Billion. Why that stunning proposal from the commissioner of the nba and he says its time to legalize gambling on professional sports. Ingredientsall the of a battle with two companies squaring off over mail. Good monday morning, you are watching Market Makers. Mayonnaise and botox, a delicious day on Market Makers. These are the top stories. A big takeover in the pharmaceutical business an activist has agreed to buy allergan the maker of botox for city 6 billion in cash and stock, the equivalent to 219 per share. Allergan has been fending off hostile takeover bids. Valley and appears to be throwing in the tell and it says it cannot justify to a chair holders paying a price of 219 or more per share. The biggest takeover of the u. S. Energy company is four years halliburton which has agreed to buy baker hughes for 35 . 6 billion. These are the second and Third Largest oil service operators. Together, they will dominate the u. S. Market for onshore fracking and the combined company will be little more than half the size of slumber j sash schlumberger. Intoeconomy slipped recession in the japanese based on a sales tax hike. Here is Martin Schultz we were hoping for about two percent annualized growth during the fall quarter which would have been very important to show the economy is not just bottoming out after the sales tax hike in april but also growing strongly already. This negative number is true is clearly a disappointment and shows the economy takes much longer to recover than we were hoping for. With the economy in reverse, abe is now likely to hold off on nextond tax hike set for october and may delay it until 2017. The doctor being treated for ebola has died at a hospital in omaha. He had been evacuated from sierra leone over the weekend and Nebraska Medical Center says his case was is strictly advanced by the time he was was extremely advanced by the time he was brought back to the u. S. Lets take a deeper dive into the 66 billion deal for halligan. For allergan. Walk us through this deal. Lets go back in history this started out with valiant offering 50 billion, 66 billion now so allergan has done pretty well for itself and raising this offer by 16 billion or so. Withctivis form up to become the biggest drugmaker in the world. We are seeing a huge premium compared to where the started out. What it is what is it about allergan that is so appealing . One of the interesting things right now in the pharmaceutical sector is we have midsized players. Most of their sales in the u. S. Are situated in key geographies and we have seen activists and others by these guys up and take the products to new markets they think they can take a relatively cash paying product like botox and they can sell it in asia or more places in europe. Allergan had not necessarily been doing at the level activis may be able to do. Do you want to weigh in here, bill . In terms of m a . Did we see valiant get played by a Hedge Fund Titan . It seems if there is any loser here, maybe its them because he has made 2. 71 billion profit. Youve got it, bill ackman has one both ways on this deal. I believe there is a side deal that goes too 15 valiant so about 400 million. Valiant is a house of cards built on false premises and not doing r d and things like that. And allergan, you have two strong companies. The stock is up 23 times the last 16 years. Activis has come from nowhere. And bought Warner Chilcott their biggest deal ever now and i think rent saunders and paul lazzaro have built a heck of a company. I am all for strong American Companies to compete globally but im not into taking companies apart but valiant has a real problem. This can be a very strong combination, very aggressive in marketing and they have like 1. 8 billion dollars in synergies and both of their pipelines are filled with products. 1. 8 billion. They have an obligation to their shareholders bridges pharmaceuticals are different than most companies but they of an obligation to the shareholders which leads them to wanting to strip off the r d side, marketing is also a big part of the company and valiant clearly was bringing to the table something that was not as valuable unless in combination. Which ishe argument difficult to make is that its a house of cards. They are rolling up assets and they are shutting down the R D Department and monetizing those things in latin america and asia. Thats a very valuable skill as well. Is there a loser here . 15 tioned there is a valiant takes 15 of pershing squares profits and i think it works out to north of 400 million. Valiant was in it to win it. Get to walk away with 400 million. Bill ackman gets 2. 3 billion. The only potential loser here is activis only if they threw up this deal. They are not a loser. This is a onetime hit for valley and. They have to keep this thing going. If you dont have an r d pipeline in this business, you are destroying shareholder value. Merck hasontent continued to invest in r d. You have to invest in this business. If you dont, you are destroying shareholder value. I cannot see this is a benefit to shareholders. If youre just a traitor but if you are interested for the longterm, this is a great deal. Activis makes more sense than valiant . It makes more sense if you are allergan. They want to save this company. We will start to see activis and valiant competing on more deals. I sat down with the chairman of activis about a year ago and he compared his model to valiant and said we are different from them or. All, we see these guys go after the same types of assets and have the same ambitions to be the biggest pharmaceutical companies. I dont know if they are doing exactly the same model that we will see these guys coming together on more deals coming up, i think. The return on equity on money spent on r d in america has been terrible. At best, it has been running Single Digits so it might be a precursor to lifelong success in the space. A lot of people are seeing that these assets are not adding paid to the amount youre betting to get that level. If obamacare and those things keep going, the move valiant has government controlled assets is extremely valuable. Thats why they want botox. You can still get 200 per shopper botox. It might be 10 a shot under obamacare. And they can keep jacking up the prices . No one is asking for discount botox. Once youre used to a bausch lomb lands, you want that lands. Mens lens. Credite give bill ackman for putting allergan in play or do we curse bill ackman for forcing activis which may have had an interest in allergan to step up with the bid of 66 billion . I think bill ackman wins either way. I dont think we applaud him for putting it imply because allergan was doing these things on its own. Disagree with you to the extent that i dont think you can look at this over under. Who is the productive r d shops . Novartis is one and allergan and tremendous results and medtronic, these companies are getting great return on r d. Bristolmyers is another. Given the kind of return that activis which one has given them the kind of returns that investors in valiant have seen under bill ackman . Nobody is made that kind of money. It has been some of the generic sorts of nondrug controls that have been taken off and investors are looking at this and saying no, these large ferns are sailing and difficult waters as they lose control of their ability to price their own products. It has no correlation to how much it cost them to develop it. As a business model, i think its a question and thats why we see the amount of m a we are seeing because its a business process and is not working so well in pharmaceuticals right now. You have not lost control over pricing of patented drugs. The new drugs coming out are patented. They have not lost control over pricing. They are getting extraordinary margins on those products. They will continue to do so. That is a sustainable model. My objection to valley and is i dont think it is sustainable. They have to keep acquiring and thats what tyco did. That game runs out and you have ever larger deals. Size dealt make that because they dont have the Balance Sheet to do it. We need to take a break but stay with us. Well cover more when we return. Thank you for giving us the latest on pharmaceuticals. We need to shift gears before we go back to bill george and talk about a story that stephanie broke 15 minutes before we went on air. My, motter Deutsche Bank has in next, major translate this andCompany Issuedcds Company Issued cds, that marketmaking business. In the early 2000, Deutsche Bank built the biggest preeminent credit derivative shop on wall street. In addition to losing talents, regulatory requirements, Balance Sheet requirements i am speaking to those inside Deutsche Bank who got the call directly the head of fixed income for products who simply said in europe and the u. S. , we are getting out. Even if the market turns because people say volatility is coming back in the market. Its the right time to be in cds but Deutsche Bank says its too expensive a business for us to be in any longer. Fascinating and it raises questions as to who else might follow Deutsche Bank out the door and who decides to stay in. They could be the Market Leader. They were the Market Leader years ago so we could see other banks follow suit or this is an opportunity, maybe other banks will double down the get bigger. They said they will not cut jobs, just refocusing their business on cash. If you are a Credit Derivatives person, youre one of the smartest people in the credit complex at Deutsche Bank and you may not want to hang around. Excellent points a big story and you heard it from the woman who broke it, stephanie ruhle. We will discuss some of the troubles with activis when we come back. There is more at stake here it is a giant food company taking on a startup with mayonnaise. We will have that and more. Welcome back. Activism is a hot topic on the show this morning. Here is a question for you why are activists going after our countrys best Companies Instead of trying to help the worst . Let me bring back bill george, the man who has seen a lot of companies go through a lot of things. Is it fair to say that activists nelson peltzhn and and bill ackman are going after the best companies . They would argue they are going after the worst and who needs them. Newmontnk pepsico and and dupont are two of americans best companies. Amgen is one of the top performers. Knewu look at one in dread we has done a pepsico, she has created a heck of a strategy with a strong ranch eyes with foods and beverages. They are the fastest grower in the food space in terms of overall volume. Great performance the last three years, up 52 and coke is focusing on sugarbased beverages. Y are only growing at a theyre not growing. If you look at dupont, thats a good example. 2009koman came in there in and she had a conglomerate, a technical conglomerate and she has focused on the areas of growth and is spinning off her Performance Coatings and now Performance Materials and focusing on the big growth areas like ag and nutrition and biomaterials. Clear andy welldefined strategy. Since she took over, their stock is up 250 . Peltz comes inon a monster break it up further. Dupont is a 200 12yearold company, one of americas great legacy companies, and she is building it for the future. We need to support people who are doing that and not take it apart. Dont want them to be weak players on the global scene like kraft. There is no guarantee that the activist gets what he or she wants. Provokes a least, it public discussion about the future of the business. Remaining the up same company it is now or whatever company it ends up being and nelson peltz may not get his way but at least it forces everybody to think very hard about what the future for the company will be. She has beenat but thinking hard about that. Thatu know and i know thats not the case with all ceos. Youre the activist year, could make the argument that there were a lot of fat happy ceos who did not think hard enough about the Strategic Vision for their company and how to maximize shareholder value if thats what you are in the business to do. I think you are in the business to serve your customers longterm. You want to create sustainable shareholder value for the longterm but i agree with your points why dont they go nies that seemed to be drifting like mcdonalds . Couldnt you make that argument for sears . Eddie lampert has not gotten it right that they do not have it right before he joined the party. Thats for sure. I have been critical of sears for the last 1520 years. They have been going downhill for three decades. Companies have been a longterm decline because they had locked in boards. Those are the kind of come praise activists should be all about. They are going after the best companies. Amgen is a tight company and loeb was to break it into the drugs on the market and the drugs coming on the market. It is based on central iron rmb that used the castle from the drugs on the market to fund the future drugs and it has worked. It is a 200 in the last couple of years. I dont understand why they the wiiocus on companies. I want america to have strong global fires. Lets stay on sears for a moment. Would love to criticize Eddie Lampert print he knows how to m money but he does not know i to run a retail business. If he had not walked in the door to turn the place around, who should have . A retailer that knows what they are doing, someone who can put the place on track thats what you want to have. Carl icon took twa into bankruptcy. Bill ackman and ron johnson got into real trouble at jcpenney. Eddie lempert is not know how to run a retail business. It is a total mess. Do you shop at sears . None of my family does. I do not. When he to get somebody who knows how to run the business. There are some good examples. Bob nardelli who knew nothing about retail was taking home depot down and Ralph Wentworth got involved and saw the problem and brought results. Even hp astern to get on track. Is always a pleasure to be with you. George, a man who truly knows corporate america. Stay with us because Market Makers will be back after the short break for theg up, fall out highfrequency trading universe. Startupilicon valley that is taking on a Food Industry giant. I hope they realize that Erik Schatzker makes a mean mayo. Aboutt the place to talk live from bloomberg headquarters in new york, this is Market Makers. Back, im Erik Schatzker. It has been about six months since author Michael Lewis ignited the debate over highfrequency trading. He called the start the stock market rate and traders and regulators have been trying to regulate the fallout. We want to know where things stand now and where does hfc go from here. We will ask the head of Market Structure and liquidity at ubs. Thanks for having me. Lets begin by putting things into perspective. Lets remind people of some of the size and scope around highfrequency trading and dark pools which get lumped into the same basket. Broadly defined, High Frequency trading is roughly 50 and a. Equity volumes large minority of other markets print we are talking 20 to 40 of the u. S. And other countries. Its nothing really new. Its largely automation of what used to be done manually. To the question about dark pools, they need to revamp that. Agreed, alternative Trading Systems we can use your help on that one. Atfs are about 15 of u. S. Equity volumes. And they are a minority in a number of other markets as well. Weve got a pretty Diverse Group of customers whether its retail or others and theyve each got different views on it and different workflows so we are trying an atf ubs should manage its own dark pools . But also routing to every other major atf out there. How things specifically change since the book came out . A lot more questions from clients and how we handle their orders, more questions are out about what are the potential conflict in order routing. That is a huge issue. There is a lot of discussion there. Done a good job covering that. Increasingly, the traitors we talk to are being asked to go to the boards and actually present mutualecifically fund boards and the heads of the desk going to the meeting saying this is what we do to protect our clients. The more awareness there is of all these issues, the more the end the clients are asking how they are being protected. The customers have asked the questions and raise the issue but has anyone actually change their behavior . It totally varies, anywhere from a lot of folks asking us for whats being done with their order and we spend an enormous amount of time doing that globally and we can have a separate session on that and then in terms of actual changes, we have some clients getting specific like turning off certain venues when possible. They say they are too small and the fill rates are too low. , i want to take on the economics of the venues you go through. There is a potential conflict. Economics go to the brokers are there is a potential conflict that exists. Some clients say give me the economics directly back. This is transparency. Absolutely. Thats a good thing. People might debate the merits of Michael Lewiss argument but book is dones ultimately is for the sell side to become more transparent to the buy side, everybody wins. The investors when. Lets take a step back. The cost of trading now, no matter how you are and how you measure it, its down by a vast amount. We can debate whether some of the Michael Lewis issues are good or bad. Theres room for improvement but there is a lot of work going on from the sec and others were they keep improving transparency. When the book came out, a lot of people said this is not new. Since 2007en around anyone paying attention knows these issues full well. What is it it took a book like that to wake up the buy side . Clients our didnt wake them up or unnecessarily alarm them . It could be one and the other. I think thats an important distinction. The book came out and everyone took it for gospel and im not sure thats fair. Weve got the opportunity to work with a love clients around the world and a lot of them have brought these issues for a long time. They do deserve more credit. I would say that some of them are spending more time thinking about it, these are not new topics. The regulators have been focusing on this for years as well. While there is much more awareness of it and the market is more transparent that we can have these debates which are healthy, they are not necessarily new. One of the implications for the sell side is not only has the buy side and taking a close look but regulators are taking a close look as well. From a sell side perspective, there is clearly increasing costs of providing best execution whether it is regulatory or infrastructure that we have talked about like market data and running an aps, the cost of providing best execution keeps increasing. As a result, we have seen a bit of consolidation on the sell side among the atfs and exchanges were to be competitive and differentiate, it increases costs. There are still more than 40 dark pools. Everybody agrees that they would like to see the number come down through the market dynamics. Theres about 11 exchanges today and i think there is also a big hope that that comes down further as well. These conversations that are being had, have they actually improve the product for the process or has it caused more conversations that fidelity has to have with the sacred sisters of notre dame . Is given us the opportunity to work more closely with clients on things like customizing their algorithms. We are trying to figure out how i actually turned my idea into it rather how do i have better workflow . Had a way better track and analyze it . Thats one of the real tangible outcomes. Thank you very much for sharing with us your experience. Come back soon. Absolutely. While some of your focused on the fight in the health care industry, erik is thinking about a fight that began in the Grocery Store aisles that might be headed for the court room. Someone will have to answer this question just what is mayonnaise . Welcome back. The kitchen gloves are coming off. Food industry giant unilever is suing the Silicon Valley startup creek and its over mayonnaise. They say the Hampton Creek vegan notmayojust mayo is because it does not contain eggs. And 10 creek is fighting back. The ceo is with us now from San Francisco to explain. Josh, give us the scoop. The scoop is we have a product called just mayo or use a plant instead of a chicken egg and we do so because we want the good thing to be healthier and more affordable and its a different approach. We call it mayo instead of mayonnaise. Realizes thiser is an approach that is winning with consumers as part of the reason youre seeing what you are seeing. Didhen you label it mayo you have any inkling of what might happen . Think that unilever would filed his lawsuit against you claiming seeking not just that you take all of your jars off the shelves but i think they are seeking triple damages and all kinds of other things. I did not. There is another product called mindful mayo that uses a plant instead of a chicken egg, too. We did not believe this would happen. We still feel like were on the right side of the law. More importantly, we think we are on the right side of how we build a food system that makes it easy for regular people to eat. I never started this thing to be an alternative or a substitute. The started it to be right there in the condiment aisle or right there in the cookie aisle when we do that with everyone else. Can you afford to fight unilever . They have unlimited resources and you are a startup. Thanthink its more likely not you will have to ask your guests that you know labor ends up withdrawing the lawsuit because of the incredible amount unilever endsthat up withdrawing the lawsuit because of the incredible mountain support. If we need. To go to court we will. We thinkits important to stand their ground and do whats right and you bet we will you have hired some highpowered Legal Assistance . We hired david boise and their ancestors and taking cases that have broader societal implications would think this potentially does. Its part of the reason why we are exercised about it because more than mayo, its about a broader conversation about food and how to make it easier for good people to do the right thing. Today is my on tomorrow it might be something else. I think unilever what is ironic is that i think they actually agree with that and its the reason they try to create a mayonnaise without chicken eggs back in 2006. Is the reason i have been aggressive on their sustainability policies and we think they should continue to do so. When you say thatboise, shi willing tockner is do things for other than purely financial motivation, what does that mean . Are they providing Legal Services to your firm at a cut rate or doing it pro bono . No, they are in business also. They get approached all the time. They have many cases come to them and they turned down a lot of cases but they took hours because we have a food system today that is just broken. Its a food system that ironically makes it really difficult for people to eat well because most things that are bad for the body and bad for the planet taste great and are affordable but how do we create a new system where the good thing is better and they see this as a broader fight and conversation around that and its one of the reasons why they decided to run with us. Has this big story been a positive for you . For me personally, i never shop in the vegan ill. Most of the food tastes disgusting. Now that i know you have got tryever in heat, i want to it. Are other people now focusing on your product . You said i never shop in the vegan aisle. The vegan ill has some products that might be better for the body or the planet but you are presumably a good person. You are not using the thing that ends up better i will vouch for stephanie. She is a good person but she makes a good point that this is drawing a lot of attention to your product. Do you keep it going by filing a counter soup again a counter suit against unilever . We know its the right thing or want to make sure that you dont have to go to some niche substitute aisle to get a certain thing. We want you right in aisle 7 to choose what is right. I appreciate that. I want to make sure we get an answer to that question if you dont mind. Are you guys going to take it to the next level by filing a counter suit . Absolutely. When will that lawsuit drop . We will see, we are working with our partners on it now. Unless unilever decides to withdraw the lawsuit which i think is likely, given the dynamics at play here, we will absolutely file a counter suit and look forward to sharing the story more. What will you allege in the countersuit . There are a couple of issues and you might ask this of your next guest. There is a host of sustainability claims that unilever makes on how they create their products including what happens to certain chicks in the supply chain that we think the consumer might want to hear about. Adequate tot is cause the court to possibly rule in our favor. Josh, great to have you on the show, one half of the debate. They will crack this lawsuit like an egg. A josh, i do dog on vegan but the cookies are good. Because there is no eggs in it, im willing to eat cookie dough. When we come back, we will bring you the other side of this debate. Unilever has a different view on the subject of mayo and what deserves to be called mayo or mayonnaise and we will talk to the Vice President of foods of north america at unilever. Now for the other side of the great mayonnaise war. You just heard from the ceo of waston creek, josh tetrick being sued by unilever and now you hear from unilever getting Bloomberg Television its first interview on the subject. Michael faraday is here, the Vice President of foods that unilever north america. I know mayonnaise is important to you but Erik Schatzker makes mayonnaise himself. There is someone possibly threatening your business, dont trust this man. I have five brothers and sisters and 17 this is and nephews were getting together for thanksgiving. When my mom goes to the store to buy mayonnaise, i dont want her to be fault fooled by a false label. This is all about false labeling . You dont bring her free mayonnaise . Byebye the mayonnaise as well. Whats the basis for that accusation of false labeling . The core thing is we went to consumers and we showed them tha just mayo label. It has an egg on it. That itf the consumers was mayonnaise. Its not mayonnaise. If it taste like mayonnaise, who cares . Theres a definition of mayonnaise with eggs, oil, and vinegar and its a regulated definition put in place to protect consumers. When there is a label which is communicating something false, consumers are not protected and we think consumers need to be protected. Hampton creek has not been upfront. They have not told us the media that the fda has also raised concerns. Hampton creeks lawyer told us that the fda has raised concerns with them. We believe they are the same concerns we have about mislabeling the product. You are right and i look at the fda standard for mayonnaise this morning. It needs to contain vegetable egg yolkn egg yolk containing ingredient and an acidifying ingredient like lemon or vinegar. The name of the food is mayonnaise, not mayo. Very importantly, when i go turkeydeli and i order a sub with mayo, i know what i am asking and the guy behind the counter knows what i am asking. More importantly, when we did the research, we asked them about just mayo and a label with the egg on it. They came back and said it was mayonnaise. People who see mayo translat to mayonnaise translates that to mayonnaise. When is the fta definition dated . It is 2014. So its current. Im going to go with me. If im in a Grocery Store and they are offering it to me to taste test and i like the way it tastes, i dont care what the label says. Isnt that whats important . Whats important is Consumer Choice and we believe in Consumer Choice. We like the fact that there is Great Innovation in the category and Consumer Choice and consumers have to be able to choose based on facts. The facts are wrong on the just mail label. You cannot have a giant egg on the able and no eggs in the product. Why do you care about this tiny Little Company in San Francisco . You are unilever. This is about consumer labeling and misleading consumers. The consumer tries just man your mayonnaise, they will go back to the unilever product. Thats what we believe. Then why did you guys engage in is amateur hour stuff, changing the reader comments on your website to add the word dressing when somebody said mayo . I say amateur hour because thats what it looks like. Unilever is acting and Hampton Creek is not acting. Hampton creek reached out to us with a letter on november 4 and raised issues about some things on our website. Whether we hear from consumers or competitors, we take issues and challenges like that seriously. Put words in your customers mouse. They did not say dressing. In this case, we acted. I would contrast that with what Hampton Creek has done. It has known this is a consumer issue with their label. They have not acted at all. On that specific page, there was a mistake made. The comments should have been taken down and they were inadvertently altered and thats a new policy procedure. This is a small Innovative Company trying different methods back theirr seems to egos. Why dont you buy them . Believe in sustainability and partner with Many Small Companies that have a sustainability mission. With that goes transparency grid you have to be transparent and they are not transparent on their label. Is good, buyuct them and given the transverse and they can give you a delicious vegan product. If their product is labeled correctly or if they called it just not mailing took the egg off the front of the jar, that would be fine. We have to ask about the thing josh was asking about. He implied that you guys will drop your lawsuit because you are terrified of what will happen in discovery and that people will find out in the course of discovery when david boise steps into the courtroom about how these chicks and chickens were treated in the course of making mayonnaise. We both know its not pretty. We have not heard that david boise is involved in this case, its his firm. These are not celebrity lawyers they hired. Secondly, we are not worried at all. This lawsuit is a serious thing because its about consumer knowledge. There is an easy way to make all of this go away. We want to sit down with Hampton Creek and discuss a new label design that does not mislead consumers. I am amazed that unilever wants a meeting with little Hampton Creek. Unilever,herty of thank you. Live from bloomberg headquarters in new york, this with theirmakers, schatzker and stephanie ruhle. Obamacare, the sequel. Secondyear signups start out with no glitches. That may be overshadowed by an upcoming political fight. Betting on her sports. Millions of americans are breaking the law by doing it. The commissioner of the nba wants to make it legal. Havent had enough frozen, you can look for it on the ice. Welcome back to the second hour of Market Makers. Im stephanie ruhle. Im thinking about blts. I to have mail on the brain. On the brain. But you can make it yourself, it is that simple. We have the top business stories of the morning. If this deal goes through, they will be a new top 10 drug maker. To a 19 a share for a total of 66 billion in cash and stocks. Aey have been fending off bid. It appears to be calling it quits today, in a statement, the company said it cannot justify to it shareholders paying a price of 219 or more a share. Be thee happens to largest takeover in the u. S. Energy industry in three years. Halliburton agreed to buy baker hughes for 34. 6 billion. This is the second and Third Largest Oil Field Service companys. They are concerned by the potential friday trust action. We are very well advised from an antitrust and point. Standpoint. We have just now started to work with regulatory authorities. At the end of the day, we wouldnt have done this deal if we didnt believe it was achievable from a regulatory standpoint. So lets just let the process work. The combined company will dominate the u. S. Market for on soil onshore fracking. Deutsche bank is getting out of the credit default swap market. Deutsche bank says it wants to focus on trading for bonds. Biggest Security Risk to World Markets would be russia, according to a new bloomberg mobile poll of international investors. The russia. S. Ukraine conflict has the biggest risk. Another big story is out of japan. Its economy has fallen back into recession for the fourth time in six years. Lets take a look at what this means for the global economy, with the newest member of our team here at bloomberg. Joe weisenthal, the managing editor of bloomberg markets. Jo, welcome aboard, my brother. Now that you are here, we have to be that nice. What does this mean . Its hilarious. Its bad economic news. I appreciate your sensibilities. The nikkei is been on such a to air. Tear,h a. It doesnt seem like anything is moving forward economically. On either hand, the finance ministry is raising taxes. There is this consumption tax hike that is supposed to come in, and a debate about delaying it. There is no urgency for it, there is no need for it. They had one conception tax, which knocked the wind out of tax whichsumption knocked the wind out of the consumer. It seems like nothing that was envisioned as part of the plan is working out. Why . Its interesting. There is a comparison between the u. S. And japan. Much on monetary policy, to stability economy, you can get a lot lot of reaction in financial markets. The nikkei is booming kind of like the u. S. Has boomed. Isnt that the picture for europe . On the flipside, you dont actually see particularly impressive real economic growth, which would be more impressive to see. That takes a while. The new gay is up 42 since they started the nikkei is up 42 since they started. Everyone is anticipating it is going to work. It will create inflation. A booming market for a most six years now. Still, no one is really impressed with the u. S. Recovering. True, but we were in much better shape than the japanese to start off. We did have a much better response than pretty much anyone else in the world back in 2009. But they do seem to be this issue, which is monetary easing works very fast for financial markets. And then the real economy is sort of left behind. I want to talk about a story that is important to me today. Deutsche bank. I thought you were going to ask him about mayo. Bank, the firm that built a credit derivative empire in the early to mid2000s, is announced and the getting out of single name cds. They are the only bank to do it. They are claiming it is the regulatory environment, the Balance Sheet requirements. Even if the market turns around, they are simple getting out of the space. What do you make of this . That this is been fading has been fading for a while. Its interesting, this continual move away from the big investment banks. Playing in fewer and fewer markets, and perhaps there is a regulation aspect to it. Next time there is a crisis, it will be interesting to see how things look with these big players involved in fewer markets. You have to wonder, redick Credit Derivatives are among the highestpaid guys out there, along with distress traders. If you take away this product, these highvolume products, where banks owing to put up the big dollars . Where are banks going to put up the big dollars . Thats a good question. Things have become less interesting because there arent that many defaults. The default rate is 1 or less. And the credit cycle turns, things become interesting again in credit, maybe Deutsche Bank will regret the move. Saying they are staying in emerging markets, where it does make sense. Its more of a satiric business. Business. Teric they can jack up the prices and make more money. The only action will be in just distress. Can do whatbank others have done for decades. Again,business gets hot they can over higher, offer up to your guarantees, and get back in business. I think there is an element, thats part of all markets, where we see more interest in industries as a whole as opposed to individual names of companies. Whether it is credit or equity. It feels to me like this is part of that trend, and People Choose to hedge via index cbs, as opposed individual names. For there to be an index come other has to be single names. Youre still going to be trading these index products that are so much more liquid. Index product an or options, then single name cds . Heres a question. If the index remains liquid, but the single names become less liquid, because people like Deutsche Bank are dropping out of the market, that creates a huge opportunity for hedge fund traders, doesnt not . Indeed it does. Our other banks going to follow suit and get out of the market, or is Deutsche Bank unique because they are undercapitalized and they need to . My best guess is that they are ahead of its curve ahead of the curve. Deutsche bank has been the leader in Credit Derivatives. But who knows . If you are Morgan Stanley or goldman sachs, and deutsches out of the game, maybe this is an opportunity. Volatility has spiked up, and you have a whole deck not trading. How can we be questioning their credit accuracy, when you just gave it their blessing . Before we go, we have to talk about retail sales. What you think about holiday retails . You never want to prognosticate too much. But there are a lot of signs it could be a really good holiday season. Consumer confidence by any measure is on the rise. Last weekend, the quit rate hit the highest level since the crisis. That means people feel good enough to leave their jobs for something else. , theres aas prices great chart earlier i saw talking about the first signs of holiday Seasonal Hiring are much bigger than they have been any other years. You never know. It could all fall apart. We get excited, and the we get disappointed. But right now, all the wind is at the back of the consumer. What is the best thing you have read today . Put me on the spot. If you dont have one, thats fine. I dont have one. Next time. We want to know what youre thinking. Its great to have you here. Welcome aboard. Joe weisenthal of bloomberg, right here with us this morning. Coming up, republicans gear up to take another run at obamacare. We will look at their chances. Its no slamdunk. The commissioner of the mba says lets make it legal to bet on close sports pro sports. Stay with us. Year two of obamacare kicked off this weekend at healthcare. Gov. That is quite a turnaround from a year ago, when the website collapsed on its very first day of operation. Peter cook has more for us. What can you tell us . It was a much better we can for obamacare 2. 0. 100,000, that it actually submitted applications. 500,000 people actually visited, log onto the site on the very first day of activity. There were no reports of major problems with healthcare. Gov. There were minor problems reported in Washington State and california. Their individual state market places had problems with their website. By a large, so far so good for this new enrollment period. The question will be, and people will sign up . The target is 10 Million People by the end of 2015. We are at 7. 1 million right now. As pretty,es as well do republicans have a shot of trying to kick back . How do you kick at something that is working . Its easy. A lot of americans dont think it is working that well. Despite signs of improvement in the program, American Attitudes towards the law itself, and towards healthcare. Gov still raise a lot of questions. Troubled eye how it rolled out a year ago, and they havent overcome those obstacles. A will be within republicancontrolled congress, easier for them to target aspects of the plan. The medical device tax, the workweek restrictions in terms of who is eligible for an roman of the program. Those of had democratic support, be surprised if aspects get challenged early and often. Healthcare. Gov is the federal site. How about the state of changes . There over and enrollment periods are up and running right now. Some states are doing better than others. The federal exchanges are big this year. Faceederal exchanges may the biggest challenge next year, and that is the Supreme Court once again looking at this issue of subsidies, and whether or not anyone signed up through the federal exchanges even eligible for subsidies. Thehe court rules against federal exchange, thats the biggest threat to the law itself. That would have nothing to do with the republican party, another threat to obamacare. Peter cook, thank you very much. How about we ask an insider what he thinks . Company offers Subsidized Health care plans through via for double care act, and help states build their own health care changes. He has a firsthand look of what consumers are experiencing. Would you see over this weekend . This weekend was a lot better than last year. Thats a pretty low bar to clear. That is right. Having said that, early data that we would like to share with that inhat we think romans interest is enrollment interest is two times larger than last year. Over 20 of the people who called us and enrolled here were referred to them by employers, in the restaurant and hospitality segment. Operationally, things are better. The interest is a lot higher. We are optimistic we will get some nice enrollment numbers. One of the biggest differences what are the biggest differences in what they were offering today versus what they were offering last year . If you look at the first two days of data, the price of the slightly over 500 on a gross basis. The average tax subsidy that most consumers are eligible for, which we are clocking and measuring slightly over 300. They are quite similar to those last year. We are seeing the difference in the way of consumer trends. Things, likele some evidence the shopper is getting more sophisticated. More shoppers are asking us for both Health Insurance and dental and vision plans. There is evidence that the shopper is getting more sophisticated. Peoplealso seeing more navigate our site on mobile and tablet devices. That is something we would expect. Ofdo you have any sense whether the customer is signing up for Health Insurance on your site, through your company, like what they are getting . You know that the polls show that the public support for obamacare is at an alltime low. I think the early stats that we are seeing out there are that over three quarters of the shoppers that call us are eligible for subsidies. Our average conversation are over 40 minutes. ,ustomers for the most part given the interest coming in early, feels very confident. How you explain the discrepancy . Your customers like what they getting and feel positive. Yet americans on the whole dont like this program . There is a clear dichotomy. Customers who are actually shopping, actually purchase plans, and there are many 70 ies out there that say of shoppers like their plans and keep them. At the same time, there is a lot of conversation around the satisfaction with obamacare i think will take a few years to pay up. It feels like consumers are overwhelmed by the complexity. We agree. We think historically, for the longest time, most consumers tended to focus and 10 to look sibley for the plan with the cheapest premium. This year, we are rolling out this Innovative New feature which allows consumers to shop for and look at all of their outofpocket expenses over the year. We will continue to innovate in this regard. Health insurance is one of the most kabul get a products you can buy. We want to make it simpler every year. Do you have any sense of who is actually buying these plans . What the insurers are concerned about is that too many people who are infirm, old, in poor health, sign up for Health Insurance. And Healthy People dont. Its the Healthy People, because they dont go to the hospital, and because they dont go to the doctor, you end up paying for this program. The evidence doesnt support that. If you look at how much the average plans have inflated from last year to this year, the average plan appears to have inflated a little under 5 . That is not the scenario you would expect if what was really going on here was a dynamic where the risk pool being insured was largely comprised of people who tended to overuse medical services. I think the other thing that we are seeing this year is, on our platform, we have nearly twice as many insurers and twice as many plans. Rhetoric aside, the best data that we are able to see shows that competition is increasing, ensure per dissipation is increasing. Consumer participation in the exchange, ill be it for two days in, is a lot better. What happens to your business if the Supreme Court overrules obamacare . That is a great question. Know, weys probably are a fast platform that builds public and private exchanges. We build a changes for consumers, we build a changes for employers, and we build a changes for states. So the Supreme Court decision goes against providing tax credits in the federal markets. We expect on the state side of the business more and more states do have interest in using our platform to build their status changes. On the private market side, we see two things happening. States which those have statebased exchanges, obviously, our business remains robust and strong. He was really ellis act. Exchanges,erally run they would obviously be an impact there. But that is the place where we expect our business overall to remain strong in the unsubsidized market. Overall, we expect the business to continue to remain strong and grow. Choices here to stay. Game up. Atforms are we are looking forward to many years of growth. Chini krishnan. The ceo of get insured. Com. Market makers, will be back. Market makers, with Erik Schatzker and stephanie ruhle. It is 26 past the hour, which means bloomberg is on the markets. Shrek needs a new home. Its not working out in the swap. Dreamworks animation is slipping after the news that hasbro is called off negotiations to acquire the studio. Its the second time in two months that a potential takeover has faded. Animated films are pure gold. But not this one. The market is telling us this is a good thing. At least from hasbro. Dreamworks hasnt had a win sent shrek. We will be back. Whom live from bloomberg headquarters in new york, this is Market Makers. Welcome back. It was a surprise proposal from the commissioner of the nba adam silver says betting should be allowed in professional sports. He wrote in the New York Times that theres an obvious appetite for a safe and legal way to bet on games and called on congress to come up with a regulative framework. Why now . We asked our next guest. Why now . I think this is really an interesting time. Its hard to figure out why now but he has stuck his stake in the ground. He has broken off from his brethren commissioners in putting forward a proposal for gambling. I think the why now relates to being proactive in getting head of the other commissioners and wanting to say its better in the light than in the shadows. He talks about regulations that we should make it federal and we have a hearing coming up in new jersey opposing batting, opposing sports betting. He is saying on the one hand we still oppose that but if we had a federal comprehensive program, we would not be dealing with these individual state problems we have. I think he is getting ahead of it i think we cant ignore the monetization angle. Aey did a deal withfanduel, Fantasy Sports company and thats part of this as well. Thats his incentive . I think all these commissioners are trying to figure out the monetization angle. Anddo we control it monetize it rather than someone else doing it . Yes, the first deal out there is fanduel and the nba last week and all of a setting, the nbas taking control of the Fantasy Sports angle where other commissioners are sitting back and asking how to monetize this. Adam silver is stepping out and doing this first. This is just like cala deau, legalizing marijuana like colorado, legalizing marijuana, if we legalize it and control it, everybody wins. I think this is comparable to what went on with legalize marijuana. He says its better out in the light them in the shadows. He talks about strict federal regulations. With the new jersey thing, he is almost saying we will keep opposing the state laws until the federal government does something. Its really a challenge to congress saying lets legalize this. Of all the things a new commissioner wants to stake his claim on, but Donald Sterling thing was a reaction to those comments but he has six gambling he has picked gambling which flies in the face of integrity in many ways. Will be nba be the new legal bookie . I think thats what they want. Really . They want the government to be the legal bookie. They want the government to control this area like we talked about with marijuana. He wanted government to regulate this so they dont have the dark side coming to players and referees and potentially compromising the integrity of the sport. I think thats whats going on here. When you say this flies in the face of integrity, what do you mean by that . In normal situations, gambling flies in the face of integrity. We go way back with pete rose and the black sox scandal in 1920 with a referee in the nba who got accused of throwing games and fixing games. Integrity,lk about gambling strikes at the heart of integrity. Except for the fact that gambling happens and its going to happen whether congress legalizes it or not. If players are going to throw games to make money with bookies, they will do it, arent they, whether its legal or not . Adam seller is saying lets flip the page and make it legal isrefore adam silver saying lets flip the page and make it legal. Obvious appetite for safe and legal wagering in this country. He is looking at that and saying lets make it obvious and safe and lets make it legal. What is your opinion of his move . Ok, i think this is coming. I think this is inevitable. Thatnk there is no way gambling stays under the surface. Its just too much of an appetite. The nfl has Fantasy Sports on nfl. Com. Thats gambling. The nhl has Fantasy Sports. Major League Baseball has Fantasy Sports. We can say its just fantasy but thats the tip of the iceberg. The lease have to get ahead of this. I commend adam silver for getting in front of it. The question is how will we handle this huge appetite for gambling in a safe and legal manner . That is up to congress and people beyond the nba but they are stepping out in front of it. Clearly, there are some obvious risks. What about the risks we have not thought of . The obvious risk is players being paid off. Dramatic and i just dont see it happening especially in team sports. To say that one player in football or basketball or baseball can control the outcome it again, these are team sports and the fact is, they make so much money. For them to risk that for whatever its going to be if they are offered tens of millions of dollars, thats a different story but i dont see that happening. The risk is integrity. The risk is that we as a public say that maybe that sport is not as clean as we thought. Adam silver believes the other way is better adding it legal is better than what we have now which is illegal. It sounds like you agree with him. I think its coming. I guess i commend him for getting out in front. Im not sure i agree with gambling in sports but eventually it coming whether we like it or not. , he is also ant espn analyst. For disney its the gift that keeps on giving a year after the film came out, audiences cannot get enough of frozen even when its not in the theater. When we return, we will let it go. Welcome back. And itd huber uber and huber and will start up in 10 cities. The companies trying to attract new users by striking deals to enhance writer experiences in their cars. Rider experiences. There one car to get time and get me to my destination as soon as possible. Whether or not they will play music is irrelevant. It may be irrelevant and its irrelevant to me even if i dont get my taylor swift. There is no harm in it. We dont know if theres any cash changing hands. Uber there are some customers or spotify users. I think it is reflective of whats going on in the sharing economy were Likeminded Companies are teaming up to offer each other services. Sharingis sort of a thing and thats why taylor served taylor swift doesnt like it because its not enough sharing for her. Put them together and maybe you get Something Better than one plus one. Maybe its 2. 05 but thats better than to then 2. I ask for the news. I asked for Bloomberg Radio in the morning and z100 when im going out. What is it . Its a super popular new york radio station. Swiftop radio with taylor and bruno mars kind of music. When youre going outcome you want to hear that kind of music i think. Car tom i in and uber asked them to turn it on as opposed to taxicabs. Now that you and get your spotify and uber, will you change your mind . The fact that they offer me a next destin enhanced experience makes me inclined to go uber rather than yellow. There you go. Maybe this is the best way to see disneys hit frozen on ice. The disney megahit the progress of the box office is now set to break into record on the ice. Disney on dies is letting frozen go across the United States and canada from now until next year. The executive vp of entertainment is with us now to look at how the frozen brenda differs. To say this is blowing up is an understatement. Compare this on ice to every other entity in your franchise. We have never quite seen the onslaught of ticket sales like we have seen for frozen. We went on sale this summer and sold 10,000 tickets within the first hour, over 250,000 tickets in the first monday four hours. We just finished a five day stint at Brooklyn Barclays center and play to 112,000 fans. It has been mind blowing. Are you selling when more product than another shows . Im guessing your demographic is eightyearold girls. Showing up to the berkeley center, they are doubly in costume and they want awand. Consumersseeing consume everything frozen. Disney is seeing it and they are coming into disney on ice wearing the costumes. They are purchasing lights. It is experiential type merchandise print we sold over 50,000 mugs. 50,000 olaf mugs . How much is a cost . It can arrange depending on what city it can range depending on what city youre in but arranges 12 to 15. Everything comes with a guarantee. You cannot get it anywhere else. How much of the upside that you are seeing as a result of this unbelievable interest in frozen flows to you and how much to disney . We are a licensee of the disney company. I cannot comment on what their numbers are. We are doing very well and have a Great Partnership with them. Because were are doing well, they are doing well with anything that is frozen. We also have a disney on i shows theyre all very successful touring domestically and worldwide. Is the first time ive every heard anybody say that we are a parasitic business. We are. Its a great explanation. Is anything you can take away success . Zens his marble on ice . Spectacularve arena also fromfeld entertainment. Anything we do as a learning for the next live show. With this, we have seen the audience involvement and added frozen segments to two other disney on my shows, once a just opened in poland this last week which has been phenomenal. Its going to continue the success and will support everything at feld entertainment. We will bring in additional audience over what we typically do. The audience will look forward to seeing disney on ice when it comes in january with the princess and heroes show and ringling brothers when it comes back in the spring and monster jam and Everything Else we have. Are you going to create another frozen product . We are very happy with this show. Maybe frozen on grass . It is a natural on ice. It makes for a beautiful transformation from the film to this medium. It and plans to include update some of our other disney on i shows. In the meantime, this show will enjoy a 10 month tour domestically. This year into the beginning of next year, it will lay in mexico city and hit the west coast and United States next year and then go outside the u. S. Could it be like the lion king and mamma mia and go on forever . We hope so. We hope they success continues. I dont know if anything can see this kind of level of success for ever. Is this going to be your most popular . You have been in business for 35 years . Is this going to be your most profitable year ever . First of all, the show only opened in the Fourth Quarter of this year. We are seeing tremendous left because lift because of this phenomenon. It will play to over one Million People by the end of the year. Maybe even by the end of the month. Does it cost more money than the other disney on ice shows . It is on par with the level of other shows. Ticket prices what the market demands. There is a secondary and third ticket market where we see inflated prices and that is not what we are putting out. Does that mean you could increase . Ice and if i on buy a ticket from ticketmaster, does it cost the same as heroes on ice . It depends when you go. We participate in dynamic pricing so depends on what you go and what the market demands budget and get a ticket to frozen on ice for about 15. Thats pretty accessible. Some ofe talking about the things you have in the pipeline, when you look at the way people respond to frozen, what other ideas as a give you about things that you might stage . Anything that has that great emotional music is what will be popular with kids and families. As long as disney continues to produce really great animated films with characters with emotional resonance and great music, that will do well for us. Do you think disney pays close attention to what happens in this aftermarket . Whether they respond to it and see what happens beyond the film . I think so. They are very smart. Makers on ice, think about it. Time for us to let it go, that is it for Market Makers. A pretty good monday. Are you in the mood for mayo with lunch . I might try that. Maybe if it was called just not mayo. We will leave that there for the moment. That issue is likely to continue. In the meantime, lets talk about tomorrows show the ceo of interactive will be here to speak about grand theft auto v. Join us tomorrow but it is approaching 56 best ever which means Bloomberg Television is taking you on the markets. Sainits right ,im mia and where watching what is happening more broadly with the markets. All three of the benchmarks are firmly in the red and were fluctuating in the early part of this morning. I can also tell you we are also looking at whats happening in the Options Market as well. Its time for options in size. We are talking about with baker hughes and calpers agreeing to pay 4. 6 billion in joining me for more is our derivatives strategist at mkm holdings. Lets talk about whats happening in these markets. We have a recession in japan, we got your going through problems and that said, it looks like the u. S. Is weathering the storm. In the midst of everything you mentioned, u. S. Equities have really gone quiet. If you think back to midoctober , the intraday ticked above 31 and a 10 day volatility of the s p 500 was around 22. That is down to four percent as of friday. Volatility that is down to four percent as of friday. That is down to 4 as of friday. You also have the shortened thanksgiving week. We think would volatility low here, it will probably remain the case into december. Volatility is about 14. We are also watching shares of baker hughes jumping to a twomonth high on the news. What do you see in the Options Market . To go back to friday, someone put on a very large trade and bought 62 point five strike calls in september and they sold 75 against that. Thatpartially financed position by selling 50 strike puts in december. Thatneed 3. 5 million for position. The announcement of halliburton buying baker hughes, that position has tripled. Will you see more consolidation in this space with more options activity because of the fact that oil is sliding down . It is a possibility. We are trying to make sense of it looking at volatility versus coverage ratios and figure out which Companies Might be most susceptible to some sort of restructuring or take over. There is no doubt it will be on peoples radars in the month ahead assuming crude oil stays down at these levels are even lower. Historically, that seems to have been the case. You also have an interesting trade on vmware with shares down nearly 4 this year. Software is aon company that has been a significant underperformer. They reported thirdquarter in job or the stock traded down sharply because billings missed street consensus. So with alatility government deal but did not show up in the Third Quarter will show up in the Fourth Quarter. That could be a very nice catalyst for the stock. Why do you think that deal will emerge from the Government Data . Because we cover the stock. Our Analyst Thinks it will show up. Januaryto look at to and it does not capture earnings and we want to buy some calls out right. So you are buying the january 90 call . Those out to buy right with implied volatility of longterm lows which makes calls relatively an expensive. I guess thats where the money is to be made. Thank you for your time. We are on the markets again in 30 minutes, money clip is next. Welcome to money clip. I am matt miller in for olivia sterns. This is the run down around the world. Japan slips into recession for the fourth time in six years. What does this mean for abenomics . Financial expense comes to the virtual world. Bitcoin anyone . The shanghai stock market opens up to the outside. Investors cannot get enough on day one. To