Transcripts For BLOOMBERG Market Makers 20140613

Bloomberg television. We are happy to be back. Lets talk tech. Another big tech deal to talk about, priceline is buying opentable 42 . 6 billion. For 2. 6 billion. This is crazy. Around isy head this the new normal, is this where we are supposed to be . Or is this the return of 1999 . In 1999, i loved opentable and urban fetch. But where those now . It a lot more worthable that uber is 17 billion. Er is a life changer. We will have to agree to disagree. Opentable is a life changer for me. He just eats at mcdonalds, they dont take reservations. Every time i try to use opentable, i can never get a table. Instead, i call, and restaurants say the same thing. 5 30, 10 30, i would rather they off. Say screw said, weo of priceline think it is a good fit. They called it an adjacent business. We have similar Business Models. You are catering to the same sort of customers. There is definitely true to that. These are the same people spending their money in different channels. One thing i was intriguing that they mentioned was the possibility of eventually just like with priceline, you are paying online for your plane ticket. Could there be a point where you wouldnt have to pay your waiter . You would pay with a nap instead. They did allude to that coming down the line. That was a side note in the call, but an intriguing one. There are potentially some Growth Opportunities here. They also talked about the idea that there are 30,000 restaurants that participate in this, there are far more restaurants out there. At least, theoretically. Useal dining restaurants these. Is that maybe you could have more expansion into more casual places. As oppose to just the highend restaurants. Why is there this surge . Sea the new at red atrezzie at. Yelplled is going is going in the directions too. You are still going to go to opentable separately, and priceline operates a number of different sites under its company under separate banners. Is still separate, booking. Com is still separate. Opentable will still operate out of san francisco. Priceline says we will still have the same management team. Yes, it is aggregation under one business but under different brands. Were you surprised it was priceline the bottom . Priceline that bought them . I thought it would be yelp. There is too much overlap. Lp is trying to develop their own system. I thought maybe opentable and grubhub would have merged. Whether it is a table at the restaurant or takeout, its the same thing. At this case you were talking about the same platform, different i want to put this question medial sweeney and covers technology, what do you think . Would have made more sense for opentable to combine with grubhub or is a company like priceline the logical acquirer . It makes a lot of sense, priceline can afford it. They are trying to open up a new ,ertical with the restaurants in addition to hotels and airlines and car rentals. They are going to open up this restaurant vertical. Opentable is the best place to make. Priceline is looking to increase their mobile usage. Whether it is facebook or google, everyone is trying to think about how to participate in the growth of mobile usage. Priceline, opentable which is primarily mobile base, this is a great way to do it. You are saying this is a good move, priceline is the right company . I think so. Opentable ist primarily domestic. One of the things priceline could do is bring that to an international marketplace. I think within the priceline portfolio of properties, opentable is certainly one that fits in pretty well. ,hey certainly paid up for it 10 times revenue with a 40 premium. Its not cheap, but nothing is. Im still trying to get my head around facebook paying 19 million 19 million for whats app. Im surprised they didnt pay for this partially in stock. Their stock is up 50 over the past year, it is been doing very well. Does that Say Something too here . Ially not a bubble as we have seen in a lot of these tech deals, they have been using stock. I think what happened was this was a little more of who the sellers were at opentable. I think some of the private Equity Investors that opentable preferred cash. Usually we see some kind of stock component. From that perspective, it was unusual. A little unusual. What might this do for the other companies . If priceline owns opentable, is that kind of like facebook owning oculus . If you want to get into virtual reality, forget about it because you have facebook behind it. To these other wouldbe competitors have a shot . I think they do. Exits for a lot of these Startup Companies him of the ipo market which remains robust. Market remains a very robust here. You are seeing a lot of strategic deals getting done. I think it is a great time to raise capital, we all know that. It also shows that there are lots of exits for the start up companies for investors. The ecosystem within technology in Silicon Valley seems to be alive and well. Alive and well, not frothy . Sapp,9 billion for what that extraordinary. You keep hearing relative to the. Com bubble the. Com they have 90s real Revenue Growth as opposed everything being on the count. Who else might have gone after opentable . Is a rare that there perfect combination, only one company that would buy. Who else might have been sniffing around . That might ask the 46 premium . Anyone who is looking to get into the local marketplace. Someone who is trying to increase their mobile percentage. The percentage of business coming out of their mobile apps. It could have been anybody of the Big Companies looking for a strategic by. A strategic buy. Essentially expedia on the travel site. I think it kind of illustrates that there are a lot of strategic buyers out there that are recognizing that business is going mobile. If there is a proven Business Model like opentable im a and it has a strong mobile base, that is attractive. Paul, thank you very much. Hyman. Julie it is time for us to move on to the newsfeed thomas the top business stories from around the world. Interest rates may rise. The central bank may raise sooner the markets expect. Risingys right in mortgage debt may threaten the uks recovery. May be off to the races. I was yesterday. Liberty global and Discovery Communications want to buy a 49 stake in the formula one are racing series. The two sides are about 1 billion apart and how they value the company. Popularity clintons is officially slipping. According to a new Bloomberg National poll, 52 of americans view her favorably, that is down from 70 a year and half ago. Plus she no longer has an against support republican possibilities. When we come back, we could be on the verge of a civil war. Iraqrenewed violence in means for countries to do business there. Lust, who needs a bank when you have a mobile device . Solutionsinancial and worried, when banking with millenials. Ons is Market Makers, bloomberg television, streaming on your phone, your tablet, and at bloomberg. Com, and now we are also on apple tv. Welcome back to Market Makers. And Stephanie Ruhle. Iraq may be on the verge of civil war as militants move closer to baghdad. We want to take a look at the business impact. What it means to the companies that invest their. Alix steel has been looking into this. There are Oil Companies there, but real estates who wouldve thought about that, its the secondbiggest investment opportunity. Korean firm is building the largest Housing Project in the company in the country. Thats worth about 8 million. The United Arab Emirates has a large contract as well. Company has a contract as well. Also works there. We have seen this trend for the last few years, Foreign Investment was at one point 6 billion in 2011. Is that more because there is so much reconstruction to be done . Or because there was a housing deficit . Both. Acrosss a huge market all sectors. Tech, defense obviously. Its also infrastructure, telecom, transportation. Iraq has done a lot to try to make the country very appealing to Foreign Investment. ,f you are a Foreign Company you can own the land that you are operating on. Companiesrying to woo that want to work there. Lets talk about oil dependency. Our u. S. Oil companies doing . The majority are in the kurdistan region, near the violence but not overtaken by the violence. , theyve exxon, chevron have all been there since 2011. In the southern end of the country, you have other big players like shell and bp. They are 90 of the country that he of the production is in that country. Thinking if it continues, yes they will pull out. That will hurt investment. It will prevent more from more oil from being pumped out of the north they are not exporting anyways. That would be an issue longerterm, if there is a civil war. One thing was company that operates there, Gulf Petroleum says their field are doing well. They are expecting things to stay on track. Still working, for now. We will continue the conversation i looking at specifically oil. With us from london is seth kleinman, with Citigroup Global markets. A big move for brent yesterday. It felt like kind of a delayed reaction to what we had seen play out in iraq earlier this week. Brent is still only at 113 per barrel. I say only, not because it hasnt moved meaningfully it has. But we read hundred 13 just a few months ago. That is true. The reality is, it is very concerning what is happening in iraq. Both for the people and for the economy. The world needs iraqi oil. It needs iraqi not to descend into civil war. Right now, they are exporting oil from the south. 2ve about 2 million Million Barrels a day. If you look longerterm, their estimates are at 2035, a rock will count iraq will count for half of the supply. Right now, the Oil Production is in the south. The situation is fluid, so the market is obviously very concerned. The market is concerned, but what is the Market Pricing . 113e at a point where the represent a loss of traction in the south . Marketink right now the is pricing in uncertainty. It is hard to put a value on something that is hopefully a low probability event. It could potentially be a massive impact. This is another one of those events. I think there is uncertainty, but dont expect us to leave oil anytime soon. Can i just play the contrarian . It has been difficult to get oil out of the northern part of the country because the kurds and iraqis cannot agree on how to split revenue. If they take a preeminent role , does that give the kurds were ability to export down the road . It could. There are unpredictable ways this could play out in terms of geopolitics. Alignmentsee a between the kurds, the iranians, and United States. Everyone is trying to reduce the impact of this extreme sunni organization. See theame time, if you United States or ron acting against the sunni, you could see increased support for them in a rock. You could see closer cooperation more kurdishad and oil would flow. But it is very uncertain. Developed talk about countries releasing their Strategic Petroleum reserves . I havent heard anything yet, but i suspect those conversations are being had behind closed doors. I think back to 2011, and the libyan crisis broke out. The libyan oil supplied effectively disappeared from the international market. You saw brent react much more strongly, topping 120. Is that we are likely to see if the situation deteriorates in a rock in iraq . Caphat is really kept the on oil prices so far is the United States, the u. S. Shale story. U. S. Production is continuing to grow one Million Barrels a day. That is a huge number. Oil is about a 90 billion 90 billion barrel a day market. If you really saw iraqi volumes , 120ted, then clearly would be in the market place pretty quickly. Those who are invested in the market said this week water investors calling you most about now . Its funny. Coming into this year, it looked benign. Issues, but mostly it was iran and libya. To be making some progress with iran. But now, libya has really gone worst case scenario. Iran looks like there is progress, but it is not clear. Then russia, ukraine comes along. Its totally out of left field, not on anyones radar. And i have a rock. Iraq. And now you have erikwas just talking with about u. S. Companies that operate in these countries. At what point of a pullout at what point do they pull out . When you see threats against workers, that is when you would see a complete curtailment of investment. Longterm, we need that investments in iraq. Therealready a concern, is potential for mortar,. We thank you very much for joining us. When we come back, we will have more. We are talking about immigration. Coming up it is not dead yet. Thats what some are saying about Immigration Reform despite a shocking defeat. Eric cantor was one of the few republicans that was talking about Immigration Reform. We will also be talking about College Players who want to get paid. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and Stephanie Ruhle. You are watching Market Makers. Im Erik Schatzker. Im Stephanie Ruhle. Immigration reform. Wrong, many in washington are blaming eric position ons on his Immigration Reform. Hader eric cantor express interest in a bipartisan plan. That label them as proamnesty, and that likely dooms any action on the issue. Out fordont rule it 2015, it is good to see you back here. That, and thats why you are here. If eric cantor can lose on his immigration position, that has to be an issue in the 2014 midterms. Asse people who get elected republicans surely cant embrace Immigration Reform in 2015. Or can they . I think they can. For 2014, conventional wisdom says this thing is dead. The atmospherics around how poorly the republicans did in 2012 with latino vote remains. That pressure will still remain on a number of members of congress. I think president obama will be more willing to deal next year, because he will be focused on legacy as opposed to the policies the politics of a midterm election. , and there right Republican Party is awake and aware of the fact that immigration played such an issue in the 2012 election, how you explain cantors loss . Or is it just a fringe group of far right voters that turnout for primaries . Thatm not entirely certain immigration was the biggest reason why aaron kanter lost that race. There was a lot of erik cantor lost that race. He couldve spent more time in the district. There was a sense he was out of touch. Wasimmigration issue certainly a factor, but seeing it only as a result of immigration is problematic. Its not like he was the Worlds Largest champion for this thing. He didnt talk very much about the issue. When he did, he talked about how he was against amnesty. Perception is reality. If the assumption is he lost because of immigration, will that put more pressure on the Republican Party . That jacket looks great on you. [laughter] my wife warned me about this one. I dont think that places any more pressure on them then they felt before. People who are going to vote against it, who are dead set against voting on Immigration Reform are probably in the same place. I think the factors for people who were on the fence could potentially move them in the direction of reform if they werent there already. I think the reality of another president ial election coming up will put pressure on people to act on this issue. Lets go back to the midterms for a moment. If a republican is up for reelection, do they have to worry about the socalled right flank . Immigration becomes an issue for many of these candidates. If they are elected it doesnt matter whether they are Tea Party People or not. If they are elected to office having taken a firm stance on amnesty and Immigration Reform, how much can you count on them to be willing to deal with the president . Even if he is a dealmaking mood. How nubbers of the Republican Party have been crucified for even drifting from positions that they took elections. Immigration seems to be toxic on that front. Part of it is the president has been unwilling to entertain a stepbystep approach on Immigration Reform. If you are willing to come to the table and say you will get border security, you will get employer verification. And then we will talk about the 12 man folks who are here fold million folks who are here illegally. They would have some protection on the issue. They can say they were tough on verification, on the issues we care about. In return for that was without certainty for these people. We got additional economic growth. I think that is a deal that a lot of republicans would take. I want to share with john boehner i want to share what john boehner had to say on immigration. The issue on Immigration Reform has not changed. The president continues to ignore laws that he signed into law. Violating his oath of oath of office. He did it with the release of these taliban files. I reminded the president yesterday that every time he does this, it makes it harder to gain the trust of our members to do the big things that need to be done. It seems as though there is absolutely no trust here. Is that the case . No question. Trust is not high on capitol hill right now between republicans and the president. To realize is,e if republicans take back the senate and retain the house, the president is going to have to figure out what he will be able sodo in his last two years he will have alexis a legacy. It is up to republicans to give him the benefit of the doubt. Maybe they wont be able to do that, but they should if it could mean a big policy achievement like Immigration Reform. Deeplyow you care about the issue. Thank you for joining us. Let your wife know you took a risk and one. When we come back, and you study underscores the concern of financial institutions. Millenials are no longer taking it to the bank. We will be back in a few. You are watching Market Makers on bloomberg television. Welcome back to Market Makers. Im Stephanie Ruhle with my partner Erik Schatzker. Millenials are breaking up with banking. A new study looking at what industries are light right thedestruction found that Banking Industry is losing big time with the Younger Generation. Russ martin is with viacom media scratch, he also runs that commissioned the study. Shocker. Millenials who dont want to work for the man. We hope to find the truth. Citedught that millenial hated banks. But they dont hate banks, they just find banks to be irrelevant. That is even worse. We dont see it changing anytime soon. Why do they find banks relevant . Irrelevant . Cante than half of them tell the difference between their bank and any other. I dont think you have to be a millenial to think that. A third of them dont think they will need a bank in the next five years. To which i would say, grow up . Last i checked, google wasnt operating offering mortgages. Think thethem dont solution will come from the Banking Industry. They believe it will come from big tech, google, or from tech startups. Is an important premise that underscores the change. What precisely needs to change . In banks for them to succeed . No, banks are making lots of money. What needs to change for millenials to want to engage in Financial Transactions with anyone. Whether it be google, apple, or wells fargo. What it takes is a great understanding, besides shallow punditry, of the millennial generation. What we are not seeing is the kind of innovation, focus, and energy from the major banks on this generation. Do we necessarily need it . I got it, they are a different generation. I want different things. Part of me feels like, give me a break, go to work. 23, no one asked me how i felt about my direct deposit. Its the largest generation in american history. We want to work, but they are underemployed. They are the most educated, the most collaborative, and the most in debt. This is not a generation that is sitting home complaining. It is a generation that, when they cant find a job, are starting companies in record numbers. This is the largest number of entrepreneurs we have ever seen. You raise an important point. These people dont have much to offer a bank right now. They may not be making much money. I certainly dont have a down payment for a home. They certainly dont have a down payment for a home. A debit card they may have. I guess the underlying argument is that banks should somehow find a way to build a relationship with these people, even if they are not valuable clients right now. It may become valuable clients in the future. Were talking about more than 85 million people. It is difficult to talk about the largest generation is that big a chunk. The older segment of the , phase 1, 25 to 33 years old are starting to do well. You have to have a place to put your money. That is why you see thousands of startups are jumping in. They are due mystifying the Banking Experience and reinventing online payments. Suddenly you are seeing that as each one chips away at the Core Competencies of the major bank, they are also solving the problems that banks have not been able to solve. Like what . The problems are beyond marketing. When we talk about the problems with banks and millenials most people stop at marketing. When more than 60 of millennials would rather watch a commercial then go to a bank, that is an issue. When we look at the study, we see that banks are at the highest susceptibility for disruption. They are getting destroyed by other areas of business like genes jeans. Like detergent. Like toothpaste. How is it possible yes. Hold on a second. I understand that millenials would say i would rather go to the dentist than watch a bank commercial. Who cares . At the end of the day, they still have an account with citibank. They are searching aggressively for alternatives. It is disturbing. We looked at 15 different industries. We surveyed 10,000 people over three years. It is one of the most ambitious studies we have attempted to read we ever attempted. When we look at categories of business that are most likely for destruction, we didnt think banks would score as poorly as they did. What do you think . The one thing that bothers me about this is that there is a reason that banking is expensive. , stodgyse are old institutions filled with bureaucracy. But they also spend billions of dollars a year on regulatory compliance. And technology to protect customers. Theres a reason your money isnt stolen from the bank. The bank has made it safe. All of these startups dont have a freaking clue. It is totally rad to get paid in bitcoin until bitcoin disappears. Im not advocating for bitcoin. But erik, you are not wrong. Those are fundamental issues. When banks were marketing to boomers and gen x, those were things you could win on. Win on safety securities, privacy, in the 21st century. You have to compete on a deeper understanding of robert Product Development and customer service. Banks are no longer a place that millenials wish to work. Why is that . I dont believe that. A week ago, Goldman Sachs Training Program started. They had some of the smartest kids in the country working there. Thousands of kids didnt get jobs there. All of them are having trouble hiring innovative high nearing people pioneering people. Please come back soon. Martin joins us. A trial in california could change the way we look at College Sports. To says say they have which school in between all of those games and practices. They want to get paid for it. Big news. Just breaking, the u. S. Justice department has asked citigroup for more than 10 billion to settle a probe into their sale of mortgagebacked bonds in the runup to the 2008 financial crisis. This is all from a person familiar with the negotiations. We understand that citigroup about 4o settle for billion. That offer was rejected by the Justice Department. That is when the tension against to increase. The Justice Department threatens to sue citigroup. We have seen this play out before. Were certainly seeing it play out in other places. But that has to do with Money Laundering and antiterrorist financing. Aboutndamentally it is the Justice Department feeling stronger, exerting its authority. They say pay up, or we are going after you. Jpmorgan had to cave, bank of america is in the process of doing the same thing. When the Justice Department can leave you hung up and hung out to dry when you hear numbers this big and talk to analysts on the street, they are starting to say it is as though the department of justice is just picking these massive numbers. It feels like they are out of thin air. We are going to explore this. Kerri will join us to talk about these negotiations. But here is what i am thinking about. Back when jpmorgan was negotiating with the Justice Department, and ended up paying billionof more than 20 the threat was that they would be indicted. Bank faced a criminal indictment, it wouldnt be able to do business. It would effectively have to fold, or at least pack up shop and leave town overnight. That has been proven false. The Credit Suisse settlement with the Justice Department demonstrates that a criminal indictment no longer put the bank out of business. Granted, citigroup is doing things in north america that Credit Suisse doesnt. It has a commercial and consumer inc. In operation. But it doesnt seem to me that prosecutors i have to put , thatis on seem prosecutors have as much leverage as they did in the fall. Dont think there is a bank out there that will stand up to the department of justice at this point. Many people thought one of the threw uphe jamie dimon the white flag and said i submit is because he wanted to start 2014 on a fresh slate. When you talk to Financial Investors and bank analyst, one of the issues have been i dont know what the litigation costs will be. Me banks are saying hit where it hurts, you pick the number, i will take it. Just let me move on. If citibank really going to be the one in stand up to say we are not going to take it . The department of justice has these banks act into a corner. The banks are saying fine, i will pay you. There is a 6 billion difference between what citigroup offered to pay to settle these allegations and what the Justice Department is seeking. Maybe that gap narrows, and they negotiate a settlement. But at the very least, citigroup is putting up something of a struggle. Are prepared to pay something, but we are not prepared to pay what you are asking for. At the end of the day, do they really have any leverage . Look at the position banks are in right now. Look at how the department of justice is looming over them. We just sat here with ross martin about how the Younger Generation doesnt believe in banks. Anchors are still being called fat cats trade bankers are still being called fat cats. I will just pointed out. Lets use the market. Down . 28. Tock is it is a 48 stock. At the very least, the market is saying we are not alarmed. The bank may have some leverage, or because they are comfortable with citigroups provisions. Maybe it cost citigroup 10 billion, but it will not come out of earnings. Citigroup has already taken that money out and set it aside. Ass number. Big it is 56 past the hour, which means bloomberg is on the markets. Priceline, opentable. They are buying opentable for a whopping 2. 6 billion, all cash. Priceline is slightly in the red. Opentable, from where it closed last night, investors are feeling it. Investors should be divided. Put 46 premium on the table, it is all cash. It is not like they are going to get priceline stock. Take it away,st and socket in the bank. Lets talk about intel. They have risen to the highest intraday level in years. Intel is up seven percent today. Intel raised its secondquarter revenue forecast, and said sales will increase for the First Time Since 2011. Intel is trading way up. Will be back in a moment. Stick around. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and Stephanie Ruhle. Welcome back to Market Makers. I am Stephanie Ruhle. And i am Erik Schatzker. We continue with breaking news. Moments ago we told you citigroup is in talks or at least was in talks with the Justice Department to settle allegations over the sale of mortgagebacked bonds before the financial crisis. Citigroup offered to settle for 4 billion. The Justice Department wants 10 billion. Our own keri geiger has been on top of these cases. Jpmorgan, bank of america, now citigroup. Where does this money come from . Wonderre starting to where it comes from because there are very big. Some of it has to do with how these things residential mortgagebacked security. Right. For those who have mortgage fatigue and wonder what this is all about, but this is all going through what this is all about. It is a civil settlement to claw back some of the funds that were bets placed ond Mortgage Backed securities. But we knew that the Justice Department was going to go after other banks besides they view morgan. Jpmorgan went first. It was an awful lot of money. But they bought washington mutual, two firms that we understood did a lot of bad stuff. Countrywide and merrill lynch, two other firms that do a lot of bad stuff. But citi didnt citi is in a different position. Jpmorgan would be big, big of america would be big. Citigroup is the one who got caught with its pants for this down around the ankles. That is way worse. I did not talk about what you see moving past the pants, but what we do have is we have a huge split between 4 billion and a 10 billion, and these numbers go out to the market, and we can kind of see what happens. What happens to the stock price . The stock is not moving. It is down . 35. And jpmorgan, that was a massive double settlement for 1. We see this with bnp, a doubledigit with a b, as he said earlier so well, its like dr. Evil type money. Is one of the reasons these stocks are not moving is those are invested in financial . At the end of the day, those who jpmorgan,ed in citi, and bank of america still believe in the fundamentals they know the bank will live to fight another day. Killillion will not citibank, and even if they do not cover 10 million, the bank will pay, there will be a one quarter head, and they will move on. The share prices continued to groo up. Where this starts to hurt is the smaller banks. With the bnp settlement, barreling down the road here at 10 billion, that could really hurt the bottom line. But they can absorb them. I think what the issue is is that people are concerned that this is being extracted out of not just the financial crisis but this will hurt the shareholder rally in the long term. Is a larger issue that there is no great big massive bank ceo to call the dojs bluff . If jamie dimon did not say to the department of justice, beat it, then these other guys are not going to. They are beaten puppies at this point. I think it is really hard to say to the department of justice beat it you. They have a lot of leverage. It is difficult to litigate these giant cases. They could sue for larger amounts of money. Ceos jobs. T the one thing that they held was the ability to charge a bank criminally. Does the Credit Suisse situation change anything yo that was supposed to be the overhang in the jpmorgan case. There was an indictment, or maybe there was briefly. A betteroup at position than jpmorgan was in the fall . Not necessarily because the whole issue as far as we not facingis anything criminal on this. But still being asked to pay 10 billion dollars. And neither is bank of america. This is a lot of money that banks are now expected to pay to settle stuff that happened during the financial crisis. Lets be honest there are lots of people out there who want be banks to pay. That is what i was going to say or are people just saying screw you, it did not work it is not matter. These are voters, and the Justice Department is a creature of the government. So you are saying they have to pay to play. I am not saying they have to, im just saying that is one view, and that is the view from inside the Financial Services industry and it is kind of unfair, and the Justice Department is just behaving like a political animal, and then the view from outside the Financial Services industry which is that the Justice Department is behaving like a political animal, and maybe that is ok. Happensack stuff that during the financial crisis and help banks move forward from the financial crisis. At some point, we will be past this. We will be passed it. Do you ever wonder why is it that the government thinks we fannie and without freddie and they are here to help americans and they do not think banks are . I guess, i mean i do not think it is a perfect analogue, fannie and freddie versus the banks i am talking about big, massive, knotty players during the crisis. I guess i dont understand why banks can get out from under this and fannie and freddie have in terms of how they are viewed by the general public and the government. That is not entirely true. There was a bill in the senate not so long ago that would have taken friday and fannie would have taken fannie and freddie apart. Populace sentiments, deep prestige populist sentiment that is going after the bank might not think that is going away anytime soon, and however much these are tied to that, or it is really just a way to actually fix some of the wrongdoings of the financial crisis it is hard to tell. Keri, as you can tell, we like to talk about this issue, and we will be talking about it more. I think there are some bad players from back in 2008, and instead of leading member tyrant be really rich, put them in jail. But here we are five years later, come on, lets just get business done. Citi is lets just hope watching this segment. Arent they always . That is our keri geiger. And here is the question how in the world did meg whitman get paid more and more every time she restructures the company . Cory johnson takes a very interesting look at what some may call the perverse incentives and how layouts boost executive compensation at hp. Hewlettpackard has announced a onetime restructuring, a little more time with more cuts and more layouts, and they could all help Ceo Meg Whitman make more. 3. 6 billion in 2012 has ballooned to 4. 1 billion dollars. That is half 1 billion more, and 29,000 layoffs. But what is restructuring . Look atke a structuring. Structuring is the cost of building a business. You have a new idea, you hire someone to build it, maybe it is awesome. But maybe it becomes obsolete. Maybe it fails. So you shut down the project and you lay off someone. That is business, right . But restructuring . When a company restructures, it suggests that the setting on a project and laying off the someone is one time and does not count. That is how the accounting work. Sales go up, leaving a nongap profit, but the restructuring goes down here. That is the bottom line bottom line, that is what the shareholders get. But the more cost the company can move from here down to here, the bigger the adjusted profit. And there is the bonus question. In the last three years, meg whitman has received 50 million, a 4 million bonus last year, and hewlettpackard has seen 11 quarters of shrinking sales. They have the net rockets fall, losing 12 billion in the last three fiscal years, and restructuring will cost 50,000 people their jobs. So you wonder how does the Company Seeking to cut costs raise bonuses . Lot a tory note, a quarter of women was the annual Incentive Plan is a sub on my financial performance, but the bottom line is defined as this nongaap profit. So the more cost meg whitman can move from here down to here, the bigger the nongaap profit in the bigger the bonus. And yes, the bigger the layoffs, the bigger her pay. Everyone would be better if hp could ever revive this business, but intel this happens with every restructuring, it improves the structure of the ceos pay hike. Cory johnson is with us from san francisco. Cory, i love seeing you play the role of the professor, but next time, a tweed jacket with suede elbow pactches. Lets talk about meg whitman and these restructuring how many restructuring charges have a speed taken under meg . Well, hps restructuring itself is just breathtaking. If you look back, not only have they taken restructuring during every single quarter that meg whitman has been ceo, restructuring of all the way back to the First Quarter of 2008. In everything one of those quarters, 20 four quarters, the company has had some sort of restructuring charge. What are we blaming meg here for . She is the one who has it in her contract that she should be compensated. It is not her fault. Hp is the one who agreed to these terms. Absolutely. She decided she wants to be paid whether people get laid off or the restructuring continued, indeed, if the restructuring its even worse, she could end up getting paid more. Certainly the bonus pool, nongaap, or quote unquote bottom line, which is not a bottom line at all. She was able to negotiate a deal other people have as well. One of the remarkable things of how much the company restructures. Analysts really scratching their heads at the last quarter thing we do not understand you keep saying that business is improving, but restructuring is going on longer, costing more, and costing more people their jobs. Part of the reason we know all of the stuff, cory, is that hp is a Public Company with public shareholders in a duty of transparency in force by the sec. Are we just witnessing at hp wont happen in a private equity owned company, but it would be invisible from us . It is hard to say. I do not know what happens in the dark. It is true i was able to discover this by digging through financials, but when the Company Announces meg whitman have a one sound likery and a this laudatory thing even while all of these people are getting laid off, instead you find out she is being paid 50 million and her pay actually can go up with more layouts. I should be fair. Listen to what hp had to say in terms of defending this compensation package, which they say our Compensation Program is based on numerous factors, including cash flow, revenue, and earnings performance, but again they define earnings performance as earnings before earnings before the restructuring. Investors stuck with the actual result, not the nongaap results. Cori, our viewers love you for so many reasons, but one of those of you love to get your sleeves rolled up, dig in. Thank you. Our own cory johnson with us from san francisco. That is why i like him, too. Trial up, the nightmare of the ncaa. It may determine whether College Athletes should be getting paid. Plus, it is friday. It is time to play the yearbook game. Who is this media ceo . Graduated from Deerfield Academy prep school in massachusetts in 1970. That is all our producers are telling us. Take a look. We are doing the same. Tweet us at us. You can get both of us marketmakers. Welcome back, everybody. You are watching Market Makers here on friday in new york city. I am Erik Schatzker along with Stephanie Ruhle. The issue should College Players be paid for the use of their names and images in broadcast and also in videogames . The case pits the in the aa again say group of former players. The case pits the ncaa former a group of players. Andrew, what we begin by putting this into perspective because this is not the only case pitting College Players or people who represent them against the ncaa. This is referred to as the open in ks, but there are a couple of others. Describe the landscape for us. Quite a landscape. There is a triumvirate, a triplet of cases against the in the aa that could really change the whole status quo that College Sports is right now. There is this case, the open in obannon case. Gaining the and benefits against the ncaa, and there is a third case learned by attorney Jeffrey Kessler who has led the nba players, sports athletes for many years, trying to get more sports conversation and trying to arrange a free market for College Football and basketball layers, similar to this obannon case. It will change college at linux as we notice these cases are successful. What we think about these cases . Are they being led by lawyers who are really just opening up a can of worms . I mean, kids on a college campus, some of whom could be paid hundreds of thousands of dollars, will they ever go to school . That will certainly be in the aas argument. They will be on the stand, mark emmert and a couple of College Commissioners will be on the stand probably next week to talk scholarship and amateurism and competitive balance in what you are asking a school to do, but right now were hearing from obannon, who was that his nephews house, turn on a image, tall,w his skinny, lefthanded guy, but was not added a fight. That was really the genesis of this case to figure out hey, wait a minute, they are using our names, our likenesses for their privofit. The document we sign the college evidently goes to perpetuity. That is what this case is about. Getting compensation restrictions removed for names, images, likenesses of these players that are used for material gain by their schools, by their conferences, and by the ncaa with nothing back to them. Ultimately, one of the questions people are going to rew, is who gets paid if obannon wins this case, how far does it go . He was asked on the stand this week, should Little League players get paid if their games are broadcast on espn, for example, in his answer was yes. Some people might find that absurd. I quite honestly do not think it is absurd at least in principle. In practice, it might be a little more complicated. What is your view . Regrets the Little League, not so much because it is potentially technically true keyecause it removes the issue here. The key issue as we have legal adults age 18 to 22 that are out there being broadcast. Now, there is a value to these broadcast. Obviously the ncaa pays billions of dollars for the ncaa march madness and they are not getting compensated. I think you bring up an important question the logistics of it could be a nightmare. Who gets paid . Onlythe stars, college basketball, only College Football. What about womens sports . Sports . Ut other i fear is if you take money away from the sports that could change the whole moderate. Whole model. The ncaa rules are designed for all sports, mens wrestling, womens track and field, and they really dont have the application they should for the revenueproducing sports, especially at the top level. You have alabama football making 90 million in profit. These kinds of things again, what we may end up with, and i am just speculating here, down the road is a twopart system, one for the revenue sports and one for the nonrevenue sports where the traditional ncaa rules apply. And some may ask themselves what is wrong with that . If you get the point, andrew, case either the obannon or the northwestern case or the jeff kessler case involving the top players in the ncaa moves forward and appears to be gaining traction, how are the leaks going to respond . Nba looknfl and the at the situation say i am not so sure what the economics of our socalled farm system are going to be, so why dont we start Minor Leagues of our own . Is that a possibility . That is a great point. What we have had is an easy alliance that is getting uneasier between the pro and the College System where they have had rules. Is one anda, it done, would be in the fell, it is three years, this minorleague in the College System. As he went out, we may be developing toward the more pro model. The nba has a minorleague. The nfl has made a lot of points about developing its own minorleague, its development elite. That started this year and is gaining some steam. So we may end up with pro leagues outside the College System that serve the same purpose as the College System as form systems for the nfl. That is where we may be heading here. Listen, i think we will have a logistical issue if we get to that. Right now, you know what i say all the time there will be lawyers. There will be appeals. If the obannon side is a successful, we will be appealing this may be all the way to the supreme court, may be talking about this in three years. The unionization issue is going to be full in ounrlb. We are going to be here a while, but we may see a sea change in ncaa soon enough. Wife i love the take away there will be lawyers. Thank you so much, andrew brandt. We will be back here on Market Makers. Coming up here on Market Makers, the best offenders at the world cup are not on the field. I will take you behind the scenes to look at the security of the big tournament. Plus, it is friday. I hope you guys are ready for the yearbook game. Im going to help you again. Who is this a who graduated from deerfield in massachusetts in 1970 . You can tweet us sruhle erikschatzker i am Erik Schatzker and you are watching bloomberg television. It is day two of the world cup and we have already seen clashes between protesters and pulleys. It should not surprise you if you have been watching our world cup coverage. I went down for an inside look at how police in the military prepared for the biggest matches of the cup. Believe me, it is a whole different game when somebody is throwing a molotov cocktail your way. Have a look. [chanting] the soldiers are preparing for an unusual battle on the soccer field. Refill is holding the world cup for the first time in 64 years, and the country is not taking any chances. Lieutenant colonel paulo silva will be keeping the peace here in one of 12 cities where 64 world cup matches will be played over the next month. [speaking foreign language] his troops have been training for more than a year to combat any number of scenarios. Angry protesters, anarchists, hostage takers, even terrorists. Speaking foreign language] brazil wants to avoid a repeat of last yours Confederations Cup when a series of rallies turned into deadly riots. [speaking foreign language] rio is used to hosting big event frog with risk, like the popes visit in july 2013. The security challenges all new. So as much of the equipment he police we used to gather intelligence. [speaking portuguese] like any big city, it has a command city to manage streets at high risk areas. It is getting a major upgrade for the world cup. 45 million of special funding from everything to stateoftheart video to mobile surveillance units, plus 4000 more officers. To helphas an app residents make immediate contact with the closest cops. Edit the gets to grave, and grave, thetoo military is ready to roll in. [speaking portuguese] the challenge has just begun and it will not end with the july. Cup final in the olympics in rio is just two years away. That is the story, day two of the world cup, and it continues until july 13. Stephanie, it was my good fortune to go to brazil of course and to tell these stories, but i do want to give a shout out to my producers. Here they are in the chopper high over the amazon. And dan are amazing. They did great camera work. They clearly turned the reporting we get into some amazing stuff. You did a pretty good job, too. I do not know if i can be a part of this segment. Eric just said girls. That eric, not this one. It is another example of why the show needs a webcam during commercials. If you had any idea what this guy decide, he would never be back on. Our probability expert, he is a statistics guy. Brazil is a favorite, brazil one yesterday, but it is a controversial match. That is what, then it is all about. They have a higher chance of winning because stuff like that happens regularly at home. Japanese russ smith questionable calls . But that game in any other country, that call does not happen. That is why they have a home field advantage. Everything kicked off last night with brazilcroatia. Today, three matches you are watching closely mexico versus cameroon, spain versus the netherlands, and chile versus australia because that is important because of what either of those teams might do as spoilers. Right, but australia and cameroon, there are two of you the worst teams, severe time to watch one game, it is all about spainnetherlands. People who are watching the world cup are basically awake around the clock. But there are some french fans out there like if you are in america and you happen to not be working. People on television might not be able to watch every game. What is the smart money betting on today . One becauseanother it has a little but of an edge, but the most likely outcome is probably a 00 tie. It will be a low scoring game. What a torture game so many moments of excitement than00 game, many more you think. The winner of group b gets to lay group a, and if you win that, you probably get to play brazil. Of the arts are 41 for spain winning. The most likely is 00. This is the most competitive, which is why did the most interesting because either one has a pretty a shot of making it into the final game. These are the best to in the group. Cameroon was a real surprise the last time around. A real surprise, but again if they go further this year, they would be a real surprise, but not the kind of team you look forward to go that far. But you want them to. You want them to have your rooting for them, but if not, youre rooting for mexico. You have nothing to say about the australians. What about chile . Chile is a strong threat. They need to not tie today, though, because of a tight and they give up points that they should be expected to get. Soy 62 probability that they beat australia. Even if they tie, that is a bad result for them. Have you done your brackets . I have done my brackets. Who do you expect to win . Brazil. If soccer had a final four, you think switzerland will be in the semis. I have to take a risk somehow. Isnt that an oxymoron, taking a risk on switzerland. I do not think of that. You so much. K coming up, all in the family. That is what the manager of ringling brothers does. His top three managers are his daughters. What a way to ring in fathers day. Folks, we are waiting on some breaking news out of washington. Momentarily president obama will be epic to the microphone to make a statement about the escalating crisis in iraq. We have been following this very closely. It is having an impact on oil prices. A militant group aligned with al qaeda has taken control of a the secondincluding largest city in moving toward baghdad with a very clear intent on taking that city as well. We will bring you that live when it begins at about 10 minutes to 15 minutes, but for now we need to talk about this weekend because it is fathers day, and today were taking a special look at companies that are run by fathers and their children. Ringling bros. And Barnum Bailey circus has been in the feld family for over 40 years, now Feld Entertainment of that operates live shows like eriks favorite, disney on ice. Kennetht does is ceo feld and his daughters, who are executives at the company. Literallyly and youre running a surplus. How does all of this happened . We have always been traveling. I think i have traveled for days a week for the last 45 years, and all of our shows, we do not have any stationary shows, so they are always someplace in the world. We operate in 72 countries all over the United States, and we just travel, so we figured out a way to make it work. What is it like growing up in the circus . Well, if we wanted to see our dad, we had to travel, so we are used to it. It was great, though. When clowns as babysitters. We learned all kinds of acrobatics. We had the best birthday parties in the history of the world. Were you ever in the circus . We were. We were clowns in the circus and we grope in the washington, d. C. Area, with so when the show came off to town, our dot would drop it off early in the morning, we would get our makeup on and we would have clown costumes and we would perform. Labor. D [laughter] assumptionsa lot of about the circus. What are some of the biggest misconceptions about the way business is done under the big top . I think what people do not understand i mean, we are a family business. We create Family Entertainment for families, and the circus is multigenerational, so what is interesting is nicole and alana will go looking for talent all over. They may be dealing with a certain act to hire, and they will say oh, your dad hired my father, and your grandfather hired my grandfather, and it is amazing. So we have preschool, nursery school, kindergarten through 12th grade on the circus people live on the train. We are their employer, but we are also the landlord. It is often a perception that you do have children and families and they have to put in long hours and travel a time and dont get paid very well. Actually, our performers are incredibly well compensated, and they have we have an incredible medical plan, they live on our train, our of legal age, and it is really a family environment and really quite a community. I think one of the biggest misconceptions is that this is contemporary entertainment for contemporary family, even though it is a timehonored tradition. How do you find people who were willing to take the risks that some of the acts in the circus require . I think back to the accident ,hat happened in rhode island some people were very badly injured. Yes, that was unearned portion of situation, and our performers fortunately are hasvering, but the circus always been a place where people want to risk their lives. That is what they do for a living. I mean, they are really unique you are close to these people, so i guess you know them well, but those of us outside the circus would i mean, stephanie come from a world where people think taking risk involves dollars. Taking a risk with your life shooting yourself out of the canon. It is no different from us. A lot of these performers are multigenerational. Their father, their grandfather, and her greatgrandfather before them perform these acts, and they spend their entire life perfecting this art for the enjoyment of people. Kenneth, it seems like you have been in countless lawsuits as it relates to how animals are treated and most recently you won, which is sort of surprising. One would think you are the guy they are going after, but that is not the case. What happened was we were sued, it was 15 years in litigation, and we were sued by the Humane Society of the United States, the aspca, other Animal Rights groups, and there was a former employee that actually during discovery we found was have these stories i mean, there were falsehoods, and it was proven in court, and they were paying. As they say, follow the money, the checks, so they settled with us. So they sued us, and they wound up paying us, and total all of these groups over 25 million. That raises a question for me, it and im not sure which one of you wants to answer it, but between insurance premiums, which keep going up, and you guys are a risky business, and americas bust up legal system, how much of an obstacle how much harder hasn it become to run your business because of costs like that . Our business is constantly growing and we are a diversified company. We have monster jam, supercross, ran across, we have our newest production, marvel universe live, so they all have inherent risks, but they also are broad based and they work internationally, so what we have nonlinear entertainment. What is your most valuable property right now . The fact that you have disney on ice and you can be rolling out frozen, i cannot imagine that every little girl on the planet will not want to see it. Well, we have a really exciting year. We have two major launches. The first one is marvel universe live. We are launching in july. We were 25 characters. It is the only place to see spiderman, the avengers, and the xmen together performing with all of their powers, and then in september, were launching of course disney on ice presents frozen, and we have already sold over 800,000 tickets to this production, so we are really excited about it, and we are going to have a great year. How important is it for your company look, ringling brothers obviously has a long and glorious history in the circus business, but how important is it for you to partner and identify with other brands like marble, for example, or disney . A 35yeare have relationship with the disney company. My dad actually created the firstever disney on ice, and we also have disney live, which is a stage show, an extension of that. And we are really proud of this partnership and we are proud to be bringing these characters to 70 countries worldwide. We are really the ambassadors for disney in many places where folks are not able to get to the park or maybe do not have access to all of the films, we are the ones bringing disney to them. All right, the family bringing us all of the best circus performances. Thank you so much. Ladies, you have a big fathers day ahead. Kenneth, alana, nicole, Juliette Feld of Feld Entertainment. We will be back. Stick around. We are waiting for the president to step up to a microphone on the south lawn of the white house. He is due to deliver a statement on iraq. As you may be aware by now, militants affiliated with al qaeda have taken not just the secondlargest city in iraq, the city of mosul, but they are on their way to baghdad. They control already large swaths of the country. People who follow iraq closely know that the militants have been maneuvering, training, but the speed at which they took mosul and have taken large parts of the country have surprised many, and of course there is this risk that they will be successful in their efforts to move south and take even larger ,arts of the country of iraq and then and this is the big question mark hanging over the oil market, perhaps even occupying some of the oil ,roducers in the southern iraq 3 Million Barrels a day of production. Stephanie, you will recall the oil market really rallied very hard, up to 125 per barrel for european brent crude in late it1 when the libyan crisis rusted and libyan oil came off the market. Iraq produces even more oil than libya did at that time. Lets actually go to washington, d. C. I want to bring in peter cook. He is out at the white house. What are you expecting here . Being told not to expect any decision from the president necessarily in the statement here, and a decision on action to be taken in iraq or with regard to iraq, but again the president talking yesterday about he is not taking any options off the table except the sne option of u. S. Boot on the ground. Will the u. S. Engage in any military intervention, airstrikes, drone strikes in iraq to try to help the almaliki . Of nuri al it was largely thought perhaps that this country was on its way to stability or less of a foreignpolicy problem for them, now once again having to revisit john and republicans like mccain say the u. S. Should have never left iraq in the first place and this is one of the results of that decision. Peter, it is a complication position that the president is in because he felt so strongly about the need to pull troops out of iraq. America has not had anybody here effectively since december 2012. Is that right . That is right, and it all came down to the decision, a failure to reach an agreement with the iraq use over an agreement with the iraqis that would allow u. S. To remain iraq, so this has implications for afghanistan as well. That is what the u. S. Was hoping for back in 2011. It did not happen for a variety of reasons, and now again, john mccain and others saying that was a mistake. There should have been some sort of agreement, and right now this is the after effect of all of this stop these are tough choices for this president. He is facing of course criticism as well. Takeotential criticism to any military action in iraq. There will be questions about whether or not that once again is crossing over a line that this president does not want to take, particularly at this moment in time. Theater, republicans are already hammering president obama over this, arent they . He is hearing it from both sides. Some are publicans are saying be president should not even consider nil at a reaction here, that we have exited iraq. On the other side, you have republicans like Lindsey Graham and john mccain urging action here. Your brothers wondering if they are perhaps to be regional laying a bigger role here. Peter, one thing we have not heard, and im curious whether you have heard anything about it, is the degree to which america is not as interested, possibly, in the developments in iraq as it was a decade ago because we produce so much more oil than we used to. There are many who believe that america rushed into iraq in the first place or into kuwait years ago because we had these Strategic Oil interests that we want to protect. Now perhaps not so much. Actor into any conversations that you have had . I have not heard that put it bluntly, as you put it, erik. This is the secondbiggest oil producer in opec. The nation i can obviously affect the price of oil around the world, even where the u. S. Production is today. So no i have not, but there are a whole host of lawmakers, both democrats and republican, who of no interest whatsoever in the u. S. Getting involved militarily in iraq one more time. Peter, stay with us. I want to bring in alix steel. She is in the newsroom checking on oil markets ahead of the president s statement. We are not seeing that Much Movement when it comes to brent or wti, but overall, oil is headed for the best weekly gain. They are ninemonth high. You see brett really holding at 1. 13. Is notough u. S. Oil necessarily related to iraq and the violence weve seen there, they tend to move in tandem. The question is if we do wind up seeing any kind of collapse in iraqs oil market, what winds up happening in the global oil ticks or . The global oil picture . Where does that extra supply wind up coming from . Wells fargo saying if the advanced nations released some of their Strategic Reserves as well as saudi arabia pumping at full capacity, it could offset about 90 of the loss that we receive from iraq, but that would include skyrocketing oil prices, guys. Alix, specifically what are they concerned about . If the militants move south into major oilproducing regions in iraq, is expected that they would take steps to either destroy those installations or at the very least take steps to shut production. . I have not heard anything of that kind. This is a huge revenue maker for iraq in general, so shutting down those fields would not necessarily be in anyones interest. In terms of libya, that took a long time to happen. Were still trying to see libya comeback online. There have been times where it has and terminals have been able to export oil, so shutting down a main revenue stream, not necessarily like i said in anyones interest. I have not heard that being a concern. The issue is since 90 or so of the Oil Production that iraq exports come from the south, if there is a shift in security based on the south or the north going to baghdad to the more Northern Region to protect oil regions there, that leaves the southern regions relatively bald herbal, and that might cause some discomfort for some of the reducers, but for some of the producers. It would take a lot for Oil Companies to pull out at this point. Peter cook, our chief washington correspondent, i understand why the president , you know what, peter, hang on one second because i understand the president is about to make his statement, so lets yesterday i convened a meeting with my National Security council to discuss the situation there and this morning i received an update from my team. Over the last several days, we have seen significant gains made i if il, a terrorist organization that operates in iraq and on syria. In the face of a terrorist offensive, Iraqi Security forces have proven unable to defend which of allowed terrorist to overrun iraqi territory which poses a danger to iraq and its people and given the nature of these terrorists, the it could pose a threat eventually to american interests. This threat is not brandnew. Over the last year, we have been steadily ramping up our Security Assistance to the Iraqi Government with increased training, equipping, and intelligence. Now iraq needs Additional Support to break the momentum of extremist groups and bowl to the capabilities of Iraqi Security forces. We will not be sending u. S. Troops back into combat in iraq but i have asked my National Security team to prepare a range of other options that can help support iraq Security Forces and i will review those options in the days ahead. I want to be clear though this is not solely or even primarily a military challenge. Over the past decade, american troops have made extraordinary sacrifices to give iraqis an opportunity to claim their own future. Unfortunately, iraqi leaders have been unable to overcome too often the mistrust and sectarian differences that has l