeb tried with sony. He have a big push now with other bs because of this proxy season. He may not succeed there. That has not been a great investment for him at the moment. They are really at the peak of the fight now because it is proxy season and we will see. You may have to lick his wounds and pull back from that too. Acts, ocore vex, star board. His fund is relatively new. Make maguire he is really involved with sothebys. Of the time. T 100 there are going to be losers, but generally they are around and they are still around because they win more than they lose. Trackake carl icahns record. It is pretty impressive. Over many decades. Karl was doing it when you had to put big ads in the wall street journal to get attention. Right now he is on twitter. Thank you both, ken squire, founder and principal of 13d, and bloomberg contributing editor the one and only bill cohan. And rising demand and not a lot of inventory. Are buying investors up, yes, trailer parks. You are watching Market Makers. I am Erik Schatzker with Stephanie Ruhle. Who wouldve thought that leaving a highpaying job on wall street and investing of all things and trailer parts would be a good idea . Demand for trailer parks has never been higher thanks in part to the unfortunate reality of the great recession, pushing Many Americans out of the middle class, and supply is stagnant. Lumbar magazine profiled a bloomberg magazine profiled the story. Anthony, are trailer parks really i guess a booming asset class . I think absolutely. As you say, the supply is constrained, and demand is huge, and that they are wonderful assets. You do not own the homes in most cases, you own the dirt, so you are renting dirt, which is a lot easier than renting an apartment building, so yeah, demand is high. No superintendents for the dirt, i suppose. Zellpeople know that sam was an early investor in trailer parks and perhaps he blazed a trail so to speak for others to follow. Is he the model for guys like dan weitzman, the former golden sachs trader who you profile . The snl. Yes and no. After higher in parks, fixed income,le, steady more like retirement villages . Yes, he likes those. And big parks. The little players, theyre relating willing to go and what they call family parts, which are a little more diverse in terms of economics, the economic background of People Living there, and they can be really small, and these guys a lot of times are going after 100, 150 patents, which is small in this world. Where is the Value Proposition . Is it real estate or are they just getting more and more crowded . A lot of these guys looked into going to apartments, but with apartments, supply can shoot up when people can build crazy apartment buildings, like they are in portland, for example. With mobile homes, nobody wants another part in their community, and a lot of places, mobile home is the cheapest place to live. So you have the demand for cheapest housing but no supply. And you are often buying from unsophisticated owners. These people had these parts since the 1970s so you can rip them off . Well, your words, not mine. To say that i like to buy from an unsophisticated seller, thats translates i can rip that dude off. I think it is also that you have owners who have not put a lot into these parks in 10, 20 years, right . Makeu come in, you improvements, and the guy we interviewed did do a lot of improvements. They put in speed bumps, redid the plumbing. The owners are often really happy that there is new money coming into these parts, so they fix them up, do things like metering the water so everybody pays for water. Before, the park owner would do that. They just make these places run. The guys in San Francisco they run this place like you would run a tech company. They get managers, but they run everything from mill valley california over the internet. Anthony, quick question before we run, are people going to look back on this the way they looked on subprime as a way for sophisticated investors to prey upon americas poor . You know, i am sure you know, we have gotten letters to that effect. Yeah. I mean, it is possible. On the other hand, like i said, the tenants seem to be pretty happy. Isnt it a much smaller asset class . Can you really compare these trailer park trade to subprime . Maybe not inside. Anthony, i am sorry, we have to run. Thank you for a much, Bloomberg Markets magazine, Anthony Effinger in portland, oregon, check out the issue in Bloomberg Markets magazine and on bloomberg. Com. He playedup, once second fiddle to jerry seinfeld, now he is the master of his own domain. We will hear from actor jason alexander. He is no George Costan za. Welcome back to Market Makers. I am Stephanie Ruhle joined by Erik Schatzker. Jason outlander, the former seinfeld superstar, is weeping George Costanza under the rug literally in his new standup act at harrahs in vegas. I asked about his new gig innocent city and the new to rocking. Wifi branch into the market and eventually to casinos and nightclubs and about 2. 5 years ago started performing under my own name. If you are doing standup comedy, vegas is kind of mecca. That is the great place to be playing. Lets stop by your own name and the value of a brand. Every artist, musician, actor wants to have a brand. And you have a brand associated with George Costanza. Has that been a positive or a negative . I would say it is a net positive in as much as, you know, most actors if you really want to look at us as brands, i guess, we never get that, we never get that kind of status. It is very rare that an actor gets to do something that can be labeled a iconic, that has real staying power, that seems to appeal to every demographic. Showis what the seinfeld accomplished. We do not know why or how, but it not only did it on the air, it continues to sustain long past our expiration date. Enormoust has given me entree throughout the world, which is a great thing for me. I enjoy meeting people. It opened the doors was a by would be disingenuous if i do not also add that it closes some doors because there are certain producers or directors or executors in my business to go well, everyone hat he is george, they will accept it for anything else. They are wrong about that. Audiences are very smart and the professionals often get it wrong. But vastly it is a net positive for me. Are you surprised by seinfelds staying power. Does that amaze you that seinf eldtoday is a twitter handle . It is amazing. Other than the fact that the show was truly funny, i do not think we understand why it became quite as successful as it was or why it continues to have such penetration today. The interesting thing about the website that you are noting is one of the reasons we stopped doing the show is we said we can surprise the audience anymore, we have done every possible situation, and the contributions on that website are often very funny, very unique, very much in keeping with the show we were doing. I applaud it wil. I go on and read and say that would have been a great episode. You once said you got into acting to hide from being who you are. When you do stand up comedy, you are putting yourself out there in the biggest way possible. Why this change . Thank you for reinforcing every horrible believe that i have. It is very frightening, and it is true, i went into acting because i was very shy and very much a loner and when i started doing theater as a kid, the minute you are in a cast, you have all of these collaborators and friends. I got to engage with people in a very open and kind of powerful way, but it was never me. I was hiding behind a character. Standup, my fear about doing standup, the reason i resisted it for so long is exactly what you are describing. I did not want to feel that expose. It was a very frightening idea for me. Jason alexander are doing standup is kind of a character, too. It is not really who i am. Often i am not espousing things i believe in. If you set not down and had a conversation with me over dinner, we would not be talking about the things i talk about during the standup show. Lets talk about one piece of the show that is not yourself. The same hairpiece, the toupee. And, you are not wearing yours. I cannot ask the hairpiece to play. It became a very practical thing when i started doing standup as myself. I was concerned that if you put my picture the way i look right now up on a billboard, and said jacek alexander, standup comic, that people would anticipate george, that they were going to get an evening with george, and that is not what i do. Oupee separates you and George Costanza . It does. If that is president obama introducing in all likelihood the new secretary of health and Human Services. Lets listen in. [applause] all right, everybody have a seat, have a seat. Good morning. Good morning. Office, iixth year in am extraordinarily grateful to have so many aides and advisers who have been there since the earliest days, but it is still somewhat bittersweet when any of them leave for new endeavors come even when their successor is wonderful. In early march, kathleen my secretary of health and Human Services, told me she would be moving on once the first open Enrollment Period under the Affordable Care act came to an end, and after five years of Extraordinary Service to our country and 7. 5 million americans who have signed up for coverage through these changes, she has earned that right. Applause]d i will miss her advice, i will miss her friendship, i will miss her wit, but i am proud to nominate somebody who succeeds oher who hold these traits in abundance, Sylvia Mathews burwell. [applause] just a couple of things about kathleen. When i nominated her more than five years ago, i had gotten to know kathleen when she was governor of kansas and had shown extraordinary skills there, was a great advisor and supporter during my president ial campaign, and so i knew she was up for what was a tough job. I mentioned to her that one of her many response abilities at hhs would be to make sure our country is prepared for a pandemic flu outbreak. I did not know at the time that would literally be her first task. [laughter] nobody remembers that now, but it was, and it just gives you a sense of the source of daily haslenges that kathleen handled, often without fanfare, often on acknowledged, but that have been critical to the health and welfare of the American People. She has fought to improve Childrens Health from birth to kindergarten, expanded Maternal Health care, reduced racial and ethnic disparities, brought us closer to the first aidsfree generation. She has been a tireless advocate for womens health, and of course what kathleen will go down in history for is serving as the secretary of health and Human Services when the United States of america finally declared that quality, Affordable Health care is not a privilege but it is a right for every single citizen of these United States of america. [cheers and applause] kathleen has been here through the long fight to pass the Affordable Care act. She helped guide its implementation, even when it got rough. She has got bonds, i have got bumps, bruises, but we did it because we knew of all the people that we had met all across the country who had lost a home, had put off care, had stay with a job instead of starting a business because they were uncertain about their health care situation. We have met families who had seen their children suffer because of the uncertainty of health care, and we were committed to get this done. And that is what we have done. And that is what kathleen has and that is what kathleen has done. Yes, we lost the First Quarter of the Enrollment Period with problems with healthcare. Gov. And there were problems. But, under kathleens leadership, her team at hhs fixed,the corner, got it got the job done. The final score speaks for itself. R seven. 5 Million People across the country that have the security of Health Insurance, most of them for the very first time. That is because of the woman standing next to me today. We are proud of her for that. That is a historic a ccomplishment. [cheers and applause] meantime, in the alongside 7. 5 million being enrolled, Health Care Costs are growing at their slowest rate in 50 years. I keep reading folks saying they are not doing anything about costs. They are growing at the slowest rate in 50 years. That is in part because of kathleens extraordinary leadership. Health records are moving from paper to hightech systems. Kathleen pursued Health Care Fraud and returned billions of dollars, record songs, to the Medicare Trust fund. Kathleens work will benefit our families and this country for decades to come. We want to thank kathleens dudend, gary, the first of kansas. John, who havend been willing to share their mom with us. Dad,een, i know that your who served as governor of ohio and inspired used to pursue public service, who passed away last year, would have been so proud of you today. We thank you once again for your service to our country. [applause] [cheers and applause] now, we know there is still more work to do at hhs. To implement the Affordable Care act, there is another Enrollment Period six months from now. There are responsibilities to meet over at the large and very important agency. I could choose no manager has as myenced, as competent, current director of the office of management and budget, Sylvia Mathews burwell. [applause] sylvia is from a small town in west virginia. Thatrings the common sense you see in small towns. Of caring the values about your neighbor and ordinary folks to some of the biggest and most complex challenges of her time. She is a proven manager who has demonstrated her ability to feel strongeams, forge relationships, and deliver excellent results at the highest level. Both in the public and private sectors. As coo and later president for Global Development at the gates foundation, sylvia worked on the cutting edge of the worlds most pressing health challenges. As the head of the Walmart Foundation and a member of the board had met life, she gave firsthand experience into how Insurance Markets work. And how they can work better for businesses and families. Here, she has already deliver results. In the years since she has arrived, the deficit has plunged by more than 400 million. I am just saying. That has happened. [applause] when the government was forced to shut down last october, and even as most of her own team was barred from reporting to work, sylvia was a rock. A steady hand on the wheel who helped navigate the country through a challenging time. Once the government was allowed to reopen, sylvia was vital to winning the twoyear budget agreed that that put the end to these manufactured crises we have seen in washington. So we can keep our focus on growing the economy and creating new jobs. All the while, she has helped initiatives tont bring the government to the 21st century, including efforts to speed up job creation by speeding up the permitting process for big infrastructure projects. Sylvia is a proven manager who knows how to deliver results. She will need to be a proven manager, these are tough tasks and big challenges. From covering more families with Economic Security that Health Insurance provides to ensuring the safety of our food and drug supply to protecting the country from outbreak or bioterror attacks. To keeping america at the forefront of job creating medical research. All of us rely on the dedicated servants and scientists, and researchers at hhs, the fda, cdc, and nih. They are an extraordinary team. Sometimes the American People take for granted the incredible network of outstanding Public Servants that we have who are helping to keep us healthy and improve our lives every single day. , want to thank stephen sylvias husband. And matthew and helene for sharing wife and mom with us. You arounds seeing the white house. I know you will do an outstanding job as americas secretary of health and Human Services. I hope the Senate Confirms sylvia without delay. She is going to do great. Last time she was confirmed unanimously. Not much has changed since that time. [laughter] i want to give them both an opportunity to say a few words, starting with kathleen. [applause] that was president obama introducing his new secretary of health and Human Services, Sylvia Mathews burwell. Lets bring in julianna goldman. Part of the team that broke this story yesterday. What everybody is wondering about is the timing. Why get rid of Kathleen Sebelius now, so long after all of the problems with obamacare happened . Ik, the timing really has to do with the fact that you have a positive narrative when it comes to the Affordable Care act. Last week, the entity enrollment peopleand 7. 1 million had enrolled. Yesterday, she was testifying at 7. 5 Million People had enrolled in obamacare. That is defining expectations from the disastrous rollout in october. This lets sebelius go out on a high note and it allows them to get confirmation hearings out of the way before the summer and fall, getting into the heat of the Midterm Campaign season. Where health care and obamacare is going to be a major issue for republicans. This allows them to hold those hearings when obamacare has a positive spin on it and they can just get them out of the way and move on. Did waiting this long come at a cost to the president . People want the president to be a man of action. When he did not act on sebelius when everyone expected him to, it seemed as though he was failing in that regard. What i think is interesting, having watched this president is 2007 and 2008 back when he was a senator, he likes to do things on his own time. He does not like for any of his actions or decisions to be seen as caving to pressure. Since october, there have been enormous pressure on the white house, on this president from Top Democrats to hold somebody accountable. All along, the white house is saying we are not interested in ceremonial firing. Were going to clean up this mess and then take stock and move forward. If you look at this arc, that is exactly what they have done here. They were under a lot of pressure to hold somebody accountable. At the same time, you have the president and white house officials saying that the and the mess that are totally unacceptable. You cannot Say Something is sayptable you cannot something is unacceptable if you are not going to fire someone. Thank you, julianna goldman. Silicon valley meets the golf course. Before we tell everybody what is coming lets take a market check. Aroundt of anxiety stocks over the past few days because of the performance of the nasdaq. The Broader Market as well. The nasdaq briefly turned around a few moments ago and was in the grain. It is back in the red but stocks are off their lows. One explanation for it is the performance of biotech. Worth highlighting what is beenning, by a text have leading the s p 500, gilead and avisrgan are up, activ among the leading movers. Of basis,ntage change biotechs are coming back. If that continues it could lead the market out of its trough. Talking about the market taking a downturn, just as many are saying this is a correction we need and they finally have the opportunity to come in here and buy. Look at social media, so many investors have wanted to get in but cannot when they look at valuations. Yesterday could be a time when they are finally buying. To investors need a correction, or do traders need a correction . Does a tree fall i mean, what is the difference. I think fundamentally there is a difference. But if you close your eyes and said here is how this person behaves and here is how that person behaves, i bet all those investors look a lot like traders. I am conceding something small here. Coming up on Market Makers, Silicon Valley meets the golf course. Devicerable designed to improve your game. It is friday, time to play the year but game. What a cutie pie. A media mogul who graduated from high school in 1967, Valley Stream high school long island . Class of 1967. Thoughts . Tweet us. Schatzker. First one wins. Who is that . I think i might have it. I dont. Schatzker, this is Market Makers. Time for the top tech and media headlines. Has beenbleed bug found in the hardware connecting homes and internets. Cisco and juniper say some of their networks are susceptible to this flaw, which could allow hacks that could allow hackers to access personal information like logins. Tony has told anyone using the new laptop should stop using it. In february,ed only 26,000 have been sold. Now that cbs has figured out what to do about the late show, now they have to figure out what to do about late late, Craig Ferguson might be leaving the show that follows. Timeslot is at the mayor. Show. E late we dont watch that. Every once in a while we stay up that late. When we come back, we are talking golf. Talking to a guy who figured out theto pair tech was one of 1 s favorite sports. Welcome back to market i am Stephanie Ruhle. We have golf fever. We have found a man bringing new technology to the 600 year old game of golf. The ceo of active mind technology. Game golf is a wearable device that records, analyzes, and is meant to improve a game. Mcdowell and jimmy. Them at the practice rounds of the masters. That is what we are doing. Wearable technology collects statistics from some golfers and immerses them in a social experience to make it fun. Not just a gps, it is more sophisticated than that. There is confusion going on. There is geospatial technology. We have mapped over 30,000 golf courses, we know where a golfer is on the course and what clubs they are using so we can generate the distances of their clubs and basically recreate their round of golf. What is your background . I have a background in technology and also in behavioral psychology, this is merging both. To go off . You drawn there are a lot of reasons why people with great Business Ideas brings soto golf, it much passion and people spend money on it, is that why . I have worked with professional ballerinas to weaken where your coffers to weekend warrior golfers. ,his started six years ago millions of manhours went into this. Prove thatr data to metrics can make your game better . Yes, of course. We are seeing it already. Atce we launched the product the end of january at the pga merchandise show, we were using theeing users device, gathering data and were seeing an improvement in the way they were playing the rounds of golf. What kinds of choices do they make as a result of having these Data Available . It is a little device that is worn on the top of your clubs. At the simplest, we collect club distances. We know what are your distances. Most people have a different perception. They had a lot longer they think they hit a lot longer than they do. You have to make huge investments. What is involved in adding new courses . Right now we have over 30,000 courses. We are taking the general imagery wherever we can get it on these courses. Have built our own software that allows us to serve up the data to the golfers. It is a good testament, the fact that we have jim furyk and Graeme Mcdowell using the technology. Normal golfers can also compete against these guys. The data is publicly available . It is social at its core. Walk through it. You could virtually play against lee westwood. Pretty cool, walk me through it one more time. I think i missed how you do it. This happens occasionally. Jim furyk uploaded his data two weeks ago. He played a round of golf and uploaded his data. We have his drive distances and his statistics, i cant compete against his round of golf. On the same course or not. And you cannot cheat. Wow. Progolfers said this is how my game has changed . If this was not helping their game, they would not be wearing this technology. And the u. S. Golf association is allowing two people to wear it in competitions . Correct. As of very recently. The design of this, when we started designing this we had in mind we wanted to create something that would bring golfers to the 21st century while respecting its traditions. It does not interfere with the club itself . W in theou have a scre top of your golf club. It can be any club, does not have to be a specialized shaft. It does not matter, it screws into the top of the handle. Was the cost . Tags and au get 18 wearable device that fits on your pals. Cheaper than a big b ertha. Just in time for fathers day. The fit it for golf. A good analogy is a system use on the tour. That is the comparison that has been made. Congratulation, thank you for joining us. Technology,e mind the makers of the game golf. If you want to listen to the live coverage of the masters, tune in to bloomberg radio. We are covering it live. When we come back, you know the taste they can is trendy and luscious. Bacon is trendy and a luscious. It is now getting more expensive. That is gross. We will be back with more Market Makers. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and Stephanie Ruhle. Welcome back to Market Makers. I am Stephanie Ruhle. I am air schatzker. Happy friday. Erik is a huge fan of wild boar. We are going to talk about bacon , Everybody Loves it. We are all paying more for it and it is not just your side of bacon. All breakfast staples are burning a hole in our wallet. We will bring in alix steel, she is taking into how much more this is going to cost us. What is the damage . In marchfood prices are up over 2 . We talk about bacon, there is a virus that is killing piglets with a 100 mortality rate. Up 11 for thee year. Coffee prices are up 50 . Oj prices are spiking. Wound upnment decreasing the amount of oranges florida will produce. If you take a look at that, that is pretty painful. Except sugar, sugar will be down but Everything Else will cost you more. Sugar is the most minute portion. It is all about the bacon. Eggs are pretty cheap. With the disease, there is no cure. It could be as much as 6 million piglets that have been killed. Glets, not big pigs . When they are piglets, there is feces transmission that is the real issue. Transmission. Spread sowhy it quickly. They can also be transported on truck and equipment if you dont have the right type of sterilization. Bacterial or viral . Viral. You cannot snap your fingers and have more piglets. It takes about nine months to raise her a pig for slaughter weight. We have farmers keep about 9 of piglets for breeding purposes. They are producing less pegs. It used to be 10. 1 piglets per mom, now it is 9. 5. Weucing the amount of pigs can slaughter while keeping this 9 for breeding. It is a longterm effect, especially if there is no cure. This is a problem for restaurants and households. Prices have been rising for several years and people have turned to pork. That beefed up demand, if you will. A rotation for chicken down the road. When are we going to feel it and restaurants . Usually they can hedge out six months or 12 months earlier, but they wound up buying their ofply in october or november each year. Mcdonalds does not end up hedging, they are so big and by so much they can source from anywhere. The smaller you are the more strategic you have to be. Alix steel, thank you for giving us the latest on the rising prices of bacon. I am always hungry. The rising cost of super delicious bacon. If beef is too expensive, if pork is too expensive, what about artificial meat . Sounds gross. It could help solve some of the worlds most pressing problems like Climate Change. The track and some old investors who are putting their money where their mouth is. Bill gates is one who has invested in the sort of beyond meat. Brown meats ceo ethan is with us from los angeles. What is beyond meat taste like . We take the texture and taste of beef and chicken and supply it in plantbased proteins. There is the upside of meat in terms of the experience but none of the downside in terms of cholesterol. You still get protein delivery. Trying interested in this stuff, i want to find out how close it tastes. Market at all for something that masquerades as meat . It is a great question. Drivers pushing consumers. The first is human health, whether it is diabetes, heart disease, or cancer. The second is Climate Change, scientists have attributed 51 of Greenhouse Gas emissions to livestock. 45 of the worlds surface is now devoted to feeding livestock. 66 billion animals per year are slaughtered. Consumers are becoming more and more aware of these and that is pushing them in the direction of wanting to continue to consume meat. Emotion, for example when i think about how animals are slaughtered, specifically it makes me feel horrible, but i love hotdogs. I want to eat a hamburger every day. Is the ultimately question. You are describing this stuff as planned base. I am wondering why not just eat plants and get your protein from government and eggs . Kale does not taste like a cheeseburger. Meat is so important to us and who we are. It is why we are the way we are, the way our brains are, our guts. The thought that we are going to go back to eating plants is not the right one. The way to think about it is meat is made up of five things. Tracen, fat, water, minerals and trace carbohydrates. All those things are available in the plant kingdom. Towe can use science assemble them in exactly the same way that muscles assemble them, it is meat. You can get hung up and say meat has to come from a pig or cow, think about what meat is in terms of the parts. Provided you can assemble all those in the same way, i am uncomfortable with the word fake or artificial. It is the same with what it is delivering to the body. The quest for nutrient dense food. We can provide a better source. How did you get involved . If 10 men were walking down the someone said guess who is the ceo of beyond meat, i would not guess you. Great question. I cannot of the technology sector. I was working on fuel cells for a long time, which is a similar problem. Later fuels for automobiles. This is cleaner fuels for the body. Felt a calling that i early on from my childhood, my dad is a professor but we had a farm in the family where we have holstein cattle. I would spend weekends and summer time there. I had a lot of exposure to animals. I was never able to make the distinction between the animals we kept in the barn and the animals in our house. I never got the speech from is thefather, this way of the world. Hard to understand why we treated one set of animals one way. That stayed with me as an adult. I started to learn about Climate Change and that made a huge impression. When i learned it was just not a change andof climate Greenhouse Gas emissions can be attributed to livestock. Ethan, i am having trouble with the whole fake, artificial, however you turn term it. The product you are manufacturing has to be like meat taste, feel, etc. Are you a wine drinker . I have been known to drink wine. Lets take a great wine. We all appreciate those things for what they are. Wouldnt it be difficult to take soybeans and pretend that by engineering soybeans we can turn them into something equivalent to a bordeaux . Is a relevant comparison. In the other sense, if we think a little bit further down and maybe a little granular about what a soybean is and what a muscle is. And you think about the amino acids and the fact that you can pull a similar set of amino acids from a plant as animal muscle. At some point, we are saying dont change anything, continue to love blts and bacon. Let us make it from amino acids and fats from plants. It is a beautiful idea. My kids love happy meals, i wish i could give them something to eat that tasted like a fast food burger but was not that. I love the idea. Here is something that motivates me. I have two to our eight years old and nine years old who love mcdonalds. Make analds wants to ads,y into plants and sal going to mcdonalds for a salad is not the most exciting experience. And it tastes gross. Is theymcdonalds does make burgers, fries, nuggets. Lets make those burgers and nuggets out of plants. You cannot tell me that the white stuff in a chicken mcnuggets is particularly healthy meat. Agreed. It annoys me that it is so tasty. They can give me something good for me. Have you had conversations with the likes of mcdonalds or with burger king or any of these fast food chains that now overwhelmingly depend on a commoditized meat supply. Early discussions with some companies you would not guess we are talking to. I have been to one of the largest meat producers in the country and watched them make sausage. I cannot help but say why cant those amino acids and those fats be our amino acids and fats. When you look at the process, it is not actually it does not look like what is on your plate. It has a liquid form, etc. We can replace that easily. We can continue the conversation. Erik, i love this. Nobody does not want to eat a keen lybarger more a quinoa burger. Ethan brown, ceo of beyond meat. Music Services Going to rock your world. Which one has the right notes for you. To play friday, time the yearbook game. A media mogul who graduated from high school in 1967. Who this is. E out guesses to me, stephanie, or the show. Welcome back to Market Makers. The race for your ears is on. Streaming Music Services are vying for subscribers and advertising dollars. Their services might seem similar but there are real differences. Bloombergs queen of the beats, cristina alesci, has figured out that best match for you based on your favorite car. Come on. Syncing your devices, not hipster enough for vinyl . Where do you go for music . Streaming Music Services like spotify, and pandora let users access millions of songs. Which one is right for you . Think of each service like a car you might buy. It is like pandora, the mercedes s class. And almost drives itself. Choose Frank Sinatra and it will by rosemaryc clooney. Pandora is free but you will hear ads. Dont want ads . Four dollars a month. You cannot always hear the song you want on demand. For that, go to spotify. I call it the mclaren of streaming music. High profile, flashy, and really powerful. Do you really need that much car . Maybe you do, it has a killer catalog and incredible sharing features. Spotifys free Service Comes with commercials. Pay the 10 a month, lose the commercials, and you can listen while you are not collected to the internet. If you want it all, go with ferrari,ic, like a it can go from zero to 100 and fit a car seat. You can make a playlist by beatzs version of mad libs. Five dollars or 10, no one says blending style and substance comes cheap. Cristina alesci, queen of the beats. What do you use . Pandora, apple itunes radio. Z. Do not do spotify or beat i still buy music. Oldschool. People do not need to own music. Is like getting your own music mix. They would hurt my feelings when people would guess what i like, they would pick the wrong thing. Use our producer telling what movies are awesome. Time to play the yearbook game. He is a media mogul who graduated from high school in 1967, Valley Stream central high in new york. All our producers are telling us, help us out, tweet at erik, me, or the show. Who is this man . It is friday, the yearbook game. A media mogul who graduated from high school in 1967. As i said, in new york. Ding, ding, ding. The winner seems to get it right almost every week, adam. Les moonves. Did you guess it . I did. Thats it for Market Makers, join us next week. Coming up on 56 s, bloomberg is on the markets. I am julie hyman. Taking a look at stocks, paring losses after the s p suffered its worst decline. Surged and is now trading above 16. Vix is not the best judge of a fullback. He is joining me to explain why. People look at the vix as an indicator of the socalled fear index. Indicator of how much complacency or anxiety there is in the market. Why is it not necessarily the best indicator of that right now . There are silver problems. Im not saying the vix is a bad index, it is how you use it. The vix is an amalgam of all the options in the first two months expiring in the s p. You have a lot of stuff piled in together. When you keep adding data you get less specific. More important, vix options are not based on the vix index. The vix options listed under the index are based on futures. The last thing is this, vix calls, adam the money, upside calls are very expensive. People who buy protection and that vix thinking it will go up, they end crushed and up losing money or not meaning what not making what they thought. Do you think it is a good idea to hedge gains now. Back,0 has been pulling is there still downside you should be protecting against . Certainly. Lastly, i mentioned i saw abnormal activity. Up laste getting bid friday, an hour later the market was selling off sharply. There is a little more fluff that needs to be taken out of the s p. For that i would not use the vix , i would use a s p put spread. Walk us through that. Way, layout as little cash as possible by having the maximum amount of protection. Something i was looking at in may was lying the 70. 65, 7. 45 put sprea 17. 45 put spread. From there, allocate 5,000 for this trade. It will give you enough offset if the s p does drop 5 , which is feasible. How aas talking about correction is usually considered about 5 to 10 , we are off about 3. 5 from the highs. If it turned into a real correction, you would see further downside. I want to talk about biotech. We have been watching the Biotech Sector a lot. Part of the momentum we have been seeing. Category,ls into that it has been bouncing back but we are seeing their edge options at earnings. What is the market telling us here . Not High Expectations going into the numbers. Not high but not terribly bad. It is a difficult situation, the biotech index is up 22 since february 14. Gilead in the last week is off 8 , rebounding about 2 today. About a 5 move from their earnings report, a moderately bearish bias. I would not get to bearish on this thing, it has been beat up, training eight times forward earnings. The Options Market is deathly not getting a lot of bullishness. Strategy would be smart if you are long stopped going into the earnings report. Give us the specifics on your strategy for gilead. I mightowned gilead look at selling Something Like the 6750 or 68 call for april 25 expiration or even may expiration. It will offset your costs a little, the Options Market our pricing at 5 , if you can get a 2 or 3 premium, you have already offset the market. On the markets again in 30 minutes. Welcome to lunch money, we tie together the best stories, interviews, and videos in business news. I am adam johnson. New galaxy samsungs is out and apple stepping up its game. How the pros are using technology to up their games. s Christine Lagarde has a rosy outlook for the global economy. Have we turned the corner on a recession . The most important meal of the day is getting pricier. All that bacon. The 1990s tv stars,