The future of shopping. Apple has a new idea. Use social media to show off your outfits and get expert ideas on what to wear and buy. Look who is sitting and stephanies chair. My guest post is mark use go. Mark, it is terrific to have you here. The chair never fill of stephanie, but i am glad to be with you. Barra. Rst up, mary she is feeling the heat. She is back in washington, testifying for a second time about the faulty ignition switch that cost at least 13 lives over the course of a decade. Recalls,e been so many almost 20 in fact, more than 20 million cars. Congress wants to know how it happened and what gm is doing to ensure it never happens again. Matt miller is on capitol hill. The hearing is about to begin. We know a bit of what mary barra is going to say. Give us a sense of what we can expect from her and the lawmakers to whom she will be speaking. To saycan expect her pretty much what she has been saying the last four or five times we have interviewed her, but with a stronger and more confident voice. At the first congressional hearings. And seemed to be giving post answers. She now seems to have come into her own as ceo. She had just started when this whole fiasco started to unravel. She had just been put into her position as the first female ceo of any major car company. What you are not going to hear is a change in her answer to the question how could you not have known about this . That hasomething baffled everyone in congress. It is baffling everyone following the story. She has said she just did not know when she is not going to know any better why she didnt know this time than she did last time. She will say it was a cultural problem at gm and she is focused on change in that culture. It will be exciting to watch what anton the lucas has to say. Valukas has to say. More or be able to get at least new answers out of him. The answers coming out of mary barra will not be different than the ones she presented her when she had the Shareholders Meeting last week. Busy day on capitol hill. You are there the gm hearings. Mike mckee is down there for the fed decision. We will follow the hearing throughout the morning and you can watch it live, bloomberg. Com tv. Right now, the newsfeed. Policymakers of the bank of england and say investors are underestimating the chance Interest Rates will rise. That follows remarks by mark carney. Sooner rates may rise than expected. Investors are waiting to hear from the Federal Reserve today. Thet yellen will hold second News Conference as chair of the fed. First is unveiling its smart phone. It is said to have a 3d screen. At t will be the exclusive carrier in the united dates. That is the same role at t played when apples iphone was rolled out. A rare stamp sold for 9. 5 million at sothebys. The buyer, not disclosed. The seller was the estate of john dupont, who died in prison while serving time for murder. Let us go back to this question of investing at a time in changing Monetary Policy. You heard what mark carney and other governors of the bank of england have said about Interest Rates. We will get a sense of how the interestrate Setting Panel of said officials feels today at 2 00 p. M. Mark is the head investor of a Million Dollars in capital. It you invest with other managers and have to make decisions about how to allocate your investments, whether youre going to invest in funds and with managers that have a more macroeconomic focus, or whether you will be more Market Neutral and steer clear of any kind of disruption. How do you feel right now . That is a great question. We spent a great deal of time talking about it. With all of the noise around rates rising sooner than anticipated, the threat of the , we are hawkish shifting a little bit in our tactical fun. Tactical fund. Who play. Ople they are long and short. We do think the sentiment is for rising rates. We are on the other side of that. We think rates will be lower for longer. We think it is overblown. We can talk about that more later if you like. We can talk about it now. Structurally, we have an aging population in the u. S. And europe. Every day, 10,000 people in the u. S. And europe turn 65. 55yearolds have a preference for bonds overstocks. They do not love having debt. Decent ave a decreasing supply of bonds. Prices will go up and the yields will go down. You frame that in terms that are interesting to me. On one hand, it sounds like you are in the new neutral camp, looking at a future where there are structural economic challenges and Interest Rates will have to remain low to tackle that problem for years to come. On the other hand, you sound a bit like larry fink, who does not feel that way about the future of Interest Rates. He spends a lot of time talking about the challenges of retirement and the Way Investors will behave. We talk about the new abnormal instead of the new normal or the new neutral. I do not think this is normal at all. We have only seen one period like this, that was the great depression. Forget. Out what people s from zero Interest Rate 19 29 21944. There is this belief that growth is going to come back. The days of 3 gdp growth in the u. S. , they are probably gone for a wild. How challenging is it to be an investor now . Was be longed to do and strong. You more than made up your losses during the recession. Here we are, s p 500, up 30 last year. We are up in the Single Digits this year. It is very hard is it not hard to tell where things are going a lot harder . I hear that from a lot of people. The common refrain is that this is the toughest environment that we have seen for investing in our careers. If youre a Market Neutral guy, if you are a dollar long and a dollar short, five or six years ago, you made 5 or 6 . Today, you are long and short, you make a zip. Theres is a cost to borrow. Paid to borrow and now you have to pay to borrow. Part of what makes this challenging is not the uncertain policy direction of fed policy, but with the ecb is going to do. That is where jonathan ferro, here from london, comes in. You are talking to betty liu about the shift in tone from the boe and mark carney and how it has caught people by surprise. Were you caught by surprise . Thatwas surprised he took stance. It has been a rapid change of language. Are unpredictable. You should know that by now. It has been shocking. Is surprisedngland about the low probability of actual rate hikes. Why are they surprised . The guys behind the whole thinking in the market, that we were going to get no raise, they have added they have batted it away. Rush and eagerness to normalize policy . Curveball Financial Stability . The big fear is that in two years, when we get the next crisis, were still a zero, how do they react to that . You are right. They have been talking about this since 2009. The forward curve has been upward sloping since 2009. It has been wrong since 2009. It will be wrong for probably the next five years. What carney is doing, and i what janet is going to do today, i think she is going to go hawkish. Prick theying to bubble. Loans are flying off the shelf. There is a credit bubble spread and she has to prick it. If she does not, it could get away from her. Cannot take up rates if you do not have growth. If you do not have growth, you cannot slow down and economy with higher rates. It is already slow. They need the market to tighten. That is what is going on. Is increased transparency creating this ability for them to get more done in the marketplace just by words. K at what draghi did with do whatever it takes. Wheree bond, yet look spanish rates are, italian rates are. Incredible. All with words. An incredible start. Here for the whole hour. Tune in today at 2 00 for a special edition of bottom line. There has been a shakeup that harvard. Be covering that any couple of minutes. Pushing the boundaries with online consumers. Pos tries to figure out the future of shopping. You are watching Market Makers. m here with mark yusko we are talking about 32 point 7 billion. That is the size of the endowment at harvard university. It is far from being the most successful. After years of subpar results, harvard is lagging behind the rest of the ivy league. The university is looking for new leadership. Michael, what happened at harvard . How is it that the great harvard has been screwing it up for so long . How is it that they have managed to screw it up to the point that it is lagging so far behind the rest of the ivy league when it comes to endowment returns so critical for the Financial Health and prospect of a University Like harvard . That is too bad. We are having technical problems. We will try to bring him into the conversation. One thing you do not know about mark use go, he used to run the endowment at the university of north carolina. You are familiar with the problems and challenges that management faces. A University Endowment is not an easy task. It is not an easy task at harvard. Right now, jane mandell oh is still in charge. She was preceded by mohamed elerian. Ofthere are offer types endowments. There are the small ones run by Financial Advisors and then there are 50 million to 500 million. They do not have enough assets to hire their own team and they are usually hired usually run by a consultant. Tore is usually 500 million 10 or 15 billion. Once you get above 15 billion and start getting into 20 billion, now, you are too big to be outsourced in external management. Theythey did at harvard, started to create a internal management. Running internal management is different than picking external managers. Mcdonnell, how deep is the anxiety at harvard over the performance of the endowment . Over the past five years, it has posted average annual returns of 1. 7 . Anyone with two eyes knows how well the market has done it that time. I apologize for the technical difficulties. The cable must go through the box. The anxiety over there, it is difficult to tell. Clearly they are operating at a much higher level. Hand,performance, on one they are defensive about it and say they are beating their own internal policy portfolio, on they compared, themselves against their peers. Last five years, they have been trailing the ivy league. It has been a difficult time for them. On one hand, they are trying to reposition the portfolio after difficult after a difficult 2009. Find newtrying to opportunities, to try to find this elusive alpha. Six years into her tenure, she is leaving. To stay for at least 10. She said she needed five to turn the portfolio around. Ofare yet to see the results that. At least the kind of results we ame to expect to come from place like harvard where it is the biggest in the world. It is supposed to be the best when it comes to producing top results. I am going to go the other way. You justke the graphic showed of first to worst and we took it 10 years, 15 years, and 20 years, it will invert. The schools on the left have a less private equity, less nontraditional investment, much more traditional stocks and bonds. Is that looking backwards or forwards . Over the last five years, you have one of the best fiveyear period for public equities in the u. S. In the history of the stock market. If you add the five years before that, when it was not such a good period for stocks, suddenly, things are a little heavy. Things that harvard does spectacularly well and has done well for years. Those results turn the other way. The problem is, that is not what people see or focus on. Are you getting the feeling that whether it was harvard hospices Harvard Posco decision harvards decision or. s decision everybody has nothing but great things to say about the work that she has done. What is fascinating is trying to lift the lid. Everyone knows it is a black box when it comes to endowment money management. Are somew that there issues with the private equity portfolio and emerging markets. Will tell to see if she can turn it around. We have to leave it there. Michael mcdonnell is in boston. Sticking with us for the hour. Coming up, mary barra is on capitol hill. Lawmakers are asking why it took gm so long to do anything about the faulty ignition switch that ultimately resulted in the death of at least 13 people. Kwik breaking news out of the nfl. It is out of the patent office. They have canceled a trademark of the Washington Redskins name. They say it is disparaging of native americans. It does not mean they have to change their name, but it may raise the pressure on dan snyder. We are back in two. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and stephanie ruhle. You are watching Market Makers. I am Erik Schatzker. Who is this guy . He is not stephanie ruhle. He is mark yusko. Stephanie is on assignment. It is great to have you here. He is my guest host for the hour. We are going back to washington. Opening statements are underway for general panel motors. They are asking about the failure to recall cars with faulty ignition switches. Matt miller is there. Ofy barra is in the midst her opening statement. The lawmakers have had an opportunity to make their statements. What did they tell you about the mood inside this room . They do not seem to be as angry as they were last time. They are interested in political showmanship. If you came to this hearing hoping it was just an inquiry, focused on getting answers, then you would be mistaken. It is definitely about the pr that the congress can get themselves. Diana brought back her prop of the ignition switch and held it up to the cameras. It does not add anything or help us learn anything more. It is just about her making a pressent, maybe making a appearance for her reelection next time, i guess area on the other hand, there are some very serious questions here. One of them is the same we have outd from the time we found about this. How can Something Like this happen and what is wrong with the culture at General Motors that would allow Something Like this to happen. A lot of people were asking mary barra to give them specific examples of how she is going to change gms culture beyond the installation of a Senior Executive in charge of safety. Fore were a lot of calls legislative changes, to give more power to knit some to nhtsa. About someng to hear kind of restitution. Ken feinberg was supposed to be into action 30 to 60 days after the last hearing. It has been almost 80 days and that is a concern for the congresspeople here. One comment earlier was that she looked more confident this her in her speeches or in commentary, that she was taking a more bold response. Do you see that . Absolutely. It you see that from her. If you came here to the first set of hearings and if you listened to her give her first public appearance speeches about this issue, you can tell she had a lot. Her lawyers warn her not to divulge too much information. It is difficult to answer if you areout not used to. She has gained selfconfidence and is putting more i am not saying she was lying to begin with, but she is giving more honesty. She is not giving the answers you want, because she claims she positively did not know about this and neither did any Senior Executive. The report seems to support that. Bergerresentative from posed the question who is working for . He is getting paid by General Motors. These congresspeople may ask more interesting questions of anton then they can of mary barra. Movement ofseen any talking about the future as opposed to the past . I am not sure eating the dead horse over and over is giving us new information. Are they giving her some opportunity to respond to how theyre going to move forward as opposed to beating up on what is going on . You hope to hear Something Like that. It would be nice if the political showmanship was dialed back a little bit and we got something useful out of these hearings. That hereen saying focus is squarely on making sure Something Like this does not happen again. She repeated that again at the Shareholders Meeting and again in her opening statements. We have not gone to a more lax a more relaxed q a session. We are going through the incredible amount of opening statements. Is justton valukas finishing up now. I am going to go back in there. I want to ask mark a question about General Motors. You invest with managers. Many are in equities. You do some of your own investing in equities. What purpose is this hearing serving, not to americans in general, because this is supposed to be a nexus size an exercise in democracy, challenging major actors in the economy and society. From a shareholders point of view, is it helping . I do not think it is helping at all. You think the gm may be able to skirt some of the scrutiny and controversy . I think we are seeing so much of this because the role of the government in the bailout. I do not think there would be so much grandstanding without that. The reality is, it is a big company. It impacts a lot of peoples lives. There should be good scrutiny on it. This was many years ago. Lets focus on today and things going on. Lets talk about the Safety Record of current vehicles and the things they are doing to make sure they deliver good products. That 13 people died is a fact that congress and the rest of us cannot escape. Than 20 million cars have been recalled. Wish congress were still asking mary barra more about why gm cannot seem to get control of its recall problem, as opposed to focusing on the one issue around which Anton Valukas prepared his report. That is my question to you. They will ask her that question. I cannot saying believe you are recalling cars as late as monday night. Another 3 million cars. Some of those were 2014 models. It is shocking and hard to get your head around. I think it is important to note that this is still a company of cars. S a lot consumers recognized the improvement in quality of the cars that they are selling now. In the last month, they sold more cars than ever before. This has not deterred people from buying the cars. Stock is up. It has risen the last couple of days, even if the even with the further recall report. Analysts comfortable with Investors Holding the stock. That says a lot, i think. Matt miller. He is down at the house hearing. When we come back, cracking the code. Getzappos is trying to consumers to shop socially. Stick around. You are watching Market Makers. Is turning selfies into sales. They are testing new boundaries to engage with online consumers. That means the focus is on the s,llions of likes, hashtag and append out on the web and pins out on the web. What are you doing out there . We created this labs office because we have seen retail and ecommerce changes so quickly. Surely zappos is at the forefront. Black dressnt those shoes and you have them in mind, you come to zappos and we find them for you, ship them to you. Great customer service. As we are trying to evolve our brand, people are spending so much time on pinterest and instagram, that is one of the things we think about as a retailer. Now youre trying to transition us to make it part of. Ur lifestyle i would not say transition. We will not we will not stop being part of that amazing experience. Seeing, Consumer Behavior changes and people move to their phones. You make an important point. Mark and i might sharp with our phones, but we are not likely to do that much shopping with our phones. , they dohe other hand a lot of shopping on their phone. When everyone saw facebook being big and pinterest blowing up, everyone said lets build our own social network and everyone failed at that, including us. People are doing stuff nash naturally on instagram. To us older folks, we joke about it, but there is a hashtag on instagram called ootd. It stands for outfit of the day. There are 30 million pictures on instagram with that hashtag. 30 million pictures that have said this is my style, this is what i care about and i want the world to know. How do we not be a part of that conversation . I call it self expression. Brand to you get your be tied to those things . We did a small pot lit. We saw some interesting engagement. We asked people you are doing an outfit picture. We do not want you to do anything else but at the hashtag nextootd. Is great at doing things emanuel. When we see some one doing those things, we look at what they wear, look at their friends st yles. We have a huge catalog. What is the followthrough like . When those recommendations are , what dohose people they do . Do they shop . They all go to their recommendation. The thing we are seeing, if you are and instagram, you may check out one of our recommendation. You may not feel like buying right away. We have heard a lot of feedback like zappos sells clothing . We are known for shoes. Is a bot . No, it is a stylist. This will create jobs. A big reason we moved our headquarters to las vegas is to grow our call centers locally and not outsource it. Are on ourlists that team that do some of these stylist recommendations as well. Commercially focused. A lot of companies spend time on social media trying to build brand awareness, loyalty, without any real sense as to whether there is a followthrough. That seems to be different with the zappos. Huge you look at our investment in our call center, it is hard to measure the roi. When we do a 10 hour phone call with a customer that just wants to talk for 10 hours, there is no immediate shortterm roi. It might be negative. Exactly. It becomes a story of legend. The oldfashioned way of brand building. Nordstromesque. That level ofieve branding, you are a go to experience. I think we are a whole experience. Shoes. Pos started in thank you. Is staying with us. The setback for the Washington Redskins and dan snyder and the controversial battle over the teams thing name. We are going to speak to the former ceo of the oakland raiders. You are watching Market Makers. The Washington Redskins controversy has taken a turn. The u. S. Patent office has canceled a trademark on the teams name. They say the name is disparaging of native americans. Jonathan allen happens to be here in new york city. Great to have you here. On the phone, we have any trask. She is an analyst for cbs sports. Cohost for the hour. Amy, we have to begin with you. This is not the first time native americans have won a victory against the redskinss name. It does feel important. It is a significant decision. It is a significant moment. Look,vernment has said, we agree with the dictionary. The dictionary defines this word as a derogatory slur. We agree with that definition and we will not protect the marks and logos anymore. That meanes practically speaking, for a team like the skins . There will be a appellate rights and the legal work has not been exhausted yet. I am not a patent or trademark lawyer. What it means is when all of the appellate rights are exhausted, the federal government will no longer be affording its protection to the marks and logos, which means, initially, others can go out and use those marks and logos for commercial gain and the team in the league will not be able to stop that. You may also see fans starting to drift away from choosing to identify with that. At some point, you may see dropoff in the sale of merchandise, perhaps more significantly, it has some fans will always want to buy that merchandise, you may see corporations and businesses starting to walk away from wanting to identify with that. Now that the u. S. Government has spoken and said yes, it is a disparaging slur. Jonathan, you could write about dan snyder exclusively. Have otherely, i things to cover. It can be a difficult interview, i am told. Amy is dead on here. What is going on is the patent and trade office is putting economic pressure on the Washington Football Team and dan snyder and the nfl which can put more pressure on dan snyder to drop the name. This is the beginning important to point out the skins won the appeal the last time around. At some point, you would think this is becoming untenable. You would think. I have lived in washington my whole life. I grew up as a fan of this team. Conscious socially friends in washington would like to see the name changed. Caricature. A i think ultimately, there will be a lot of pressure on dan snyder to change. The other caricatures in teams are even worse. The cleveland indians, some might argue the braves. This seems natural. It is a controversial topic. The direction we are moving in, we are probably not going to look for the lowest common denominator in team names. I think he will have to change it. It may be a while. Dan snyder is a stubborn ceo. The league, ast, a whole, needs to and perhaps will say, enough. You would know. What power does the league have to do that . Lets think for a moment about what transpired with the clippers in los angeles. We know the league had only certain powers it could exercise. It exercised them. There are still no resolution there. What could the league do in this case . The greatest power in the greatest strength the league will have from its legal right, but from the pressure that the owners can exert on other owners. Let me tell you. That is significant pressure. When you are in that room and 32 and at somen there. 31 or 24 of them say this is not ok, dan snyder is going to legalo decide that, rights notwithstanding, whether he wants to have an issue between him and the other owners. We know adam silver stepped in and did the right thing for the nba. Roger goodell, is he going to do that for the skins in the nfl . I would have thought so. I hope so. Theve been surprised leagues position on this has been noted. Not only has the league stepped back and said we are not going to be involved, they have been advancing the same arguments that the Washington Team has been advancing. I do have confidence that the league has the ability to do the right thing. I hope it will do the right thing. Remember one other thing from an economic standpoint the league has a misty tool. They can amortize the expense associated with a name change over 32 clubs. Great of you to join us. Amy trask. Jonathan allen and mark, thank you. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and stephanie ruhle. Forecast from the fed investors await word from janet yellen on jobs, inflation, and the economic outlook. You will hear from chief economist at goldman sachs, yonhap just. Amazon gets ready to take on apple again, unveiling a smartphone. For all fever football fever americans are going crazy over soccer now, but what will it be like once the world cup is over . Ou are watching Market Makers on Bloomberg Television. Are of Bloomberg Businessweek, fantastic to have you. Only for you. This is a worldwide first, cohosting a television show. Only for me, you heard it right here. Three hours from now we will hear from janet yellen and her colleagues at the fed with a forecast on jobs, inflation and the economic outlook, and she will hold her second News Conference as chair of the fed. This is a great opportunity to jan. Jan hogtie is what kind of posture do you expect janet yellen to take, and what will we hear from the fed that is important . There are a few things. The main thing to note is that since the last press conference in general the information has been pretty encouraging even though First Quarter gdp was very weak, probably revised down to 2 when all is said and done. The higher frequency numbers have been encouraging, and she is sure to note that. While the fed will have to revise down the gdp numbers for the full year, just mechanically, because of weakness in the First Quarter, i think, in general, the tone coming out from the fed is going to be a little more positive. The Unemployment Rate projections will probably be revised down a little bit, and i think what we will hear is that they do expect the economy to grow at an abovetrend pace going forward. At the same time, i think janet yellen will still emphasize there is a lot of slack in the economy, and that wages are. Till growing at a slow pace that is a good piece of evidence that there still is a lot of slack despite the different indicators on that, and she does not expect to be tightening Monetary Policy anytime soon beyond the taper. Senate confirmed new members to the Federal Reserve ward. Dashboard. How do you expect the composition to impact what happens . I do not think there will be a major change in terms of the composition. At the margin it might be that the departure of jeremy stein and the two new members, and lsher Stanley Fischer and will be a little more dovish. I think the thinking at the board of governors is relatively similar between these people. Of course, the Bank President s have a wider range of views but that has been true for the last several years, so i do not think that is a major change. Jan hatzius, anyone that follows the fed knows there is a next obsession with dots these days too much, too little, just enough . I think the markets are focused, even on small changes, and i think it is natural that the fed will save the small changes do not really mean that much month by month, quarter by quarter, or year by year, as janet yellen said in the next last conference. Direction,ove in one then another, and it does not necessarily mean that much. Much about how much shorter time intervals, so it is naturally an object for obsession. It will be important what happens to the dots. There is the economic argument for the dots to move up slightly. The labor market numbers have generally been good. You can see a slight move off course. On the other hand, i think there is also the compositional argument in terms of who is submitting these numbers might argue for, you know, more stability, and the discussion around the longterm, neutral rate is probably also a reason to expect if at all, only a small upward movement in the 20 15th and 2016 dots. At the very least, do the dots not give us the most transparency into the thinking of the fed until the minutes, ill . Until the minutes, out t . Come ou have at this point because the quantitative data. Says in theellen press conference, and will we see in the statement is also going to be in wharton. Important. The statement is a better representation of what the committee and the voting membership of the committee expects. Of course, it is no longer quantitative, so in that sense we have to Pay Attention to the dots. That certainly makes sense. When janet yellen again her term there was noise made about how she was planning to be more transparent and here we are trying to decipher her dots charts. How do you think she has done . You think there has been more transparency, have the press ference is been effective transparency, have the press conference as been effective . Chair of thee vice subcommittee on communication. The expanded summary of Economic Projections all of that was something she had a lot of input into. She has not done chair she has not been chair for that long so we are not had additional initiatives, but there is room for improvement, things we might see, maybe not today, but over the next six or 12 months, such as, potentially, even more information about the outlook on Monetary Policy, for example. One thing they could do is provide information on, you know, which members have you know, which policy expectations whether it is mainly the onbers with optimistic views the economy that have higher dots, or mainly the members that have a more hawkish view on Monetary Policy that have the higher dots. I think they could provide more information there. There has been a suggestion of more frequent press conferences, having a press conference at meeting, publishing a summary of Economic Projections at every fomc meeting. Those willre that necessarily be realized that i do think we will see some incremental changes in the direction of yet more transparency. A few months ago, the fed made it seem as if there were only two things all of us needed to Pay Attention to the Unemployment Rate and inflation expectations. It is a whole lot murkier now because the fed has backed away from some of those socalled thresholds. What are you mostly focused on . Broad measures of labor Market Progress are important and the Unemployment Rate is certainly one input there, but you also want to look at includes theh involuntary parttimers and marginally attached workers. I think you want to focus on things like the duration of unemployment, and, i think, very importantly, you want to focus on what is happening with wages. The fact that wages are still only growing at 2 in nominal terms is a good indicator that there is quite a lot of labor market slack because in a normally functioning labor market, with a credible 2 inflation target, you would 4 nominal growth. So the fact that we are still at 2 nominal wage growth is a strong argument that we are still quite far away, and perhaps further away from the than employment mandate the 6. 3 unemployment mandate would suggest. We cannot let you go without asking you about the world cup. Goldman sachs has addicted that brazil has a 48. 5 chance of winning. They tied against mexican the mexicans as you know. Im sure you watch germany rollover portugal. Are you over argentina. Are you at odds with the forecast . The german team has looked good, brazil has not looked as strong as we thought. We updated the probability from the early one ash purely plot prediction. Itative i think brazil is still the favorite. Home Team Advantage is very important. They are a team that has performed particularly strongly at world cups and early results are not always a good guide to what happens in the end. It will be interesting, and so far, the european teams in general, not just germany, but certainly holland and italy as well have looked quite strong at this world cup, but it is the early days. , thank you for joining us. He is the chief economist at goldman sachs. For a special edition at 2 00 p. M. Of bottom line with live coverage of the janet yellen press conference. Amazon has found a way to improve business on devices. Amazon has a brandnew smartphone that is being unveiled today. We will take you to seattle for the unveiling card plus, unveiling. Plus, rush rush around him, the himel, roche rush around , the sequel. His younger brother is going on trial. You are watching Market Makers , live on Bloomberg Television and streaming on your phone, tablet, and on bloomberg. Com. First. Bloomberg. In the bezos is spotlight today because the amazon ceo is widely expected to unveil a smartphone. Now, a lot of people are asking why. I am asking why, my cohost sheila is asking why, and the answer is going to come from bloomberg west editor at large cory johnson, who is in seattle, where jeff bezos is going to make this announcement. What are we expecting . Theres been a lot of buzz. It seems as though there are few surprises left. What we are expecting we will get a lot more details when it actually happens in about two hours we are expecting some sort of amazon phone, perhaps with special technology where cameras can sense what the user is doing, in the way the Samsung Phone allows you to hover near the phone without actually touching it. They are announcing it here in the fremont neighborhood of seattle with a lot of innovation companies, and theres a lot of technological innovation happening here and amazon wants to stay at the forefront. They have been working on this announcement and this facility where jeff bezos will hit the stage in two hours they have been setting this up for 20 days already. Tois a big deal for amazon put their shopping experience, quite literally, into the hands of users with the expectation that users will do even more business with amazon. Cory johnson, 20 days, i find that fathomable does amazon put need to put on that much of a show to get the worlds attention . It is amazon. It seems whatever amazon does they Pay Attention. Certainly i care, because i am a caring person when it comes to amazon. There is a tremendous shift away from the desktop and into mobile, and it will leave some Big Companies in the dust. Right near here, you see the struggles that microsoft has had maintaining its dominant. Indeed, it has lost dominance as computing has gone mobile. Facebook in spectacular terms has moved their business toward mobile. Others have struggled. Amazon is aware of that and recognizes the candle is not enough to remain a dominant online retailer if computing is going away from the desktop and into mobile. The phone might be a place for that to happen. I would argue theres a lot that could happen in the mobile computing and phone world and there is room for new entrants. Cory is there a risk johnson, is there a risk amazon is spreading themselves too thin they have streaming movies, they send people diapers, they send power tools to my husband they are trying to do many things instead of focusing on one thing. Bookr friend named his about amazon and jeff bezos the everything stored. They want to sell everything at low cost and low margins so they can dominate targets. What they are trying to do is support the business that sells stuff, and whether it is streaming video, streaming music, offering a phone or television device, fundamentally, what that is about is selling more stuff in their store. When i look at the music business, the prime video business, really, those are ancillaries, replacements for what they lost in terms of physical goods selling cds and dvds, which was important when they were expanding beyond books. Look, they will try this. They try a lot of things. If it does not work, they move on. They are willing to experiment and see what sticks. This is a they got effort. Excellent points. Looking forward to your coverage from the amazon phone launch in seattle. Wests our bloomberg editoratlarge cory johnson. We are joined by paulson trotsky and here, you new york city, forgive me im sorry, victor. Victor anthony is with topeka capital markets. Sometimes i just lose it. It happens. It happens. Victor, lets start with you. Sheila asked if amazon is spreading itself too thin. Cory makes the case that amazon is willing to experiment. At the end of the day, in my mind, amazon has been one of the few companies in history that has figured out how to own a customer. Is, iney are doing anding to the setups setups and the phone, it is creating an ecosystem, trapping the customer in the ecosystem, and getting them to spend more. I agree, it is about driving physical good sales. Amazon does not seem to gauge success based on profit. It does a lot of things, cost a lot of money, and it is folks on Revenue Growth and acquiring customers. What would be the benchmark for success for an amazon phone . If you look at the smartphone market, there are 5. 2 billion phones in the market. Only 32 are penetrated. There is an open market for someone to come in and get market share. In the u. S. Alone, only 60 of the phones are smartphones. That 40 , probably pricesensitive consumers, there is an opportunity for amazon to come in and get market share. As we went into tablet devices, everyone thought they would never be able to sell against apple, but another is an opportunity to compete against samsung and apple in the smartphone market, not just in the u. S. , but also abroad. , where does the amazon phone fit into jeff bezos strategy from your perspective . It is kind of a whack on the side of the head for apple in a sense. Your previous question about how would you know if this is successful, i think it would be successful if it causes apple to change behavior. Specifically, apple charges a tax when you sell content to an apple device, which is why you have to do this and run of going to amazon website to have some extent to you so you can consume it on your mobile device. That fee gets charged on every appleof amazon equipment. If he could cut that down, he would be happy. Think some of this is an attempt to say we have had enough, and youll have to be more open about how you sell content to our devices. Through your devices. Would you say the jeff bezos and the Amazon Kindle fire change the strategy with the ipad in any way . I do not think meaningfully, which is unfortunate. I think they did not see enough units to make a difference, but if you hit apple directly by taking share from them in the mobile phone market, you are more likely to see a reaction. My analogy is what google has managed to do with android having an impact on the ios 8 allowing computers to talk to each other, stuff apple would never do, and now they are because google was taking share and causing trouble. There are interesting differences between amazon and apple apple is designcentered, amazon is not. Consumers love apple and apple products. The thing consumers feel that way toward amazon . Is there the passion around amazon products that might translate into sales for this device . No one i have met, so no. Purchasing from amazon is very pragmatic. It is the everything stored, the kind of relationship you have walmart, notnd bmw, and that is perfectly ok. That is the way they have set themselves up and that is the relationship they want. They do not want people to fetishize their product to be successful. . Can both survive, victor if amazon does not really care fetishizt jason ation, can they squeeze out anyone in the middle . There is precedent for that with apple devices. When amazon capture the lowend consumer, adding incremental features which is located they did with the kindle fire tablet, that drove sales. I think youll find the same thing with the phone. I still have the same question about investors will the point arrived when investors will become impatient with jeff bezos and his ambition to try new things, and perhaps not focus on that income . They have already, havent they . This is probably the last piece if you x out drones. That is speculative. [laughter] expansion a market and if that does not happen, investors will probably bailout on the stock. I think you will see the cash flow bill significantly. Victor, thank you for joining us. , with uspaul kedrosky from san diego. Andeat roundtable with paul Victor Anthony from topeka capital markets. Tune in for a special bloomberg west with live coverage of the announcement, 1 00 p. M. Eastern time, 10 00 a. M. Pacific. Lets take you back to washington with an update on the contentious hearing taking place with General MotorsCeo Mary Barra under fire by house lawmakers. Matt miller, you have seen him already this morning, he is there. We need to draw attention to this. This is not tooting our own horn. This is real. Bloomberg businessweek is in the news it sounds as if a cover story on the General Motors in Bloomberg Businessweek, is providing all ammunition a lot of when it comes to the questions they are asking mary barra. It is definitely helping as far as context because one of the main issues at this hearing, same as as same as at the first hearing, no one can quite get his or her head around how this could have possibly happened without Senior Executives finding out. The Bloomberg Businessweek story that talks about the culture of what happens to whistleblowers at General Motors, which is they are not promoted, and in some cases, apparently, get fired, this has been brought up by a couple of congresspeople during the hearing. Congresswoman czajkowski, for example. There is a story today in Bloomberg Businessweek about a is this book whistleblower that tried to bring these problems to the attention of the company and lost his job as a result. A previously referenced article by bloomberg notes that cortland kelly, who worked on the cavalier, the predecessor to the cobalt, raise questions about a defective fuel line and he had to do that with even threatening whistleblower actions. 93, was referenced on page mr. Lucas, of your report. Murphy, thewas 10 chairman of the committee here. So, a lot of questions about how it could have happened, how the culture had gotten so bad, and, i guess, this Bloomberg Businessweek story provides an explanation, it insight into what it was like, and unfortunate, probably still is like mgm. Hopefully mary barra can change that. It does start to answer questions because as you know, writer had a narrow mandate, and we, of course, do not, trying to educate you on what happened at gm and how mary barra misted all. Coming up, the brother a former Hedge Fund Billionaire on trial. From the bird headquarters in new york, this is Market Makers, with Erik Schatzker and stephanie ruhle. You are watching Market Makers. Sheila is here. Stephanie ruhle is on assignment. My cohost. I could not be more happy. Now this, a great guest to introduce you to, a nationally renowned whitecollar criminal attorney, former u. S. Assistant attorney reed brown skied is with me. He prosecuted Hedge Fund BillionaireRaj Rajaratnam, who is now serving 11 years for masterminding an Insider Trading scandal, the likes of which the world has never seen, and this week, Raj Rajaratnams brother Rengan Rajaratnam is on trial for similar charges. Sheila, this is your area of specialty. And did, my area of obsession, you might say. Started thisents morning. However, it seems a little unusual to go after the little fish after the big oil is already in present. Big whale is already in print prison. Every case is significant when the government brings it in , especially in the Insider Trading context. Right now, the federal 13ernment has won the last trials and they want to keep that undefeated record. The government went after Rengan Rajaratnam because they believe they have the evidence. During the Raj Rajaratnam trial, there was significant evidence that Rengan Rajaratnam was involved to trade on inside information that Raj Rajaratnam obtained from two sources of information, breaching their duties of confidentiality, and they are confident, based on wire calls and cooperating witnesses that they will be victorious. The government has made a real pr move out of their winning streak. Wonou mentioned, they have 13 trials, with 85 or 80 conviction or guilty pleas. What does this say about the defendants chance in front of the jury . , in todaysjaratnam times, it is very difficult to face a jury from wall street or the hedge fund industry. There are great perceptions, and they are not good ones about that industry in the postfinancial crisis, regardless of whether the financial crisis editing to do with Insider Trading, which it did not. Nonetheless, Rengan Rajaratnam is represented by a very good lawyer who has won some significant pretrial motions, and a motion that allows him to argue that Rengan Rajaratnam came back from brazil to raise these face these charges and that reflected consciousness of innocence. He will make some powerful arguments. Do you believe that perception issue helped you when you were a prosecutor for the government, and now, amounts to, i would have to imagine, a challenge in private practice, serving the clients that now hire you, reed brodsky . You definitely felt you had the wind at your back in front of juries, speaking to them, appealing to the fact that people have suffered, or people were victims, or the market was a victim of Insider Trading. Is moreefense side it challenging. I believe in the jury system. There were occasions in the heart of the financial crisis there were charges of illegal securities fraud and they were able to overcome that. I believe good defense lawyers in the right case, the rate situation, will be able to appeal to a jury and obtain an acquittal. A u. S. Attorney in manhattan who has led many of these cases, an ambitious seeming fellow, do you think his goal is attorney general, would you like to run for governor what you think is in his future . Viableas a lot of options. He enjoys his job. He loves being the u. S. Attorney for the Southern District of new york. But if you where the u. S. Attorney for the Southern District, you would say the same thing. Undoubtedly. In theositions open up executive branch, one could only speculate. He would be a viable option. If and when he returns to private practice, people will welcome him with open arms. Record, 850,eat but just as we have seen, there are some questions. They have been around for a long time, as to whether prosecutors catch all of the evildoers. This recent study, we read about inyesterday, showing that effect percent of mergers and acquisitions there is statistically evidence for some form of Insider Trading. There is no question prosecutors and regulators do not even get a fraction of that. There is no question about it, no question that prosecutors and regulators do not have the resources to go after all suspicious conduct. They try to target the most prominent, where the evidence is the strongest, to send a message that people should not engage in study,vior, but the which was quite something in scope,f its breadth and dates back to the 1990s, and the government would say they had anecdotal evidence for a period of time that there was illegal Insider Trading going on, and at some point the first wiretap was approved, and they went up on a series of wiretaps cellding Raj Rajaratnams phone, and they believe that has been more effective in terms of deterring people from committing illegal Insider Trading. What would be interesting is if they did a new study and divided it up postRaj Rajaratnams arrest, and it did turn deterred conduct. I do believe peoples behavior has changed since Raj Rajaratnam s arrest. We will continue. Reed brodsky. We are going beyond Insider Trading to some of the other Big Government probes out there. Stick with us. Sheila and i will be back in a couple of minutes. This is Market Makers, and sheelah kolhatkar and i are having a great conversation with reed brodsky. Good so far, dont you think . Fascinating. The department of justice has been under fire for the perceived lack of prosecution pertaining to the financial crisis, specifically not enough for the bankers involved in mortgage fraud, that have not gone to jail, or even put on trial, and instead have been focusing on Insider Trading. Do you think the critique is valid . Do you think the priorities have been aligned question my do you share the frustration, even . When i was with the government, i was a little frustrated because i felt the government focuses as much as possible on anything and everything, and the criticism was you have not arrested people in the financial crisis, and therefore you have not caught them. The fact that someone has not been arrested does not mean that the government was not asked in investigating interested in investigating, but that they did not find the evidence. It is much more important for the government to focus on individuals rather than the company. It does not seem to be happening that way. Is the frustration over the failure of individual prosecutions one of the reasons we see the department of justice it seemingly is making whole cloth when it comes to the amount of money it is trying to extract out of big banks . Look at citigroup, 10 million. Citigroup offered 1 million. Paribas, 10 billion would that number come from . Do you know what i mean . Im not involved in that. I realize that, but you have a much better window into the workings of the boj benched that than sheelah kolhatkar and i ever will. Perception, if they are that they are random and did not have a basis in fact, they risk credibility and to take the risk to the public will look at this and just say you are trying to extract large dollar amounts from companies to declare the three when youre not charge any particular individuals. I would prefer to see the government focus on individuals, preferred to the government find whether any particular individual committed a crime and then go after the individual if they have the evidence, rather than focus on a particular company, which is essentially owned by shareholders. Reed brodsky, thank you very much. Thank you very much. He is the former assistant u. S. Attorney for the Southern District of manhattan and he is now a whitecollar criminal attorney. Always great to have you here. Getting their kicks, you might say u. S. Sport fans are tuning into the world cup in record numbers, going mad for soccer. We will find out if the enthusiasm could last. Usa. Usa. Animal style the suicide burger some of the items you could order off of secret menus at your favorite fast food chains. At mcdonalds, you will not find you happennu, but if to find yourself at a mcdonalds in brazil and you do not want a big mac, you have choices. In my recent trip to brazil taking a look at preparations for the world cup, i got a closer look. [speakingnish portuguese] [speaking portuguese] would you order it . You always get the dream assignments. Do you think that it could happen here . I do not know if americans would result revolt over having to eat that for lunch. Noreither you, nor me, eric, who we are bringing into about the world cup, because 11 Million People watched the united states, team usa, beat gone on the other night, a soccer game, right . I am hoping that it is going to last. . Hat does history tell us everybody is talking about soccer getting more popular in america. I have heard that before. That is the thing. The media wants to get into it, the sports want to push the story, but it is not clear because the data tells you a different story depending on what data you want to look at. Tell us which data tell us the story. Professional soccer, the ratings of professional soccer, mls, champions league, that we see on cable, that has been flat for the past five years. The previous world cup, it has gone up and gone down. Mlss the american one. Right. We have seen different distribution distribution deals. The total, if you look at all three lines, they basically have not gone anywhere and that is before the 2010 games in south africa. Nothing has changed when it comes to pro soccer despite the fact the world cup ratings are higher. Is it somewhat location dependent . The fact that it is brazil . Totally. It is an American Time zone. The last three world cups, africa, europe, asia it is sadly not as easy to watch the games at a time when we want to watch them. Of course the numbers will be high. If they were not high, what would that say, if they could from bizarre time zones. I do not think it means soccer is more popular, but it is a more convenient sport we can watch. What about sales when team usa beat a team like ghana, which had ousted america from the last world cups, that has to drive merchandise. Hopefully, and we have seen that trend. In the last five years, mls merchandise has almost doubled. Nascar and nhl they have been flat for the last five years. Mls numbers in merchandise have risen despite the fact that tv ratings have not. What does that say . What people want to buy the stuff, look cool, where the jerseys, but they do not actually watch on television. Wears aah kolhatkars toronto jersey. I would have to wipe off all of my blue and white face paint. The funny thing is if you look at ticket sales outside of resilience watching the game in brazil, the u. S. Is the biggest ofporter of fan exporter fans watching the games right now, but if you look at it relative to the size, the distances they have to travel and the quality of the teams they are playing, the u. S. Is not caring that well. Australia has sent a lot of for a given the Distance Team that is not very good. Germany has sent a lot of people. Given how many people we have, it is not as big of a number as you would hope for. And to me, frankly, it is no surprise. If you have to choose soccer among a menu that includes foot all, basketball, baseball, and hockey, right . You have to be careful. There are tricky numbers entered one is pushing different numbers. Eric chemi, our master on the world cup, eric chemi. Market makers back in a moment. That is going to do it for withet makers, today, stephanie not here, but i have had some great cohosts. Sheelah kolhatkar from Bloomberg Businessweek, thank you. That was a little fun, especially with reed brodsky, talking about Insider Trading. She knows a little bit about that. Tomorrow, congress has been looking this week at High Frequency trading and whether it is fair to all investors. We will talk to the president of bats, it will brian, so stay tuned for that. Right now though, it is 56 minutes past the hour. Bloomberg tv is on the markets. Alix steel has more. Thank you. All eyes are on the fed today as investors hope to get some clarity on when the central bank may actually start to raise rates, and joining me for the options insight with a look at where traders are looking at where the market is headed, anjuj. You really cannot get to bearish. What do you think . I think Technical Levels say we are headed higher. Fomc is a big decision people are waiting for. We expect them to come down a little bit. From the 12level . Down today with option settled at 1174 because there was mixed expiration this morning and about 10 and a half million time contract expired. The trading range we have seen is actually on the lower side, and structural breaks, maybe we get down to 10 unless there is something surprising that comes out of the fomc, it is likely to stay low. In terms of the market drifting higher, what is a more aggressive Options Strategy question mark it does not seem like you are expecting a big move strategy . It does not seem like you are expecting a big move. No big move. Interest hoping that the 3. 5 million contracts expire. Is there anything that will add more action into the markets, more volatility, or are we in to this for the summer no matter what happens on the outside . Based on what we know, the unknowns stay where they are, and there is always the possibility of the unknown unknown, the cliche. See a game testing the 50day moving average. What is the correlation in the Options Market . We are seeing bullish activity. The company stated it might have to restate its Financial Statements for 2011 and maybe 2012 and 2013 statements, and that spooked the market and the stock fell off sharply after rising to alltime highs earlier this month. Today, we see the reversal of that. Maybe investors see that the whatments might not be people expect them to be. We saw a decent trade where an investor was buying the calls out to december and 725 strike puts, the risk reversal, long calls, short the puts. That means he would get 141 benefit and one for one loss. Another stock you are watching, micron technologies. You have a bullish call. Have been here before talking about the dynamics for the industry have changed and it is no longer the commodity market that used to be, and a lot of recent Analyst Reports have come out with their saying yes, that is the case, raising the price tag. Margins could expand. Margins could expand with product differentiation, and the lack of supply coming into the market, basically and the copley oligopoly. Much of it is to sell the put spread for a not around one dollar, 1. 10. Thank you. We have to leave it there. Thank you for the bullish trade on micron technology. Anshul agarwal. We are on the markets again in 30 minutes. Wherecome to money clip we tie together the news and business news. Love is in the air. Two elon musks solar, to oracle. The world cup. It went from hightech soccer bells to fancy new referee boards. We are following the money trails of the militant group that is taking over northern iraq. The can that moves in all directions, it also syncs to your smart phone. Mans best friend is Getting Better help. We will kick it off