Transcripts For BLOOMBERG Market Makers 20140611

Makers here in new york city. Stephanie is on assignment to date stop you today. You will see her back shortly. There is no better place to go right now than the political earthquake in washington. As you probably already know, eric cantor was shockingly defeated in virginia last night. He was one of wall streets favorite congressman, bankers and bankers and traders believed he understood what they wanted to see happen and were among his Biggest Campaign contributors. His loss has immediate implications for a range of policy issues trickle to the business community. Latest. Ok brings us the and also with us is chuck gabriel, president of alpha partners, which advises Institutional Investors on matters of policy and politics. Hill, you are on capitol every day, and if im not mistaken, you saw eric cantor there yesterday, which had to Say Something about how he felt going into this primary election in virginia. It says a lot. He was at a gop News Conference in the morning. He was taking part in both on the floor as late as 2 30 p. M. In the afternoon. There was a election in his district, and by 7 00 or 8 00 last night, the word came that he had been defeated by a relative unknown, and economics professor from Randolph Macon college. Huge ripple effects, not only on the House Republican leadership, the party itself, but also as you said, the business community. There will be short and longterm ramifications. I talked to peter king of new york about that. Almost anything controversial will be put to the side. Whether it is Immigration Reform or reforms in the bank. Thank out we are not coming up on a debt ceiling or a shutdown. Fortunately, we can keep the government running, but i do not or herthing dramatic chattering over the next several months. The first big impact here, you will see Tea Party Conservatives demand a seat at the table. Maybe eric cantors seat, or even possibly John Boehners seat as speaker of the house. Conversation with alpha,abriel from everyone is scratching their heads, wondering how eric cantor did not see this threat coming, how he allow this to happen, and what this signals for the gop, for the future of the party, for policy, and possibly even the midterm elections. Tell us your thoughts. A danger inhere is reading too much into this. It might be a classic case of an income and becoming a little bit aloof at home in an antiincumbent year. Thes interesting to see contrast that Lindsey Graham was a big immigration supporter and he won hamburg and he won home state of north carolina. Earthquake. T of an it was almost three years ago that the congressmans district was the epicenter of that earthquake. And he was socalled he was one of the socalled young guns. Republican inng the house. What does this mean for at the very least, house leadership in the Republican Party echoed many saw eric cantor as the natural excess or for john boehner in the Republican Party . Because many saw eric cantor as the natural successor for john boehner as speaker. That is a very important question, because it is not clear. And peter may be getting some wins about this doubt on the hill this morning. It is not clear whether the Republican Leadership might not feel the need to send a signal fairly quickly, perhaps one of continuity that john boehner might be willing to stay. Been thoughts that he might leave, this particular particularly if the democrats keep the senate. The readthrough on this is quite interesting. Peter, you mentioned that the tea party is going to want a seat at the table. Many even in virginia may find it hard to believe that as many voters as came out last night in this primary considered eric ,antor too liberal for the gop but that appears to be the message sent in a primary race. This is any idea how going to play out in the next days and weeks . First of all, theres the question of whether virgin you democrats voted in a primary. That is one thing his folks are talking about. But there are already wider implications. Of erdrich the early word leadership scramble, cantor will not resign. There will be more pressure on the leadership to step forward and say how they will handle this, and whether or not john boehner will indeed continue as speaker, and whether or not there will be a challenge. Fiscal conservative, tea party sure, thesebe are three faces that would like a seat at the table, a bigger see than they have now. They may have to satisfy them by moving one of them into cantors position. Chuck, what do you think thosethose three echo three . What are the policy implications going to be, at the very least, between now and november midterms . Ken jordans name is often mentioned, but he would be behind handling as the conservative challenger. Jeb hensarling as the conservative challenger. We could be looking at his abdication from the house i Natural Services committee. There is Financial Services committee. There is a lot of important work that he would be stepping away from. There is a reauthorization and is very important to boeing. But then you get into the next congress and we have just seen what i would call an epic frail what i would call an epic fail of fannie and freddie. The conventional wisdom that has emerged on the tail of that is that we are unlikely to see housing reform until 2016, partially because Jeb Hensarling has had a hard line about not only ending fannie and freddie, phasing them out, but not replacing them. A new chairman might shake that up. Chuck, before we let you run, i need to ask cantor was popular on wall street in part because of his stance on the issues you just mentioned. Who is wall street going to champion now . Well, the important thing is the readthrough for this next republican primary and for this fall. It wont matter a lot with regard to the november Election Results where the senate is particularly in play. But that is a great question. I dont think it will be kevin mccarthy. Tom price is an interesting name, one that peter mentioned earlier. But that has to be sorted out, no question. Thank you very much, chuck gabriel. Hang on, peter. We may come back to you. For the moment, i need to thank you gentlemen. Im not sure whether we will be able to continue the conversation. We have some important reaction to bring you to eric cantors primary loss. This is coming to us from the president of the u. S. Chamber of commerce, tom donahue. He is standing by with our own alix steel at the Goldman Sachs north American Energy conference in lower manhattan. Alix steel, over to you. Thank you. The explosive news of the day, cantors lost the primary, what is your reaction . I think cantor is a very serious person who was working on some challenging and controversial issues, and who was in the leadership. I think he provided a lot of help and balance and we will miss him. Do you think it was a vote against the chamber of commerce at the end of the day . O, come on. We have been in 12 primaries since we started this. We have not lost one yet. We were not in that primary. The headline is sort of interesting. Your headline, the headlines in the press the tea party eats cantor. The tea party had nothing to do with it. They did not have any money or people there. It was an attractive professor in a very, very conservative district in virginia. Everybody was surprised. But he was definitely the guy on the outside. But is everybody on the outside a tea party person . Not necessarily. But eric cantor had millions from wall street banks. What does that tell you about the state of business when it comes to getting elected . Should look at what happens throughout the primary process, which is a recognition with half of the voting population. They are having primaries in both parties. Iny ought to put people place who have a chance at being elected, and if they are elected, will go in and try to do things to create jobs, to drive the economy, and to put some common sense back into people working together. It seems like a tea party or there will unseat an incumbent, potential to. Stick with has the potential to. Eric cantor did not even see it coming. You didnt see it and i didnt see it, but there are 435 members of congress. I feel badly for eric cantor. He is a very talented guy. But we are not going to fold up our tent and go home and not participate in the boy scout meeting because of one race. I look at what is happening across the whole system and i think people across this country are looking for folks that want to make something happen, that want to bring this country to a point where we create more jobs, where we drive Economic Growth and deal with the problems we have. Of othero you think races where we might see a tea Tea Party Candidate upset and incumbent . I think in mississippi, there were issues. There were highly emotional issues and issues of age and other things. And not many people voted. Now we will see in two weeks from now when they have a real election and two people sitting there going facetoface what happens in that election. Maybe that will make it more instructive. Is the bottom line is, this what the american process is about. And it is, by the way, how do you make money. You have to get a conflict going here. What are the issues that you as the president of the chamber of commerce care about . Like immigration. It seems like that was one of the reasons why he got voted out. That would be old that will be for us to find out. I dont know that is the case. I dont believe immigration is dead. Might have some change in the timing, but there are enough people in the yesterday, anyway who would have easily voted for immigration bill economy need an immigration bill. We needed for four or five reasons. We educate all of these people and send them home. On the lower end, we need these workers to come here, or you will have to go and pick your motherinlaw up at the nursing home and bring her home to live with you. These are trickling issues for the cut Critical Issues for the country. Whether we deal with them now or wait until they get worse. Will we see Tea Party Candidates, or outsiders, taking on leadership positions that disrupt that agenda . I have found over a long time frame that whoever eventually ends up in leadership positions has to do with the possibility of that position. When you are the outside person trying to work your way in, you can say all kinds of things. When you are the person with a responsibility, when the American People look to you to make decisions that affect them, their children, our economy, and our security, leadership all over the place does a better job. But we have not really seen that with the tech part with the tea party. Look at ted cruz and the Government Shutdown. Look at this new at what has happened with the new influx of republicans. There are a lot of serious people who have been nonaided and elected. Ted cruz, by the way, he just had a big deal down at the republican conference in texas. What was he doing . He was more calm and moderate and talking about issues, because he understands that being aggressive while you are noting into the game is exactly what you can be if you want to leave the game. A long time at this in this country and were going to stay at it and you will do, more often than not, what is good for the American People. Whether the Republican Party assimilates the outsiders or not, what does this mean for businesses . I think businesses are doing fairly well. Even though they just lost an ally in cantor . We have lots of allies. You can try to make this the story of the year, but it will not last very long. We have the elections coming up in two weeks. We have other activities that we all have to deal with around the world. Have serious questions about what we are going to do about jobs and growth and yes, immigration. We have serious questions about what we will do about infrastructure. And then on Social Security, because in just a few weeks we will lose one of the Social Security programs and have to deal with that. The bottom line here is that i feel badly for eric cantor, because he is a great servant to the American People. Have you spoken to him, by the way . Not yet. We are here. But the bottom line is, this is so exciting. Very exciting. Does this affect John Boehners job as speaker . Not if he wants to be speaker. Are you saying that if he does not want to be speaker he is in trouble, or a fee wants to be speaker or if he wants to be speaker he is in trouble . Im sure he wants to be speaker. But his job is not in trouble. Why is his job not in trouble . Because he has enough to get elected. That is how it works. You might have 10 exciting stories you can tell what you think of Jeb Hensarling . What do you mean . Republicanins the leadership, what do you think about him . I would have to think about that. Tohink the congress has choose their own leadership. We have never, ever allow the chamber to get into the business of who they choose as leader. That mistake them up people that it is a bad mistake about people that do that. We have to get good leadership so that whatever comes up to a vote or whoever is in leadership, we have the best people there to get the best possible results. Preference for majority leader . I would never take a preference. That would be a contradiction of what i just told you. But but you will but you want someone that is good for business. You want someone who will work with you. Everybody will work with us. We have 300,000 members. We represent 3 million companies. We have thousands and thousands of chambers all over the country. The opportunity to go and sit down and talk to people about our issues is wide open. What we are concerned about is making sure that they get a fair hearing give a fair hearing to our views and vote according to their conscience. We have been doing pretty well on that for a long time. You are so calm, on the news of the day, so calm. Thank you so much. I will send it back to you in the studio. Terrific stuff. A great opportunity to speak with the u. S. Chamber of commerce, tom donohue, in the wake of eric cantors surprising loss in the gop primary. Peter cook is still with us. It seems to me that alix steel in the hit the nail on the head, Abram Markley called a remarkably calm tom donohue in the face of such a striking development. Tom donohue is one of the most powerful and respected lobbyists in this town for a reason. That was a very professional job by Thanh Donohue Tom donohue, but there is no question that eric cantor is a hit to the chamber of commerce. And a hit to the business community. This is a lawmaker where ceos came to capitol hill to talk about issues, the went to his office first. This is a defeat for the chamber of commerce. They have a lot of allies on capitol hill and are a force to be reckoned with, but they will have to deal with this defeat for eric cantor. It is not something they thought about 24 hours ago. Peter cook, thank you. Overseas, aime, standoff between taxis and is playing out. Are and limo drivers bringing traffic to a standstill, protesting the reach that uber has and the threat it poses to their livelihoods. Are in trafalgar square. Olivia, begin by what you see on the ground there. What is it like echo what is it like . Hear you. Arely there is a ton of noise. Cap drivers have been honking their horns all day long. See we are in trafalgar square. Down there westminster. It is a maze of red. A two mile radius in the center of london where traffic is barely moving. And ambulances trying to make its way. An ambulance is trying to make its way. [siren] [indiscernible] between 10,000 bs per day. Ca ofhas had the affect gridlock in london. As anr is operating but the apper, comes out today. They are not doing their jobs. Uber cannot operate as they are operating now. They are using their smart app as a meter. Cannot private vehicles cannot use a meter, and that is what they are doing. The point is, we are asking them to enforce the op enforce the laws that operate in london. Thank you so much. The issue here in london is that they say uber is operating as a taxi meter illegally. There is much reaction to a very disruptive Startup Technology in what is a very heavily related industry. Olivia sterns in trafalgar square. You can see for yourself how the tests by a london cabbie by london cabbies is bringing traffic to a standstill. You have to ask how this will affect uber in the long run. Is this a blip on the screen, or does this pose a more serious threat . Lets bring in paul kedrosky, managing partner at f k venture partners. And we point that out, because uber is a venture backed company. Does this represent a threat to our business in the long run . Or even possibly in the short run . Give us perspective. Is one of the longstanding reasons why the taxi industries, and Industries Like this has been avoided by venture capitalists. Even though there is a huge opportunity to make dramatic change, you face an industry that is entrenched and deeply politically connected, and protected him anyway in many tos by Regulatory Framework stay in business. We are seeing all of this in the context of european taxi blockade and strikes. This is exactly what you might worry about. I have to say, though, the early stuff im hearing, especially out of the eu with respect to proposals to make it more difficult for uber to enter suggest that uber has a stronger position than many people expect. There is an intent to open up more competition. In london, theres a problem, but that is not what im hearing on the continent. Is this because there is such a long tradition behind the london cabbie . The knowledge that they have to pass that makes them a distinct breed from your typical cabdriver . Right, theyy entrench themselves in the traditional framework. The mapping software, they are supposed to have all of this memorize. It is intensive with the testing. That is lovely, but consumers are saying they want alternatives. Uber is just one of those alternatives and they are being prevented. What constitutes a taxi meter anyway . Pricesve a device that the delivery of transportation by zones, does that turn it into a meter . Then the whole idea of a meter is illegitimate. It does not make any sense. We have a classic Technology Problem where it is forcing you to think, if i have a taxi meter i am protected and if i dont, im allowed to do the sorts of things. The technology itself starts to blur the boundaries. Is of the classic Technology Problem, like the holdout for thehorsedrawn carriages or steam engine . And if that is the case, lets use the internal Combustion Engine as an analogy. It is not like it was only one solution. Or bends thatler invented the engine, and then we saw innovation with henry ford, who will be the next company that comes along and takes an uberlike service to the next level . Seen this already happening any accommodations. Providing an uberlike service just on demand with overnight stays. You are seeing this in all of these markets where there are all of these resources where people are on holidays and they want to rent out these empty houses. There are these regulations that say we allow only these kinds of companies or people to offer these kinds of services. Comes along. Group you will see all of these groups be threatened by the providers for fractional services. It sounds like uber is just the beginning. We are watching closely. Paul kedrosky, venture capitalist. We are back in two minutes. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Welcome back. You are watching Market Makers on bloomberg television. Im Erik Schatzker. Stephanie is on assignment today. Top business the stories around the world. In is selling 81 stake outdoor america, the billboard company. Cbs split off from the Parent Company this year and plans to convert it to a real estate trust. Airbus has had its biggest order camp cancellation ever. Price for that order, 16 billion. Emirates is one of the biggest customers for the boeing 737. A new Bloomberg National poll, 62 of those we surveyed said they would pay more for energy if it means less pollution. And more with support a candidate who is willing to address the issue. U. S. Stocks are in the middle of theve year bull market, to surprise of many investors who were certain that this would be the year that Interest Rates rose. The bond market, or many parts of it, are performing even better than a quit ease. I am delighted to bring in bonnie, the director of reddit at her company. Lets talk about this phenomenon. This was supposed to be the year that the credit market backed out and people lost money. That has not happened. It has left many, including me, wondering how long this can continue. Lets take a step act. This is probably the fourth year he was supposed to happen. That Interest Rates rose and everyone fled the bond market. Nothing happens in a vacuum. The strength of the u. S. Economic recovery has been spotty at best. And especially with what is going on in european markets and the european economy. The fear of a deflationary spiral, and now the ecb embarking on what is ostensibly their own qe program. Investors are starting to look at that and say, o, my goodness, the u. S. Looks cheap to some of the european bond markets. Not only that, but when you look especially among Institutional Investors, and the stock market is up 30 in some cases, why take that strategy for income and lock it up . You have several dynamics that investors have on their radar screens. It doesnt make sense, though. At a time when the economy may not be growing quickly, but the prospects appear to be better than they were a couple of years ago. There is widespread talk that once the fed finishes tapering, we will see in interestrate increase of maybe only quarter percentage point sometime in the middle of next year, and that would suggest that the economy has healed to a meaningful tightening. Those dont sound like the conditions for a bond market, do they echo do they . X no, they dont. And the scenario you just basic is your lets admit that it is a dramatic oversimplification. Not even that, but it is a cyclical recovery. We think we are in a much more secular environment. It is a more complicated conversation. It is a more complicated and more longterm conversation. If you look at some of the factors that impacted our economy and impacted employment i mean, employment gains are 1830ing like fouryearolds, 30 of them live with their parents. That is not something you would have seen in our something 1834yearolds live with their parents. That is not something you would have seen in our generation. How is it that the tenyear spano spanish yields is trading through treasury . That is the question of the day. Human beings are pattern seeking storytelling treaters creatures. This is crazy. Look at this chart. Are tryingand people to explain. When you look at the u. S. , and we have gone through our cycle and we are im tapering mode. The europeans are are just starting on the qe path. Gingerly. At the and when you look qe path, it did not create a lot of jew a lot of jobs, but it did increase investment in stocks and bonds. Maybe the same thing will happen in europe. The growth is looking very near. But over here, the fed is a buyer of treasuries. In europe, the ecb is not a buyer of sovereign debt. And there is not that much assetbacked paper for it to buy. No, but they have been talking about buying corporate debt. Could you imagine if we were to do that here, what that would do to corporate spreads . They would coming even more. And it would be almost hard to believe. But then again, we would be in our 50 year of Interest Rates of saying interestrate have to we would be in our fifth year of saying interestrate have to rise. You look around the world and you assess the strength relative to the treasury market and the u. S. Credit market, and we look maybe at japan. What is cheap . What interests you . Within asset classic lasses . Yes. We think that high yields are on the oversight of the level. We do like bank loans. Senior in the capital structure and you do have the intrinsic protection against the rising rates. The other sector we like is the emerging market corporate bonds. There is an area where the demographics are totally different. You dont have the 1834yearolds still living at home. Older population and not the retiring baby boomers here. And it is an investment great asset class now. It is not below investment grade. You get the same yield as you doing usc junk bonds, essentially. That is a good trade. U. S. Junkbond, essentially. That is a good trade. If there are folks who share credit, then in what . Risk do not think the tradeoff in local currency makes a compelling right now. To that point that led to the selloff in it in the paper tension fan term in the paper temper tantrum, our funds, we like the credit exposure. We did not want to take the basically, monetary exposure. It is one thing to have an asset class, but it is another to executed on a daytoday basis. Theave seen a change where day today banks have made it harder to be a fixed investor. There are not as many bond out there to buy on a daily basis. The inventories are lower. How hard is it . It depends. The line side, we have not had as much of a problem. We have about 50 billion in assets under management now. The firms that have the problem sourcing are the bigger eyes. The bigger dies. The blackrock, pimco that is to we are referring to. To get it meaningful exposure it is a lot more dollar wise. And it is harder to move that needle and it forces them to rely on derivative instruments. For the midtier firms, we are a little bit more nimble. But not ingood size, performance. Exactly. Bonnie, thank you very much. A rare treat to have you in new york city. The numbers simply dont lie, but will they tell us who will win the world cup . We will do some number crunching on the comeback. And we might also be talking about brazils signature spirit. If he it could be the next tequila. If you are not familiar, the Brazil National spirit could be on the verge of an explosion. Companies are starting to pile into the market. Down with one of the countries Top Producers to get a look and taste at the finished product. I drink twice a week, when it is raining and when it is not raining. Cachaca is a liquor made from 100 sugarcane. It gives energy for the body through sugar. Through happiness cachaca for all the people. It tastes very good, but not a college. Drinking, not as a drunkard, but i love beverages. Cachaca is the meaning its most popular drink. It exported 9 million worth last year. Almost twice as much tequila. Many people for the first time will taste cachaca here. I think they will like it. Historically, brazilians considered cachaca a low craft low class drink. It had an image problem in america, two, and until 2012 when he was classified as brazilian rum. When it was classified as brazilian rum. , you have the pure sugarcane juice and you condense it directly. When it is fermented, you have about 12 alcohol. Now, the u. S. Recognizes cachaca as a distinct spirit. In return, the u. S. Recognizes recognizesn, brazil u. S. Bourbon and whiskey. Thought jack daniels and i try to apply the value to cachaca. The flavor, the smoothness. Ageur sellers is where we the cachaca. I raised dairy cattle here a long time before. It is no good is this dealing with milk. Cachaca is better. 4 p. M. Eastern time, brazil versus croatia. Who will win the tournament . Our resident it a cruncher has been digging through all of the probabilities. I want you to tell us what some of the predictions are. Give us your sense, being the , of who you think is going to win. I have some productions of my own. Productions are all over the place, but the big four that everyone has, brazil, argentina, germany, spain. Everyone is consistent with that. When you start looking at the fifth lace team and beyond, you , and all, belgium that. With the big four, that is where the heart of the game is going to be, and the most likely winner will come out of those four. Why brazil, though . Everyone picks them as the favor favorite. But they are the favorite, one, because they have one the most world cups. And number two, they are the host country. They always make it to the final and they win a huge proportion of the time. Being a host, that gives you the two thirds of a goal per game advantage. Two thirds of every game equates to an extra goal. It really helps you. Let talk brackets elegy ology. T americans are crazy about it. What are some of the things they should be considering echo considering . When you look at the percentages, some people have resulted a 20 favorite. Over at epn, they have the more like 50 . Likeetting has them more 20 . Are statistically driven based on the players, team, who they have played, ranking, and where they have one. Where they have won games. It depends on how many games back, how many years back you want to include. How do you want to treat injuries . How do you want to weigh offerings offense versus defense . That is why some people have them in 20 and others have them at 50 , but everyone has them at number one. Do against soccer the odds . The odds are low. Anytime you have a score where the numbers are low, it is hard to predict. After ball is the most predicable sport because its course at about 100. About 100. S at soccer is so random on an individual game basis, but over the course of a tournament, you see some trends. Latin American Teams win the with latin American World cups. That is why brazil and argentina tends to tend to stick out in this case. I will not surprise you because i have picked brazil and argentina to be in the final. And i think that my final four, fairly unsurprisingly, apart from her geoeye. Fromuruguay. But i am not taking them to be the champion. I am picking argentina. If people have not watched lionel messi play, they have got to see him in action. Your pixie echo obviously, i went with brazil and argentina. Whoa, and italy. Yes, that is my dark horse. Everyone else is going with germany and spain. Youve got to take a chance, right . I like a risk. And to have you picked as the winner . Roseau, of course. But they are brazil, of course. But they are not my favorite. Even if you go with a 20 , there is an 80 chance that they will not win. There you go. Tune in tonight for our world cup special shootout. Can nike beat adidas in soccer . Remember, a d this is the official world cup adidas is the official world cup sponsor. Ou deftly want to watch its a perfect program. You to the big e3 videogame conference happening right now in los angeles. You are watching Market Makers on bloomberg television. Im Erik Schatzker. All of the big names in the gaming world are in los angeles for the big e3 gathering. The focus is on the next frontier, the future you might say, Virtual Reality. Jon erlichman is covering e3. Lets talk Virtual Reality. The traditional gaming industry is still so important, a 14 billion business last year. It is very hollywoodlike. If youve got the best console and games, you are on top. This Virtual Reality is where we are not sure where things will play out. Oculus was acquired by facebook and made a big at e3 two years ago when it was in its infancy twoade a big splash at e3 years ago when it was in its infancy. Now we know that oculus is thinking about a future beyond gaming, more as a communication tool. The home of the grand theft auto franchise argued there is a social aspect. How big a market is hard to say right now. To virtualcomes reality, is there one thing that everybody is talking about . Besides, of course, your interview with the founder of oculus at 1 00 p. M. This afternoon . Sony is pushing through this market. Makes you think of the matrix. They are not sharing too many specifics of when you can do your hands on this, but i think it has established a pitcher additional players that the traditional players like sony will be using this to enhance things like the playstation. Can it be an edge and again processed the same way that xbox is making a big push into Traditional Television . This at 1 00on p. M. With Jon Erlichman. Do not miss it and an exclusive interview that Jon Erlichman has with the ceo of oculus. Market makers is coming back in just a couple of short moment. We are taking a break. We will be going to the Goldman Sachs energy conference. You saw alix steel there earlier. Goldman president gary kellen will be sitting down with alix steel in just a few minutes. Get ready for a highenergy hour. Well take you to the Goldman Sachs Energy Summit to hear from goldman president , gary cohn. The 800pound gorilla of video streaming, everyone from nasa to lincoln turns to this company. Youll hear from the founder of ustream. Donkey drugs . Well tell you about the company that takes Human Pharmaceuticals and turns them into meds for pets. This is Market Makers quots bloomberg television. Im Erik Schatzker. Stephanie is on assignment today. More now on the political story thats shaking washington and wall street to the core. The surprise defeat in a Republican Party primary of House Majority leader, eric cantor, one of the financial industrys favorite congressmen. Were going to explore the implications right now with our own al hunt. Hes been covering washington since the coolidge administration, and hes now a Bloomberg View columnist and host of political capital. Plus we have g. O. P. Strategist tir holt, a former aide to john boehner, who also worked on the bushcheney campaigns. Al remembers this well. We havent seen anything like the cantor defeat in about 20 years. Refresh our memories. You worked on the george campaign. Right, and this was the house race against speaker tom foley in spokane, washington. It was part of the 1994 republican revolution. George was an earnest guy who had gotten through the primary, almost by accident against two more conservative candidates. How things have changed. And as it turned out, foley was really slow to respond. By the time he got off the airplane about two weeks before the election, because he stayed in washington up until the last minute, he was literally a deer in the headlights. Noticed idea what was coming. And it was a fun campaign. Its fun to surprise the incumbents occasionally. Im sure that it is if youre on the right side. Al, was eric cantor a deer in the headlights . He didnt know until he was hit, but yeah, he was. I remember that 1994 election and that race and the tom foley loss was a real surprise. Terry and his candidates did a great job. But i dont think it was anything like last night. 1994 was a good republican year. There was a sense that foley might be a little out of touch. No one, no one that i know thought that there was any chance eric cantor was going to lose yesterday. It is a district that is a republican district, but it is not a rightwing district. Cantor has been elected six times before. I think it was just a real shock. A real shock that means what ultimately . Well, my sense, and well see what terry thinks, my sense for people to say the tea party is in the ascendancy is just as crazy as saying that they were dead. What i think the message is going to send two messages. Number one, its going send the message, you got to be careful. Whatever thats exaggerated or not, that will be the per sefplgs the secretary thing substantively, because this guy did attack cantor unfairly on immigration, i think its going to make immigration much more difficult legislatively and probably affect the debate in 2016. I want to play an excerpt of an interview that alix steel did with the president of the u. S. Chamber of commerce. They were talking about eric cantors defeat and the role or not that the tea party played. Heres what he had to safe. The headline is sort of interesting, your headline, headlines in the press, the tea party beats candidates. Tea party had nothing to do with this. They didnt put any money in it. They didnt have any people there. It was sort of an attractive, you know, professor in a very, very conservative district in virginia. So terry, tom done hoe may be technically correct that this wasnt a tea party victory, etc. , but is it wrong to think of it in tea party terms . Not entirely. The tea party and the agenda that the conservative movement has very much been a dominant force in the Republican Party over the last five or six years, particularly, but where tom is correct, and where it is significant is that the tea party grurengs the big groups, didnt push all in on this candidate. They didnt spend a ton of money on him. In fact, the person who spent the most money on mr. Brat was mr. Cantor, 2 million spent in the primary, most of it on tv ads. It increased his name i. D. I say this about lowturnout elections. It is about precision. It is about knowing who your voters are and communicating with your voters f. Were talking about an election thats in the low tens of thousands of voters, you have to know whos going to vote for you, and you have to move them in a ground game to turn out for you. When the intensity is all on the side of the challenger, the opponent has or the incumbent has a doubly hard job to do. I think that was a combination of those factors. Al made the point just a couple of minutes ago that the lesson here may be to watch out for your right flank. Is that a lesson that you would extrapolate to other i hesitate to say moderate republicans. Nobody would have considered eric cantor a moderate republican, but is that the way you would extrapolate around the country . Well, i think that most republican incumbents are very aware of their right flank and have really, in most cases, effectively embraced the right flank and motivated it toward their campaign. I think this is more isolated than it is dominant in the Political Landscape right now. But it is a lesson for most members of congress who today are engaged in a real conversation about what their leadership is going to look like. Dont get distracted, run your campaign as hard as you can, use microtargeting and precision to know your voters, and dont take anything for granted. Can i just jump in here for a second . I think that tom donahoe, he misunderstands the tea party. Sal russo and others didnt put any money in it, but what it very much was was a grass roots organization, but it really was grass roots whether you like it or dislike it. Certainly whatever you call it, there was a tea party flavor to what occurred yesterday in that virginia district, and its not a very conservative district. Its very republican, but obama got 42 , 46 . Mark warner carried it. There was certainly a rightwing element. If he had an air game, not a ground game. Peter cook, our chief washington correspondent, made the point last hour the tea party is going demand a seat at the table. What does that mean for the job of the speaker of the house . Tom donohoe seems to think that that job is John Boehners so long as he wants it. What do you guys think . I believe its john, speaker boehners job as long as he wants it, particularly now, because eric cantor, for whatever anybody else says, was a very dedicated, policyoriented, hardworking member of congress. He had good relationships around the conference. He would have been elected unanimously as majority leader again. It shakes up the leadership in the house of representatives. It gives new blood a chance. But you cant just demand a seat at the leadership table. You got to have the votes. Whoever had the votes is going to be at the leadership table, regardless of whether or not somebody is demanding a seat at the table. I think john baner is probably safe. I really do. The fight will be over majority leader and over whip. I do think what Everyone Wants o call it, that really ultraconservative tea party win is going to demand a seat. Whether they get it remains to be seen. Someone is going to say, hey, we need to be represented. If you have a hard guy up there, and i think that will be a fairly persuasive argument, however it shakes out. But one thing will happen from now until october, everything that happens in the house every day will be about whos going to win these races. Well, terry allen, it just so happens on the very same day that we got the results of eric cantors primary in virginia, we also have the results of a brandnew Bloomberg National poll, and the numbers arent so good for the man who is currently sitting in the white house, president barack obama. Heres our White House Correspondent with more. Julianna . Thats right, erik. Americans right now are essentially saying to the president , were just not that in to you, and were looking here at the president s favorability ratings. Its a measure of how popular the guy is, how much americans just like him. Thats always been a bright spot for the president until now. Thats dragging down his Approval Ratings broadly. When you get to the specific issue, the president s favorability rating hit an alltime low for the bloomberg poll of 44 of americans viewing him favorably, 52 viewing him not favorably. In march, we were talking about that bloomberg poll and we said the president asa Approval Ratings had ticked up from the end of the year following the Government Shutdown and the healthcare debacle, those, those Approval Rating have fallen back down to the level. Hes at about 43 job Approval Ratings. When you get into the specific issues, the economy, his handling of the deficit, healthcare, those numbers are back down as well. Theyre under water with more people disapproval than approving. Terry holt, the president s Approval Rating is 44 . If eric cantor cant win a virginia primary and the right to run for an eighth consecutive term in congress, who is electable in this country . Well, ive never seen a more cynical electorate, frankly. The democrats are quite unsatisfied with the president s record, even if they still support him. Theyre not intense for him. The American People in the second half of a president s eightyear term, theyre particularly hard to change their mind. We saw this with president bush in the last couple of years of his of his government. This president is going to have a really hard time getting out of this hole, and it just speaks to the cynicism of the American People. Just lianna, how does the white house respond in the president definitely wants to get some things done before he leaves office. When he sees his numbers as low as 44 and the midterms looming, and the results of the cantor primary, what are they thinking . Number one issue, erik, for americans is still the economy. I think they know that americans have been seeing this president over the last several months not just distracted by healthcare, but also distracted by ukraine, with russia, with other Foreign Policy issues, and they are looking for him to turn their attention to the economy. Thats something that the white house is planning to do now with an eye toward the midterm elections. But even if another issue that we polled on here, were looking at how americans viewed the president s handling of the Taliban Prisoner Exchange that freed the last prisoner of war in afghanistan, Sergeant Bowe bergdahl, and also the scandal that rocked the department of veterans affairs. And there, too, americans overwhelmingly disapproved of how the president handled these two issues. One potential bright spot for the white house is that a good percentage, around 18 in both issues, they were not sure how they felt, and so that gives the white house maybe some room to recover here. But again, republicans are calling for hearings in both areas, and theyre going to be looking to highlight these issues as emblematic of mismanagement, of overreach, of things that had been plaguing this administration throughout. Politics are dominating the news agenda today with the president at a record low Approval Rating and, of course, eric cantors loss in the virginia primary. Julianna, thank you very much. Also with us, the host of political capital, al hunt, and g. O. P. Strategist terry holt. Great conversations this morning, important insight and perspective to share with you all. Coming up time to go to the Goldman Sachs Energy Summit. Its day two of the Goldman Sachs north American Energy summit, a seminal event this year in particular because the u. S. Is reaching with goldman calls a historic inflexion point in the energy industry. Bloomberg reporter alec steele is on location for us alix steel is on location for us with a couple of special gives. I know who one of them is, but youll have to tell us who the other is. Im joined by gary cohn, like you said, as well as al monico, c. E. O. Of end bridge. Great to have you here. First off, i got to hit on the news of the day for you. Eric cantors defeat in the virginia primary, i mean, what does it say about wall street . What does that mean to businesses . Im not sure it means anything specific to businesses. I think eric has been a great leader. Hes been a great public servant, and i think weve all enjoyed having eric in the congress. I think it more in essence makes a statement about whats going on in washington, and can you go to washington and try and be a compromiser and try to get things done and be a centerist and get reelected . I think for financial markets, for main street and wall street, thats an issue that were dealing with today more than we were dealing with yesterday tifment goldman being one of cantors top contributors, i mean conscious we take anything away from it as an antiwall street vote in virginia . What do you think . I would have no idea. My concern, as i said, as much more about eric being a compromiser. I mean, eric stood out on some of the tough issues. He stood out on immigration. He was willing to talk about immigration, he was willing to talk about tax reform. He was willing to talk about the environment. He was willing to talk about sticky issues that were sticky for republicans. They were sticky for democrats. He was willing to try and create a coalition, of believers, trying to create compromise, understanding that he couldnt get everything. He couldnt get everything done, but he was trying to move forward and create progress. I think thats the real important takeway from this. Awe does it make your business harder . I dont know. I dont think so. Too soon to say . Yeah, too soon to say. Thank you for your thoughts. Now from d. C. To energy, which actually probably isnt that separate. The idea here of the conference is really how to marry economic interests, business interests, as well as regulatory interests, and environmental interests, very difficult to do. You gentlemen were both on a panel. I want to get your take on the biggest stand out. What are people talking about . You know, first of all, im glad you asked square that i question about u. S. Politics. I think he handled it much better than i would. What, as a canadian, what do you mean . Well, we have some views on it, thats for sure. Really, its the realization in the Energy Business that we do have to come to grips with the fact that we need energy. Its certainly critical to our economic wellbeing. The question is, how do we develop it in a Sustainable Way . I think thats really what you heard on the panel. You heard a couple of different views on how to get there. I think thats our challenge. We have the supply. Weve got great capital and Technology Skills to develop it. The question is, how do we all put it together now and make it work for Economic Development . What encourages Capital Investment . I mean, gary, whats going to make Companies Put money to work in an environment that is so uncertain . That was one of the main themes of the panel. It was uncertainty. When people are investing capital, especially in the energy sector, where the payoffs are multiple decades, when you invest a lot of capital in the energy sector, you get paid off over 10, 20, 30 years. You need certainty. You need to understand how youre going to get paid off. Yes, youre willing on take on risks, nothing is guaranteed, but you need regulatory certainty and environmental certainty. You need to have supply certainty. And the panel spent a lot of time talking about how can we be more certain about the issues and can we remove the variables from the equation . You really have your boots on the ground in a way. Youre responsible for building out the insfratrurkt. Currently you have Northern Gateway waiting for approval in canada. That will bring oil from al per to clittish columbia. What do you need to see to feel better . You know, im going to pick up on what gary said arent sent the reason why we all search for more certainty is because that will reduce our cost to capital and make us more competitive in getting the crude oil and natural gas and other products to market. So thats really the linchpin of all of this, reducing the uncertainty to meet to make us more competitive. I think were getting there. Were making more progress on the project youre preferring to, gateway. I think there weve also made some great progress. What we emphasized on the panel was you really need to take a different approach today in order to engage communities and make sure were addressing their concerns. Can you call up a guy and say, im going to put a pipeline through your land and then send a piece to the paper to the regulator . Explain how much harder it is. Its not that simple, but in many ways, the way the industry used to do business was similar to that. We were driven by convincing people about the economic benefits first. Well, in this environment, what we need to do is make sure that theyre convinced about the safety and Environmental Protection of your project. Because if you dont get that part, theyre not going to trust you, and the economic benefits arent going to matter. And i was interested particularly, gary, with the question that you asked about exports and should we be exporting oil and natural gas, or my spinoff question is should we be igniting domestic demand near canada, as well as the u. S. Instead . Thats what i was trying to spur on the panel. The question is can we create domestic assumption . This deals with the certainty and regulation issues. The tragedy of all this to me would be if we create this huge wind fall of cheap energy in the United States and the only thing we can do with it is export it to another country that will consume it and use it to make markets and take those products and export them back into the United States, and we as u. S. Consumers will buy those finished products. We will have lost the opportunity to create all those jobs many manufacturing those products. I think this is the enormity opportunity that sits in front of us. The final question i ask the panel at the end of the session was, do you believe 10 years from now north america will reindustrialize itself . All the panelists said yes, with some but, right. With some caveats. That to me is the big issue. Can we remove some of the though obstacles that we can take this huge competitive advantage we have, three or four or five dollar natural gas versus 13 or 14 natural gas everywhere else in the world and use it to manufacture . At the end of the day, do we really need someone to say, yes, go on, keystone, yes, go on gateway, or is it more subtle in order to get clarity . Let me first i got to jump in on this export question. Yes, please. He have a slightly different view. You know, at the end of the day, you need the right price signals to encourage investment. And if you look at north america right now, its an island. It has virtually no connectivity to the globe. I think the price signals are extremely important, because we are living in a highcost environment in north america for producing our oil and gas. We need to have the right price signals. We neat right signals in order to encourage production and keep investment. Does that cut off demand . Can that cut off demand if prices go too high for exporting too much . If you look at the studies for natural gas, for example, when they started approving the export project, it was very clear that the impact on Natural Gas Prices were minimalist. I think the bottom line is we have a tremendous reserve potential here. We have lots of reserves. So i dont think were going to get to a point where we export so much product that its going to have an uncompetitive impact on the rest of the economy. And this is a big week for you over the next few days, right, june 17 should be when you hear about the Gateway Pipeline thats approved. How do you feel about it . Any word . We cant speculate. We dont know what the federal government is going say. I do know one thing, though. We have put our best foot forward. Weve done all we can. We have more to do, mind you, if the approval does come. Were going to spend many more time engaging with First Nations and the community. That will be a key focus area. But certainly from a safety and environmental perspective, even though we have more work to do, i think weve put a real nice foot forward on this. Good luck. Fingers crossed for you. Gary, last question to you. At what point, if we dont get the kind of clarity were looking for, do we just stop the revolution weve been seeing . I. E. A. Says well be done with noil 10 years. I dont think well stop. Were part of a global marketplace. Thats the whole equation. Right now, we produce cheap natural gas. Theres a global coal market out there. Were part of the global coal market. Were part of the global oil market. Oil in the United States is part of the oil market, oil in north america, same thing. Were going to continue to be part of that market. Being able to export is whats going to keep us producing. If we cant consume here in the United States, were going to export. Were still creating jobs, and were still creating Economic Growth. By creating the oil, by creating the gas plans, by creating the lick question fakes plans, thats still an industry. We had Governor Jindal on our panel, and you see what hes done in louisiana. One in seven louisianans worked in the energy industry. A lot of that has to deal with manufacturing, but a lot deals with exports. Sure, and you can ask for products. So, look, were going to continue to produce gas in this country. Weve started down this path. Were going to continue to go down this path. We are part of the world economy. Were part of the world commodity cycle. Gentlemen, thank you so much. Really appreciate your time today. Gary and al, good luck on the decisions coming down the pipeline in the next week. Im digging it. All right, erik, back to you. Alix, thank you very much. Thats alix steel down at the north American Energy summit. More of the goldman conference coming to you all day, and also be sure to tune in tonight to charlie rose for his enter swrue gary cohns boss, lloyd blankfein, thats at 8 00 p. M. And 10 00 p. M. Eastern time. Live from bloomberg headquarters in new york, this. Market makers i am Erik Schatzker. Can you imagine a World Without live streaming, the Video Technology that has opened so many special events to a worldwide audience . Facebook alln, and term turn to you stream. Here to talk about it is the founder. Lets talk about the business of live streaming. How big is it . Live streaming was a 1. 7 fewerviewer billion viewer hours. Today, we are on the leader and live broadcasting. All of these companies are our customers youre are using video in new ways. That is important. Theakes me wonder where highest growth and highest marginal opportunities lie in the streaming business. Is it to consumers . World. T in the b2 b cisco might be helping a company like yours to allow to companies to do business together. I think it is Something Like that. There has been a lot of consumer and Net Neutrality conversations. There is a Huge Consumer market. But they are also trying to act like media companies. There is a huge opportunity for us to build across all of the duplin different applications. 8 Million People in a to our hour windowwo watched the launch of sonys new gaming system. When a business can do a corporate Product Launch is doing, what apple as well. We still have not gotten down to what makes the most sense for you to focus on. Is your company chasing the consumer opportunity . I was in the military. I graduated from west point in june 2001. I wanted to solve a simple issue. Help soldiers send and receive and communicate what they were missing all around the world. Initially working a lot with the bignies growth for us is around enterprise. How can we have businesses be transparentve and productive and transparent . Is that because you see so much conflict in the consumer , netflixverizon, Net Neutrality. Video is hot. It is hot in the enterprise. What tends to happen with adopting consumer technologies, they lag about 510 years behind. It is starting to happen with enterprise video. You have about 60 million in funding . And you are generating how much revenue . We have moved our business softwarebecome a company. You can get started very quickly on our website. In the year and a half, our has 5000 paying customers in the enterprise. Up there with some of the Fastest Growing out there in the world. Time to beke a long profitable. We have high gross margins. We have great customers, loyal to the brand. Are an internet Video Company that is cash flow breakeven and not far away from profitability. What happens next . Ber venture backers have to salivating. If go daddy can file for an ipo, surely your company can. Right now, we are building really amazing products. I am focused on continuing to drive the business. Raising more venture capital. These are things that are on the table. This market is new. There is growth that is going to happen over the next couple of years. Has anybody tried to buy you . Always had those conversations. We have not seen a partner that seems to make sense at this point. We have good business. Summoning people benefit from your service and do not even on ait. 80 Million People monthly baseness around the world is who we touch. Great having you on Market Makers. Up, elon musk as his head and the clouds again. He was showing off his new spacecraft to congress. I am Erik Schatzker. You are watching Market Makers. Broughtire elon musk his latest ride to washington. His latest spacecraft. Peter cook was on hand for the space x show. He caught up with elon musk. Musk goes to washington, it is not for the smithsonian. That is right. He went to the museum last night and he had dance music playing, lights flashing. This was another show for elon musk to be sure. Audience heortant is reaching out to. He brought his new spacex cap so. He brought up to washington to show members of congress, the power players and watching can come a what this thing looks like, let them go inside it, sit in the seats, the whole nine yards. Contracting to win a to ferry u. S. Astronauts up to the International Space station. Contract. G dollar decidegressman will not the contract, but they will decide the funding. Level ofim about his confidence that spacex will actually win. I think we have done everything we can to have this be a good design. Nasa has been an awesome supporter of spacex in the past. We would not be where we are. Oday without nasa i think we have shown we can do a good job. Hopefully that makes a difference for this competition. That have already carried cargo up to the space station. S caseoes help spacex here. It is possible that two out of the three companies could win the bid. Elon musk is not leaving anything to chance. They help the visit will help. Looking to make friends. He has also made enemies over suing the airports. Some elbowing here. The biggeste and players in washington, Lockheed Martin and boeing. Still feels the loss it was justified. They had no other option to sue over that. It has ruffled some feathers. He had choice words for his competitors saying, they are trying to stop on spacex. He is feeling confident about how to try to prove his chances and that as well. I know we will see peter again later. There is so much talk about. Eric cantor losing his republican primary. To the head of a company that makes medicines for your pets. Im Erik Schatzker. You are watching bloomberg television. Do dogs get alzheimers . Get cancer . Medicines we humans take to not always agree with our pets. What do you do . We are a Biopharmaceutical Company dedicated to bringing the best in class medicines to companion animals. Develop are drugs you for these animals or these are drugs that are already exists that you and i might take, that are then adapted for animals . We are taking drugs that are known to work, we are taking billions ofm the you are licensing these drugs . These are off patent drugs. Buy the active ingredient and formulated them appropriately. We also have a biologics platform. Developing first in class biologics for cats, dogs, and horses. You are a Public Company. Yes. Ipo ata very successful the end of 2013. We have over 100 million in the bank. I assure you we are putting that money to good use. Perception of canine, feline, and equine pharmaceutical market is growing. Why . Pets have really become a part of the family. Hang on the second. Pets of always been a part of the family. Here is a great stat. People spent 370 Million Dollars on hollowing costumes for their pets. Hold on. Yes. Are willing to spend more on their pets than they are on themselves. It is a recession proof industry. Stop going out to dinner as much, but they will not stop feeding their dogs science diet. Animals no reason these cannot have the level of therapeutics we have. There are some Big Drug Companies that have Animal Health divisions. Why dont we hear more from them . They are more focused on livestock. Activity, bute very few companies are focused solely on companion animals. You raised the subject of medicines for livestock. The effects that drugs have on animals. With theve issues amount of drugs we are pumping into our livestock . Certainly, myself, i personally do have issues. Why is that . Think were seeing side effects in people. Antibiotic resistance and other issues. How much regulation is there around medicine for pets . Good question. Approved very few fda drugs that are formulated specifically for pets. Upstuff from the ground exclusively for animals. That is right. Right now, veterinarians use a lot of human drugs off label. Like what . Antidepressants . Sure. It is important for us that these drugs get tested and that they are fda approved. Business,e not your but what about the idea that medicines developed for animals find their way to humans . Would most definitely have thought about that. Really only about 5 of drugs make it from a mouse to an approved drug. We knew have a mouse and you injected with cancer cells, that have mouse does not cancer, it has a lump. Is muchrks and dogs, it more likely to work in humans. Fascinating. Thank you so much for joining us. A Public Company that makes drugs for your fourlegged friends. Market makers will be back in a couple of minutes. That is going to do it for Market Makers. Ceo of be talking to the the company that runs the ironman competitions. In the meantime, it is approaching 56 past the hour. Bloomberg television is taking you on the markets. Here is julie hyman. Thank you so much. We are seeing stocks falling today. After the world bank cut its Global Growth forecast, it is trading lower after record closes. Bit higher. Oving a joining me for the options inside is in equity derivatives strategist from baycrest. Slow. X has been very even though it is moving up, it is still relatively low. Are we seeing change in the future and what the pricing is for expectations of volatility . Implied volatility, the expectation of future volatility, is slightly trending higher, whereas realized volatility, historical volatility, is still very low. It is good to see a little bit of volatility coming back into the market. Arehe same time, we postearnings seasons now and there will be along period of Economic Data that is coming up. See areally good to little bit of expectation. What about overall for the s p 500 and options trading with the s p . Even though we are off the record, we are still very close isthe record to read trading in a very tight range over the past month or so. As you say, if we are in it period of low Economic Data, is there any indication of a directional change . I dont think that there will be a big directional change. In fact, we are seeing people less likely to put down the hedges because they have lost some much money by putting hedges and those hedges never really worked out for them. Because markets stayed flat or trended higher. I think that expectation of stair there that we could continue to trend higher. Lets look at one individual situation. Cvs. Outdoor. You seeing people play this . Theyre converting b class shares to cbs outdoors. There is a cbs shares that for every share of cbs, you will get almost two shares of cbs outdoors. It is a discount. Away ase, theyre giving lot of it in terms of how they structure it and how they finance the shares that are going to be tendered in order to convert them. There is a lot of activity that we are starting today. 9. Deal finishes around july we are seeing a real uptick in activity. Ple are trying to convert right. It is about 10 of cbs shares that would be needed to basically convert entirely to cbs shares. People are looking to monetize that by lending those shares at a premium and charging people that. Quickly i want to get back to housing and what is going on with housing markets. Somebody put on a very long put trade. It is trading around 32. Someone bought strike puts around 37,000. Around 37. It is going to see a drop. It will erase the entire gains. Thank you so much. We will be back on the markets in 30 minutes. Welcome to money clip. I am adam johnson. Lloyd blankfein wants the u. S. To get it right on energy. Goldman sachs is looking for answers. The brazilian presence as people need to get behind the world cup. Aig has a new ceo, peter hancock. Says he is ama plan to get students out of debt but it turns out senator Elizabeth Warren think your plan is better. Camuto. Designervince