He stops by to play what he is talking about. Good morning, everybody. Makers. Tching market im excited to be here. We have a great show coming up. Had to do that. There was a time when you hosted a show with three women. It is time now for the news feeds on the top business stories making news around the world. The lake about 400 million loan fraud. They fired 11 people for failing to prevent or discover fraud. More City Employees may face penalty. A private at the firm is preparing to buy the biggest rental immunity in manhattan. Im sure you remember this. To dish out 400 million. The owners of the apartment complex defaulted on a 3 billion mortgage three years ago. Anyone in the u. S. Can buy google glass. It is the a test version of its spectacle on sale. We can improve both the hardware and the software. If you have got teenage boys, they justy know why closed out a monster year. Grand theft auto five. Do you do for an encore . With us today, the man with the answers. Welcome back. Great to have you. Tradednoticed your stock a little bit down this morning. Why do the is, streets so consistently overestimate or underestimate . It is an extraordinary strong guidance given that we do not way. A new highly diversified. It is perfectly reasonable for them to say we would like more. I am not sure why anyone, disappointing. We were right with an analyst at the patients. Analyst expectations. They are announcing at a time when they will have new video coming out. We really want to know when grand theft auto six is coming out. Million versions of grand theft auto 54 sold very it is still selling. The successes continuing to see more success. Grand theft auto online is generating more spending. That is a first for us. Ago, when short years you release a video game, you made the game and put it in a box, ship the product and that is it. You collect your money. Today, that is just the beginning of a longterm engagement with consumers. Grand theft out online is exciting because of that. Stingy . He so why not give people a better area i a better idea of what is coming down the pipeline. Not giving them much more than that very we have tried to launch more property. Border about a more a new borderlands title. A couple of analysts who follow thus made the point that, apart from the fact those are a lot of signpost. We stopped using analyst calls to do marketing announcements. We want to make sure we leave simmers with a strong appetite for what we have and announced really kicks off our competitors have a different approach to request those same analysts you just reference and consumers alike are wondering forher it is a rock Star Syndicate divisions will come series. A major press we hope that will fall in that category and a flyer they activating back . Why is there so uch activation that you will . When is grand theft auto six coming out . Vice we have not begun talking about it. No plans for a movie. We have not taken any of our titles and turn them into a Motion Picture or reason. We do not and Motion Pictures. It is not a great business. Lifeve conversations about thing all the time during the problems is licensing is swamped. Y have Something Else to it is offset by a potential award. We want to know what is in the i find. Generation going to use technology and Something Different . Title number one sports in that game, you get to see the beginning of what those consuls can fill can allow . Envelope onsh the what a machine can allow their it it is still new. We tend to do that later in the cycle your there are great opportunities and evolve will show that off. The fiscal year was ended with almost 1 billion in cash there are minimally three things we can contemplate here in the last a month, we returned 770 to shareholders. , to is certainly an option return cash to shareholders. Secondly as organic growth. The company has been great. We have 700 million in revenue in thousands of them. The last year, we did not release. We had 1,000,000,002 in revenue. Quite adited of bit of revenue growth. Then there are the opportunities to buy things. We need to take a quick break. Sit tight. Strauss, you are being very coy as usual. An idea on when we can expect the next monster hit . That would presumably be grand theft auto six but you have other stuff off your honestly. Autoou do with grand theft what disney has now done with star wars . Keep the franchise bible effectively forever . That is our goal. We now have 10 that sold over 5 billion units for the additional individual release. Does not always proceed. The way you do that is created enormous it is patient and deliver high quality each time. Moreu have to deliver every time. What are the challenges . Technology making it easier to improve the experience at lower cost . Do not seem to be going up in this generation. We have Processing Power and greater geographical capabilities. Inside thereativity game is much of anything else. The heart goes into it. For six years in a row, we have had the highest medically scores in the business. Red dead redemption sold 13 million unit. It is one i missed. I want to ask you about your digital strategy. See in terms of monetization with grand theft auto online . Oure said it succeeded expectations our initial thought it was assarily relatively recent thought. This is our second year with basketball. We watched it with grand theft and that has one thing ive noticed that i find perplexing is valuation. You have had a huge year. Grand theft auto five got a billion dollars in sales. You trade as seven times moldable presales. I would say our guidance reflects the fact that we push the ball higher and exceed expectations. Whereour seventh quarter we have beaten our own guidance, 29 over the last 30 quarters. We all love what we do. It and to keep doing keep delivering. A billion dollars in cash, the best product lineup in the business, best creative teams in the business. I think the future is pretty good for us. You sell relatively inexpensive games. What is the rise of the casual games like candy crushed and angry birds . I wish we owned one of more of those titles. By the time they raised their hands and had a great hit, the price for buying them is way too high. For the company that made angry birds, that was a one percent hit ratio. The company that made candy crushed, they have done a pretty good job. But their hit ratio is low. Make we make deep immersive titles. Our hit ratio is high and that is make it a good this is. Good business. Attention on the video industry. Another event that focus attention was the acquisition by facebook or 2 billion is a lot of money to spend on an untried and tested product. 2 billion is your market cap. He did not mention what is up. This is true but it is not a video acquisition. I have a demo. It is still in demo stages. For a core gamer, it could be a wonderful spirit. A lot of people who play videogames play with their friends next to them. That technology will not appeal to them. It is a Core Technology but antisocial. We will support it to the extent it is brought to market. Are they working with facebook . Tend to talk about that. I would say we do not have an long it will how take and facebook is not a Hardware Company. It is not meant as a criticism but an observation. It remains to be seen. The deal is worth nearly 1 billion. You think thisll be the beginning of a youtube m a frenzy . We are biased. Investor and were thrilled with the valuation. It was reported in the new fronts and a number of people have talked about it. Digital advertising is growing through the roof. It is still very low. Certain time where advertisers say, were getting the results and we are going to have to pay for it. Digital networks will become valuable at that point. That is that that. Class before we get into other content deals, do you think there is content opportunity in the short form video . Or do you think we will go into longform like amazon . Lets all of the above. I think there is an opportunity with longform and every time a new medium is launched, even though you still watch audiovisual media in this way. We watch it on a small or mediumsized largescreen. They offer different formats. Pay television had different formats. Wille audiovisual material offer a different format. That is a short format. Story but that does not have it would not be taken does. How does the media capitalize on the hunger for content question mark the demand we see from the likes of yahoo , example. Not just netflix, but amazon as well. Video is getting into the game. You are right. We have owned content businesses. Indeed a content business. Stay tuned. We expect to acquire another content business. The reason we are peppering is because,stions has a 32yearold, you were the president of 20th century fox. Appler deal in the works, has another hard well hardware deal. This is really new for apple. In a differents mindset. The innovation always had to be inhouse. This is the first acquisition. Tim cook is saying it is a different show now and that is impressive. I cannot comment on evaluation. I do not know the numbers. It does strike me as a big number. They believe they can dominate the business by creating putting apples magic into what beats us. Is a goodd us there reason youre not in the film or music business. You believe there are better businesses than film or music. Videogames being one of them. Beats is a hardware business for the moment. The future of the Company Seems to be in its streaming service. Curious to know what you think of streaming. Fourere enough room for competitors . Questionnaire demonstrating there is an economic model, but mama the none of those has a big revenue base. But there is no question i was having breakfast this morning. A shiftow dealing with from digital to digital. The shift, it means download is dead. It is not dead, but under pressure. That is quick. They thought they had the holy grail. To deal with streaming. Will it be monetized double . Monetizeable . Nowo you think pandora needs to team up with a Hardware Company and do you think if apple beats the potential deal that speeds up the process for spotify to go public . The latter is almost certainly true. You never want to bet against apple. They really figured out how to make digital music. No one had done it. Mp3 players have been launched and apple figured out how to make money with their technology. They were the first to create a technological mix of hardware and software that actually word from a consumer point of view. What trends in media today are you most closely paying attention to . Sexy as thet as conversation were having, but the world coming unwired, Everyone Wants to be unwired. Data over mobile is a really interesting opportunity and a really interesting issue. That creates opportunities for us in cyberspace. We own two companies in cyberspace. We are looking for new opportunity. That would be two examples. The explosionso of television content. Television distribution is everyone posses this is now. Amazons business, yahoo s business, and someone has to supply all the content. Highly creative surprises will do it. Great to see you and thank you for joining us. A great conversation with the chairman and ceo of the Company Behind greg. Oms founder of the companiesall those public. That is next. Also, a bloomberg exclusive ear the Russian Foreign minister tells us the situation in ukraine is that it and getting worse bad and getting worse. That country is as close to somewhere as you can get. Live from bloomberg headquarters in new york, this is Market Makers. Im Erik Schatzker. I am Olivia Sterns in for stephanie ruhle. Blackstone has had a pretty good year. He stated, just how successful have the ipo posses been . Blackstone has been doing a good job. T has closed a bit in weeks we have seen very good news for private investors in a sense private investors have in getting money back on their investments. Was 38 billion. Huge checks to private investors. When you look at a deal like hilton, which we all thought ,ould he a terrible deal theyre doing it out of pretty good evaluation. Blackstone is a seller here. Market investors are the buyers. You are looking at a 13 return on investments since going public there it when you look at Something Like pinnacle, youre looking at a 50 return and that does not factor in the announcement deal with phil scheier, which bumps the deal up ready far. Into the 70s. You are looking at this portfolio of assets, which cally it is interesting the divergence between an Extended Stay Hotel company and hilton. It looks like a big bet on the Hotel Industry. Chris absolutely. Absolutely. Qwest is blackstones schwarzman says with these Companies Speak for privateess case equity . You by a company like hilton and you pay a lot of money for it like you did in july of 2007. Then it goes into the wastebasket. You can hold on long enough because you are private and you are not under monthly or quarterly pressure. Qwest that is right. They have a timing element that works to their advantage. That is for sure. That said, you do not want to go through a deal like hilton. An extreme amount of restructuring. They do have time on their side. Just to put this into perspective, for hilton, they still own 70 area they want to be thoughtful on how they go into the market in the next couple of months. Exit theyears to fully investment. You do not want to put downward pressure by selling them back. How much is their stake in hilton really about investment in real estate and how much is about the Hotel Industry . Like a franchise model. They do not own that much real estate. It is more of a franchise model at this point. Qwest as blackstone gets larger and it continues to get larger and larger and larger, who bring up investor assets, will this become the norm . Blackstone needs to make large salesthat out right become harder. There are not that many potential buyers. Your only exit is an ipo . You bringnteresting that up. Blackstone has done a pretty good job on the Corporate Private equity side in the m a exit. Deals iy of their do not have the exact numbers in front of me but it seems like they are more successful exiting on the m a front. I was wondering when i would become a bigger part of their future. How many potential buyers out of hilton . Qwest they will keep them quite small. That is what they say and that is what all of these guys are saying. They were burned so badly by the big deals. It is their deals. Looking forward to those earnings. They will be hit hard. Thanks to cristina alesci. A realng up, sergei says war is what is taking place in the ukraine right now. Now to the ukraine. Sergei said russia has no plans to put troops in eastern ukraine. Have a listen and a look at what sergei told us. Qwest the ukrainians kill ukrainians. War as as close to civil you can get. I sent the messenger asking to respond to these in the german media. [indiscernible] these were spread even before and they were rejected. Now they are out again. We would like to see whether this is true or not. We also asked about the united conversation. Indicates he might have been involved in the life of the governor, he might have been involved in inciting foreign fighters to the ukraine and so on. We are waiting for answers. Have a view yet. Qwest we have strong suspicions. This might be true. Americans, they say, well, you should not pretend youre not there. Reports of 10 to 12 russian engines. Reaction was, please present them to the world. Show thedocuments, interviews with them. This happened for months now. No single allegations have been proven. Without any challenge, you know. We shall call them bluff. Ukraine is in a civil war. As close to the symbol were as we can get. My point is an interesting point. I always proposal propose my to go to the media. They always refuse to do this. I do not know why. The tension is part of mother russia. Language, russian , christianity, was born on the territory of ukraine as it stands now. We do not consider ourselves foreigners. In russia with ponzi him, and emerging markets investor. He is a chairman and ceo. Lets start with your basic reaction. It sounds like a bit of a contradiction . Situation russia has made a decision that he will not go with troops. The important thing for investors to watch is the buildup toward the election. The chances of them voting in the president ial election ukraine means the russians will have a lot of attitude. They also said in that interview they would wait and react. Ofmeans, it gives a lot reaction to investors with whoever wins. Qwest explain how you have come to the conclusion or the belief that russia will not come. People have been commenting it would be very expensive for russia to actually take ukraine. They do not want to absorb ukraine. Came in they annexed that. It is incidental, 80 of the ukraine economy. It has been more expensive for russia. Way. Is a cheaper what theyre concerned about is not having a nato member on its border. By disrupting what is going on in the ukraine, i do not think there is an fsb actively dissipated. Andre letting this happen being supportive of the relatively legitimate referendum going on. That gets the russians going where they need to be. Long can that situation persist . If you believe the putin goal is d stabilization, that is certainly something you could maintain indefinitely in the short run. A good question. Erms of Investment Opportunity the stock is down from the innovation of crimea. Cbs is actually coming quite a bit, 60 bits. We have not seen this selloff we are looking for for investing. The question is what you do between now and when things drag on. Abouts is sergei talking the importance of the ukraine capital city. , russiann language religion, orthodox christianity, was born on the territory of stands now. It we do not consider ourselves foreigners. That sounds like they think they have a right. If not, a strong connection. You said things did not get as bad as you thought. Once again, ratcheting up the sanctions. Is inench president ukraine talking about that possibility today. How does that affect your decisions in russia . We have to keep an eye on it. I, sanctions do you think that is likely . Look like not europeans it looks like there will be a lot of pressure on the russian economy if the sanctions put in place, if there is not a political solution within the next two months. Look through july. If you do not end up with a real solution by july, a back burner negotiation with whoever wins the election, then russia will be a tricky place to invest. Clearly, geopolitics play a very big role in the Investment Decisions you make. What do you think would will do next . He does not have to do anything. City is pretty much the way he wanted, there is very little chance these guys will be voting in the may 25 election. Whoever wins will have to negotiate with moscow for legitimacy. It is the one focal point. Everything they do there will be what impact will be on the sanctions and how the economy will do. Are you bullish on russian bonds . Where do you see the opportunity . I have not seen enough of the selloff on the corporate side. We have been getting more practice on the ukraine. Qwest last time you are here, you had sold off some of your position. Qwest then we got back in. Things are a little bit up from the bottom. We will see. A betterdo believe is prospect . Corporate or sovereign debt . Now, i amine, right working with the sovereign debt. The corporate debt might be more of a story. What about russian corporate debt . We heard on the show that while russian sovereign debt may not be the wisest investment, some of russian and corporate sold off so much, Something Like armageddon. If you guys have stepped in on the corporate side and done quite well. The problem with corporate debt, that is basically semisovereign. You get really stood real story assets. You do well. If you get it wrong, there is not a good insight. Thank you. Coo of trey loss capital. Up, wondering if they are covered by obamacare. I do not know about this. We look at the medical treatment Pampered Pets are getting these days. How much a pet owner is willing to spend to keep tech cats and dogs. Illions of dollars on pet care that is expected to grow about six percent annually. I went down to one where you will not believe the type of care that pets are getting. This is a 150 pound st. Bernard. Today, he is training on an underwater treadmill to strengthen his legs and core. Just one example of the advances in Specialty Care for pets. I can understand acupuncture in humans but not in dogs. There is no placebo effect in dogs. If they get better, the brain is not telling them it will or will not work. Nowadays, pet owners are with onehuge sums associated with humans. Like sonograms and physical therapy. We mightdoing what call pilates. Qwest the level of care is no different than the operating room. We use the same titanium people. With americans spend close to 60 billion on pets. A quarter billion will be on health. Health care . It skyrockets. They are no longer out in the yards in the doghouse. They are in our laps, on our couch, and really ingrained inside our household. People want the same kind of medical care they can get for their kids for their cats and dogs. There is a lot of parallels between pediatric human medicine and veterinary medicine. They developed medicine for arthritis, motion sickness, and itchy skin, a condition their ceo affects says affects 20 of dogs. Nareschange the way that vets are treating dogs. It may be a significant revolution. A revolution they hope to cash in on as more and more pet owners seek out human care. Good boy. Way to work. I know you have got some cats. When you splash out would you splash out for acupuncture . Good boy. Way to work. My kids would be mortified if i put a limit on how much i spent on my cat. This is deans. There are some of the antics my cat is up to. That is coffee. My cat is quite acrobatic. The other one just sits around and watches it all happened. Christ are you spending more on your dogs and cats today then you would have 20 years ago . Class i did not have a cat 20 years ago, but yes, probably. The vet tells you you have to take care of your pet. Diet is important. I am sure you are spending more on cat food then 20 years ago. They may have got nine lives 10 years ago. [indiscernible] is, that is preventative care. Now people are trying to extend the lives of their cats to cause of how important they are to cats. Acupuncture is really helping that cats arthritis. People live longer and they want their pets to live longer and now we are talking about things like cardiology, diabetes, oncology, even ophthalmology for dogs and cats. All of that is not covered by insurance. It makes it a more critical revenue model [indiscernible] disposable income. You said your kids would be embarrassed if they if you did not spend everything you could to save your pets. That is why we are not going there. Fine. Bloomberg tv is on the markets. Lets take a look at where stocks are trading. U. S. Markets were trading after two Straight Record closes in the smp. Close only one percent yesterday. One point, itd cross above 1900. It is turning down a little bit. It doubts is up by 3 10 of one percent. Nasdaq is down by 1 10. This stock is getting crushed today. This is a mall store. You find fossils tools fossil stores in malls. People are not shopping in malls as much as they used to. If you are a mall store like fossil, it is not a great time to be occupying that real estate. Second Quarter Results are disappointing. We will be back in two minutes. Live, from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Gears. Economy shifts bill gross says is going from a new normal to a new neutral. Trade retail rat race skeptics question whether the sector can stay the course. Collett counterintelligence. Starbucks designs stores with one thing in mind, getting you to spend more money. Makers onrket bloomberg television. Im Olivia Sterns. Theave found out all secrets about grand theft auto six. Now we have bill gross coming up. Ofwe will have the ceo finish line talking about running shoes, the retail season, and starbucks. Time for the top three business stories from around the world. Firstquarter sales falling at macys. Bad weather getting the blame. Its first dividend in years and will boost share buybacks by one point 5 million. The head of the bank of england says the u. K. Has moved closer to needing higher interest rates. The central bank is forecasting inflation will stay close to the two percent threshold over the next three years. More fallout from the 400 million loan fraud at citigroups mexico unit. The city probe is continuing. Many more employees may be punished. Pimco has replaced its iconic stagnant postcrisis economy with a similar but different new neutral. Bill, welcome back. How is the new neutral different from the new normal . And applies to interest rates. We are not replacing the new normal. The new normal is something i mention five years ago in 2009. The new normal refers to slow based uponowth, structural headwinds such as demographics and high debt levels. We are stuck with the new normal. ,n terms of investment markets we have a new neutral. Basically refers to the neutral policy rate going ,orward, that magical number whatever it is, whatever janet yellen and mr. Kearney and others decide it should be to maintain two Percent Inflation and two percent or three percent real growth. The new neutral is a magical number that will drive markets Going Forward. What that says to me is that this notion that the economy is inching its way back toward some selfsustaining momentum is far too optimistic. I think so. We are tapering. End. Ll to the extent of that stimulation that is provided a trillion dlars worth a year of purchasing power going away, perhaps the economy is better off than it was before. Its the policy rate, 25 basis points currently. On thee price of money short end that will ultimately determine the strength of the economy and potential for inflation Going Forward. Fed officials have been talking about this for months. You see it in their blue dots in which they look at the normal fed funds rate. They all think its close to four percent. Thats why we think the new neutral policy rate is not four percent, its about two percent. Depends significantly on further stimulation from Central Banks, because we have high levels of debt that must be supported with low interest rates. Ts not necessarily a positive it is the reality we see Going Forward over the next three or four years, and has important implications for stocks and list assets. What does do well in the new neutral . Do junk bonds do well . What does it mean for stocks . It means that nothing does really well. Past,ally well is in the the tremendous bull market from 1981 in terms of treasuries that lasted up until the last year and a half. When you have a 2. 5 treasury, thats what youre going to get. If you have a two percent policy 2017 and 2018, thats what youre going to get in terms of your savings. What does it mean for stocks . The Critical Link to equities is that the shortterm rate is a fundamental Building Block for all assets. It means all risk assets will be low returning. It also means that all assets will be lower risking. The market at the moment expects a four percent policy rate three to four years out. Importantly, that will stabilize and make equity and risk markets less bubbly than they appear to be now. You have been very consistent. You have come under some criticism for sticking to your guns. People look at your investment returns, and they have not been happy with what they have received or seen. Doingonth seems to be better for you. What is working for pimco, what is working for bill gross, and what is it . It is focus on the policy rate. We have done three percent or more than a year in which stocks are flat. I think we are doing really well. It has been the focus on the policy rate. If markets believe the policy rate will be three percent to four percent in 2017 and 2018 and that is neutral, we think that is wrong. Our focus on the front end of the yield curve, fives and sevens as opposed to the 30 year bond, is an important consideration. Focus on high yield bonds and highassets which are not returning, but basically stable and low risk and low volatility, its been an important link over the last several months as well. We are sticking to our guns. Our guns in terms of the new neutral. By the end of 2014, pimco will be at the top, not close to the middle. Two percent interest rates, when do you think we will see signs of inflation picking up . Bond traders pointed out, for example, that the Small Business survey or plans to increase pay are trending up. A little but lower wage pressure on nonsupervisors. The readings of jobs that are hard to fill our back up to 2000 levels. When do you think we will start to see signs of inflation picking up, and what will you be looking for . We think its happening already. We saw the producer numbers today. Its a different index than it was in the past. The. 5 d an increase in on a monthly basis in terms of the core and services and goods. The fed focuses on what they call the p. C. E. Inflation rate, 1. 1 . Inir target is two or more order to be safe during the next potential recession. We have a long way to go. Pi have the cbi tomorrow c tomorrow. At the end of the month, we will see an increase closer to that two percent level. It is that two percent level that the fed uses not as a cap, but as a target. We are a long way from that target. It will take us perhaps a year to a year and a half to get there. Most people know by now there has been some wellpublicized turmoil at your firm trade firm. You and your colleagues are taking decisive steps to address it. Money continues to come out of some of your funds and some of your accounts. How long do you think its going to take before you restore the confidence among your investors such that any decisions they make about their investments with pimco are not motivated by concerns like that, and are motivated strictly and only by their expectations for the returns that you can deliver . It takes some numbers. We have good numbers over the past month or two, and it will take some more numbers in terms of the next few months. Investors depend on pimco. As easily ast come it has in the past. Is no question in terms of our organization. We are a Better Company now than we were three or four months ago. Theres much more focus on the bottoms up, types of rewards that pimco has provided over the years. And little bit less in terms of the topdown allocation. Its pretty much right where we want to be. The questions were authorized because mohammed has left. Those questions will be answered and have been answered in the past few months. They will be answered as we move along. We thank you for joining us. They call them the king of the bond market. Bill gross of pimco. Mbas you end up bailing on banking. Who end up bailing on banking. What theyre leaving for. You are watching Market Makers on bloomberg television. Youre watching Market Makers. Im Erik Schatzker, here with Olivia Sterns. Buy a has agreed to mobile messaging app that lets users send messages that selfdestruct at a specific time. No word on how much yahoo is paying. Chat settle government claims that it did not inform users that their messages could be saved. Analysts have forecast his son he would make money this year. The company is trying to overcome weak demand for its televisions and personal computers. Forrong First Quarter tencent. Canceled dinner plans, interrupted vacation that seems par for the course for those working in finance. They lay, young bankers are bailing out of their highpaying jobs and setting up their own gigs and technology. Ise to talk about the trend the cofounder of wakefield, the company that connects jobseekers to startups across the country. You worked in private equity for eight years and left to start a startup. What is making everybody want to make this transition . You will get the same hours for less money. One, just the sheer labor economics in play. The Financial Sector has contracted in terms of numbers of jobs, . 20 tony percent by the citys own data in new york. by the citys own data in new york. What the Younger Generation of workers want, one of those is culture. They are drawn to the relaxed culture that feels more like how you behave in the rest of your life versus something that is clear and separate when you go to work. Finally, the impact you can have on these businesses versus sitting in a strict hierarchy and maybe updating powerpoint 11 00 p. M. At night, you can see the impact of your work on a startup. Have seen things like Goldman Sachs say they are going to enforce the fact that their analysts are going to have to take a saturday off. What else do they need to do, and what else do you think they should be doing to try to retain their talent . Its a hard trend to reverse. You have got decades of culture where you were supposed to be on demand, and that was part of the job. It will be a hard thing for the banks to reverse. What do they need to do to reverse that trend . Its an overall look of the culture, and looking at everything from the office space where people work, and the expectation around the job. If someone is wired to not be productive until noon, maybe dont make them come in at 8 00 in the morning. Startups have taken a smart look at culture and structure from that regard. Are some of the finance refugees fleeing from tech a little to pieeyed . Olivia mentioned you dont get paid to well working for a startup. Equity the promise of riches down the road if your company gets acquired or you go public, but its a small number of startups who truly make it. There are others who function not unlike sweatshops. You work bloody hard. Two discussions here. If you leave and start your own company, you have to accept the odds are extremely stacked against you, and it probably is going to fail. Thats what happened with my first startup. Different discussion for someone who is leaving to go work at a startup. For us, its a cultural comment. A company could have a couple hundred employees, but maybe there five years old. Dramatically different from being an employee at a huge bank. Five years on, you are still a startup. Youre probably in your third round of venture funding. Facebook has been around for 10 years. Its not even a question of valuation. Its a hard question. For us, we look at it through a cultural lens. These companies that are newer, its what matters is whether you have a startup mentality. About thepoint culture, there are probably a lot of myths. Everyone is thinking you will be able to bring your dog to work, show up in a hoodie sweatshirt, and youre going to get to get you show up late. What are the myths about this . Myths. E are some a lot of these companies are run by people who dont have managerial experience. Coming from a big bank, where someone has worked in corporate , maybe the decades company is run by a 27yearold who is not thought about how to structure a work lace for a team. There are myths in terms of the culture. You have to really want to do it. So many people really do want to do it, and they really do want Something Different in their work. What are the chief qualities that a startup or Venture Capital backers want in new employees . One of the biggest questions is, do you fit culturally . The people in finance, having this reset of working 90, 100 hour weeks because someone says you have to, versus going in and trying to have the most impact every single day. That is the biggest obstacle for people coming out of an established industry like finance, moving into something more dynamic, lets say. It is one of the biggest determinants of success also. Thank you, chris johnson, founder of wakefield media. We will be back in a few minutes in Market Makers. My shoppers can i enough of Sporting Goods. It is time for bloomberg to go on the markets. Heres a look at what is happening to u. S. Equities right now. Were in the red across the board. The s p down by about four points. This comes after the s p and dow closed at record highs yesterday. Large move her to tell you about, dear, the biggest maker of Agricultural Equipment in the world, posted lowerthanexpected sales and reduced its fullyear revenue outlook. Re is shipping less machinery. The dollar is a factor, weakening against other currencies. Coming up, on the road to another showdown in washington. This one is about bridges and highways. Starbucks wants to plan every step you take. Its a way to get you to buy more. This is Market Makers on bloomberg television. We are streaming on your phone, tablet, and bloomberg. Com. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. You are watching Market Makers. Im Erik Schatzker. Im Olivia Sterns, in for stephanie ruhle. Where did all the mall rats go . They are still running to the Sporting Goods stores, like finish line. With us from indianapolis is the ceo of finish line. Why are sneakers and activewear holding up in what is otherwise a weak retail environment . Its all about technology. Its all about new and exciting things coming to the market. This whole segment of the Retail Community has been exciting now for five or six years. It is kind of building. Lots of brands involved in this, and lots of new technologies out there. Consumers love it. When people think of technology, they think of facebook or cisco or google. They dont think of activewear. A predominant part of our business is footwear. , all ofootwear category the brands of come with new things. You go back in time from the andution of air at nike, now recently, under armour participating with a technology called speed form. A broad factory, for extreme comfort. Comes out ofe that adidas that has all kinds of comfort and bounce to it, technical bounce to it. Everybody is coming with these new technologies for the feet, and consumers love it. You are making Shoe Technology in a broad factory. What is hot in the footwear and apparel Sporting Goods market . What does that tell you about where the economy is going . The point is that the brands have used innovation to generate excitement with consumers. It starts with the pinnacle, the jordan brand, bringing new and interesting styles and silhouettes and fabrications to the footwear. Ive been in this business about 12 years now. Weve had 12 years of fantastic performance from people like brad jordan. Leaders in the footwear, athletic footwear business. When you have those kinds of products and to bring to the marketplace our core consumer, a young consumer we consider it an 18 to 29yearold abouter, theyre excited what comes out, and they cant wait to get to it. Sometimes they even line up to get it on a saturday morning in the malls. If innovation and technology are driving traffic, thats terrific. What matters to you most are margins. Which brand is giving you the most power to sell through at full price . Have the best brand partners. I have been in this business over 40 years. The last 12 of it here at the finish line with these athletic brands, and this whole segment of the industry, these guys are great Business Partners with us. They help us sustain strong margins in our business. Their segmentation of the market is outstanding. We are not carrying what everybody else is carrying. We have an identity to ourselves. This is a fantastic segment and great industry. Adidas is not the same as uma, is not the same as nike, under armour, new balance. What do Consumers Want . What are they prepared to pay top dollar for . Nike is the leader in the marketplace, and does more than half of our business. The consumers vote on that. We dont create an environment where we prefer brands. We allow the customers to vote, and the vote has been over a long, sustained period of time, that nike is the leader. The other brands have come with all kinds of new and interesting stuff, and that keeps the market exciting. Motivated ande challenged, and they all participate. Verye thing erik is excited is that hes going to see the world cup in person. What impact do you think the world cup will have on finish line . Cup and like the world the olympics dont have the same impact that they had years ago. Exposure for new products and for these brands is ongoing. Its every week. Consumers about know exactly what is coming to the market, and they know it quickly, and they react to it very quickly. This is not an adventure of an business the way it was 15 or 20 years ago. In 2013igned a deal with macys to be the exclusive provider of footwear for sneakers. How is that deal panning out . It is been fantastic. Is a fantasticp group to work with. Their whole direction around on the channel lines of beautifully with hours. They know we have to be where the customer is, and giving them what they want through whatever channel it is. We have been perfectly aligned with them. Have brought some assets to macys in terms of our relationship with the athletic brands. That has worked out well for both of us. Theres a lot of buzz these days around under armour. Of thetioned some technology theyre putting to work in their running shoes. Is under armour the brand to watch . We watch all of them. Under armour has been a great brand. They have done a phenomenal job in a short period of time. Kevin and his team just keep ringing it. Bringing it. Its exciting for us to be around people like that. There is plenty of runway for a brand like under armour to grow. You see the growth that nike has every year. Nike up over 25 billion now. Are lucky Business People to have them as partners, under armour and nike. Does kevin plank care more about the feedback you give him than mark parker . We happen to know kevin since he began, and i dont know phil since he began. Are an important part of their business. We get to that core, elite customer. We have plenty of conversations with parker as well as kevin plank. Thisank you for joining us morning. Great conversation with the ceo of finish line. Coming up, road rage in capitol hill. The next big fight in congress will likely be over infrastructure. Willesident obama highlight the latest showdown looming in washington, d. C. This time, highway funding peter cook has the details. Are we once again on the road to crisis here . We are slowly headed that direction. Today president obama will make the case for the Tappan Zee Bridge. Let me walk you through whats happening. The current highway bill does end ofire till the september. The department of transportation estimates the Highway Trust Fund could run dry by august, putting 112 thousand construction projects, 700,000 jobs in jeopardy. Leaders in both parties agree on the need for billions in infrastructure investment, but disagree on how to pay for that Investment Grade on tuesday, i spoke with anthony fox inves tment. On tuesday, i spoke with anthony fox. Every Community Across this country has a to do list. Right now we are under investing in infrastructure. A signal notnd only to ourselves, but the rest of the world that america is back in business when it comes to our transportation system. Case for the the administrations proposal, the four year plan, a price tag of 302 billion. There would be no increase in the politically sensitive gasoline tax in this Midterm Election year. You have a bipartisan 105 billion, fiveyear senate plan that was introduced this week. House republicans promised to unveil their own plan i the august recess. The trust fund could be dry by then. We could be looking at a temporary solution to get us past the election. Is the Tappan Zee Bridge one of those projects caught in the crossfire . Not necessarily. Billionfor the 3. 9 replacement is pretty much already in line. Its a kind of project the Administration Says should be happening across the country and would be happening if theres a highway deal. The bridge is past its projected 50 year lifetime. The new threemile bridge is designed to last 100 years. The president will highlight the fact that the federal permitting process for the replacement was completed in 1. 5 years, not the usual three and a half years. Congress still needs to fund those projects. Thanks to peter cook. Comesme president obama to town, it will be causing a lot of gridlock. Indeed. Coming up, mind control at starbucks. The chain is designing ways to get you to buy more at its stores. You might think your friendly neighborhood starbucks gives off a laidback vibe, but that vibe is the result of countless hours of store testing and tweaking by highly paid designers. The averagee starbucks to break down the five ways in which your favorite coffee chain might just be controlling you subconsciously. Walk into a starbucks, and you will feel a pretty laidback vibe. That is what starbucks wants. That casual experience is the result of kinds of very wellthoughtout details. In yet, not even walk but already, starbucks is working on you. Start with the door handle. Designers like to call this the handshake between the customer and the store. The store handled it not get here by accident. Its providing a little bit of advertising, getting you thinking about the coffee you are about to buy. All about flow, getting people in and out of their stores in the most efficient way possible. In this store, they need to get people to the back to place their order. How do they do that . They use lighting and visual cues. The merchandise and food is back there, and it is let more brightly than the rest of the store. Without even realizing, you automatically move towards the back. Starbucks already knows two things are happening to you. Youre getting to see all the different seating options in the place. You are also getting positive reinforcement before you have even placed your order. You are seeing all these nice people enjoying their delicious cups of starbucks coffee. This little strip of countertop does not look like much. It is all part of starbucks plan to maintain your connection to the people who work here. If this was not here, the first thing you would encounter after placing your order are these really tall coffee machines, which might push you back from the counter. Continues, you are drawn towards the counter. Because everything is below eye level, you can maintain eye contact with the people making your coffee. I just gave starbucks my money. Why am i seeing more advertising for coffee . Starbucks is based on repeat business. Advertising on my way out of the store gets me thinking about the next time i come back. You knew they were controlling your brain because of coffee, and we are addicted, but that takes it to the next level. I think of it as set design for the soundstage we are all living in, and not really realizing it. Be one ofen had to the first, curating the story in such a way that it caused you to think differently about the merchandise you are buying. Also putting the cache bay into stores, something tommy bahama is doing recently. 70 of people when they first walk into a store naturally move to the right versus the left. For a lot of boutiques, you want to put the new merchandise on the right and hide the stale stuff in the back. Thats true. I gravitate towards the right, and feel weird when the store directs me to the left. This is like that moment in mad men where maybe you should be analyzing human behavior. That will do it for Market Makers for today. We will be talking about how jayz is rocking the sports agent world. We will be talking about some of their clients. Look at the happy couple should be fun. Thanks for having me. I had a great time. Im glad we learned that bill gross said nobody will be making money in the new neutral. You are going to be getting acupuncture for your cats. And we know how starbucks is playing us. When wasnt starbucks playing us . Thats true. We are addicted. Bill gross is trying to persuade the world that pimco is a better firm that was before alarien left a comment hes making his case at the very least. Bloomberg television is taking you on the markets with julie hyman. We are watching stocks falling today after the dow and highs. Emerging markets are rising on speculation that Central Banks will push ahead with stimulus. Talk more about it with a closer look at the u. S. Versus emerging markets performance is the equity derivatives strategist at baycrest partners. Growth stocks have been falling. Have seenarkets we a lot of volatility in those. Where are we going to find the future growth . If momentum stops in the u. S. , were going to pull back. Where we going to get that growth from . You have to look at the chart of i. W. M. I. W. M. Is an etf. You see that as i. W. M. Started to sell off after the growth expectations embedded in highgrowth stocks started to go too high and unsustainable, iwm started to sell off midmarch. We do not think that the high valuation embedded in iwm stocks are done coming down yet. There is still some room to the downside of those valuations. Investors looking for growth have to go to emerging markets in order to get that growth. What about the concerns, particularly when you look at china, that you are seeing slowing growth theyre, and what kind of effect that could have across the emerging markets . Do you think there will be enough intervention there to prevent growth from slowing down . If you look at overall, in , in totalitykets you see that the growth might be slowing but at the same time we are nowhere close to big problems in the market. So long as developed markets stay flat or to slightly positive growth trajectory, emerging markets have a lot more room to grow to the upside. If you compare emerging markets eem for performance versus s. P. Y. , look at the underperformance that e. E. M. Has had for a oneyear period. There is some catching up to do. Theres a lot of catching up to do. E. E. M. Is up 50 . What is your options trade on e. E. M. . I want to buy call spreads in e. E. M. It makes sense to use options to play the direction bets using e. E. M. I want to buy the 45 and a half put for sell the 37 around . 50. Thank you so much. Locum to money clip. Welcome to money clip. Heres what weve got wearied adidas staying in the game. How starbucks is elephant trip infiltrating your subconscious. Ts, we are talking sterling versus magic. Star. Killed the radio can the internet bringing back to life . Thefrance where the film f