Transcripts For BLOOMBERG Market Makers 20140605

Youre watching Market Makers on Bloomberg Television. Down pouring in new york. Shes in a sunny locale but working hard. Time for the news feed top of the stories around the world. The nations job situation continuing to improve. Government report showing new unemployment claims at their lowest levels in seven years. Fell to 310,000 last week. Amazon is planning to introduce a smart phone later this month. According to a person familiar with the plan. It would ramp up if rivalry with apple. The company tweeted about an event it will hold in seattle on june 18. A picture of its thin black device offering a hint of what the phone might look like. Military jet slammed into a california neighborhood yesterday afternoon. Amazingly no one was killed or injured in the crash. The pilot ejected before the plane crashed into a residential area in southern california. Two homes were destroyed and a third was heavily damaged. General motors c. E. O. Mary barra held a town hall meeting this morning to address the companys recall scandal. She revealed the findings of an investigation of the mistakes g. M. Made over the past decade and 15 people have been fired. For more we bring in matt miller. What were the most important things we heard from mary barra this morning . There were the facts, one you just mentioned, the 15 people maybe not fired but no longer with the company. She wouldnt confirm in the q and a section after when our tim higgins asked her if those employees were fired, if they were retired, if they even received buyout packages. She said that was a personal issue between the employees and the companies. She gave us a few other facts as well. Saying that five people were still with the company but eceived disciplinary measures. Said that ken finebergs fund hes going to administer the results of that. Will start to roll out in the next couple weeks. Well start to find out whats happening as far as victim compensation. It may be more than just the 13 deaths that g. M. Has linked specifically to the ignition problem. She and mark royce both made very clear as well as dan, who sat there, taking questions from reporters, that they will want to compensate anybody that ken fineberg feels necessary to compensate. Any families that had deaths due to this problem or any people that were seriously injured. I think the most important part we got out of this town hall meeting, though, were not the facts from the lucas report. Well all be reading that and pulling out the facts for ourselves that we find most interesting, most important, but the most important thing was the cultural ask that mary barra had of all of her employees. Remember it was an internal event. It was a town hall for the company. She wants whistle blowers to come out from now on. She wants a change in the way the company operates. Not watching your own back or the back of your supervisor, but watching out for the company as a whole. Listen to what she had to say about that. If you are aware of a potential problem affecting safety or quality and you dont speak up, youre part of the problem. And that is not acceptable. If you see a problem that you dont think you dont believe its being handled properly, elevate it to your supervisor. If you still dont believe its being handled properly, contact me directly. I want an environment at g. M. Where the customer is at the center of every action and decision we make. After all, we exist to serve their needs not ours. So its interesting. Previously General Motors employee who went to a supervisor with a problem and then was turned down would never gone directly to the c. E. O. No matter what level he or she was working in. But now it seems that thats what shes asking. And she seems very sincere in that. Its a real cultural shift that i think the entire industry, some of those companies in the industry have gone through, but the entire industry has brought that on and is pulling g. M. They have no choice but to come along. Is this the end . What does this do for the congressional and d. O. J. Investigation . I think this is definitely not the end. In some ways its the beginning because they are finally going to get the answers to the questions they put to mary barra a couple months ago. And didnt yet then. So theyll be getting information. Theyll be obviously moving on a lot of that information. And we are going to see a lot more come out. Remember, next week is General Motors shareholders meeting. Next tuesday well be seeing what the investors in the Company Think or what those who want to speak publicly think and how they are going to vote about General Motors leadership. It will be interesting. Its definitely ongoing and its not really a solid turning point. Its just another piece in a story thats going to be a long one. Matt, thank you very much. Sprint and t mobile are zeroing in on a merge. They have talked about joining for years and now a deal could finally be on the table as soon as july. The companies had made headway on price agreement, capital structure, and termination fees. We bring in walter. Welcome for the merger that might happen at some point. I have heard anything from 10 to 50 goes through. Alex, your reporting . Its hard to say. Thats just a better question for walt. Its anyones guess. At this stage of the game sprint has spent months trying to make a case toward regulators privately to pitch their idea these two companies longterm have an untenable future. The only way they can compete with at t and verizon is by putting them together. At this point we know that deutscha telecom and softbank, owns 80 of frank, deutscha tell owns 2 3 of t mobile. Those two companies have an agreement on the main nngs points. Price will be 40 a share. Capital structure roughly 50 50. And termination fee which will probably end up being closer to 1 billion which is what many masa wants. But the deal wont be out until july or august and thats because these Companies Continue to Work Together to put a model for regulators to say, hey, heres what we need to show them in order to convince them that this deal should be approved. Consensus view on the street to answer that question is very low chances, less than 20 . The reality is that its an uphill battle, but they are trying to put together the case. They start in january, maybe there was setback then. They are doing things like showing how that might be a competitor for comcast on wired broadband. Showing how they need scale in order to invest more in their wireless network. Talking about building out in rural. They are building the case. Remember, d. O. J. Came out very strongly against it. F. C. C. Is facing pressure with a lot of transactions. Net neutrality debate. A lot of things on the debate. Low probability. I dont understand quite honestly if this deal does get announced why montason wants to spend 1 billion. The billion is a potential breakup. If you announce the deal, regulators turn it down, you have an 80 chance of failing, you have thrown away a billion bucks. His view is probably not 80 chance of failing. Do you think hes having conversations that would make him think perhaps he doesnt have an 80 chance of failing . Maybe the alternative for him not very good for sprint. He bought this company. Theyve got issues as far as how quickly they are rolling out their network. Lets keep in mind, its a 30 billion transaction. 1 billion fee relative to a 30 billion transaction is not crazy. You look at at t and t mobile, buying the same company, breakup fee 4 billion, 5 billion. Its smaller. It would be better if it was nothing. I think your point is good. It is a reasonable question to ask. Is he operating with a delusional force field around him where he lives in a world where he thinks the deal should go through he yet the evidence in front of him suggests it wont . That said, i think he may have a little bit of help from the other two telecom deals that have come before him. Its debatable whether or not these really are going to help him. You could take make a case if youre going to put together at t, directv, timewarner cable, if you look at the Telecom World including those companies and how big they are going to get and influential, t mobile and sprint, these are piddling little companies compared to these. If you are going to accept the big ones, why reject the small one . Quickly before we run out of time, was there anything that happened recently that persuaded these companies that worth continuing these negotiations and agreeing on terms in principle . I think getting over the hump as far as who is running the company. You had dan on here not long ago. I think he conceded maybe hes not the guy to run the Company Going forward. If air t mobile standpoint, when at t was coming in, it was very disruptive. If they come to an agreement that t mobile can be the guys running it, they could be the uncarrier on steroids, it makes it more pat lattable for Deutsch Telecom to try and go in frovent regulators. That was a key factor i think in moving forward. Guys, thanks so much. Appreciate your break down on that. Alex and walt. When we come back mere on Market Makers, president Obama Meeting with World Leaders at the g7 summit. Well have the latest from brussels. And forget about luxury box seats. Well show you how the high ultrahigh end way some v. I. P. s might be watching this years stup stanley cup. Its not on my couch. This is Market Makers and Bloomberg Television streaming on your phone, tablet, and bloomberg. Com. We are streaming the amazon fire tv and apple tv. Brussels, president obama is meeting with g7 leaders and the crisis in ukraine is taking the spotlight. Hans nicholls is in brussels with the details. President obama just wrapped up a press conference with the british prime minister, David Cameron. Did the president say anything about talking to Vladimir Putin at this point . He clearly left out good morning. President obama clearly left the door opened for a meeting, a sit down with Vladimir Putin. He said it is entirely appropriate, it is, for mr. Putin to be attending the event in normandy. What you see from the u. S. Administration is an approach to try to speak with one voice from the european side and u. S. Side on actions, on talking to mr. Putin. Concerted strategy. Yes, tomorrow putin does have meetings planned with cameron, with merkel, and the idea to have those three heads of state and convince and urge putin to start working with president elect in the ukraine and have some sort of wind down, some sort of deescalation of the situation. Alix, there are a lot of deadlines. At the end of the month the e. U. Meets again. You are seeing the leaders set up deadlines for potential escalation and sanctions. By sanctions i mean sectorial saxes, industries not individuals. We did saw in that press conference wrap up between David Cameron and president obama, anything significant ties between the two countries when it comes to sanctions . We heard a lot of russian countries have very much more hands off approach at this point. President obama just had this great line there at the end, yes secretarytorial sanctions will hurt the economy in europe. Theres been a broad recognition from the u. S. Side for three months. Any sort of serious sanctions on the russians will hurt a flagging economy here in europe. At the same time obama said it will hurt russia more. Theres been a great deal of effort and intensity spent on making sure that the u. S. And the European Union speak with a unified voice. Last night the statement coming out of the g7 meeting on ukraine was unified but it was pretty weak. It said additional sanctions if, and it didnt get specific on what the triggers would be. Today youre hearing a few more specifics. Youre hearing things from cameron. Youre hearing things from merkel. The question is can they get the entire European Union aligned and on the same page . Thanks so much. Hans nicholls in brussels following the g7 for us. Obama will travel to paris where hell meet the french president. Ryan, obama just said it would be improper for him to intervene in the socalled b. M. P. Affair in which the d. O. J. Wants to slap a 10 billion fine we understand on the french bank. Doesnt that create a problem . Olon saidous yesterday, that matter is on his agenda for inner tonight. Yeah. Thats very clear the french intend to discuss it. The president has made it very clear. And they heard secretary kerry just the other day say that while he maybe shouldnt say this in the public domain, the u. S. Is prepared to find some kind of fair resolution and they are confident they can with their French Partners work, as he put it, through this. I think we can expect the french president to tell president obama the same things hes been saying over the last couple of months. This is unfair, that its disproportionate. To really focus on this issue first of all of it not really being within the u. S. Jurisdiction. At least as far as the french are concerned. These were dollar transactions as far as the u. S. Is concerned. That makes them very much part of its jurisdiction. But beyond that, this would be ad for the french economy. Bnps ability to land money. Possibly for the integrity of the Financial System for all of europe. As the french finance minister said, they have no intention of defending any one bank, but they are interested in defending the economy. And the french president made it very clear, the french people arent happy with the situation around b. N. P. , hes going to talk about it whether president obama wants to or not tonight at dinner. Thank you very much. That is ryan. Hes in paris awaiting the arrival of president obama who will dine tonight with the french president. Next, the hottest ticket in hockey has a whole new edge. Find out how elite superfans plan on watching the stanley cup. Alix steele today. Back in the day scoring a luxury box seat for a big game was all it took to impress a client. No longer, we live in the era of the tickets to the game are part of it. The v. I. P. Treatment available for this years stanley cup. Robert has been cure rating five star sports packages for 20 years. The one recounting is a trip to london olympics. Transportation, lodging, and tickets to gold medal games. Price tag 350,000 which includes the 18 commission that his company pocketed. What kind of access can tuckman get me for this years stanley cup finals . I have my wish list. Hang out with some of the champs. And of course play. The estimate, 15,000 to 20,000 per person. Its been 20 years since the rangers made the finals and i want more. Can i go into the lobblinger room . Very possible. Can i ride on the zamboni . Can i get mark messy to skate with my kids . You can get him to skate with your kids and give them shooting tips. Is it going to happen right before the game . Probably not before the stanley cup. If you want to do it the next day or prior, absolutely. Tuckman stumbled upon this business two years out of college. While selling ads for a sports magazine. As incentive he would often include tickets for a luxury suite. He realized these extras were what mattered. The easy part zpwegget tickets. Designing the rest of the experience is the value added. Even with the best access, it turns out some things are off limits. Can i hitch a ride with lundquist to the game . Probably. Thats difficult. He has his routine and im sure theres no amount of money in the world that hes going to change that. Ultimate goal is to win the stanley cup. Scarlett, im so impressed with how much care you put into that package. Not one image of the l. A. Kings. We didnt need to go into that. All about the ragers right now. Rangers right now. The experience of watching a game at home is so much better these days its hard to turn your eyes away from the h. D. And 3d. Thats why a lot of these teams and league need to get in bed with the quote package organizers. They need to provide an experience. Partly also because its so much easier now with stub hub and the like to get tickets on the secondary market. Youre not prisoner to the broker who could back in the day kind of charge you whatever he wanted. 4,000 or something for Madison Square garden monday and tuesday . It is more expensive for the games because its been 20 years since the rangers went to the cup. I was asking robert when is the best time to buy tickets if you have to go to m. S. G. . He says wait until the day of the game. Maybe a couple hours beforehand. The price also come down. The people who buy up as soon as they announce the finals and who is in the finals are the superfans who just cant wait. So they snap up that ticket. Thats why youre not working. Thats right. Whats the kick back for the teams . He gets 18 commission. He has relationships that he leverages with the teams with former players, with current players. To get some of the obviously grass cant be involved. Everybody who is providing a service of sorts will get paid something at the end of the day. They help each other out. He has access to other events as well. The masters golf tournament, u. S. Open. You can put that all together and its part of the relationship building. Wonder what the most expensive stuff hes ever deliffed . The olympics . Olympics. I thought it was more. He was saying after a while it got hard to come up apparently in alixs world 350 grand is a deal. Swipe it on the card. You and three members of your family. Me and the cat. Thanks. Terrific stuff. Scarlett. The e. C. B. Makes an historic move. Well talk about it after this break. Good morning once again, folks. You are watching Market Makers. Im alix steele. The e. C. B. Entering unchartered territory this morning announcing today it is reducing Interest Rates and installing a negative rate on Bank Deposits for the first time in its history. For more perspective on its historic move, we bring in a Portfolio Manager of oppenhimer funds and bloombergs market reporter jonathan. There were so many headlines out this morning. Break me down what happened about an hour ago. Lets just say we went into this expectations were up there. Mario exceeded expectations. We knew there would be great cuts, he did that. But it was about the measures they announced in the press conference. Here comes the jargon, bear with me. The sterilization of the Securities Market program. This was they bought italian bonds, spanish bonds. They got the nod from the German Central Bank, we buy these bonds but sterilize these purchases, neutralize the impact on the money supply. They were doing this every week. They do this every week. They conduct six deposits to take that money out of the market. They are going to stop doing that. Essentially thats quantitative they are draining the money precisely. The big one is they are preparing an asset purchase program. This might take time. Thats pretty key. The question to traders back in europe, you are 1. 35, not come back much. We are back to where we started. Is this enough . Mario, is it enough . Is the end . Heres what he had to say. We think its a significant package. Are we finished . The answer is no. We arent finished here. If need be, within our mandate, we arent finished here. We are not finished here. There is more work to dofment he also said we are in a very different world. We are. My question would be are they acting too late . How long does it take for this policy to affect the real economy . It makes me wonder whether his is mario recognizing how effective that word unlimited was in the past . Now hes had to follow through on whatever steps are necessary. We are actually getting to see some of the necessary steps. But by also saying im prepared to go further is kind of dangling whatever it takes out there again, isnt he . Hes saying that through different channels. Not only by saying we are doing work to actually engaging us in purchases, not sovereign purchases because thee will have the german nono line. The style of the bank of england and consistent with monetary policy. Channel number two, very important. What did he say . While we do this we are also lowering our inflation forecast by the way for this year, next year, and the following year. I. E. This doesnt even do it. So we are already preparing the ground. We are just defining already now why we need to do more later. Third and most important, nobody talks about it, but i think during the e. C. B. Presidency, this has always been a Key Communication tool. How did he start the statement . The decision was unanimous. Not only that. Not only was the decision unanimous. Its the same every time. We have a price stability mandate. Theres justification number one for this. And also the transmission mechanism is broken. Justification number two. To go unconventional. They have to go unconventional to get this 20 work. When inflation is so low the backs are against the wall. The German Central Bank did not want to do this. They did not want this to happen. Whats happened is we are so far dont you road they have no choice. The end of the sterilization process, where is the legality here . Is that legal in terms of the e. C. B. . It is all legal under the clear umbrella, this is all under the necessary requirement of monetary transmission. Ok. I see. Identified like to know, where do you think mario wants to see the euro . I think he definitely doesnt want to see any more upside. A little should over a buck 36 right now. This is still a 130 to 1. 40 range in the euro. If you want to talk about acting implications for currencies, definitely the first trade here is to maybe sell some topside and see the limited possibility of eurorising. Why did we see this happen today . In my opinion first of all, just a personal thing. The price action on e. C. B. , especially on the euro, is almost never the right one for the long term. Remember when he announced o. N. T. . Big selloff in the euro. The e. C. B. Disappointed. A year and a half later it was the trade of the crentry. It was so obvious that everything was going to rally and the eurowas going to be strong. Let me ask this. One of the reasons we have had strength in the eurois because you have seen fundamental investor flow come into the eurozone and buy bonds, particularly equities unhedged. That pushes up the euro. All its done today is make euroas an asset more attractive. You are going to see more money coming in. They are fighting a fundamental tide. All they have done is make things look more attractive. I very much agree with that. In the shortterm you have the most positive impact through all the classes. Youre buying spreads. Youre buying european financials, european equities in general because financial is such a big part of the index. You are buying the end credit products. R the eurothe trade is not a today trade, its not this month trade. Its more a fundamental trade oferte long term. What i think the e. C. B. Has accomplished today is confirm for now the trend in the eurochanged. That trend change happened close to 140. And they are planting the seeds to make sure that the eurocan engage into a gradual liquidity supply driven trend that offsets the Strong Demand for the euro. Its all about demand side is exactly what you described. The supply side they are saying lets make sure we supply plenty of euroliquidity that is able to offset the demand for euros. Does any event matter if the theme in the eurozone is still austerity . At the end of the day . Very important question, for the economy this is not as straightforward as it seems to be for now why . Because when an economy is deleveraging, what the e. C. B. Is doing is guaranteeing the supply of funds. What you need for these funds to go through the economy you need there to be nand for funds. If you are deleveraging, what it means i want to minimize my debt. If you give me money, im going to pay down my debt, i. E. Im not going to reinvest it or consume it. If youre no in profit maximizing mode or consumption, you are deleveraging, you are not putting that money back into the economy. So this is all tricky. What they can do now is guarantee that for whenever the money demand, demand for funds will come, the funds are there. Which is what mario touched on. If i think mario had a genie come out of the lamp and that jean geeny said one wish, the feds to hike. Thats what he will drive the eurodown. The bank of that japan had the same jeanie, they would ask that as well. Get the yen down more and euros down more. How does that work . Rate hike . Look at the Balance Sheet tallies. Over the last couple years you have an e. C. B. Balance sheet thats contracted. The feds might be tankering, you have a spread sheet that has four million euros. The e. C. B. Is half of that. Its the fundamentals behind the exchange rate. You need to see the fed more acty. Emerging markets might want something different. Japan, the eurozone, they have a very different demand. The impacts was felt strongly were the long positions where. Emerging markets. Credit equities, emerging market effects. Eurowas never a low currency in the first place driven by its own dynamics. The impact of the fed on the euroback then was limited. Now as positioningure the eurohas changed you have room to make the change. The fed hasnt been the fed tightening has been frontloaded. The curve is stream as we steep as we like to think. Currencies tend to reflect that, too. A lot is already priced in. What are you going to do in terms of hawkish talk to offset that . Fascinating conversation, guys. Two extremely passionate people talking about the euro. I never see that on u. S. Television. Hanks so much. Well be back in a couple minutes on Market Makers with this. Could be nothing short of wizardry. Well tell you how harry potter is breathing new life into the sunshine state. J. K. Rolling, Harry Potter Series is iconic young Adult Fiction responsible for billions of dollars in spending on everything from movie particular totes halloween costumes. But harrys magic is being cited as a catalyst. Florida being the state which recovered from the great recessions job losses faster than any other. We are reporting from the theme park home in orlando. Welldone, harry. Welldone. Harry potter saved the world from voldemor and may have saved florida from the worst effects of the financial crisis. When u. S. Tourism slumped into 2010 along with the rest of the economy, universal Orlando Resort placed an estimated 265 million bet on the Wizarding World of harry potter. Since then visits to the city have reached record levels and more tourists mean more jobs. The recovery was stronger because not only did harry potter compabet need for employees, but there was a multiplier that brought the need for new hire that surrounding resorts and hotels. Among the hardest hit by the foreclosure crisis, floridas Unemployment Rate peaked at 11. 4 in 2010. Now its dropped below the national average. Today the state leads the country in job growth beyond just lowwage Amusement Park jobs. By getting those jobs brought to the market, we are increasing the demand for housing and for other services and trades that were higherpaying sectors. With the expansion of hog warts express slated to open the next few weeks, fans of the 25 billion franchise have new reason to travel to orlando by plane or by broom. Ask local officials and theyll tell you harrys not the only one waiving a wand for the economy. There was already a Magic Kingdom in orlando. We reported 59 million visitors last year. More than any destination in the united states. You dont accomplish that on the backs of any one reason. It really has to take everything combined. Not to be outdone by universal, disney world just unveiled parts of the une fantasy land in its Magic Kingdom park, and sea world, leg kwlowland, and orlando eye all recently broke down. Youre a really good teacher harry. When you are whether are you a fan of harry potter or mickey mouse, the real winner in this competition is the florida economy. I see florida jobs, last the big winner here . Go ahead. Tell us i know youre still in orlando. Tell us what you have been seeing and more evidence of thatence planes how florida was able to turn it around so quickly. Yes. As i was saying one of the big winners here of course is jobs. We have seen a 16 increase since harry the Wizarding World of harry potter opened its doors in 2010. When the new opening of the alley, any day now they hired 3,500 new workers for that project. Some very happy harry potter fans here in orlando. Did you get to ride one of the rides . It is my dream to go down to the harry potter Wizarding World. I did get to ride some of the rides while we were here working very hard scouting out locations. I actually have been here by myself as well. Full disclosure, big harry potter fan. That was the original Wizarding World of harry potter. In universal islands of adventure. E new expansion at universal studios, florida. Most is barricaded by eightfoot tall walls. From what we could see a very fun represent pli cat of downtown london. Very eager fans such as myself standing outside trying to snap pictures, trying to look inside. We do know they are doing soft openings right now. Executives have been privileged to ride through the hog warts express train. We were there for that. Didnt get to participate for ourselves. They anxious people who will be planning to do the hourslong wait whenever they do announce the opening day. Yang, aim so jealous. What point do we reach saturation point with these theme parks . Competing with disney as well. At some point the tourists get maxed out. Thats true. There is sort of a fatigue, perhaps. Thats one thing that the people that visit orlando, the organization here, responsible for marketing all of these attractions, isnt all that concerned about. One point they do make is that they really rely on repeat customers, those diehard disney fans, harry potter fans, marvel fans who keep coming back year after year. One thing that is important is they keep expanding, keep renovating, keep adding new attractions. One coming down the pipeline soon, in a few years disneys Animal Kingdom will add an avatar theme to its park. Highest grossing movie of all time. While the story today is about harry potter and its impact on the florida economy. In a few years it could very well be avatar. Does that mean the job expansion we do see when it relates to theme parks and trickle down, is that longer term and consistent rather than transitory . I think we spoke to an economist that says you see a multiplier effect. We will as they keep expanding, these parks are getting larger not smaller. You are going to see thousands more workers. And with that comes healthier jobs and all the other jobs, education jobs, construction jobs that come along with that that are necessary to keep the population going. We visit longterm. Certainly not going to be certainly we will see that sort of tape little bit because one of the big things also about this harry potter story is that back during the financial crisis, back in the depths of the recession, construction was cheaper, all these investors who struck while the iron was hot took advantage of those prices. Now creating Something Like an avatarland will cost millions more, 25 million more probably Construction Costs alone. We do expect officials here do expect to see the good vibes going and do expect to see gross in the long term. Yang, thank you very much. Enjoy your time in the sunshine state. Im so jealous. I want to go there for years. I got to go. All right. Coming up well tell how you sams club is leading a revolution at the checkout. A revolution that might keep your personal information out of the hands of cyberthieves. Market makers on bloomberg. Im eric. Sams club is seizing on targets misfortune. Walmarts wholesale unit is introducing a safer credit card. Master card will use Chip Technology. You have seen this before. To protect against fraud. Making it the first major american retailer to switch to a more secure payment system. I spoke with sams Club Executive Vice President of merchandising. And ask them why the company decided to make this move. Members have been telling us for quite some time now that security is important to them. So we have been working for quite some time around the chip embedded technology on credit cards. We will still have the magnetic strip on the back, but well have this Chip Technology on the cards we worked closely with our partners at g. E. Capital retail bank and master card to deliver this security for them. Again along with the savings theyll get from this new Value Proposition we have. Charles, people have been clamoring for more credit card security for a long time. They see whats going on, for example, in europe or in canada and see they have chip and Pin Technology. Why cant america have chip and Pin Technology . Why did it take so long . Why now . Well, im not a credit expert. I can tell you is that this is something our members have been asking for. While we have been working on it a long time, its something that we are able to deliver in a chip and signature right now. But the chip and pin is not available in the united states. While you do see it in europe, we will absolutely get there and well move quickly to do that. Right now its all thats available for us to deliver for our members. We are very confident its a much more secure mechanism than what we have. Although we have had no issues in the past whatsoever around any security with our sams club credit. You would move to chip and pin if the Payment Network could handle it . We absolutely would. Absolutely. Look, sams club is part of walmart. One of americas biggest corporations. Can i safely assume that walmart is putting pressure on the banks and Credit Card Companies like master card, visa, American Express to get with the program and give america the chip and Pin Technology that it needs in order to be more secure . What i would say is that walmart for its customers and sams club for our members have them in our best interest, right . And thats what they want. So at sams club we have this technology with the chips embeded in all our registers. Most of walmarts already have them. Theyll have them by the end of the year and well move as fast as anybody will let us to get this technology in there. We are focused on delivering that. How much lead time do you think sams club has over other retailers, the ones you compete with, who are now going to have to face the proposition of not offering a secure technology . I really couldnt tell you how far away we have. I cant tell you what they are working on. I can tell you this. We have been working on it for some time. When you say some time how long is some time . Months and years. Not days and weeks. Charles, he says months and years which would suggest this was an issue walmart and sams club cared about before we found out about the preach at target. The question is, how much does that mean for customers at the end of the day . We had that i wanted to know people are going to shop there no matter what. What does that mean . Im not sure im absolutely certain that walmart has run numbers. Numbers they are not prepared to share with us. I do want to know what kind of an impact they think this is going to have on loyalty and customer acquisition. Whether it will be easier for them to steal customers away. Youll need to stick around everybody. In the next hour of Market Makers well tell you why kraft is going cuckoo for social media. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and Stephanie Ruhle. Digital wars. Companies and consumers all worried about protecting their Information Online and the debate about the right approach to the internet. Making the main food making it a main course on social media. We will talk about the buzz on bacon. And a new feature to make moment todate a remember. Welcome to Market Makers. I am alix steel in for Stephanie Ruhle. These are the top business stories from around the world. Tech company ceos have signed a letter asking the senate to muscle the National Security agency. The open letter published in todays New York Times and washington post. Facebook, google and apple ceos are among those asking for the move. The European Central bank cut deposit rates to below zero this morning to. 1 . A majorthe first time bank has used a negative rate and it is designed to counter inflation in the euro zone. Alibaba is getting into the game. Announced today it is going to buy a stake in the club that one last years asia grant. Mary callahan erdos is one of the most important figures in banking. She oversees one point 3 trillion a jpmorgan. Her Powerhouse Group grew to two 2 billion in revenue last year. When you think about your business, what you oversee, what keeps you up at night right now . We worry a lot about our clients being properly invested. I actually you know, everybody worries about the next lack swan event, the next crisis in the financial market. I worry more about the people that, post2000 eight, having gotten back on track in their asset allocations, there are a whole lot of people still heavily weighted in cash, and i think it is going to be a while before we can get them all properly back into the right asset allocation, which is what they need to be so that they can be invested in the long term. Do some of those people not trust the system yet . When you look at the current regulatory environment, is it in cash . People to stay i think it is just healing from an experience and believing that there is a direction to go in to start making money. If you talk to our largest clients, people really have to invest in the longterm and stay focused on the longterm, they continue to take advantage of slowdowns at the beginning of the year and heavily invest, private equity markets in places like south africa and a lot of opportunities in europe where the markets have been a little more volatile, taking longshore positions, hedge funds have been able to weather the storm quite well there, infrastructure. There are a lot of places people continue to put their money to work and i think others will follow. Are you seeing more people in finance and private equity when maybe they should not be in that zone . I dont think we are in that situation. I think there are clients may be more heavily weighted toward credit. They are leaning on yields and dividend paying stocks when they could feel freer to invest in the long term the equity markets. I think once they can reallocate that, that will feel better. Is there a question you are answering the most when clients call you . I think the question i get most often is when are we going to believe the economy is back on track . When are we going to believe that we can go back to Capital Spending . We are seeing signs of the globally around the world. You just wish there was a tone from the top that told all of us it is ok to invest, we have a great, great future. We live in one of the greatest countries in the world. We have all of these things at our fingertips, lets put them to use. What do you say to top talent. There is a believe that Financial Industries have a brain drain and everybody wants to be in tech. We dont have that problem. A couple of years ago, people went to technology and media, places where you can go and experience great training. I think the most in porton most important thing is to go to a company that gives you great training and great experiences and diversity. That is what i would want for my children and their first job, world and i think that is why always had ae Strong Training Program and we are super proud of it. Mary does not just run asset management, she also runs in the marathonnual challenge. Laterl have more on that in the hour. Kraft is hunting for millenials. Working . Social media officer joins us with some insight. I think you have to look at the kraft brand and craft portfolio. We are inherently a set of social brands. We have been connecting our brands with consumers over food for over 100 years. We have some of the most iconic brands in the industry from oscar mayer to philadelphia cream cheese, planters peanuts to kraft macaroni and cheese and jello. We have the privilege of being in 98 of american households, and our job today is to find a way to make these brands relevant and fresh to a new set of consumers where they are, and where they are is on social media. Is that to say that there was a risk of becoming not relevant to those consumers if you did not do this kind of thing . Yes. If you take a step back, you have a tremendously transformational landscape happening today driven by data and technology. Every industry today, every tond is challenged with how remain relevant to consumers where they are, and they are in social media. Transforming our marketing and reinventing our marketing is one of our challenges. What are some of the changes you have made then to your social media marketing. For us, it all starts with content. Brands thattage have great personalities, established rituals and great personality. One is our oscar meyer brand. Few yearsbrand of back found that the way to a mans heart is through his stomach. This is one of the shining examples of where we connected on social media. We launched a bacon barter where they challenged a consumer with toar and a tank of gas travel across america. He did and recorded all of it for social media. What is your roi on that . Does it actually sell your product at the end of the day . Absolutely. We have launched a brandnew entirely through social and digital and that brand in its first year out of the gates grew to be a 100 Million Dollar brand. In terms of any investment we make on social, it does have to stack up to any traditional investment we make, and in fact, thats exactly what happening. You have experiment did with twitter, pinterest, facebook. What works best . It depends on the consumer we are trying to get at. Is a bullseye because it is filled with food engaged, contextually relevant consumers who want to share recipes. A brand like jello can reinvent itself as a Heritage Brand in and demonstrate that on pinterest. Jello is one of our great examples of where we have been able to find new ways of bringing that brand to a new consumer. D. C. Evidencing your work with twitter that twitter is not achieving that level of engagement with the user that it thes and is necessary for company to keep growing and ultimately keep profiting . Actually, wait, i should be clear because they dont make money yet, but ultimately to get to the place where they make money and craft makes money. Twitter has been a Strong Partnership for us. We launched a tweet at the super bowl for oscar meyer. Twitter amplification opportunity for us is tremendously interesting and we continue to look to twitter as a strategic art and her as well as a place we will invest. It does return Strategic Partner as well as a place we will invest. It does provide return on our investment. I hear you have a plugin for the ios 7 where i can wake up to the smell of bacon. I dont know if i want that coming out of my phone. Well withconnected consumers. America is obsessed with bacon. To go afterway americas favorite big and then consumers the first ever pp . Gin iphone bacon a thank you for being with us today. Coming up, cyber defense, is it a waste of money . And find out why Donald Sterling is changing his tune when it comes to the sale of the l. A. Clippers. We will talk to his lawyer. Cyber threats are on the rise and it is driving demand for Tech Companies to focus on cyber solutions. They have received double the funding from last year. How will this new focus impact our Technology Future . Here with me to discuss is the ceo of a global Tech Security firm. He joins us now from los angeles. Thanks for being here. What responses are we going to continue to see from the government and other companies over the next few years . How ramped up is this going to get . I think we have all seen how bad the problem is just with the indictment of five individuals two weeks ago. Been, the problem has the last decade, a stymieing of intellectual property from the china. To places like that has caused concern over our future being sucked out of the country. At least now the government is taking a more aggressive stance in calling out these individuals and trying to do more about it. It appears to be creating a backlash against Companies Like cisco, ibm, and microsoft. That is part of the problem we have. Again, over the last decade, we have taken a more passive stance toward calling out china. Even if you look at the indictments, theyre really symbolic. We dont expect to get residuals back from china. I think once we get past this posturing, almost bullying and trying to get the spotlight off their systemic and focused effort to get our intellectual property and cap it back on us. I think it will blow over, but it is a pretty well orchestrated Propaganda Campaign by the chinese government. Is china doing anything to us that we are not doing to them at the end of the day . That is a great question i get all the time. It is very clear that the u. S. Government is active across the board in terms of Information Collection capabilities. Many ofs an interest in the companies and what we dont see is the u. S. Government handing over intellectual properties to individual companies. We are not taking airbus secrets and handing them over to boeing. The government is involved in the collection of the data and if there is something that will help accelerate their own efforts in china, they will hand it over to their own companies and then off to the races they go, and that dramatically increases the amount of r d investment it takes to get to the market. I am going to play devils advocate as well. We dont have evidence to suggest that the government is handing over airbus secrets to boeing, but quite honestly, how do we know that isnt happening . Think of all the things we did not know before Bradley Manning and at word snowden that has changed the way we think about relationships entirely. Thats a fair point. There is nothing that has come out that i am aware of where this takes place. There is a lot of oversight in terms of how the collection takes place, but i think much more important is being able to focus on what happening between borders and hopefully, this at least, in my mind, shine some additional light on the extent of the problem so that we can get National Leaders together, focused, and involved in this problem to try to move it in a direction that is productive because right now we are at a stalemate. China and a lot about the u. S. Relationship. What is the biggest threat to us . We have to talk about russia, right . Absolutely. Russia is very active in cyber crime. Last week there was a very big piece of of a prolific malware designed to steal financials. Effort focused by the fbi and others. You see a lot of activity coming. Ut of iran, south america it is a global problem. I think each country has its own specialty. As an example, russia is probably the best at creating tools to cipher information and money out of peoples accounts. This is why i only operate in cash. Thank you so much. Folks, you have heard of apple, no doubt, but have you xiaomi. F shall me they are being called the apple of china. Their phones are about half the price of apple phones in china which is why they are doing so much better than apple in china. This is one of the Fastest Growing Technology Companies in the world right now. They did not even exist four years ago. Then the founder got together with seven other chinese tech titans, all people who could have been ceos in their own right, all people who could have retired 10 times over, and they got together to form a smart phone company, a company that was trying to crack a very mature market. A lot of investors did not believe they could do it, but in fact, they have. They are now worth 10 billion. They sold 11 billion smartphones. They have a long way to go, but this is an incredibly Ambitious Company as well. They are expanding to brazil, india, russia, huge countries, and they recently recruited a top google executive to help lead this charge. Thank you very much. At 1 00 this afternoon for an indepth look at this unique chinese company. You will want to stick around for this. Tender is heating up with a new feature that is sure to surprise you. We are approaching 26 past the hour, so it is time for bloombergs on the markets. Sprint is nearing terms for a potential acquisition of a tmobile unit. M the deal could value tmobile in the 30 plus billion dollar range and shareholders have some misgivings about that. There is a possibility that if the deal does not go through after being announced that sprint would have to shell out a billion dollars. And then what happens next . Siena. Tching the fiberoptic company rose the most in a year. Estimates came in and . 17 a sayingnd ceos are results are driven by the Company Expanding into new areas and are pretty thing that the rest of the year would be stronger than the first half. Revenues of the First Quarter of 650 the highend Million Dollars. One of the survivors of the shakeup in fiberoptic networking that happened more than a decade ago. Coming up, Donald Sterling tells us how his legal battle with the nba was resolved and what is next. And we will tell you how tender plans to heat up your next online date. The ceo joins us to unveil a new feature. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and Stephanie Ruhle. I am alix steel, in for Stephanie Ruhle who is on assignment today. And i am Erik Schatzker. As you may have seen earlier held a town hall meeting to address the recall scandal that is not going away. A threemonth investigation in fatal mistakes made by gm in 13 deaths indicated that 13 People Associated with those debts are no deaths are no longer with the company. Rightly put emphasis on the call to action the mary barra put on employees today saying, if you see anything wrong, if you see anything that jeopardizes the safety of our automobiles, you have to speak up. If you dont get satisfaction from your manager, your supervisor, bring it directly to me. And that is a huge cultural shift for a company like General Motors. You wish it did not have to be. Short. It is the kind of shift you have already seen made of ford, for example. Someone mentioned earlier that since the 1970s and 1980s this has been the case at toyota. This is part of the quality process at quality companies. And the case with gm, they have not been Building Quality product until now. I think that is the important take away from todays town hall meeting. Keep in mind, it was directed at their employees. To see other things take the spotlight as far as this report is concerned over the coming days and weeks. It is a 300 page report. It is an outside, independent report. The same guy who e investigated the Lehman Brothers bankruptcy. Exactly. There are a lot of findings in there that congress, for example, is going to want to talk about. And fred upton, the congressman from michigan has said in the coming weeks that he will call witnesses from gm back to testify. I imagine he will raise the issue of the failure to find fault with individuals. I can understand why. People make decisions. Companies and cultures dont make decisions. People do. What mary barra said, and she , ae a press Conference Today town hall, was that there were findings of responsibility in , and they felt they had been dealt with. 15 were fired or retired. Its interesting that she would not tell us why or which. Some of them may have gotten buyouts. She did not name any names. Others got disciplinary action. We did not get any details beyond that, and surely that is the sort of thing congress will ask about. What about lawyers . They took a lot of heat for their part in the coverup and they were not mentioned. Coverup is term something gm would want to avoid. Quoteunquote gekko it is obviously a coverup. Coverup at aen a lower level. I am just saying watch out when you use that statement. It is obviously a very loaded one. The lawyers seem to have gotten off at least the lead lawyer seems to have been cleared by the report and mary barra herself seems to have been cleared by the report as not knowing it. Now, the lead engineer who is responsible for the car and this ignition has been fired or at least, maybe somehow left the company in another fashion, we know from sources close to the matter. Lets go back to the point you are making at the beginning about the cultural change at General Motors. First of all, it is an enormous undertaking because it is a huge company. Second of all, the results are far from guaranteed. Toyota had a culture of responsibility, yet toyota also had a culture of denial. When things went wrong. Even happened had and of course we witnessed several years ago the scandal a result of that cultural failure. Management has to be on board with that, too, right . Its great for a company to say you are responsible, you have to come forward, but that has to trickle down to middle management. The problem is obviously in human nature. Watch yourng to back, instinctually, rather than watching the back of the organization for which you work. What you have to do is incentivize them to do that. There is a famous story of alan mulally when he came to ford, holding a board meeting, and everyone was telling him positive things, yet the company billions of dollars. He said listen, i cant have green arrows all over the scene when we are losing money. Where is it coming from . And mark fields was the first goton to speak up and around of applause. Mary barra said she will reward whistleblowers. If you see something, say something. That is what she is trying to drive here. Drive arying to turnaround because if she doesnt, there will be more problems. And by the way, there will be more recalls in the coming days and months and they have already recalled 40 million cars this year. Its only june. 14 million cars this year, and its only june. The new standard is, no matter how much it costs to fix now obvious to us, but when you are a middle manager, not so obvious , it is much cheaper than fixing it later on. This is already cost them 30 billion and it will probably cost them another multiple billions of dollars. Up, the dating app unveiling a new feature that it says will take swiping to a whole new level. We reveal all in our exclusive interview with the ceo. Missed anyay, if you of our interviews you can watch them all on kindle fire and apple tv. Dr has caught fire around the world. It makes more than 10 million new matches per day. Now it is launching a new app to keep its users engaged. The ceo joins us now from los angeles. Welcome. Tell us what this new feature is. Tinder isized that really good at helping our users form new connections. We just hit over 2 billion matches made. Making connections is not enough. We want to give users a better way to get to know their matches and a better way to communicate e. On text. That is what moments is. It gives users a way to share photos with all of their matches at once and it gives swiping bowl objects. Able objects. If they like what they see, they can swipe right. Were you inspired by snapchat . Er is really different. A continuation of our core experience. But the pictures are only there for 24 hours, right . They have a lifespan. We want users to be able to share without the pressure of what they share being permanent. What are you doing to monetize the company . Where are you in a process . Right now, we think about user growth, but there are a lot of ways we can monetize and we think users will be willing to pay for the value were giving them, from advertising to premium offerings. We will get there, but right now were focused on user growth and successfully launching moments. Married and have two kids so i have not had much reason to check out tinder until this morning, quite honestly, when one of my colleagues showed it to me, but what i was able to see very quickly is that its fun, right . The level of user engagement, i have seen some of the design logistics, is off the charts. What i am wondering is can you tell how many of the people on there are actually matching up forming some kind of lasting bond, and how many people are just screwing around, or do you care . All we are focused on is creating connection between two people. What they do with that connection is up to our users. Some seek out dates. Somehow shortterm relationships. Some are finding friends. We hear that users travel around the world and use it to get local recommendations on what to do. Certainly a lot of value in what we are driving, but its enough that it keeps bringing users back and wanting more. I have someone who i have a friend who met someone on tinder and it turned into a longterm relationship. When we come back, Corporate America is tying up its running shoes. We will take you to the starting line of j. P. Morgans annual race. Donald sterling vowed to fight to the bloody and keep ownership of the Los Angeles Clippers and he sued the nba for violating his constitutional rights, but now he has dropped the suit and agree to the sale. Why the change of heart . Were watching his asking his attorney. Is the fight between mr. Sterling and the nba over . It looks that it is over. Just to be clear then, mr. Sterling will pay the nba fine of two and a half Million Dollars and walk away from the situation . I did not negotiate the details of the disposition, i cant answer that with certainty, but it is my understanding an impression that they will not insist that the fine be paid and that they will lift the ban and that things will resume a state of normalcy. A state of normalcy. In the sense that he is selling the team, along with his wife, to mr. Ballmer, and well get on with his life. To moveys, he is trying on. Lets go back a few days, if we may. Mr. Sterling accuse the league of violating his constitutional rights. As you know, that is a serious allegation. Was it not a serious allegation . . As a just legal maneuvering it was a serious allegation tied to the leagues effort to confiscate the team at a meeting scheduled for tuesday of this week which they then can sold in canceled that canceled in light of mr. Ballmer making the antitrust allegations made it. Does that mean there will be no more illegal actions on sterlings part . Is bothderstanding sides have agreed to stop all of the legal maneuvering. Mr. Sterling will dismiss the case. The nba has agreed as i understand it, not to pursue him, and not to file any additional cases against him, and as far as i can see, all the legal jousting is done and they thisto memorialize arrangement, which i understand they are doing as we speak. What about the larger part of the story, the woman who made. He recording i dont understand the question. What about legal action against her . Not anything he has discussed with me. I see. I personally think he has enough legal headaches in the last couple of weeks and he is prepared to settle down and just move on with his life. Feel oes he continuing the battle with the National Basketball league in the present posture where they are not taking the team away from him but have involved themselves in the sale to mr. Ballmer changes the legal considerably. If mr. Sterling were to pursue any lawsuit at the present time, drag hisinevitably wife into the suit and probably mr. Ballmer, and mr. Sterling was just not prepared to go there, which is why he has decided to move on. Additionally, i think he the team, thet the fans, everybody would be better off with an immediate solution to the problem. What has mr. Sterling told you about the teams future under mr. Ballmer . I think he is looking forward to them being very successful and he wishes them well. Thank you. The attorney for Donald Sterling who has agreed to the sale of the Los Angeles Clippers to Steve Ballmer for 2 billion. A race for charity the jpmorgan host in 13 cities around the world will raise over 700,000 for charity. Tonight is the new york city race. Stephanie ruhle has a look at what its all about. 30,000 runners are lacing up ash aroundmile d central park. We all work really hard so we come out for one night and play really hard. Mary callahan erdos runs jpmorgan management. The race and has won it in the past. Wall street dominates the course. Its so great to see all the corporations in new york city come together for one night. Its just a really special, magical night, and you see it as people are running, walking, having fun. It doesnt matter what you do during the day. Tonight, we are all here. Its great. Weighing no elbow elbowing. I havent seen it yet. Runners take him glory, bragging rights, and a tshirt. If we have all of the Financial Services industry here, you yourself are a runner, lets go. James gorman, jamie dimon, mike ormond, year, who is the fastest . I can take them all. You are without a doubt the fastest runner . We will see how it goes. I am really slow. That would take me half an hour. Deveney was going to do it that she was called away to an assignment stephanie was going to do it but she was called away to an assignment and couldnt. She looked already in her workout here. Disappointed. Maybe next time. I am sure there will be a next time. Thank you very much for joining us today. It was good to have you here. Tomorrow on Market Makers, we will be talking to the ceo of. Ransocean, Stephen Newman i am so looking forward to that interview. I am an oil nerd as we know, and i cannot wait. This will be a good one. It is approaching 56 past the hour. That means Bloomberg Television is on the markets. Scarlet wu has more. U. S. Stocks are holding pretty steady following todays historic rate cut. Investors are waiting for the next shoe to , the may jobs report. That comes out at 830 a. M. On friday. Joining us now to look at what is being riced into the market. S we await that report is jim what is priced in preecb and post ecb . Its interesting, we have been seeing the vix hitting multiyear lows here. Not really seeing that much volatility being priced into the market. The ecb announcement came up, his storied news, but it did not really move the needle historic news, but it did not really move the needle. We have come all the way back and taken out the high. Shocking day, with saw trading day, but we have taken out the highs and it looks like we are going to head higher into the close. It also looks like we saw the vix come down as a result. Vix currently at 11. 6. Do you see any cause for a volatility event in the nearterm . With the vix at these levels, buying volatility could be a good trade. However, i think if you are in investor who is really concerned about the future of this market, i would use that low volatility as an opportunity to buy relatively cheap and effective putts. What about volatility protection on small caps . I think that is going to be where we are going to see a correction start if we get one. We have seeing growth names lead selloffs in this market. If i see those start to look we, i would definitely be looking for some downside protection. In terms of asset classes, what would you be looking at as a leading indicator for equities . Largecap energy names. Other volumes have been relatively thin. Belooks like money will looking for those names to move higher through september and august. If i see those names not perform on a good number tomorrow, i will definitely have some cause for concern. Somets take a look at individual companies. Shares of siena surging by the most in a year. Profits topped analyst estimates. What kind of activity are you seeing . We are seeing a big spike in siena trading, almost four times the average daily contract. What is more interesting is the activity we saw last week on thursday. A trader came in and bought more than 9000 of the july 20 cause, over a 1 million bet. That trader has not done anything with their position yet. Nothing to sell or take profit, leading me to believe that he or stock she thinks that could continue higher through july. No indications that an Options Market will revisit those highs . I think we will definitely revisit those highs. Like i said, the trader bought a huge block of the july 20 cause. We dont look at any profit taking. There is a lot of profit trading on other lines. I think the stock will stay along the 20 line. They paid 1. 25. Theyre pretty even. Earnings are due out on monday. How are you playing it . Stock,rd highs in the but it is a terrible performer, historically, on earnings day. Currently the Options Market is expecting it to selloffs as much the junellars by expiration. I am going to put june put spread on hertz. . 25. Thank you for that wrap up. We are on the markets once again in 30 minutes. Money clip is up next. Have a great day. Welcome to money clip. I am adam johnson. Gms total recall. The automaker explains why it took more than a decade to fix the fatal flaw. In tech, the worlds fastestgrowing smartphone maker has surpassed china and aiming for the rest of the world. Around the world, whatever it mario whatever it takes druggy. In companies, a medical breakthrough. Mario, whatever it takes, draghi