Transcripts For BLOOMBERG Market Makers 20150416

Here is scarlet fu. This is a betterthanexpected read on the Manufacturing Sector here from the philly fed. 7. 5 when it, as were looking for slight uptick to 6 from the prior months rita 5. This is the Philadelphia Fed business outlook. You can see this slight move up is from five to 7. 5. We are long way off from the peak of the end of last year at 40. Weve seen softness in the Manufacturing Sector take root because of the stronger dollar and a drop in oil prices. That seems to be improving for this particular index. Earlier this week, the Empire Manufacturing number came in with a negative read. There is still a lot of debate over whether manufacturing has bottomed out and were ready to see an uptick. As the dollar stabilizes and oil stabilizes, perhaps we can look at some stabilizing and the Manufacturing Sector as well. In the same index, new orders index at 0. 7 versus 3. 9. In terms of effect on markets the s p 500 down, nasdaq holding onto their losses. No real change as a result of this report. If i look at the dollar index which has been so sensitive to a lot of this manufacturing data it is lower by a third of 1 . Stephanie thank you. Erik lets take you to the bulletin. Stories you will want to know about, shares of Goldman Sachs surpassed 200 for the First Time Since 2008. It beat analyst estimates. Coleman surpasses rivals by posting a bigger increase in revenue from trading debt commodities goldman surpasses rivals by posting a bigger increase in revenues from trading debt commodities. Citigroup earnings also beat estimates. What does that tell you . The thirdlargest u. S. Bank costcutting, First Quarter expenses fell 10 . Legal costs were down 65 from a year ago. Lets have a look at where shares are viewers around the world are flocking to netflix. Global and u. S. Subscribers rose more than expected in the First Quarter. Sales up 24 . The original shows such as house of cards has helped netflix attract 62 million viewers. The company is on a roll. When all of these markets, the internet and Internet Television is catching on, and we are leading the list of two competitors, and we have competitors all around the world. In each market, theres a series of competitors. We are feeling very bullish on the longterm of these markets. Erik netflix killing this morning at stocks up almost 68 and rising to a record high. Expected to recommend the board split netflix stock. Amber nagys next gig . Ben bernankes next gig . He will become a Senior Advisor at citadel will stop he will meet with clients and offer analysis of Global Economic and financial matters. He said he chose citadel because unlike wall street banks, the firm is not regulated by the fed. Stephanie i know we dont have much time to talk about this,. Talk about the white knight going to the dark side. My mind is blown over this one. Is he moving to chicago . Erik i would guess not. He is a Senior Advisor. How much time is he going to be clocking in at citadel Gekko Stephanie if ken griffin is your boss, a lot. Sc shares are leading the way. Weaving their way into the market as the ecommerce copy goes public. It raised 267 million and its ipo last that which priced at the high end of the range. While were waiting for the first traded go through, investors may be hot on the brooklynbased startup, but some are worried about the actual numbers behind the company. Lets bring in james geller, see your rapid ratings, company that analyzes ipo risk. Etsy, are you hip to them . I think it is a great niche product, Niche Company but it doesnt have the sustainability at this stage or the profitability to be a longterm great investment. I suspect the ipo will probably do well today. Theres not a lot competing with it. We rate them on our scale of zero to 100 with financial help rating of 23, which is high risk. It has good liquidity properties. Well have more liquidity after the field, but it doesnt have profitability generating any returns, and slow in growth over the last couple of years. High risk isnt necessary erik high risk isnt necessarily a bad thing. Right, but as leslie picker wrote it is probably an acquisition play. Stephanie by phone, ebay . There are players out there who could look at this and say this is an opportunity to capture this niche in the overall ecommerce space. They have a first mover advantage. They have a lot of very exciting things going for them as per the enthusiasm of the vendors that are part of their network. A do they really have a longterm defendable position . Erik why wouldnt they . From what we can tell, that are pretty decent business model. Theyve carved out a niche for themselves. Stephanie i dont who their competition is. Erik they dont appear to have any direct competitors. You could envision an ebay to your point about first mover advantage, they built a pretty sizable platform in this niche market. Ebay can do this overnight. No, but they can throw a lot of money at it if they really wanted to. This is to say someone comes in and room this isnt to say that someone comes in immediately and replaces etsy but there is no real competitive barrier other than the artisans are reselling through them. We dont want to belittle that, i think there is extremely high enthusiasm, but it doesnt mean someone else cant come in and start to chip away at them. But then you get into the by were built question and the acquisition question. If an ebay was to be in the market, does it make sense to compete with etsy or just buy them . Stephanie do they have the first mover advantage . I cant think of another competitor. In terms of being a small craftsman, someone who makes her own product and wants to sell it, etsy seems like the only game in town. At the moment it is. Stephanie they did not start up overnight. Why would they change . They will prove there is a niche market and has via, but lets keep in mind, it is only a 200 Million Company in 2014. It is still relatively small. Erik was once small, too. If you are a believer in ets, iy think this is the best illustration. After give credit to a firm that kind of competes with yours trait and research, for putting this truck together, but i think it helps to speak to the debate were having. Here is ebay today. Ebay generates 21 22 gross merchandise fine as revenue, pretty good, i guess, whatever throughput. Etsy is about half that. If you believe etsy is going to be the next ebay of sorts, that is the room to grow, right . I think there is room to grow. Competition aside, any investor coming into the ipo today needs to be paying close attention to how well etsy is able to use the proceeds from the ipo and begin to drive toward profitability. Ultimately, Companies Need amazon wraps is the notable exception. Anyone coming applicos attention anyone coming in now should a close attention. Erik what are the warning signs . Between now and the income stephanie [indiscernible] erik im a realist. What do you do see and what should you not see . Anytime youre investing in an ipo, look at the second and third quarters after they go public. The First Quarter is a must always in the back. The Investment Bankers who bring a deal unless it is like a box which had come to market when it came to market, theyre going to make sure the First Quarter numbers are going to be hit. Dont look too closely at that. It is the second quarters and third quarters. If they are exceeding are falling short of analyst expectations and if theyre not able to hit their own growth targets, that is when you need to be paying close attention. How hot is the apple market at that stage yet the work and of competition is there for that capital at that time . Stephanie thank you for joining us, james. Ceo of rapid ratings. Etsy is of the only ipo were talking about. Isnt the only ipo were talking about. Party city has begun trading on the nasdaq. Scarlet fu is in the newsroom with the headlines. Scar, im hoping there are party hats, streamers, and confetti at the nasdaq. If not, what is the point . Scarlet i would imagine there are a lot of streamers as well. 30 city shooters open for trading, curly trading at 20. 14. They raised it have priced at 17 a piece. Right now about 20. 18 a share. Looking at a gain of about 18 to 19 . The private equity owners did not sell any shares in this ipo. Were keeping an eye on etsy. It is not yet open for trading but it is indicated to open at 33 a share. Remember, it was priced at 16 apiece. That is more than a 100 jump. It would be double what it had been priced at. That company sold 16. 7 million shares at 16 of peas at the higher end of the marketed range of 14 to 16 sold excuse me raised 267 million overall. Stephanie did you see the party city team on the podium . Not a single woman up there. That is not really a fun party. Fyi, party city doesnt look that fun. They could not have one woman in the party city network that couldnt have gone up there . Erik they could have gone outside and the times square and invited somebody in for the party. Were going to be talking about buybacks. What does black rock think . Stephanie how does the Global Economy look . We will hear from the head of the imf, Christine Lagarde. Stephanie welcome back to Market Makers. Time to bring you uptodate on the top stories. There is another sign of strength in the labor market. With the six trait week, pure than 300,000 americans filed for first time jobless benefits. The total number of people receiving benefits was the lowest since 2000. Shares of a restaurant and bakery chain panera bread arising today. Panera boosted its stock buyback in to 750 million. The Company Announced plans to sell 73 of its stores to franchise holders. Their stocks been down more than 6 this year before yesterday. People dont like gluten, i guess. Speed ahead for u. S. Cleaners cruise lines. Coming in faster than a year ago. Trade Group Estimates 4 increase in bookings in 2015. The reason cruise lines has industry provides a very strong leading indicator for the economy since many passengers booked cruises as much as 18 months in advance. And those were your top stories. Coming up in 10 minutes, shares of netflix hit an alltime high. House of cards fans. Sales are showing soaring. Jawbone wants to track more than your fitness. One of its new wristbands works like a debit card. We will be speaking with the ceo. Hedge funds are going to war against fannie and freddie. How much of the government profits from bailing out the mortgage giants . We will be asking senator charles grassley. Erik you heard larry fink earlier this year week, telling them to stop bowing to the domains of shortterm shareholders and start investing to create longterm value. What do we do to stop the buyback binge . Lets ask our guest. Mark, first of all, do you agree with larry fink there is too much in the way of buybacks and special dividends or dividend increases and not enough money pouring into r d and reinvestment in the business . Violent agreement. Stephanie there you go. It is a good company. I think svm, shareholder value at reservation, is a little bit scammy in my mind. Accounting gimmick. If you have the same amount of earnings and you have the number of shares issuing debt to buy shares, you havent actually increased earnings per share. Technically, you have, but there is no more earnings. In fact, yet the service the debt. Earnings in total actually go down a little bit. I think it is good shortterm, particularly for management but longterm, not so good. Stephanie who is to blame . F i am the ceo of a publicly traded company and i want to have longterm plans, do i have the opportunity to do that when it seems like right now, my main concern is making sure very rosenstein or carl icahn arent knocking on my door . Totally agree. When you have behavior that goes one way to extreme, theres always a misalignment of incentives. People respond to incentives. Stephanie then how do we get out of this bad cycle . It is hard. Someone has to be brave and take the first step. Take ge for example. They just authorized a 50 billion stock buyback. The biggest of all time. How about this . How about instead of sending that money back to shareholders, how about they set up in Innovation Fund . 50 billion to focus on what they said was there knew new thing. Stephanie if they set that up and it is three months which is no time at all, lets say that Innovation Fund doesnt come out was something extraordinary, carl icahn is knocking on your door saying, what have you done . I know, i know. It is very hard. It takes bravery. It takes leadership. And leadership erik but it can go wrong. There are three things in the mix. The desire not to be savaged by activists and ultimately face a proxy battle and get kicked out of your own company on the one hand, theres the interest that all ceos have in growing the business and somehow finding the next great thing whether it is the apple watch or whatever that is going to take you to the next level and the third thing which we havent talked about capital structure. There is such a thing as an efficient capital structure, and maybe taking on some debt and buying back stock and reducing equity as a percentage of your capital isnt necessarily a bad thing. It is not a bad thing. It would be a great thing in japan right now. U. S. Companies, to over leverage. Come on, the average debt ratio on companies is really high right now. Look at pepsi. Alltime most levered it is ever been. Some debt is good and of Japanese Companies take some of this approach and start levering their balance sheet, the great assets, great Growth Opportunities in asia and we think that market will crush the u. S. Market over the next 10 years, but it is because they are in efficiently today whereas i think the u. S. Erik lets take apple as an example. Would you argue what carl icahn asks make sense . No debt, ridiculous amount of cash. If crowe once cash, issuing debt, fabulous. Who is better at innovation and apple . I was walking down the street to get here. Everybody has the iphone ipad. Everybody has a screen. Everybody is using these products. It is enhancing productivity. Were the Network Effect of 10 billion of those things connected all the time. Why not let them do the innovation and let them keep the capital and keep reinvesting . Stephanie what is your opinion of activists . Their incentives are to produce returns, because they keep 20 of theups for so they do create value stephanie for themselves and their investors. What theyre supposed to do. And in many cases, with companies were under utilizing assets. Theyve done some really good things. When you go to an extreme and anything extreme and debt, extreme in activism, basically extreme politics. But i like activism and i like the fact they can create value. Look, when shares are overvalued erik we have to leave it there. Stephanie mark come always a pleasure having you. Mark, always a pleasure having you. When we return, a stronger dollar, weaker recovery. Two of the issues facing Christine Lagarde. We will be hearing from her in just a moment. Erik coming up, Christine Lagarde is standing by with tom keene of bloomberg surveillance ndc in d. C. Stephanie shares could go to 900. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Erik welcome back, everybody. You are watching Market Makers. Im Erik Schatzker. Stephanie and its thursday. One of my favorite days of the week. Do you like thursday . Erik middle friday. Stephanie i have never heard it called that. Thursday night in new york nothing better. Shares of party city big on their first day of trading. Its private equity earning owners did not sell any stock in the ipo and we are waiting. The first trading for virtue financial. Is the first highspeed trading firm to go public. The ipo delayed from last year. And atetsy is the first big Public Company hitting the market today. We are waiting for that. And earlier the blackstone ceo said that his private equity firms likes apple, google, or another company. I am screwing up. Erik im sorry. When you think of an investor like state, you think, oh, he is an investor to read he likes apple. No, he thinks blackstone is like those companies. Unique at the top of those. Like apple. You know the best. You know where to come. Stephanie when David Rubenstein can make the christmas video for carlisle, him doing a hip of video, you know that is those guys at the top of their game. All right, american international, aig has had seven chairman since 2005. Thats a big number. The former ceo of Southwest Airlines will be replacing david miller. It has repaid the government bailout. And the greek threeyear bond. It is yielding 28 , the most since the height of the euro debt crisis. Yields soared as investors wait on a resolution on the greek debt crisis. They must come up with a deal before european creditors will release the last of the bailout money. And live from moscow its vladimir putin. He took questions on his annual call in show. And at a time when the economy heads into its first recession in six years, one color wanted to know about economic sanctions imposed by the u. S. And europe. One caller wanted to know about economic sanctions. Vladimir putin it is a strategic issue for our western partners, and is probably not much to do with the ukraine anymore. Stephanie the good news for putin, the ruble is at its best performance this year. The russian currency is up 20 in 2015. Erik what you say about netflix other than wow . Netflix late yesterday reported earnings and announced it added more than 5 million subscribers bringing it to 62 million more. The market cap of netflix now exceeds that of some real content companies cbs, viacom. Yes, netflix has house of cards, but it is not a content factory. Bloomberg west editor at large cory johnson is following the netflix story as he has for months. Stephanie hold on. Cory, you have some action today. Cory a little purple, a little red. Stephanie that was yesterday. Erik, you turn it out every day. Do you have plans tonight, cory . You are not watching house of cards. What are you doing after work with that jacket on . Cory we will go over that later. Its interesting what netflix is doing with content. House of cards, oranges the new black, a couple other shows they have added. Daredevil. Its interesting what they are doing. Last season they maintained that house of cards would have value for many years. If you want to have the bull case in this company, the bull case is they will add subscribers internationally and that will be even bigger than the domestic market. Erik it is growing a pretty much the same pace as the domestic market. Cory it is. And there are Companies Like australia, new zealand, they launched in late march erik i was in australia and they still at blockbuster stores. They need netflix. Cory i do not know what they will get with this new netflix. Netflix was the place like blockbuster where you can get all the latest movies. Now netflix has intense love addition, not least of which is with amazon. That is a headwind for this company. But they do not care about profits. They are only looking at that top line. They are only looking at the subscriber adds. A year ago they were banging the table on the stock, saying you have got to on this. They earned . 30 and the First Quarter and they are banging the table even longer. Stephanie the fact that most Everyone Wants to get into the content business, one would think it was getting saturated and hurt business netflix. But now it is 900 bucks, here they come. Cory in fact, my brother is in hollywood now in the content business. And what my brother tells me all of the trucks in hollywood are rented. It has been a tremendous boom. It is not just netflix. It is showtime and amazon and everyone in this industry is getting work right now. The differentiation, that is one of the great risks. House of cards is a hit. Marco polo is a bomb. It is a hit driven business. When they have Free Cash Flow to burn, like they do now, at least into next year, major Free Cash Flow, where are they going to get the cash . Will they go to markets with a Debt Offering . Those things are in the cards for netflix. Erik cory, we have to leave it there because tom keene calls in washington. Thats cory johnson san francisco. Stephanie with a smart little jacket on. All right, the imf holding their meeting in washington this week. Tom keene is there with the woman of the moment. The imf managing director Christine Lagarde. Tom steph, thank you so much. In economics and politics words matter. Last fall, three words mattered greatly. The new mediocre. She has been absolutely dead on the last 10 months. After assorted continuing crises, we simply ask, what is next . I thought the press conference you just help was the most nuanced and the most interesting i have heard. You tiptoed around all of the immediate crises, and yet you circled back to the new reality. What is the new reality . Director lagarde two debt options tom. That new mediocre is policy makers, finance ministers, do not actually address the risks we have on the horizon. But that new reality could look a lot better today and tomorrow if they address those risks, and let me explain what i mean by today and tomorrow. Today we are seeing recovery coming along 2. 5 this year, 3. 8 next year. But it is not strong enough. Its very uneven. You mentioned china. You could have mentioned russia being in negative territory as well. It have we have a very diverse climate at the moment. Some economies are doing well. The u. S. Is strong, staying strong that you are the u. K. Is doing quite well. The euro is picking up growth. But we are also seeing the emerging market world, very slow movers, which is unusual because they still represent today 70 of the growth we are expecting. Its critical that they all work together. Tom the distinction that i see and i could go right to Charles River and Harvard University the tension with Larry Summers over the socalled secular stagnation. Is there some value to what professor summers says about secular stagnation . Director lagarde what i resent about secular stagnation is it gives you the impression that you are stuck and youre not going to get yourself out of the hole. My new mediocre is a risk, but it is one we can get out of together. If we take the right measures. If we really talk to the policymakers in each country grade we do not have all of these economies in the same spot. Its probably going to tighten gradually soon in the u. S. Monetary policy whereas it is very accommodated in japan and now in europe. Specifically in that category. Monetary policy. Into the pacific, fiscal policy has to be smart. It has to be a just did character of the country. And then we have three other factors that are really boosting growth at the moment. One is oil prices they are helping a lot. There are winners and lows sers. There is the net impact on those countries. And then there is the dollar appreciation. A very brutal appreciation. Tom is there a support affordable stop . What happens when we go through paris . Everyone is all laddered up about a euro parity. Im hearing it does not matter. Do you agree . Director lagarde i think from a euro areaperspective it is a great boost. The euro area at large it is a surplus country, so it will continue to export and will continue to drive growth in a world where it is pretty low. Tom i would not be responsible if i did not follow up on chris gileswonderful question. You tack toe you tiptoed so wonderfully a around his question about greece being an advanced economy and not under the same guidelines or rules as previous imf disasters, including two other nations. Is greece removed from getting a free pass from the imf . Or is greece going to go the other way and you were saying no . Which is a going to be with greece when they come calling . Director lagarde those two countries that have the benefit of delay tom were not greece. Director lagarde that was 30 years ago and they were developing countries. So, we never had an advanced economy actually asking for that kind of delayed payment. I very much hope this is not the case with greece. I certainly would myself not support it. Tom i had a conversation with bill gross im guessing six months ago. He was focusing on market liquidity. When Christine Lagarde wakes up and turns on Bloomberg Television and Bloomberg Radio and you look for the negative in germany how do you interpret market liquidity with such great distortions . Director lagarde there is a huge confidence factor that is associated with that. It probably would be boosted by regulation. The central banks, for instance have instruments like sovereign bonds certainly heading in that confidence boosting program we see it work. So, the 10 years negative rate, they are translating confidence in those countries anyway, but also they find that the bonds are extremely valued tom vice chairman fisher just walked by. He spoke at the Economic Club in europe and he talked about all two accommodative all too accommodative, needing to move to normality. This Christine Lagarde believe when we moved to normality, can we feel it with global stability so we do not have another event . Director lagarde i would observe its not going to be a collective move. In other words the fed, bank of japan ecb is not going to move at the same time. Tom correct. Director lagarde when one moves, the other two are still on their accommodative my tree pace. I think that should balance the risk we see of capital outflows from the highyield instruments through safe havens. So i think that has actual benefit to it. But we have to go back to normality because clearly central bankers are in completely uncharted territories. They are exploring. They are moving using Interest Rates again as one of the key levers of Monetary Policy. Tom im certain that that is not in the textbooks where we are right now. It is really uncharted territory. Director lagarde yes, it is. Absolutely. But it is needed at the same time, because how do you lift in flirtation Inflation Expectations . Monetary policy on its own will not do it. If policy makers do not address Structural Reforms that will actually boost growth potentials we are going to be using this Monetary Policy to extinction, and thats not a good idea. Tom madame lagarde thank you very much. Always interesting stuff. Stephanie here we go. Thanks to our own tom keyed with the imfs Christine Lagarde. Erik coming up, folks we will talk about devices with a ceo. Erik a little breaking news for you. Etsy has started trading. Scarlet fu is going to tell us how high. I was looking and it keeps going up. Scarlet it keeps going up. It opened at 31 a share. It has reached a high of 54. 54. It is more than doubling is trading debut. The online marketplace for homemade and vintage goods it is out of its market rage range of 14 to 16. And now trading above 30 now above 33. It keeps going up. I just want to mention party city, also making its debut. It is basically steph earlier you were talking about where are the women for party city . When they rang the bell for the new york stock exchange. We went inside the bloomberg terminal and the management is all men. Stephanie ok, you know what, scar lets get a retail analyst on. Party city customers. Party citys number one day is halloween. Who you think is trying all of those customs . Who do you think dresses up as a sexy kitten . Girls. How about putting one woman on that podium. You could not find one woman . Yes again, party city. Scarlet i like how you said sexy kitten. Stephanie all right, moving on. Getting into the payments game. An announcement of a band that will track fitness, but also let users pay for a flick of the wrist. It sums like job own jawbone is going up against apple. Pretty stylish. What are you doing . Guest it is still a device that tracks health, its doing activity, sleep, the sleep is a whole other level now. We are tracking rem, deep sleep heart rate, respiration, your body temperature. It is packed full of a lot. Stephanie what me through the payment function. Yeah, sleep is interesting but payment is a game changer. Guest i think people keep these things on all the time because they care about understanding their health. Once you have that real estate on someones wrist, you can expand it to a lot of other things. And by the way the information we have is really unique to people. It becomes an identity over time. It is a unique identifier. We had conversations about how could we use that real estate to create a seamless payment experience, right . Thats what weve done. Im so excited about it. Because what you do, you take this device, it shows where the nsc tag is, you walk through the terminal, you tap it, thats it. It is set up through the app. Erik and it is secure . Stephanie hosain its totally secure. It is what amex does. If you lose it, you can turn off just like that. Erik how you get from health and fitness to payments . Out of the two go together . Hosain when we think about fitness, we think of it as something that you have on your body all the time. It gives you that 24 seven understanding. Health and fitness everybody wants to be better, healthier, etc. We use that as a way of attracting a lot of users in the space. Are they nervous, is there heart rate going up . Are they sleeping well enough. You can start to power those experiences and make them smart. Its another thing you can do that can resist friction in your life. Stephanie is the apple watch your competition . Hosain no, we actually have an app running on the apple watch. It is a different use case. It has some different functionality, but very different from what up3 and up4 do. If users want to use that, they can get the up Software Experience on it and it will tie back to our data. Erik apple wants us to believe just to use that as an example they want us to believe the next frontier for wearables is dick tracy talking to your watch, that sort of thing. You do your own research. What do you believe is the next frontier for wearables . Hosain there is no onesizefitsall. People have different needs, different use cases. Erik but you are doing different things. Hosain we are definitely doing different things. We think about how many hours can a person keep a device on . It has to be useful all the time, just like your glasses are. Theres no downtime, right . So, the application has to be relevant all of the time, or else you will take it off right . When you think of the things on your body, we see it breaking down to fitness devices. You think of daytime use cases which are very much about smart watches and i have talked to people. They are busy. They are in meetings. We think about this as more of a device swap, because its 24 7 tracking stephanie can i wear it in the shower yet . As a lifestyle device, that is my problem. Hosain absolutely. Absolutely you can wear it in the shower. Erik where will jawbone be in two years . Where do you want to go . Hosain you can havean app that tells you you are getting stressed in certain situations stephanie saying we have to leave it. I think your advertising needs to be up yours. See . Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Stephanie fromreal hous ewives to the skinny girl empire Bethany Frenkel is back where it all started. We will speak to her in moments. Erik and you are going to hear from senator Chuck Grassley. Stephanie and blackstones ceo says that his firm is like apple and google it makes a lot of money no matter who you compare it to. We will hear from this or schwartzman in a moment. Welcome to the second hour of what i think is a pretty fun day here on Market Makers. I am stephanie ruhle. Erik im Erik Schatzker. Stephanie netflix shares are up as much a 17 today. The video streaming added 5 million subscribers last month. Original programming from netflix like house of cards is a attracting more viewers globally, including me. Goldman sachs reported the best earnings in years, beating estimates. But they paid out a smaller portion of revenue and compensation. Meanwhile, citigroup also eat estimates. Revenue rose 21 . Trading revenue at citigroup was down. It helped to offset a 10 drop in expenses. And what is going on at etsy . It raised 277 million bucks in its ipo and Retailer Party City also went public this morning. Shares of 20 and private equity owners did not sell any stock in the ipo. We are still waiting for trading to begin on virtue financial. It raised 314 million in its offering. Its ipo was delayed after the publication of Michael Lewis flash boys. The Foundation Board has agreed to accept a nations only from certain foreign countries. Others would be barred, all they could still take place in take part in the clinton global initiative. Erik bloombergs Michael Moore Stephanie Knight have been talking about this morning. Goldman sachs did well on a relative basis. Earningspershare the highest since 2008. Revenue, the highest since 2010 i think it is. But the notion of beating stephanie beating what . Erik analysts estimates . To me, ive said it and i will say it again all that means is the analysts it wrong. Michael that is a bar that stephanie a bar that keeps moving. Erik by the way, that is not meant to insult the analysts. It is meant to insult the people in think it is important that a Company Beats analysts estimates. Stephanie it is meant to insult the system. Michael i guess it is about how goldman compares to their competitors. There they were much better. Equity was up 46 . It was down at bank of america. It was a very Strong Quarter on the Investment Banking and trading side. Erik ok, lets talk about the momentum. You and i were talking about this is a concern with jpmorgan if you days ago. Did you get the sense from the financials, from the Goldman Sachs Conference Call that this is the beginning of Something Better . Michael they were very cautious to not quite take that step. They said this is a good quarter. It could get better. But the Investment Banking backlog is still pretty strong underwriting is still up. There are some elements to it. We have kind of been burned before erik it could be a one quarter phenomena. Stephanie phil cohen likes to argue that this is the golden age of banking and i always argue with him. When i look at these numbers maybe this is a golden age for banking. Just not for bankers. Erik bank shareholders. Stephanie does it seem like things are rightsided and this is a really positive time for the banks, for the industry, for shareholders maybe just not for traders . Michael the banks are doing well. No doubt about that. But theyre doing well with double the equity. If you are a shareholder, you are 15 up instead of 30 stephanie but you are taking less risk. Michael presumably. Erik 50 is maybe not where goldman would want to be. Its a good deal higher than it 15 is maybe not where goldman would want to be. Its a good deal higher than it was a year ago. Michael it is significantly higher. And there is a lot less risk when you have doubled the capital and they think that that should start to be reflected in the stocks stephanie there are people who never invested in financials because they felt like it was a black box, you never knew what was in there. And the fact that they are becoming transparent, this may open them up to so many more investors becoming comfortable with investing. Michael that is what they think. Stephanie Michael Moore from bloomberg news. Erik all right, its a fight between goliaths and goliaths. Two of the most successful investors in the world are taking on the u. S. Government over fannie mae and freddie mac. Bill ackman and bill berkowitz say that the feds have illegally seized all of the companys post profits. Remember the government did bail out these giants, put them into what is called conservatorship. But now it is not a matter of paying back the loan. The fed is paying itself devin nds and these investors have an issue with this. We will be joined by senator Chuck Grassley of iowa. Senator grassley is with us now from capitol hill. Senator grassley thank you very much by the way some people look at the questions you are raising about the divergence of profits from fannie and freddie and drawn the conclusion that you are on the side of the hedge funds. That you have been sucked into the bill ackman and Bruce Berkowitz orbit. Senator grassley let me suggest to those who say that that i do not care about any hedge funds. My concern is simply as a check and balance as you study in high school government, where a constitutional check on the executive branch of government and there are certain documents that are not being made public. There is executive privilege considered. And we are not getting answers and my questions are to get answers on whether or not somebody in the Justice Department is withholding these documents for some reason or other. Are they being held under executive privilege, and if they are being held under executive privilege, the law and the constitution requires that the president himself make that determination it is executive privilege. If the president is involved in this decision but these issues are not being made public, i think i have a responsibility as a member of the legislative branch of government overseeing the enforcement of laws and to make sure that the president follows the constitution to find out whether somebody in the Justice Department or whether the president is personally involved in this. Stephanie have you had any conversation with these Hedge Fund Managers on the other side . Senator grassley i have not had any conversations with them, no. Whether anybody else has, i cant say at this time. I can ask and find out for you, but right now i have not had any conversations with them. Erik senator senator grassley i do not need to have any conversations. My reputation of oversight is to go after the facts. And the facts are, who made this determination and why are we getting these documents . Transparency is important. Erik we know you to be fiercely independent and we know you too but accountability at the top of the list when it comes to the responsibilities of government and most importantly people in a government administration. But let me ask you this question. Does it concern you that these Hedge Fund Managers are using the questions you are raising about the divergence of profit between fannie and freddie to suggest you were on the same side . And i want you to know, in case you dont know, the day you told the New York Times you had these questions, i received an email from a pr firm, which i am quite certain is not working for you, that senator grassley was entering into a debate begun by these hedge funds. Senator grassley let me suggest, not just with this incidence with the New York Times but generally, some of the most successful oversight hearings are directly related to having some time someone in journalism as interested in the subject as i am, because sometimes bureaucrats in washington do not pay any attention until they start seeing their issue published in the New York Times or someplace else. But lets dont detract from the issue here is did the president declare executive privilege or didnt he . That is the issue. Erik senator, since were talking about fannie and freddie and you have an oversight role of fannie and freddie by virtue of the committees on which you sit in the senate, do you think these gses as they are called, should be shut down . Senator grassley a long time ago i made a decision that they were part of that it was wrong for Congress Working through them to make decisions that people ought to be able to buy houses that they cannot afford to pay for. That the commonsense decision that wasnt considered 15, 20 years ago, and fannie mae and freddie mac were big players in it and if we want to avoid that sort of problem in the future, moral hazard, lets take, weve got to either reform or do away with them and there are plenty of ways the private sector can handle what this government is involved in without the political decisions that have rocked a bubble in housing and brought us to a fiveyear brought a bubble in housing and brought us to a fiveyear recession we are not recovered from yet. Stephanie i want to talk about loretta lynch. You are chairman of the judiciary committee. She is yet to be confirmed attorney general. Six months. It does not seem like personally anyone has any issue with her. What is the holdup . Senator grassley oh. Well, simple. If you want to subtract november and december from that long time, you should do it. The democrats were in control of the summit. They decided not to bring her up. They had a lot of legislation and judges they wanted to get through. When it was submitted in congress in january, i said i would have a hearing on january 27th. We had it. I said we would be voted we would vote her out of committee. She was voted. And then it is up to the republican majority to decide when she will come up. They decided that she would, as he would come up as soon as we went through the Human Trafficking bill. That is why she is not being approved. Stephanie but dont you want eric holder out asap . Senator grassley i do not think i will see enough difference in the politicizing with Loretto Lynch then i saw with eric holder. It might be a little different. She has not shown me how she will change the department. Erik senator grassley you are from iowa. Its an especially important state when it comes to the future of the Republican Party and who is going to leave the gop in twin lead the gop in 2016. Have any of the candidates rand paul, ted cruz, marco rubio come to see you about Building Support in iowa, and have you made a decision about any of those individuals you could get behind in 2016 . Senator grassley i have had those three, plus several other candidates, mostly governors at this point, who have said you have come to talk to me about it. Ive said, come to iowa. Work hard. I am not going to back anybody. That is my status. That is my advice. I will give them advice, but the gist of my advice is, dont ignore iowa. Come and work hard. Its the only place in all of these campaigns for the president where you can run a campaign on just a few dollars and maybe get elected president of the United States as jimmy carter did, as example. Stephanie ted cruz, is he a viable candidate . Senator grassley of course. Have you ever heard him talk . Have you ever had anyone give a speech off the cup with more content and reasoning off the cuff with more content and reasoning in it then he can . What that make him make a present . We will find out. Stephanie is he qualified . Senator grassley you do not think with just one month of people running for president that i will make a decision based on one month of campaigning . I have a whole year to make that decision. It is for his getting his degree is from princeton and harvard, i dont think anybody should say he is coming up short. And what vast things he had to overcome in the state of texas to be elected overwhelmingly as the United States senator. Erik senator grassley, among the undeclared republican potential candidates, who would you most like to see in the race . Senator grassley oh, you are going to get me to answer that question. [laughter] you might ask me six or eight months from now and i might answer, but not now. Stephanie you know what . Im making a claim. I like you. I do. Senator grassley stephanie that is the kindest words ive had said to me other than when my wife said good morning. Stephanie there you go. Erik we will have you back six to eight months from now to answer that question, senator Chuck Grassley of i will. Coming up Steve Schwarzman says the Blackstone Group is like any of the greatest names in American Business today apple among them, bowling, the list goes on. Stephanie stay with as. There is a lot more we will cover on bloomberg tv. Erik earlier today the Blackstone Group reported earnings that killed it, i again. Blackstone is raising an unbelievable amount of money. And the stock is in pretty well. When i sat down with Steve Schwarzman betty liu and i, in fact sat down with the chairman of the board this morning we talked about this, but eventually the conversation got around to valuation. Because if schwarzmans firm like stone is doing that well, why is it not being blackstone is doing that well why is it not being reported in the market . If you look at a traditional asset manager like black rock which ultimately gave birth to blackstone the valuation is 20. So one dollar blackstone earnings is worth have as much as blacrock earning blackrock earnings . Why is this the case . Steve i think the world will realize we have a differentiated model. We are like a great branded company. We are more like an apple, a google, a boeing, a cat we have customers who need us just like those firms, those companies do. Betty so you are like a tim cook . Stephen not exactly. We are not as big. But in our sector, we have grown at 46 compounded earnings over six years. We are one of the Great Companies in the world. We look at them. What do they have . They have great products. They have customers. You are the first they call. It is the same with us. They are all growing. Erik you heard it there. Stephanie apple, google erik bowling caterpillar. Beoingoeing, caterpillar. You might not put apple in the same group, but steve does because he says that they define a category. Its hard to argue. Blackstone raised 77 million of new money in the last 12 months. Thats as much money as tpg manages. In a year. They raised 30 billion dollars in a single quarter. Thats more money than kkr manages. Stephanie think about the class they are in. Since the financial crisis the way that hedge funds invest your money, everyone talks about longterm capital. Who manages longterm capital better . Erik the problem though, they are not getting the multiple. Look at this. Nine times stephanie my heart is breaking for blackstone. Erik is your heartbreaking for the blackstone shareholders . Stephanie listen, im not saying that it could not be better. But its pretty good. Stephanie she went from being a housewife to a skinny girl and took home 100 million bucks. This is the woman who defined the brand name in the real housewives empire. Bethany frankel. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Stephanie welcome back to Market Makers. Im stephanie ruhle. Erik im Erik Schatzker. Overseas Financial Markets are closing for the day. Scarlet we were talking earlier about greek bonds. We had an interview with the german finance minister yesterday. Does that explain why the european stocks are tanking today . Scarlet of course you also have the begging of them to take money off the table as well. One group out of 19 industries and managed to come out with a game, and that was personal and household goods. This looks to be big biggest drop in about three months. If you look at how the stock has performed, it has been parabolic, the move. So, this is really taking some money off the table. Lets switch to what you mentioned, the greek 10year. The yield are moving up. That means the bond is falling. The euro is stronger, but this is really a dollareuro story. With the anticipated weakness we have the housing restart and jobless lanes. You mentioned that interview with brendan. He basically signaled to brendan that there would be no agreement reached in that years next weeks meeting. All right, moving on here. We are keeping our eye on each reel of stocks that made their debut in the u. S. Markets. Merchant financial has not begun trading, but party city rising 20 in the first day of tra ding. Etsy at a gain of almost double what it was price that. And when Virtu Financial begins trading, we will let you know. Stephanie we are going to focus more on party city. Surging more than 20 in the first day of trading. Will the party continue forever for this retailer . I want to bring in our correspondent. What do investors need to know about buying the stock . If you are not one of the lucky ones who got involved in the ipo and enjoyed the 20 rise, people looking at the secondary, what should they do . Reporter basically there was one interesting tidbit. 25 , if all quarter of their revenues every single year rely on one single holiday. That could be good. Would you like to guess which holiday that could be . Stephanie i do not need to guess. Halloween is my number one. Ramy yes, you are right. Halloween. All of the scary customs, the fun costumes. That is one way to they get all of their money and 1, 2, 3 weeks or so. That the bad, if there is an economic downturn or a rain then their bottom line gets hit. Party city did well adjusting saying that a decrease in halloween sales could have a material adverse effect on their revenue. Thats one thing people need to know. Stephanie now that they have raised this conditional money, all what did they need to do . Can they turn themselves into a hallmark and promote other holidays so they can pump up their sales on different dates . That is what we saw hallmark do. Ramy thats a good question. Part of this will be going to find down their determination agreement with their sponsors. Right now they have them. 9 billion dollars of debt. That something investors need to worry about. But looking ahead, theyre going to try to get out 315 new stores over the u. S. And canada over the next decade. They want to keep the party going. Erik 10 . Is it right 10 off party city sales come from gas . Ramy im not sure Stephanie Stephanie helium . Erik not nitrous, stephanie. Helium. Stephanie its not friday. That hurts my feelings. Erik [laughter] ramy there are parts of the world that are very sensitive to the helium supply. The balloons and metallic balloons, that is very price sensitive. They did see a decrease in 2012 because the helium supply fell. But they did see a pop between 2015 erik so effectively it is the swings in Commodity Prices . Ramy and also Commodity Prices when it comes to paper or plastic that make up another bulk of their sales. Call three, paper, plastic, for birthday parties, to buy for girlfriend out there. Stephanie i am not having plastic nitrous loons on my birthday. Balloons on my birthday. Ramy, from bloomberg news, talking party city. But you know, they could make arbor day a day you could wear costumes. Having to buy a card for National Siblings they last week i was like, seriously . Ok, what are we going to do when we come back . Erik were talking ben bernanke. The former fed chairman has a new gig and i mean, stephanie he is going to work at citadel, and if that is not big enough for you, im giving you another one. We are talking to bethenny frankel, the queen of the skinny girl empire. Erik say it aint so, ben. Another big time insider headed to finance. He will become a Senior Adviser at citadel. He told the New York Times he deliberately chose a firm that is not regulated by the fed. He is going to offer city dell analysis of citadel analysis of markets and meet with investors around the world. Stephanie lets just take a beat, my brother. Erik we are going to. Stephanie ben bernanke they have one of the most predatory reputations. The surprise you . Im shocked. Erik it does surprise me. Bernanke was in office or member, he was arguably the second most powerful man in the world behind president barack obama. He was at a time in office when he saw his predecessor go to work for pimco and stephanie paulson. Erik and he saw Larry Summers go to work for de shaw and not just saw, but understood the criticism they had to endure for being, what many people saw as sellouts. Stephanie but guess what . You can say they endured a lot of criticism, but on the other hand, they got paid. If you are ben bernanke, maybe it is your moment. You want to get paid. Erik you are already getting paid. He is getting paid 200,000 stephanie 200,000 for a speech. He is going to run out of getting public speaking requests. He will be paid less and less. Those who cant count on. 10 he will be paid every single week and being on the buy side, he can pay a lot more. Being that jpmorgan is no longer in a situation where they can write big checks to senior people who are former members of the government, its all part of the game. Erik i get all this, but if you want to, you know, get rid of this perception, this revolving door and ultimately is the people who regulate finance captive to those who are regulated like, lets say citadel is regulated. Its not regulated the way a bank is, but is subject to regulation. You just cant do that. Stephanie or maybe what would be better is to go on a totally expensive vacation you can afford and sit on the beach and have a drink. Erik a lot of people think it is a crying shame that ben bernanke has gone to work for a hedge fund. Stephanie im not saying it isnt, but hes not alone. Erik of course not. Tim geithner is over working for pincus. Stephanie Larry Summers. He would not turn down an invitation for golf etiquette is the. Ben bernanke, youre not alone. Erik when we come back, we will be talking about cocktails stephanie and building an empire. Bethenny frankel has done it all in just a few years and it started on bravo tv. Stay with us. You are watching bloomberg. Erik a busy day for ipos debuts. Esty has started trading and now it is Virtu Financials turn. Lets go to scarlet fu. Scarlet they opened a 20 apiece. They ipod at 19. They are at 22. 67. Thats pretty good. As you mention, party city and etsy flying pretty high on their initial day of trading as well. They had a shock after Michael Lewiss came out with flash boys, which was bad pr, but by delaying, it worked a better because the stock index at near record highs. Stephanie i would say that that is an understatement. Scarlet fu, giving us the news. Now bethenny is back. I am talking bethenny frankel. While she has hit some challenges it has not stopped her from starting a new chapter in her career. She has recently added New York Times bestselling author to her resume, outlining ways to learn from mistakes. She is with us now for more on her growing empire and her return to blackbaud. Welcome. Bethenny thank you for having me. Stephanie im a huge fan. When i think about the real housewives empire, you were the original. You were a personal chef. You have an unbelievably hot body. You were drinking margaritas. I am thinking, how do i drink as much a she does and look as good if she does, and that is how the brand was born. Now it seems like every single woman in this neverending real housewives mafia, every time they bend over, they say, oh it is time to make it work of video. As the ranch has been destroyed . Bethenny its funny how you can make it your market in unexpected places. Real housewives is not a place where you would expect you would build a brand. Erik why not . So many people watch it . Bethenny that was my reason for doing it. It was a really unfamiliar concept at that time. Since i have done it, people have created their own liquor brand and book and videos. But most of them have not succeeded because you have to have an idea that is innovative, you have to execute, and you cannot look to the left and the right to what someone else is doing to do what you are doing. I cracked a code that was not done before in liquor. It was not because i had a nice figure. I connected with the audience as a human being with my fault in my life and that is widely they trusted me to buy my product. It was not the other way around. I went on the show to show what i was doing. That is not the reason i became successful. Stephanie then why go back to the show . You are the clear winner when it comes to brand building . Why would you go back with those who kind of lost at the game . Bethenny thats true but i miss that connection with the audience. People saw me in Forbes Magazine and think i have changed and did not do not know me that well. I have a personal struggles. I miss showing my perspective and just being a relatable woman. Stephanie ok. Erik business is respectable. You are building a respectable business. You want to be known for respectability . Bethenny correct. Erik and you are going back to a show that people think of as disrespectful because it stands for a lot of things that are wrong with america consumerism plastic surgery, the list goes on. Bethenny i love that question. Look around. If you look around, if everyone is not taking risks around you i went on the apprentice. They said it would be a train wreck. If it is successful it will be because it is a train wreck. It is not easy getting on television. I took that risk. Im doubling down. I feel comfortable there. I was offered four or five other television shows. I have accepted the fact i am a professional reality star. Im good at it. Stephanie at some point, when i think of the kardashians, i think, they have made so much money. At what point did they say, this is not worth it . This is the value for my pride. You are saying, you have been out there, you have had those problems. Why not say i want to take my life back . Bethenny i love that, too. I wrote my books not because i had to write books. I wrote my books because of personal experiences as a woman. That is what defines me. I was in my 30s. I did not know if i would have a child. I was broke. I had a difficulty. I do not do anything trashy on the show. You can watch the whole show. That is why the ratings are up 20 22 . Know what is beneath me. It is like we are working at an office. They need the show when i need them, too. Erik i need to know what you turn down to go back to real housewives . Bethenny i turned down shark tank,sharknado 2 stephanie in terms of brand building do you think of the kardashians as the ultimate . Bethenny no i dont. Erik who is . Bethenny i think they are the ultimate in monetizing and making money. But if i had to think about is the card day she and brand sex . Is it beauty question mark is at the American Dream . Im not sure what the brand is. Erik who is the ultimate brand builder . Bethenny it could be anyone from my business to erik diddy . Bethenny mark zuckerberg. Stephanie thank you so much. The one and only bethenny frankel. Scarlet is 56 past the hour. That means Bloomberg Televisions on the markets. Im scarlet fu. Stocks are lower after coming off 1 on the eyes. Oil getting support from a weaker dollar. Health insurance and jobless claims show signs that growth may be losing momentum. Today for options in sight my guest. How much is the Economic Data having in terms of impact even with the fed number, which was positive on the headline number, it shows weakness when you look at new orders or the price paid guest . Guest price paid. Guest september is the most likely. The data is being mixed in. It creates ambiguity as for is what direction equities are going. Scarlet ambiguity on the maximum front. Earnings, earning started to dribble in and we have results from the big tanks. Bankamerica, Goldman Sachs, jp morgan doing well. What conclusions can we draw . Guest i think that banks are performing well. The earnings moves themselves the volatility around earnings have been quite low. The fact that the bank has the banks have gone rum 0 to 2 , that has not been a huge catalyst. Scarlet is that because of reduced expectations . Guest yes. Last year, litigations costs. That has gone away. Growth is moderate. The banks putting much came in at zero. Scarlet u. S. Stocks have backtracked a little bit. Europe coming off of its record highs as well. Theres a lot of talk about greece leaving the eurozone. You have the etm that tracks greek stocks. Does it hinge on an exit . Guest no. The headlines have been building, a lot of negative headlines about greece exiting the euro. I think there is a lot at stake. This is a game of chicken. Everybody wants to win as many concessions as they can. At the end of the day, i think that greece likes a deal. Scarlet what is your trade then . Guest we go out to may expirations. Even money is a nice way to get in upside shot on greece revenue. Scarlet but you dont want to go too far out, i noticed, with this may call. Guest right. The catalyst, they submit reforms, they stay in the euro. Its not too long dated. Scarlet i like that. Stay in the euro, for now. Guest exactly. Scarlet ok, lets get back to the u. S. The best performance since 2011. There could need more upside in the shares. How does the options activity look . Guest we see people taking advantage of this announcement, taking a very shareholderfriendly approach, selling stores to franchisees. Announcing buybacks. Looking at stock involvement. Theres a lot of positive catalysts. Scarlet thank you so much, max equity derivatives trader. Welcome to money clip, where we bring the best stories and best videos in business news. Here is the rundown, Steve Schwarzman is having a very good year. The chief executive of blackstone builds a real estate powerhouse and gets a good deal for investors. An ipo party on wall street party city and virtual financial going public. It is no party in greece, Bond Investors sell and prices plummet. Top European Union official says rela