Transcripts For BLOOMBERG Market Makers 20140731

Youre watching Market Makers. I am stephanie role. Big show ahead. Three ceos. This will be my last show for a wild. The bill ackman story that we have to dig into, he is saying about therry presentation. My favorite, the presentation was overhyped. Who do you think overhyped it . You. Before we get to duane stanford, lets talk about the newsfeed. Target has named a top executives its next ceo. Brian cornell has been running unit. S food he used to be an executive Vice President at walmart. Reeling from the data breach that affected millions of customers. Another sign the labor market is improving jobless benefit applications hit an eight year low. You are no caps off pop, but you can live like the late michael jackson. His ranch is getting ready to be put on the markets. It is not far from Santa Barbara california. A 23 Million Dollar note. Who wants to buy that ranch . Somebody. It has an Amusement Park on it. I think it is a little crazy town. Kind of like michael jackson. I asked for that. Argentina is in default. They missed the deadline to pay creditors. Not because it did not have the cash, but because a judge barred the government from paying them until it reached a deal with another group of creditors. They did not agree to restructure their bonds after argentinas last default. We have been covering the story in new york. Walk us through this. It is declared a default, which makes it officially so, or is it time for the dance to begin . There is a dance. A tango. Argentina will claim, probably end, that this is not a default. The trustee, bank of new york ,ellon, put out a statement when they usually do when a debtor defaults, that says we were not allowed to pass on the payments because of u. S. Courts. He did not say the word default. A tango because the bondholders may choose to accelerate because of a failure to pay clause, but it is technically not a failure to pay. It is a failure to receive. They have to weed into the words that says you need to have gotten the money into your pocket. The whole reason this is happening is because the bondholders want to be paid out in full. Toldliott and company were they have to define between old defaulted bonds and new defaulted bonds. Elliott wants to be paid in full. That is what the ruling says they argue for that they deserve. Argentina says they cannot do that because they cannot offer returns than offered in structuring. Politicians are going to use this as an example of why they hate the derivatives market. Would you agree with that . That could turn out be the case. What, if anything, are you hearing from the government . It was an extraordinary press conference by the chief of cabinet. He was blaming this on the hedge fund. They like to describe them as a vulture funds. Who made this ruling was working on behalf of the fund and they are trying to get the ruling overturned. In terms of people here, they are fed up with the situation. People we were talking with this morning say it does not affect them much. It will have an impact on investment. Ct it is about the devaluation of the peso and inflation. Willem, how. N. . Ependent is argentina they have been out of international markets. They are not dependent on these markets. Anyone predict an economic calamity if they default and cannot pay . It is not just them. They need to Access Capital markets. They are in dire straits. A time that they needed to go. How can they say talk to the hand . A few years ago they were saying may i have another . It is bold. They have a couple of months in the sense that there is a bond clause that prohibits them from resolving this. They be at years and, they will. End they at will. When you hear folks saying not a big deal and other weing catastrophe, how do thread the needle between those two sides of the argument . Catastrophe of the economy might i do not think catastrophe for the entire economy. Eyes industry regal relies heavily on foreign imports. That seems to be the main concern in terms of intrusion onto everyday life. It is the idea that we need to hold onto dollars domestically and that is preventing people from buying dollars and certain products. Is making things difficult for people here. How is argentina funding itself on a day to day basis if there is no access to international markets. Know, there might be something going on behind the scenes. They are printing money, they are taking money from the central bank. The central bank gets money and ism exports, etc. , which dwindled over the years and the government takes that money. It just puts its hand in the pocket of the central bank, pays off loans and prints money and uses it to fund itself. It is not a great strategy. Inflation is at 40 . People estimate Interest Rates are not matching what they need to be and the peso is so overvalued for where it should be. That is why they devalued in january. If they continue to be locked out of markets without access to more dollars, they will need to value again. Have agreed to by default it bonds from plaintiffs like elliott and some other Big Hedge Fund managers. Have we heard anything like that here . Have been everywhere. It has been months of talks that banks are going down. That is natural. A cannot rule it out. True, does that solve this crisis . It depends on if they accept it. What would happen is if these banks bought the debt off of elliott, they would then have defaulted debt on their balance sheet. If that were to happen, if elliott does not sell at a discount and the banks are holding bonds they bought at par from elliott, they would have to take the haircut. Willrgentine government have to unless they deal with it at the end of the year when the clause expires. This would not be the first time the bank has gotten involved. Jpmorgan bought bonds. That was a few years ago. Are these banks in a position to buy these bonds to take this risk . It happened a couple of months ago. The resolution to it happened earlier this year. Jpmorgan took the risk under their balance sheet. They sold some of it and cap some of it. They want to see this through. They have incentive to see this resolved. Before we go, final remarks . What is it like . What is the real take away . It is a topsyturvy world in argentina. People think like economists. You the can quote dollar rake, the black market ray, the fixed rate. People say it is almost impossible to think what are my staff going to be airing down the line. You are renting an apartment, trying to figure out how much my rent is going to be. Landlords are struggling to come up with the numbers themselves. It is an interesting thing to see. Thank you. They are helping us break this down. We have a lot more to cover. That underscores problems in broadcasting and newspapers. Banking. South street Bank Reported record operating earnings. This is Market Makers. See our stories and interviews on bloomberg. Com tv. My bad that is what bill ackman has to say about what can be called a disastrous presentation on herbalife last week. He promised evidence that the company is a fraud. Investors saw a lot of nothing and the stock gained 25 that day. He spoke about it with duane stanford. I know you just spoke to bill, but i want to jog your memory, one week ago when we spoke to him. This is what he had to say. The only clue i will give you is that enron, if you remember, had a fake training room. They were touring people around the enron campus to talk about the trading operation. They had people looking like they were trading. That is my biggest clue for tomorrow. His biggest clue. Now, he is saying his presentation was overhyped. Bill overhyping it . He is basically saying my bad, i overhyped it. I was trying to bring people to the webcast, trying to make sure they showed up. They got there looking for a body, looking for a smoking gun and it was not there. They got a threehour regulatory presentation that investors clearly decided was not what they were promised the day before. He was successful in the fact that he got 11,000 eyeballs watching the presentation. He did. Some 40,000n different looks at the presentation online since then. ,43 countries are represented countries as far as nepal. Talking to him, he seems proud that he was able to bring a large audience, but perhaps regretful that he over spoke it before hand. It is the law of the jungle as it is in television. If you bring a large audience to the show, it amounts to a whole lot of nothing. Tohe seems no less committed the ideas that they raised at that conference. He believes nutrition clubs are a signal that people are there for the business opportunity, not for the roddick. For the product. Substance is as solid as ever, the style part he got wrong. That is right. It was a pr disaster. He lays it on his own shoulders. I asked him you have a lot of people working on the pr side, did you ask their own advice . He said i am my own worst enemy. Who advises him in these types of things. Number of shops, including rubinstein, who is working for him. Bill does itns his own way. There is a feeling that bill as we know, he marches to his own drumbeat. Which is why he is so successful. He is very vocal about his case. You can probably find issues with how he has gone about it pr wise, but he does not seem to be backing away, other than to say that the message was lost because of what he promised before. Christinetioned richard. She became an independent shearcher and the bill says is the person who put him up to the idea of the herbal life herbalife short in the first place. The combination of the overhyping of the presentation and the length buried some of the material. That is similar to what you got from bill. Is it significant that someone advising bill and is on his payroll is criticizing him . She seems to be which he is doing, i spoke with her first. That led to wanting to get more from bill ackman. She is basically saying it is a shame this Great Research that this case that they laid out was completely lost because of the hype. She is the person who originally gave bill this idea. Lets put into context who wish saying the Great Research was overlooked. She is. She took issue with analysts and Conference Call for herbalifes earnings, they did not ask a lot of probing questions. She is taking it as they eight northwood is in their view, an important question. They are trying to get the word out saying we stand by the research. Now, theyre saying do not the fact that we messed up on the pr side over shadow the fact that there are interesting questions. They may be right. Thank you, duane. Tmobile has more wireless customers than expected. You will hear from john leger. Target has a new ceo. Brian cornell is coming over to target from pepsi to clean up the mess. Julie hyman is here with more. What can we say about the new boss . He likes drinking pepsi. You can get that at target. Maybe he was there for the fritos. He was head of the food business, so maybe he is more of a fritos i like fritos. He was at walmart. He headed up sams club at walmart. He was ceo of michaels. What i am hearing from the walmart analysts is he is a good choice to come over to target. He did well at sams, brought up. Heir Comp Store Sales sams business has not been asked wrong since he departed. Why have i not heard his name before . I remember all of the jcpenney craziness. There are not the right people with the right pedigree. This one seems right. He had a good job at pepsi. When he left walmart, he likely had a noncompete that lasted for some amount of time. He left in 2012. The troubles at jcpenney probably occurred during the time of noncompete. Big of a cleanup job does he have . Targets shares have bounced back from the lows that they touched in the weeks after the hack. It is not about the hack. It is about the rest of the business. An analyst says the hack was a blessing for target because it allowed them to show steinhoff full the door. 60 online business, which accounts for 2 of the overall sales, it is about the same amount of sales for walmart. A lot to do. Julie, thank you so much. You for giving us the latest on target. He has challenged the big guys with his pricecutting. We will be speaking with the ceo tmobile, john leger, about what comes next. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and Stephanie Ruhle. Good morning. Bank mergers are back. Not on wall street, perhaps. The biggest bank cannot buy anything. Saw street bank is one of the is one ofeaving the banks on the leading edge. South state. Together. Five names when you rather be in charleston, South Carolina . Talk to us about the conditions of the Financial Markets that you operate in, not the ones we see on wall street. We have seen the southeast rebound. You have seen it in unemployment numbers. The weekolina alone, before last had an announcement of 7000 new jobs in one day. We have seen the consumer rebound as well. Mortgage demand is way up, especially on the construction side. We went through a lull. We are seeing growth in our bank. Can you afford to grow your given theo business, demands on you from a regulatory perspective . Morgan stanley can handle the demands, you may not have the capital to do so. Our company byt taking advantage of opportunities in the market that are caused by the bigger banks. Fromre teams of bankers larger banks and that is how we build our company. Ones who did not want to be in new york anymore . We are in our markets, but we are with larger companies, who did not want the bureaucracy. Attractbeen able to them to a different culture and style. Customers come with them. The regulatory side is a hurdle for everyone. We have tried to use it as an advantage for our company. Mortgage is having a tough time implementing new mortgage rules and regulations. We have been able to attract Mortgage Bankers over because it is easier for us to implement the regulation. The fundamentals afford to hire 500 more compliance officers. Pressure feel the same on lending margins as larger banks do . It creates margin pressure for everybody. From a regulatory standpoint, it is overhead. That is the challenge. About market, there are 350 banks, but only a handful our size or largers. That includes bank of america and bb t. See small banks, i do not how they can hire people to handle the amount of regulations. We are fortunate in our side and the mergers we have we are creating the efficiencies to stomach it. Is there more consolidation coming . Absolutely. We are going to get down in the 3500 range. Doing two apace of pace of doing two year during the downturn. We bought three failed banks. Greatvived the depression, did not survive the great recession. What can you offer as a turnaround strategy. Unfortunately, they have management teams that have led them astray. Credit. Rreached on our credit culture did not change a lot. We did not lose money during the downturn. Ur shareholders have benefited our stock is up about 105 . If you look at the s p index, and is actually still down. Most banks have not recovered. Ours has not quite double, but we are on pace to do that. The biggest acquisition you have done is valued at about 300 million. What do you have your eyes on . We are indigestion mode. We are in digestion mode. Inhad five different brands three states, we brought them all together, rebranded as south state. We were South Carolina bank and trust before that. Hourly, that is what they see. 6 next big hurdle is the billion mark. At 10 billion mark, you are considered a big bank. Once we cross that mark, the cost to our Country Company 10oing to be between million and 15 million. For ourto drive shareholders. That might be a catalyst. We are at eight. As we get closer to 10, we would do an acquisition to take us past the 10 billion mark. How would you rate the u. S. Economic recovery . In there probably seventh inning stretch. That sounds good. At least in the southeast. I have been more encouraged. If you take the second quarter, our loan growth was up 26 . The interesting thing was not the percentage growth. It came in almost every segment. That is the first time we have seen that. Is that the only place you would like to be . Would you think about expanding your footprint . We like the southeast. There are 350 banks. There is a lot of consolidation. Banks are focused on, we enjoy the charlestons and savannas of the world. It creates a lot of value for us. I like the southeast for the food, though the really pretty women. Really nice to meet you. Thank you so much. Coming up, tmobile is always outspoken and their ceo will be with us. Theyre pricing plans are bringing in the customers. Thee will speak about takeover merger for in q mobile. Welcome back to Market Makers. Tune in for my interview with kevin plank. Right now, tmobile is back in the black after four straight quarterly losses. Almost 400d million of profit in that might prove that they can make money by cutting prices and luring more customers from its rivals. Emily chang has the companys outspoken ceo. It is all yours. Thank you so much for joining us. Moreig news is you added subscribers than forecast. You have made a deep price cuts, so you think the low hanging fruit, the people upset about the prices, have already come over to tmobile. How do you get higher up the tree . I am saddened by the fact that i was not one of the initial guests for your new show. It is only out of consolation i have agreed to come here today. Of yournking assessment, we added 1. 5 million customers. The total revenue for the company grew 8 . There was a lot of qualitative outline. The second piece you said, which is not true, which is we have not gone through a aggressive price decline to attract customers. Four for 100r offer that we outlined with 10 gigabytes worth of data, that was a data pool increased. Wengst the other things should be talking about is we still have the Fastest Network in the u. S. The gap has widened. We won jd powers number one in customer care. Interestingly, statistics show 33 percent of wireless customers in the United States are somewhat likely to switch carriers in the next six months. There is a lot of runway possibility for tmobile. If you look at the numbers last quarter, you added 2. 3 million customers. Evidence you cannot keep up with the pace of growth and you have to do Something Else . Lets pause here and cherish the fact that we added more postpaid phone subscribers than the entire industry combined, more than at t and verizon, and you are talking about our pace of growth is slowing. In q1, we announced contract freedom. It was the launch of paying early termination fees. That caused an aggressive spite. Amongst other things we did today, we raised our guidance for postpaid subscribers, saying it will be between 3 furtherand 3. 5 million, evidence that the momentum will continue. Wonder about the contract freedom. You are enabling customers to have no contract, to buy the phones up on, is that mean you buyinging less customers the expensive phones . Are you selling more mid and lower tier phones . You have to go back we have had this conversation before. Uncarrierry or the movement is to solve pains for customers. It. Omers love anytime upgrades, the whole industry has adapted. International data roaming for free. Tablet freedom. Paid termination fees is another aspect of contract freedom. Something we can do profitably. You are seeing 93 of our phone were smartquarter phones we are selling the devices. Nd notingtching pool is that they are targeting a switch for tmobile. What better to cause a switching pool to make decision that an iconic device coming out. Good variables are coming out that are great for the Fastest Network in the u. S. , and he knew customers do you think you will get . I have given guidance for the rest of the year. To commenting specifically on how many. I will point out that tmobile, because of the timing of launching the iphone, we have the lowest percentage of our that our customers that have iphones. Phones come out, we have a whole base that is waiting on the new phones coming out and we expect to be the biggest beneficiary. 33 of customers are likely to switch. A big ace of change comes out due to a new device. Where do you think a new customers going to go . We are excited about that. The earnings call, to me, it sounded like you backed away a little bit from the idea that a sprinttmobile deal is the only way. I backed away. You know me better than to see me back away from anything. What i have done as i have been very consistent on this topic. I will not comment on specific transactions for the company and i never have. In the long term, if i really want to bring longterm competition and lead this entire capital is important. One of the accelerants could be a transaction in organically in organically of some type. We have multiple options. This company is hitting on also understand we have the great runway. We will consider multiple options to look at rings that accelerate. I have been consistent on that all along. You are the guy in charge. If it does not happen, you have to figure out what to do, how else you add scale and spectrum. Know my opinion. With a transaction or without a transaction, i am hugely in favor of john legere being in charge of anything. I have said that there are multiple layers, multiple players and options for the company. How do you get scale and spectrum . One way is to move aggressively the way we are and to raise capital and participate in the auctions. Exists excel ahrendts internationally and domestically. Accelerants exist internationally and domestically. The better you do, as you say, you feel you are doing better, doesnt that make you more valuable to regulators as a Standalone Company . They want you to be standalone. Doesnt that make them want this more . Predict what regulators do i do not want in the future of the industry. Lets be clear. Some of these questions about tmobile standalone i have been very clear that there is a future for this company. We are demonstrating it. Youreal question is do want big, sustainable competition . You want three players of similar size . Do you want the competition that tmobile has to marketleading . That arewo players significantly bigger than the others. Little by little we are attacking them, but there are multiple things to consider. An opinion on how regulators would respond, if there was nothing to respond to. From the new york stock exchange. You are welcome on my new show anytime. We can talk more in depth about how you are a big fan of yourself being in charge. Thank you, john. Best line ever i am in favor of john legere being in charge of anything. I love that. I am sure you feel the same way about Stephanie Ruhle. I was going to say that. I could hear that coming out of your mouth. I am not in favor of me organizing bills or driving cars. Anything else, it would be good to have me in charge. There is john. I love that line. I bet he is a good driver. Andk so that is john legere emily chang. You do not see this happening too often. Investors are reacting with some alarm at a sudden and unexpected rise in medical costs. Lets put the question to somebody who knows better the ceo himself. He is with us from his office in connecticut. The analysts and investors appear to be zeroing in on the medical loss ratio. It is like a reverse margin. If you would like to add more detail, by all means. Year ago period for your Medicare Advantage business and youre guaranteed cost business is there cause for alarm . Be with you. Two headlines our portfolio businesses are performing well. Earnings were up 10 . Revenue is up 9 . Not onlyal costs are performing well, but we were able to improve the outlook for the full year because the medical costs were favorable to the outlook. The dynamic that analyst were focused on this morning is that a small portion of our business is in the marketplace. That is where the new Public Exchange business at just business exists. Partition that for cigna, it is about 3 of the company. We did not expect to make money there. We did it in a way that was andgeable to still grow eps manage early market play. A new marketplace, manageable for cigna because we generate powerful results. You are a very diversified business and you do not have a large presence in the Public Exchange industry. Does your limited experience suggest or signal to you that it is a bad business that obama kerry is not a great idea for Companies Like cigna . Is not abama care great idea for Companies Like cigna . We are cautious. 2 thousand 15, 2 thousand 16 we should view as version 1. 0 of this marketplace. Of itrrent implementation in terms of 2014 is fragile for the industry. What we have proven the ability to do in the Employer Market engage individuals, physicians, and positive outcomes. If that transpires over the next couple of years, it could be a sustainable market. If it does not, it will be an affordability challenge for everyone. Our focus is limited number of states and a small body of customers. Partnershipsive with the physicians. That is a pretty important if you just painted. What if you do not see the engagement levels that you need . What if obamacare does not get the engagement levels that your Industry Needs . What happens . Lets put it in context. About 150 americans 150 million americans get access to Health Insurance through their employer. There are more aggressive adoptions of employers of what we call incentive programs, proactive chronic care programs, to better engage individuals. The results, better medical costs, improved health quality. More moms going full term on their pregnancies because of well baby visits. A more preventative screening programs. Higher child immunization rates, meaning Higher Quality and healthier children. A very powerful, positive taking place. We need to apply those learnings into the marketplace now and we are in the early stages of that. If we do, it is a sustainable market. If we do not, we are dealing with a finance mechanism of sickness. That is not sustainable. Youn the short term, if have more people signed up, but they have more Health Care Costs , that is going to hit your bottom line hard. You are correct. When we stepped into this marketplace and two years before it started, we caution our analysts and said it will be a cautious step forward. Five states and a limited number of markets in those states. We do not expect to make money in this marketplace and we will manage that in our portfolio. Market and new engagement of individuals, expectation of higher medical invest in have to getting the individuals engaged. It is more challenging than we anticipated. Because of the strength of our portfolio, we can overcome that. We are making sure the dialogue is open. This is not going to be an affordable outcome for the long term. Thank you very much. Great to have you on our show. David cordani is the ceo of cigna. Lots of questions. Thank you for answering them. Market makers will be back in a moment. A mobile Security Company was overstating its revenue and now the shares have soared. If you look at the longterm, still not so good. Live from bloomberg World Headquarters in new york, this is Market Makers with Erik Shatzker andStephanie Ruhle. Having second thoughts accusing a Chinese Company of overstating its revenue now another business is made a takeover bid. We will speak to mr. Black in an exclusive interview. Rescuing radioshack. The Hedge Fund Wants to help the electronics change that quickly running out of cash. Hurts is rejecting the conventional wisdom that magazine publishing is dead. Welcome back to the second hour of Market Makers. Im Stephanie Ruhle. Abouts time to talk carson block and into mobile. This is the chinesebased Security Company that has been on quite the roller coaster ride since last october when mr. Bloch and his firm, muddy waters officially said the company is a massive fraud and that it overstated its revenue and miss represented how much cash it had on hand. Just last month, and to mobile said an investigation found no evidence of wrongdoing. Block was not impressed and twice now, they delayed the findings of a fullyear audit. Fire. Shares have been on you can see here what has been going on. Especially after an apparent buyout offer from bison capital holding, putting on the table a bid representing a 41 premium. Investors dont seem to be persuaded its a real. Shares being below the nine dollar offer price. And down today after giving up most of todays games will stop they say they have not decided to do and investigators are waiting for the annual report, the one that will supposedly called questions to rest. Fax is going to answer some of those questions . Carson block is here with the latest 10q headlines. Hes the founder of muddy waters. And cory johnson love the story so much that and he himself is a former short seller. Recovering short seller. Big news takeover bid. What do you make of it . This is ahand, maybe real bid. On the other hand, it is pretty this bid would be real given that over the past few months, a number of bad things have happened to the company that you not scream by me. First and foremost, they are already three months late filing their annual report will stop they received a clean bill of health from their own investigation, but they admitted to widespread data tampering to receive that clean bell clean bill of health clean bill of health. In the Company Fired its auditor because pwc failed to issue an audit opinion. Peter bc was requesting some of deleted that had been and some other information and told the company if we receive that information, we might not be able to rely on management postures and eight in and we might have to resign. After all of that happens, it is strange if you receive a bona fide bid at this point in time. What you mean by data tampering . Company did not provide a lot of detail, but what investors need to understand is when the company conduct did this internal investigation, there was a report that was prepared but the company did not release the report will stop instead, they put out a press release. It read that the Company Found no evidence to support allegations of fraud. Toward the end was a paragraph that said the investigators hadd many devices substantial amounts of data missing and investigators did not find management explanations with respect to the missing data credible the stop the significant thing there is this is good out by the company, so we assume that language that made it into the press release was the result of a lot of backandforth negotiation with chairman and sterling, the law firm that oversaw the investigation. So it is probably a lot worse than what the wording makes it sound like. But we just dont know because we dont have the report. Mqm mobile was trading at Something Like 25 a share before you came out with your initial report on the company and subsequently said 90 of the revenue does not exist. Presumably everything has a value. And to mobile at and say at nine dollars and . 80, which is the value of the from ice and that there that it is appropriate given your feelings about the company or is it zero . Its way too high. The real question is south of the dollar. Whether bison those that are not is a different question. 9. 80 a share is way too high for this company. The Financial Market is a clearinghouse for information. Based on what you know and what you believe about them tmobile, how does anybody explain the bid for nine dollars and . 82 . In the china fraud world, there are a lot of its for companies strongly suspected of being frauds. Even those that had oral investigations launched by the ftc. Been thee that had subject of regulatory actions. A number of those bids actually closed. The china fraud world is a strange world in many respects. If you spend real time in china and look at the widespread destruction of capital there, that is the filter through which you have to view these zeros that have and bought out, often financed by state owned banks. To that point, im sorry to report china security and surveillance had a Significant Interest and that was a name i was involved in. That got a takeout bid none of it none of us could believe and then it got taken out. Very strange things happen in this world. Im not speaking with reference to any particular transaction, but what you typically see in these buyouts is you have a corrupt mainland government owned bank, China Development bank providing most of the financing. You have had western private equity as the sponsors of many of these buyouts and we suspect a number of these buyouts where you have had western pe firms, that the people when they bought these zeros received significant kickbacks from the management. Are you saying that could be the case now . No. I dont know at this point this bid does not look typical relative to many of the bids that have actually closed will stop your typical bid is made by the chairman or the chairmans leading the consortium. Firmsare private equity known to have pockets and there will be debt financing. , its not a bit in which management is participating and theres no discussion of the financing. I dont know what to make of it given all of the facts from recent months, it would be very strange to see a own a fight it under these circumstances. But but since you dont know what to make of it, is there any chance you close out your position and say i cant play this pick . We are still short, anyone considering shorting this needs to manage risk and understand who knows . There are much Stranger Things that have happened in the china stock world than this transaction closing. Everybody should be aware of that. You may be lose you might lose a few short but its not worth anywhere close to the current price. Who is bison capital . Certainly you find yourself asking that question recently. There some confusion because there is a u. S. Firm named bison capital. This bison capital is not affiliated with the u. S. Firm. Founder, very little is known about him. He started a Company Called red baby in china could we say they are full of bull . Theyre full of vice and. Run, wee we let you talked not so long that go about the impact of the research you do with having on the socalled china fraud industry that by showing that, especially the reverse listed ones in the United States, the industry was drying up. Is that still happening or have fraudsters found new ways to perpetrate their scans . Old market a massive in china tnt. There are Companies Listed we suspect our frauds and maybe it is selfserving to say but i do think them tmobile will be important in what happens. Regardless, a few years from now, the fcc is going to have a major headache dealing with a bunch of china fraud. Problem will be substantially worse event she was able to get away with it because on the china side, the circles that create these frauds look at mqm know it is a poorly executed fraud. It was pretty obvious. So if end you is able to escape it, that throws the doors open to more fraudulent listings in the next few years. I should mention we reached out to them tmobile and they did not respond with a comment. Ask theres been a lot of talk in this program talking about bill ackman and herbalife. Like teslarts reporting earnings tonight. Why do you report the betterknown short names like herbalife, tesla and so on . We like things that are complex and not well understood. Obviously herbalife theres a lot of work acumen has put into it. Thats something where if he had not gone public on it, thats the type of situation we might have been interested in. Side, he has apparently spent 50 million researching it. We just dont have those kinds of resources. To go where there is an asymmetry of information. That takes us to emerging markets quite a bit. May be is the kind of thing that would have done but we are not going to chime in on something where theres a public battle. But given the fact you know bill has done the research, have you thought about going short herbalife . With the idead or the more recent thesis the evolution of the thesis, the whole idea that this is a pyramid scheme, that it is the ftc is going to in theent a lot of time regulatory world, more than i have and hes much better at reading those teen leaves. I think its interesting where you see the company borrow all of this money to execute share buybacks those are signs to me that maybe the end is approaching. Interesting insights. Thank you. Thank you for bringing your intern today. Coming up, the future of magazines. They seem a lot thinner than they used to be. In fact they are. But one publisher plans on bringing out a new title every other year. Having to destroy much of the company in order to save it. Some say thats what the strategy is when it comes to radioshack. You are watching Market Makers on bloomberg television. The digital era has changed the way magazines are bought and sold, but first but hearst magazine teaches print and digital platforms separate. If you want both, need to subscribe to both stop right now, hearst is focused on growing its Digital Customer base, but are there enough new customers to keep advertisers happy . Let ask david cary and the marketing present, market mark flynt. Trying to change the economics of the magazine, but is it working . Our purpose is unbound. We believe we are the only major publisher committed to bringing the new print products every 24 months will stop but we are investing a great deal in digital. We are upping advertising avenue and innovating in dramatic way. Lets upping advertising revenue . Is you been able to prove to advertisers these second screens are the platforms where you need to be. Elle magazine is clever. Its a whole separate editorial. Our bricks and mortar business the number is the biggest september in that companys history. Our fashion magazines are up 10 acrosstheboard. We have social media and television with the Esquire Network and we have branded products, 17 products in jcpenney. We have a media brand ecosystem and everyone loves the print product. That is where it all starts. But who are these people who still loved friend . They are rabid consumers. And dotrying to innovate exciting things with them. We just did in the august issue right downaire zips and opens up. Guess is the advertiser. Is paying to be your cover sponsor . Inside there has never been an inside and you found a completely separate we have found ways we have two covers and theres a great rap done by an advertiser. Excited in reader flint in print innovation. Some people might say its a great idea. Others might say its the most shameless thing ive seen in a magazine. But its actually not on the cover. Is inside the cover, so heres a great execution inside the cover. Do is retain the integrity of the cover image but the advertiser gets to participate in a fun execution. Make no mistake you will find ads elegantly appear on the cover of magazines as they appear on the cover of newspapers, trade media and billboards when you turn into a cable channel, and thats perfectly fine. Why does it take so long to get there if its fine . Up the new yorker theres no ad there and it might take a while before we see ads on the cover of the new yorker. Us because people think its sort of a sacrosanct space. Who thinks that . It is a great question. If you go to the reader and we talk about this all the time consumers today are savvy about what is content and what is advertising. Of the it is Television Web or an ad on the front page of the New York Times they know that the image is the pure content. Readers love it. With the interactivity and get a deeper brand message. Do you run the risk you end up a catalog . If i pick up cosmo or mary joanna i want to know coles is giving me her editorial decision. Consumers are consuming media were content and commerce live sidebyside. You have to be transparent, so it is clear for mary claire what is an ad and what is content. Isital has led the print missed to innovate. You will see native advertising in print and i think its going to be great. One thing i would add is in wife style magazines, and you talk about fashion, advertising is red like content. When you pick up the fat september issues of mary claire and we have fashion in a set its the a guest number issue in the history of our company. The brands are saying as much as the editors are saying. Separate discussion, but they want to read the new product gucci is having for the fall. Thats what is a better is this from a probability standpoint . Digital or print . Print is the Economic Foundation of the company. Both are important. In the last five years, our new magazines plus thisll count for 30 of our office of the magazine company. These are businesses that did not exist a few years ago or were using money. For us to grow our company at the level we want, we need our business to grow and we need art to chill business to grow. Very cool and congratulations. Thank you very much. We will be back in just a few minutes. During the commercial break, we will get our must look fashion plans on. Stay with us. Coming up, the hedge Fund Offering radioshack a lifeline it may be the struggling change last hope. The that reaction may be congress should crack down on Corporate Tax dodgers the move overseas. A Republican Campaign aide says better take another look. Live from bloomberg World Headquarters in new york, this is Market Makers with Erik Shatzker and Stephanie Ruhle. Welcome back to market time to take a look at the markets. Seeing a big selloff in u. S. Equities will stop scarlet fu is in the newsroom. Were seeing stocks decline in new york and asia. Samsung electronics came out with his appointing numbers and its playing out here in the United States. Exxon and murky oil dropping over concern about their output. When you look at the s p 500 Energy Stocks are the biggest decliners as a group. All the groups as a group are lower. All 30 stocks are down on the Dow Jones Industrial as well. The biggest decliners are nike and united health, falling more than 2 . The best performer is cocacola which is done by. 2 . In terms of the technical reasons, we saw the dow and s p 500 fall below their 50 day moving average. There had been support for both indexes since april. That might be one reason why the losses are accelerating a little bit. One name im looking at is radioshack and of the few Electronics Retail chain still in business these days but rarely. Closempany has wanted to more than a thousand stores, but its creditors blocked the move several months ago and moodys says the company could run out of cash next year. Blue Crest Capital is not been the activist game before wants to help by providing financing for lenders posing such an option. We saw them step in and go to radioshack, give them a 250 million loan. Close 1000ou cannot stores, you can only close 200. But other hedge funds are saying you cannot keep these doors open. Blue crest has reached out to the company and said we will lend you the money and give you the financing so you can repay your creditors and lets get this company cleaned up will stop they got no response from the company and they issued a formal letter. Is trying to be on radioshack offside effectively, but presumably on terms that favor blue crest. But this is a very tricky story involving many hedge funds with many tricky gains. We put this story out yesterday in the letter we have reigned does not have a date on it. I received three phone calls this morning wanting to know not more details on the letter but the date because they are trying to get their head around is ready ishaqs management or is there ceo ignoring a hedge fund reaching out saying we will provide financing . It is a very tricky story right now. It is a very tricky story. Know whether radioshack could even have a viable turnaround strategy. At this point, it may be a question of how much money creditors can recover and when. And which ones. You had a hedge fund you never heard of, a harbinger spin off and cerberus partner taking a bigger stake. Boys of hedge fund big want to win this game. A lot more interesting than . 62 a share might suggest. Is a story we will continue to follow. Im guessing radioshack, but they had no comment on our story, he will have to face the music and the public. But after next break, we will talk about branch funds. There are some investors in hopes of because hedge funds have not been doing so hot these past. Hedge funds as an asset class are doing better than last year but they are still trailing the s p 500. Thats been the case for more than two years according to hedge fund analysis. Michael singer runs and and alternative Investment Funds with more than a billion dollars in assets under management. Weve got to start with all we are seeing in argentina. Many are saying these guys should be paid back. They are vultures. I say hate the game, not the player. They are living in the rules that have been designed. Activists are getting bigger and bolder. In hundred 75 billion in their coffers, 272 campaigns worldwide. They are going after really big things entire nations will wifethe regime husband and have not done a great job running the country. Peso broke and its been unmitigated disasters one after the other. Billionaire investors will step in and take advantage. Lets are you invested with elliott . You run an alternative investment form, right . We are not invested with elliott. I just had to ask. Lets think of Elliott Management and pulsing her for a moment. If argentina just decides not to pay . That is the approach they have taken up until now. It sounds like an activism more between hedge fund and sovereign nation, it sounds like a great story and it has been a great story but does it end up working out for singer . I can give you the ultimate answer, but one i do that, we invest a lot of money with pulsing or. He is a winner and he and his team will figure out the right tactics stepbystep as distressed investors come out ahead. I cannot map it out map out a scenario where he doesnt win . Hes one of the greatest Hedge Fund Investors of all time. The dont want to take him out. It is a losing battle. Tell me what strategies are winning right now. Id love to. Me tell you about a throwback strategy. Merger arbitrage. Robert rubin, some legendary eddied managers lambert came out of there. It is an allstar crew. Any 80s and 90s, it was a terrific strategy. And and a volume was high and they made money. After the tech bubble, it died and the went away as a single strategy. Now its back because m a activity is rocking. We havent seen volume ike this since 2007. Big massive deals over 10 billion. This is where they love to play. They can pick up spreads. Companies are getting more expensive. This is where you can make a bunch of money. Here is your high yield substitute. We are in a yield starved environment and i can tell you we have an event driven Equity Mutual Fund and it does mergers and we follow the worlds greatest the greatest currency in the arbitrage market is information. Theres so much more Information Available today in the late 80s and early 90s. How can it be as successful a strategy as it was then customer i have an answer. Its a commoditized strategy. Its picking up nichols in front of the steamroller. Warren buffett did well picking up cigar butts. Thats a smart way to approach it. Deals and gobig outside the u. S. Use the appropriate amount of leverage and you will get a heck of a high yield substitute. Our team does that terrifically. You are known as an alternative guy. What does that mean to you and how do you define it is to mark i like that you said im not a Hedge Fund Guy because we show charts about how hedge funds performs. Nobody ever puts up the line is as Traditional Asset Management performs like this. That wouldnt tell you anything. Its just a wrapper and the fee structure. Hedge, private equity enter capital, but dont call it hedge will stop their main bucket of strategy, tactical trading, event ribbon. If you tactically make the right bets, you will perform well. People dont that on all hedge fund strategies. They might like Long Term Strategy and might like some Systematic Strategies and dont short credit. G but if we are approaching a bubble, does it make you feel uncomfortable that we talk about alternatives. They sound pretty illiquid to me. Hedge fundsstop fax are being wrapped in mutual funds not to provide daily liquidity. Almost every hedge fund reggie except certain Credit Strategies are very liquid. You see almost everyone represented sold to Retail Investors eating the same benefits. A numberr, there are of hedge funds and even those being wrapped in the paper of a mutual fund whose underlying assets are far less liquid than the daily liquidity offered in the investable security. Isnt that dangerous . I dont know which one that one is an matching liabilities is critical and i have to hope smart managers will do that. We have made that mistake for. They have. Heres whats happening and its an interesting dynamic. We announced a Strategic Alliance with them this year. Hedge and traditional management, eyes would say they were the strangest bedfellows but we have an amazing partnership. Alternative people who spent their career looking at alternative tonics and matching assets and liabilities learn the fund to fund his miss can pair off with traditional folks who dont know it as well but have great distribution. Then you avoid those problems. I am hopeful people wont make mistakes and rat mutual funds with illiquid strategies and have a headline that they cant make liquidity. I have my angers cross because it will bring down all ships. If you invest with the right folks if you map up with the right partner, you will get a good rod. Im not so worried about it. Hedge funds are more look with dan you think they are. Joining usu for today. Coming up, they are the poster children for Corporate Tax reform. Companies that use mergers to move assets overseas. We will look at whether its time for an end to the socalled tax and version. Tax inversion. We have some breaking news. The wall street journal is reporting a French Telecommunications company that trades on your next has make a takeover offer for tmobile. As you might imagine, tmobile stock is moving come up about 4. 5 right now but was up more than 7 earlier. No comment from tmobile. Ago lastan hour hour i believe had the ceo of tmobile talking to emily chang. Iliad was listening as john said he should be in charge of anything. It is resumed trading sprint on the face of it, this sounds preposterous. Cap ofrade with a market 11 billion euros. By 1. 3 or 1. 4, you are talking about well less than 20,000. Tmobile right now is trading at 27 billion of market cap will stop that is slightly inflated you to jump in share prices but either way, iliad is a considerably Smaller Company than tmobile. We will have to watch this play out will stop we are seeing the market reaction. The fact that sprint is involved is noteworthy. Bloomberg has not confirmed this yet. This is news coming from the wall street journal. And we will be seeking comment from the man himself, john ledger. Is it simply a matter of economic retreat is or not question mark im asking the present im asking the question and president obama says hes decided to slam American Companies increasingly taking advantage of a tax loophole known as inversion and hes putting it in patriotic terms. Big is what happens when a American Company buys a smaller rival overseas to switch jurisdiction and avoid u. S. Corporate tax. Democrats are trying to make a Campaign Issue this november and possibly for the White House Run in 2016. Our Bloomberg View columnist says not so fast and that should not come as too much of a surprise. He was a top adviser to mitt romneys president ial bid and is with us from new york this morning. Summarize in a nutshell your argument not against inversion or in favor, but against making it a political issue now. It seems like this is another in a string of little issues weve been discussing for the last couple of months, whether it raising the minimum wage or pay equity or college refinancing. This is a this is the latest in a string of things. We should not look at it as an economic issue . The biggest economic issue is not inversion specifically, but our out of whack tax code. Its become worse in the last becauseill stop other nations make their tax goes more competitive. We have no parity between money overbroad. Everybody agrees the tax code needs fixing. Coastal foreat fixing the Corporate Tax code, yet members of his own party, your party, are preventing it from going forward. Members of the republican every you cant say Single Member of the Republican Party is in favor of doing Corporate Tax reform now because we see some Forward Momentum if that was the case. I think the reality is if they were able to get some cover from the white house and the white house was able to get out want to doay we Corporate Tax reform, i think youd see a large number of republicans come on board. There is blame to be shared here. Some of the details will be in discussion and that will be a tough part, the devil is always in the details. But if you saw leadership from the white house, you would have some republicans come along. But let take a step back from the fundamentals of the argument talk about all it took. Let me play devils advocate. What is wrong with making a political issue out of something economically . Its not that there is anything wrong with that. Bothng up to a campaign, sides will do it, but it is the tone with which it is being done. As i say in my piece, equating companies that do this to committing economic treason and the notion they are unpatriotic. Its ludicrous. Ofpanies will take advantage the tax code to minimize their tax liability. Just inviting health care to their employees, that somehow they are unpatriotic. I think thats comparing apples and oranges. Your point, companies that take advantage of the wind production tax credit, that tax credit exists in theory for the productivity or Technological Advancement or reduction in Carbon Emissions to benefit the American Population at large stop they are not moving it doesnt involve switching the Tax Jurisdiction and a reduction in tax revenue to the treasury in favor of payment of taxes in another jurisdiction. I think its a ridiculous boondoggle, but that aside there are other boondoggles like tax incentives for oil and gas in place. There are a lot of elements to the probe that i think need to be changed. Issues a fundamental which is what kind of Economic Activity is the tax code promoting . We have a tax code promoting the kind of activity we are seeing. When Companies Take advantage of that, its not an unpatriotic abuse, they are trying to realize theyve got to take advantage as it exists to maximize value for their shareholders. But the reality is to call them unpatriotic whether they are unpatriotic or not, is there a sense of closing loopholes on a one by one basis . I think everything needs to be on the table. There cannot be sacred cows. What im saying is even if we taxe for some kind of grand that we got in 1986 and see that happening a year out, two years out and in the meantime, should we take some of the more egregious loopholes and fix them one by one . I say we but i mean congress. But we can talk about it but what im worried about is if you start going after some of those loopholes, you are taking the pressure of Corporate Tax reform. Ithe same argument takes the pressure off to do comprehensive and i think theres some legitimacy to that argument. But thank you. Good having a conversation with you. Always thoughtful and provocative. Were splitting the difference between politics and economic fundamentals. This is Stephanie Ruhle who will not be seeing you. For the month of august. It not a vacation. I will be resting up for the month. I will see you on twitter. You are the one usually giving me kisses, but im going to give you one. I will see you in 30 days will stop watch out because im going to be your toughest critic. You better do well. I assure you i will be tuning in and tweeting about it. That sounds good for Market Makers today. Be shaking upill the way we buy and sell houses. It could be the result of the big deal between the low and zillow and trulia. You love our because the last time she was here, she was giving you the eye. But she openly propositioned me on live television. At times that i wont be here for a front row seat. Right now, bloomberg tv is taking you on the markets. You know i hate being the bearer of bad news all stop i hate red screens, so im going to hand it off to you and the selloff. X goodlett over the next month. Stocks to u. S. Selling off in line with a global retreat corporate earnings disappointing some investors will thought exxon mobil and kraft foods this all coming before tomorrows big jobs report. Joining me as alan that man, the ef options strategist looking at the indexes, the dow, s p and five and s p 500 dropping below their 50 day moving average, what kind of technical lines are you looking at . Put it in perspective. We made new alltime highs last thursday, so you see some profit taking. If stephanie wanted green market, look at the vix. Its at the highest. We took out the recent highs we will see if we can get above the fifth teen 90 level, which is the mid point of the high for the year and below we thought on july 3. As the market is making new highs, the vix is not making new lows. That channel,ove so it looks like the vix has a little more strength. At we want to look at that on weekly closing basis to see if a bottom is in place. But we will look for that with tomorrows big jobs report. I want to get to an Exchange Traded in the news, xls. It got pretty close to multiyear highs yesterday. Fax it got within a dime in the Banking Sector has been very strong in leading the way. There was an interesting trade that came across the tape. It was only a to send trade which means it was a low probability trade. But someone put on an august the spread of two cents but did it 200 some thousand times. It for hundred thousand dollars. The old throw that down on a chip counter for a long shot play. It may be a backoffice hedge but its interesting to see a big trade like that happen for only two pennies. Your trade for this morning is dupont. With a stock substitution trade. Dupont is trading between 64 and 66 will stop 70 would mean a full retracement. That would be 18 higher. Calls for 575 has a high delta and is going to act like this thought with them on risk and six months of time. Ends will happen looking for this stock to move up and it told appreciate if we get 78. We are on the markets once again in 30 minutes. Welcome to money clip, where we tie together the best stories, interviews, and videos in business news. I am adam johnson. Bill ackman says my dad for his herbalife presentation. It fell flat. The target ceo dash cam the former pepsi executive restore the luster . A new study says big banks have a bigger advantage. In motors, matt miller gets behind the wheel of the new audie test vcl