Transcripts For BLOOMBERG Market Makers 20150423

Let us take you to scarlet fu. Scarlet new home sales was makes up 7 of the Residential Market but it is counted one contracts are signed a being more timelier and they saw a drop of 11. 4 , the first the client in four months that follows three straight months of gains. It is 481,000 on a net basis. Additionally, the february numbers were revised lower as well. Recent home cells have been constructive at the upside potential is limited by a lack of inventory. They were projected to soften but this is a bigger drop than what economists have been looking for. This doesnt seem to have much of an impact on Financial Markets on u. S. Stocks. U. S. Stock indexes are moving higher. The actual change is negligible because the s p 500 has little change. You are seeing the leg higher here for u. S. Stocks. Evidence perhaps that the Housing Market is under pressure. Erik thanks very much. We are waiting for statements from president obama. He will be speaking to reporters in the White House Briefing room. The government today declassified a counterterrorism operation. The white house says it happened in january. Two al qaeda hostages were killed. The Administration Says it had no reason to believe hostages were being held there but the Intelligence Community now has concluded they were. The president also says the american who became an al qaeda leader was killed and another american al qaeda member was killed and another separate operation. Reporters are waiting for the president in the briefing room. While we wait for that speech to happen, let us bring in peter cook. Not entirely unusual that we would find out several months after the fact that something happened. Why is this particular disclosure significant . Peter what is significant here and we expect the president to discuss the shortly is that this would represent perhaps for the first time that we know of an accidental death of hostages as a result of a counterterrorism operation. We expect the president to disclose this was a drone strike in generating. This happen in a remote part of afghanistan on the border with pakistan. The significance again is that the president who has backed the drone strikes since 2009 and have been relatively successful or so we heard from the administration and the Intelligence Community. The issue here is that these debts apparently deaths apparently the u. S. Did not know they were there at the time. They have high confidence these two were killed in this counterterrorism operation. That is the significance here. It will raise questions about the drone strikes going forward. There have been critics in the past and you can be sure that will be some criticism or questions raised as a result of this disclosure from the white house today. Erik you are absolutely right that drones remain controversial. We are all eager to hear more of a next mission. That is peter cook. I am sure you will hear from him again. Stephanie it is time now for the news bulletin. It is the largest penalty yet in the investigation of interest rat rigging Interest Rate rigging. A 2. 5 billion fine. The probe focused on whether eggs manipulated Interest Rates. At least 29 deutsche employee as were included and a dozen other firms have paid more than 6 billion to settle similar claims. It is a major blow to the proposal between comcast and Time Warner Cable. Fcc Staff Members are now opposed to the deal. The reason is that it doesnt help consumers. Justice Department Antitrust officials told lawyers for both companies they are leaning to blocking a merger. The opposition from the fcc is stronger. Officials at the agency are expected to recommend at an administrative meeting. The outlook at this point is bleak according to one. This is a death sentence. I would be shocked that comcast is not walk away and start looking at other things. That will be the real question is what does Brian Roberts now turn his attention to two by to buy. Stephanie the british trader who caused the flash crash is now in prison. He was in court on london and said he would fight extradition to the u. S. Extradition to the u. S. Is a most inevitable according to some unless he has Serious Health problems. He will be freed later today once he posts more than 7 billion in bail. He also must agree to stay at his parents home and not use the internet. A court in spain has refused a u. S. Request to expedite a former jp morgan banker accused of helping the notorious london wellhale hide more than 6 billion in losses. He told judges he is innocent. The strong dollar is hurting Revenue Growths of facebook. Sales are up 42 in the First Quarter, but Facebook Says they could have gone up even more without the impact of the dollar. Chief operating officer says the company is finding new ways to target users on mobile. We believe video will play a significant role to \ bringing more users to mobi. We believe video will become more important to marketers overtime. Stephanie 73 of ad revenue came from mobile in the quarter. The parents of the black teenager killed by a white policeman in ferguson, missouri, plan to sue the city today. Attorneys for the family of Michael Brown announced plans to file the civil lawsuit both federal and local authorities declined to prosecute the police officer. The Justice Department concluded the Ferguson Police and courts this terminates court discriminate against blacks. Erik it has been a mixed picture for the housing numbers. Very strong sales but not such strength this morning in new home sales. Let us turn our attention to dave linacre. Nice to see you again. Re max does its own research into the Housing Market. Tell us what you have found. We found out that march was a very rapidly growing into the spring selling season. There is always an uptick but this it was about 25 greater than last year. Erik from what you have concluded and what your research shows, does it help to explain the disappointing data points that we got today on the existing home sales . I know that is not an area that re max plays but given that you know what is happening in the Housing Market. David i think that as a temporary setback on the homebuilders. They are starting to switch some of the Home Building from the highend where they have been able to hide some of their increase in costs to help the entrylevel buyer. You cannot look at a monthtomonth comparison. You have to look at trends ago for more than six month at a time. Stephanie in what regions . David if you look at resales they were much stronger in the northeast and the midwest and very slow in the south and about normal in the western part of the country. The resell picture follows almost directly with what new Home Building is. Erik do you find that the Housing Market is strongest on the coast and perhaps weaker in the center of the company . David for the first time i dont think that is necessarily true if you look at the figures we just looked at. The place whither is a lot of activity is where the house prices are still relatively low and havent recovered the losses they had which includes florida california, and the southwest. If you look at the coastal areas and if it is really close to the coast, the prices have gone up significantly. That slowing down the resales. Erik which markets are most price insensitive. In other words prices are rising but sales continue to increase . David you look at Silicon Valley and san francisco. Even if you look at the front range of colorado our prices have been going up significantly more than most of the rest of the country. Stephanie why colorado . David colorado has a very diverse industry. We have a fabulous climate. A lot of people want to move there just like the other sun belt areas. We have a very strong economy. Erik what about a couple of factors and again i know you do research in this that helps influence price and the pace of sales. How long homes are being listed for before they get sold and the levels of inventory. David the hotter the market, the shorter the day. In our hottest markets, the time. Thats the time they are listed is 52 days in the average is 6768 days across the country. There is such a low amount of inventory that we are getting multiple offers very quickly. As long as we have low inventory, that will continue to happen. Erik we are just at the beginning of the spring selling season, how do you think it will shape up . David one month doesnt make a trend but i was at our convention a month ago. The agents and brokers were very enthusiastic and confident it will be a strong season for them. Erik good seeing you and thank you for your time. Stephanie one we return Pentagon Spending cuts . No problem. Contractors are finding plenty of business overseas. Erik i will remind you we are waiting for president obama. He is scheduled to speak any second now about a counterterrorism operation in january that accidentally as a matter of fact there is the president. President obama good morning. I want to the stress our grief for the two hostages. Dr. Weinstein and Giovanni Laporto were tragically killed in a u. S. Counterterrorism operation. Warren and giovanni were aid workers in pakistan devoted to improving the lives of the pakistani people. After warren was inducted by al qaeda in 2011, i directed my National Security team to do Everything Possible to find him and bring him home safely to his family. I dedicated professionals dedicated professionals across our country worked tirelessly to do it and wait worked closely with our italian allies. Our counterterrorism efforts have saved innocent lives and prevented terrorism attacks here in america and around the world. That determination to protect innocent life only makes the loss of these two men especially painful for all of us. Based on information and intelligence we have obtained, we believe that a u. S. Counterterrorism operation targeting and al qaeda compound in the afghanistanpakistan border region accidentally killed warren and giovanni this past january. Yesterday, i spoke with warrens wife and the Prime Minister of italy. As a husband and as a father, i cannot begin to imagine the english their families are enduring today. I realize there are no words that can ever equal their loss. I know there is nothing i can ever say or do to ease their heart ache. I want to simply say this. As president and as commanderinchief, i take full responsibility for all of our counterterrorism operations, including the one that inadvertently took the lives of warren and giovanni. I regret what happened. On behalf of the u. S. Government , i offer our deepest apologies to the families. As soon as we determined the cause of their deaths i determined this operation bd classified and disclosed topically. I did so because the families deserve to know the truth. I did so because even though certain aspects of our National Security have to remain secret to succeed, the u. S. Is a democracy committed to openness in good times and bad. Our initial assessment and tickets this operation was fully consistent with the guidelines under which we conduct counterterrorism efforts in the region which has been our focus for years because it is the home of al qaedas leadership. Based on the intelligence we had obtained at the time including hundreds of hours of surveillance, we believed this was an al qaeda compound but no civilians were present and capturing these terrorists was not possible. We do believe the operation did take out dangerous members of al qaeda. What we did not know tragically, is that al qaeda was hiding the presence of warren and giovanni in this same compound. It is a cruel and better truth that in the fog of war generally and our fight against terrorists specifically mistakes sometimes the limit stakes can occur. One of the things that sets america apart from many nations one of the things that makes us exceptional, is our willingness to confront squarely our imperfections and learn from our mistakes. Already i have directed a full review of what happened. We will identify the lessons that can be learned from this tragedy and any changes that should be made. We will do our utmost to ensure it is not repeated. We will continue to do everything we can to prevent the loss of innocent lives. Not just innocent americans, but all innocent lives in our counterterrorism operations. Today we join their families and friends in honoring warren and giovanni two humanitarians who were united by the spirit of service. For decades warren surveyed with the peace corps and later with the United States agency for international development. He devoted his life to people across africa and south asia. He was a loving husband, father and grandfather who willingly left the comforts of home to help the people of pakistan. At the time of his abduction, he was a contractor focusing on helping pakistani families escape poverty and give a better life to their children. Giovannis humanitarianism also took him around the world to the Central African republic, haiti, and pakistan. He fell in love with pakistan and its people and believed passionately that he could make a difference in their lives. Giovannis service reflected the commitment of the italian people, our great allies and friends. Today is the reminder of the bunch of between our countries in the shared values that bind americans and italians together. There could be no starker contrast between these two selfless men and the al qaeda captors. Warrens work benefited people across faiths while al qaeda boasted to the world that it held warren citing his jewish faith. Al qaeda held both men for years. They deprived these men of precious irreplaceable years with families who missed them terribly. Amid grief that is unimaginable i pray that these two families will find some small measure of solace in knowing that warren and giovannis legacy will end her. Their service will be remembered by pakistani men, women, and children whose lives they touched. Their spirit will live on and the love of their families are in the thoughts and prayers today. The shining example of these two men will stand as a light to people the world over who see suffering an answer with compassion. Who see hatred and offer their love. Who see war and work for peace. May god bless these two brave men and may he watch over and comfort their families for the years to come. Stephanie that was president obama talking about the deaths of two hostages being held by al qaeda in a u. S. Counterterrorism strike. One hostage was american. One was italian. Both had been held captive for years. It happened in january but was declassified this week. He says the Intelligence Community did not know the hostages were being held in the compound that was struck. An americanborn al qaeda leader was also killed. The president says the operation followed guidelines and that he takes full responsibility for the deaths of the hostages. I want to bring back in our chief washington correspondent peter cook. This is heavy news. What do we expect the follow from this to be . Peter i would expect and were already seeing almost immediately on capitol hill more questions being raised about americas counterterrorism efforts, particularly when it relates to american hostages held abroad. We have a statement already from congressman john delaney of maryland, a democrat. Warren weinstein lived in mongo county maryland so he was local to the area and previously worked in the peace corps. John delaney saying in his own statement that he wants a review conducted as to exactly how these kinds of operations move forward in the future. There will be tough questions asked about whether or not this Drone Program is effective and necessary right now as has been suggested in the past by the administration and the Intelligence Community. This is a tough moment for the president and the Intelligence Community. They did not know these hostages were present at the site. They thought this would be a successful counterterrorism attack. They have learned the consequences. It will raise some tough questions for the administration going forward. You heard the president say they thought this was legal and they will conduct their own review. There will be tough questions asked about by democrats and republicans. Erik the president says he takes full responsibility and i am sure he would be the first to say there is no excuse for this kind of error or mistake especially when the lives of people are involved. Do you know anything about the statistics . Presumably there will be some analysis or data made available that show how many drone strikes are carried out and how rare an incident like this is. Peter i think you are absolutely right. We will not hear it most likely in public. In private briefings that members of congress have and members of the intelligence committees and i think youll hear a lot of them step forward later today to say if you knew what we know about the success of these kinds of drone strikes, there would not be as many questions about the effectiveness and the need for these going forward. We will have to wait and see what we hear. I dont have those numbers in front of me. It will be surprising if the Intelligence Community provides them but i will not be surprised if we do not get some better assessment of the success rate for these. Erik it will be Something Like the case people make for the airline industry. The crash of a jetliner is a horrifying ring, but Airline Travel is pretty safe and we continue to take precautions. Thank you peter cook. When we come back, we will take a short commercial break and we will be back in a couple of short minutes. Stephanie you are watching Market Makers. Stephanie coming up, how long will this last . Republicans and democrats are working together on capitol hill. Erik he found a safer way to play games. You will meet the entrepreneur who came up with filter. Live from bloomberg headquarters in new york this is Market Makers. Erik welcome back to Market Makers. It is time to bring everybody up to speed on some of the top stories of the morning. Initial claims for Unemployment Benefits stayed below 300,000 for the seventh week in a row. Consistently low level firings indicate hiring a strong. We will see a couple of weeks if that makes for a turnaround after the weakest job around report in a year. Strong sales of light trucks in the u. S. Was undercut by problems in russia and brazil. The earnings missed out on estimates. Company shares are falling in early trading today. Gm shares were up more than 6 so far this year before today. Ebay has moved up the timeline for spinning off paypal. This is this been awful take place in the Third Quarter of this year. Paypal currently contributes more revenue to ebay then its traditional marketplace business but the ceo says this move will benefit everybody. We believe within an upper we believe more than effort that this is the right approach to deliver sustainable for shareholders. Erik feebased profit rose in the First Quarter after the complete cut cost in preparation for the split. Shares of ebay are up more than 6 and currently up 3. 8 . Navinder sarao is sitting on a 40 million fortune. Reports in london said he was so secretive about what he did, his mother did not know he made to much money. He has been granted bail but he cannot leave jail until he comes up with 7. 5 million. Goldman sachs wants to raise a 3 billion funded to invest in infrastructure. This fund would buy assets including airports, water networks, and toll roads. Investors have been turning more to and for such a because of consistent returns as well as the opportunity to hedge against inflation. It is up and away for the ceo of aramark. This meant a hundred thousand dollars last year flying around the ceo, the largest monitor air travel among the nations top 100 paid executives. He was paid almost 34 million. Internal auditors monitor how the ceo travels. Stephanie that is a lot of money. Is there a new era of good feelings on capitol hill . Democrats and republicans worked together to fix an important part of medicare last week. Mitch mcconnell finally agreed to hold a confirmation vote for the president s paternal general attorney general nominee and worked to get a trade bill passed. I have to bring in our expert on everything politics, mark halperin. I am sure you are down there getting manicures and pedicures and spray tans for the white house Correspondents Dinner but i think you have had time to sit down with john boehner. Mark that is coming up later today that we will talk with john boehner at 5 00 eastern. In terms of us being 100 days into the new all Republican Controlled Congress and i have to tell you driving in from the airport, my cab driver was singing by. Things are getting done. Not big things like tax reform or a big transportation bill or Immigration Reform or entitlement reform, but some of the smaller things like the medicare fix and maybe this trade deal happening in a bipartisan land sometimes with the president along also. It is different and i will talk with john boehner how and why it is different and how quickly things have changed. Erik before you talk to him, why is this happening . Mark i will talk to him about that. Part of it is the majority, they are dealmakers and legislators and they recognize they have a responsibility to govern. They want to get things done for the country. They want to address the problems and they are willing to work with democrats. You see it particularly in the senate and a little in the house that there is a pentup hunger. Even if they are on the far left or far right, they did not come here to do nothing. They came here to do stuff. They are tapping into the desire to show republicans can lead with the majority but try to get extend to address the challenges the country faces. Erik forgive me for being cynical but if they truly came to washington to get things done and do stuff for the country why did that not happened before that was a republican majority . Mark because it is a lot of polarization. If you are a house member, your district is really conservative and doesnt care for president obama. It is hard to get those Republican House members to do stuff in line with president obama just as in the senate if you are a democratic senator your state is probably a blue state and your constituents do not want you to make a deal with mitch mcconnell. Both parties have a lot of people. There is a lot of Centripetal Force to the extreme left or extreme right. In the past one president blue clinton was in office bill clinton was in office the divided government can counterintuitively produce a bipartisan deal deal now as we have seen in the past. Stephanie i want your sense of how sincere these relations are. I want to pull up my favorite picture of nancy pelosi and john boehner. That is a major kiss there. There she is basking in the glory of the sun. A serious lip smack on her. Is this for real . Mark i call him now the kissing speaker. He is a man who understands affection. It is a little bit of counterintuitive things. There are rivalries and people whod legitimately do not like each other but there are people i john boehner who will say i like nancy pelosi. They like each other. People builds on personal ties to leverage forward to some bipartisanship. We have seen it again in recent years that despite the personal dies, they have not been able to get things done. Things have changed here recently. It is the kind of change we will need to get one of the big things through like tax reform and entitlement reform. Maybe not a cakiss. Mark i will not say it is essential, but it could not hurt. Erik the reporting is beginning to dribble out from this book that will appear on may 5 by peter schweitzer. There is a story that you know about in the New York Times the others may not have seen documenting the flow of funds into the Clinton Foundation to president clinton himself in return for giving speeches that may have had some connection state Department Approval and government approval in general of the purchase of some u. S. Uranium assets by a russian company. How much of an impact might this have on hillarys campaign . Are people talking about that right now . Mark they are. Even if you just take the known facts, the clintons operated a world where they helped work with people around the world doing great work for the Clinton Foundation took money from rich people from around the world. Often, they traveled with those people or in one case she took a large check from a group like that and some of those companies would occasionally get help from the u. S. Government and sometimes from the state department. The appearance of that is not great. If you want to avoid any appearance of comingling different world in a way that gives special access or special treatment to someone, you stay away from that but the clintons chose not to. Now the hunt is on for a case with the state department or another Government Entity did favors or get special treatment to someone who helped the clintons. It is a problem for Hillary Clinton because it is hard to answer those questions. Stephanie the heat is on. Thank you so much mark halperin. He is having a very big day. His exclusive interview with Speaker Boehner will be right here at 5 00 p. M. On all due respect. I will not miss it. Erik i will be in the air so i will miss it but i will watch the replay. Stephanie i want to know if there will be a kiss. If i was mark halperin, i would be asking for a kiss. Erik coming up, they will have a large say if the apple watch will be a success. I am talking about the developers of the apps for the watch. Of course i am. Stephanie time now to bring you uptodate on the top stories of the morning. New home sales unexpectedly slumped last month following 11 falling 11 . In february, sales of new homes hit a sevenyear high. In a separate report, the average 30 year fixed Mortgage Rate fell two basis points to a 3. 65 , which is the lowest since february. It is the largest point yet in the search for rigging. The probe has focused on the bank manipulating benchmark Interest Rates. More trouble for comcasts merger with time when the cable Time Warner Cable. Fcc Board Members now oppose the deal after concluding it does not help consumers. They plan the merger to be sent to a hearing which could be a significant roadblock. Lawyers for both companies met with department of justice officials who said they are leaning to block the merger. Those were your top stories of the hour. Coming up in about 10 minutes, a death sentence for comcast. There is one analyst who think the latest developments are pretty bleak. Deutsche bank is paying the price. It gets hit with the biggest penalty yet. A sneak peak at the revamped version of one of new yorks west bestknown museums. Erik the apple watch finally gets into customer hands tomorrow. Some customers. A lot more will have to wait. A key to the watchs success is the quality of the apps made for it. Mike, will development for the watch be much different for App Development for the iphone or ipad . Mike it actually is in a bunch of ways. You can look at it from just the User Experience that you will have to deliver is different area and it is on somebodys wrist. You have a seven second difference or someone can twist their wrist and look us up to quickly or pull out their phone and get a different experience. What you want to put on the device has to be incredibly timely and meet the requirement of getting something you need in that short amount of time. You dont want to interrupt someone all day with them twisting the wrist. From a technical perspective when you are designing a nap, there are things we really dont think too much about when loading a new app. What is the power utilization going to be . When you think about iwatch, the last thing you want to do is have an app that is not extremely welldesigned for power control because then you will run out of power during the day. Erik we have already heard about appledeveloped apps that do not run fast. How much of a concern is that for developers that the Processing Power of the watch is not up to delivering the kind of experience people are used to wear it is pretty much instantly on. Mike this is another important area. We have Trained Developers on the watch on this tethered scenario. Most of the processing is done on the iphone and then we remote the User Experience down to the watch itself so all you are getting is the ui and the buttons you are pressing. Most developers do not know how to do that. Stephanie how much information will you be putting on the little watch . I can barely read my smartphone at this point. He knows this. We are spending so much time looking at our apps and reading texts. Now we will do it even smaller. How will you deliver that information in a way people can see it . Mike that is a question that comes up and it really is the best way to think about it is it is not just taking what you do on an iphone and putting on a watch. Stephanie walk us through that because that is how i see it. Or cannot see it. Mike you can scroll and do some reading but the intention of the watch is delivering a different type of experience. For example, the watch has much more information about sensors that are happening on your body. We are working with one of our Development Partners who is doing an app with us. They are looking at integrating center feedback from the watch to the iphone and then being able to do the work on the iphone and only tell the person the information they want. Stephanie what kind of information . Mike i will give you a for instance. You are in the airport. What is the thing we all have to look at on the ticket . We forget what the flight number is. I dont need to see my frequent flyer points or itinerary. I just want to have a reminder that it is gate 42. You have to think about the scenario you are going to deliver. Erik thank you for spending time with us. Stephanie i need that. I thought he was going to say we will tell you the shape of your liver. I dont need that kind of information. Erik you know what else people need . They need bloomberg information. We will have an app on the apple watch as well. Stephanie when we return, a Football Players the light. Delight. We are talking about getting rid of turf turns. We will talk with the guy who came up with the solution. Erik when john set out to improve astroturf he may not have realized field turf would be used from everything from super bowl to high school athletics. It has been installed in more than 7000 playing fields. The creation is the next installment in our eureka series taking some of the top innovators to the moment of innovation. Have a look. One of the most important things from athletes is the playing surface become feeble, safe, good footing. If it is too hard it is abrasive and could be detrimental to the athlete. If it is too soft, it is tiring to run on. It has to be just the right mix. I am john preble and the proud inventor of field turf. As a jock and out of love of sport, i got into the artificial turf business trying to do something to benefit athletes. The beginning of the turf business, the product was almost everywhere. Astroturf was a very abrasive surface. If you slid on it, you could easily tear skin off. If you fell a concussion was more than likely if you hit the wrong way. We did a lot of testing. I do know how many different types of recipes and different types of densities of turf and different height. If you put to much rubber it is too soft and too much sand is too hard. From that concept, i did my first soccer field. Players loved it. It was great. However, that soccer field wore out in the first season. We changed the fibers of the turf. That made a huge difference because it did not shred like the original did. Lab tests showed by having sand on the bottom and a mixture of sand and rubber in the middle and rubber on top, it gave the best shock absorbency and performance characteristics. The three layer system gives us a certain feel similar to natural grass. When we got that, that was our high moment. It is one of the Biggest Challenges to get people to play on field turf. In nebraska the coach was introduced to the concept and he flew to maryland to see my partner to inspect the field. Coach osborne gets to the field and walks across it and says so where is the field you are talking to us about . John says you just walked across the field. That was a moment in history because coach osborne was suitably impressed. That was the revelation we are going into some area that is really going to change the world. After we installed the nebraska field and the game was on national television, sales went shooting upward almost instantly. Business group by leaps and bounds business grew by leaps and bounds. When you first walk on a field turf field, you can feel the cushioning. When you play on it, you know you are playing on a field that is much safer than anything they played on before, including natural grass. We really never dreamed that it would be this big. I am thrilled that i guy from montreal can develop Something Like this and have an impact. Stephanie there you go. Erik you know who else was thrilled . The kids of brooklyn because there is field turf that replaced grass. Controversial. It is amazing. Stephanie many children who also live in new york but not brooklyn play on such fields such as my own. It is pretty awesome. Remembered her you had to play in when you are a kid . Pretty fantastic. We will be back in just a moment. We are talking comcast and time warner. Announcer live from bloomberg headquarters in new york this is Market Makers with Erik Schatzker and stephanie ruhle. Stephanie comcast may have too much to overcome if he wants to save the merger with Time Warner Cable. Erik amazons head is in the clouds. Stephanie and extreme makeover. We will see what happens when one of new Yorks Museums spends 400 million talks spends 400 million bucks on a facelift or it welcome. Im stephanie ruhle. Erik im Erik Schatzker. Stephanie lets get to the news. I am talking about the top business stories of the morning. Something went wrong when the u. S. Counterterrorism forces launched an attack earlier this year. The white house says an american and italian being held by al qaeda were accidentally killed. President obama said this about one hour ago. President obama as president and commander in chief, i take full responsibility for all our counterterrorism operations, including the one that inadvertently took the lives of those komen. I profoundly regret what happened. On behalf of the United States government, i offer my deepest apologies to the families. Stephanie the stooges were being held in the border region of afghanistan and pakistan the hostages were being held in the border region of afghanistan and pakistan. Sales of new homes fell 11 last month after hitting a sevenyear high in february. There is still a limited supply of homes on the market. Lending standards have been tightened since the end of the financial crisis. Shares of faith are falling. The Company Reported Revenue Growth ready for this . Of 42 . They say it would have been higher if not for the strong dollar. Sales fell short of estimates since 2012. Daily active users hit 936 million last month. Those are all big digits. Nasdaq has set aside 31 million to cover costs cash to cover costs of the botched listing of facebook years ago. After the computer matching the first trade when into a loop. Some of the money will be used to settle classaction litigation arising from the ipo. The british trader accused of helping to cause the 2010 flash crash may end up in the u. S. Faster than he thinks. He would fight extradition to the United States, but legal experts say extradition to the u. S. Is almost inevitable unless he has Serious Health problems. They say fighting the process may hurt his chances of cutting a deal. Sarao is in jail and will be free later today when he posts bail. He is expected to stay at his parents house and not use the internet. You do not have to be warm to be happy. According to the World Happiness report yes, there is such a thing the three happiest countries are switzerland iceland, and denmark. The u. S. Ranks 15th. Researchers used the unhappiest countries are in africa, syria and afghanistan. I went to iceland last summer during summer solstice. It was technically light all day long. People were extraordinarily happy. So happy, fit, and goodlooking. Erik i need to talk about the comcasttime warner merger. It appears to be on the verge of collapse. Sec lawyers fcc lawyers are opposed. A rejection would likely send them into extended legal proceedings, and that would pretty much kill the deal. Representatives from the companies met with leaders yesterday and came away pessimistic. Chris is a manager at the belly some people put the chance at the deal succeeding at 1 . In other words, 99 chance of a failure. Chris obviously comcast can make their case and appeal the ruling, but that is probably more than a oneyear journey. At some point, it is not a must do deal. Life has to go on, lets forget it. It is probably less than 25 at this point. Stephanie when would you guess is a point where Brian Roberts actually says goal post keeps moving, not going to try anymore . Crisco chris maybe they get the news out before then. Stephanie what does it mean to you as an investor . Chris it was never a mustdo deal. Reaction was fairly mixed when it was first announced. Some felt comcast overpaid and there would be regulatory burdens. Certainty is a good thing. Now what happens . The first question for us is how big is too big . We can only speculate as to why the deal is being blocked, but it appeals the it appears the broadband is the issue. Looking at it, if that is the metric the fcc wants to use, there is a chance that comcast a not be able to be acquiring anymore subscribers. Stephanie you are saying it would not be another acquisition target, they would simply just chris they have a lot of other options beyond cable. They could add content, go wireless, they could do nothing. But obviously comcasts position needs to get the death needs to get defined. I would be hasnt in that they will come back immediately. They will be disciplined. I would be hesitant that they will come back immediately. They will be disciplined. They ended up at 132 per share in january. When the cable market probably has gotten more, certainly the regulatory situation has gotten worse. That is a little bit of a stretch. Erik is charter paper more powerful now than it was back then . Chris it is trading at a higher multiple than it was then. They announced the bright house deal, which was contingent on the Time Warner Cable deal being close. A lot of moving parts there. There are a lot of cable counties erik is it harder today than it was back then . Chris scale is as important as it was back then. Stephanie if scale is more important than ever and regulators are saying it is more important than ever, to shrink down chris chris how big can charter eventually get . Will the regulars left them by time warner and bright house and stephanie i think the solution is to have lack stone by them. They can get as big to have blackstone buy them. Erik you can answer the question, and then i will chris look at the u. S. Cable group today. The one that is up the most is cablevision, the operator in new york. A lot of people thought they would be shut out of the Time Warner Cable deal. Comcast would not be able to wire them, charter would not want them, and they would be stuck. They are kind of back in play. Cable has always been controlled by one family. It is up to them. They did a great job of spinning off msg and amc. Erik how would they do it . Chris time warner has always been the logical acquirer because the have so much of the new york city market. They could say we are not sellers, we are going to be buyers. Stephanie is that really what rob marcus is going to do . He stands to make a ton of dough if this goes through. Chris they have been very good in dealing with shareholders. They have spent the last year reinvesting in a plan and delivering. And delevering. Maybe it makes sense for us to make a bid for cablevision. Erik is there potential for Collateral Damage with at t . Chris they have been noticeably absent from many discussions about what is going on at the fcc. I think they will sneak that one through. If the issue is broadband, that is not being touched upon. Erik think beyond comcast and at t, directv. What might we gather lets take what we know about what the government is saying and we will find out more what does that mean for the future . What deals might people have speculated are totally off the table . Chris again, the government seems to be ok with more consolidation in the video market. The sec wants the fcc wants to preserve a fertile environment. It is fair game, including more mergers in the content area. Stephanie i want to talk facebook. Our favorite topic is analyst estimates this week. When i look at facebooks numbers, when i look at mobile and how well they have done and how far they have come, they could have done better if the dollar was not where it was, but you look at shares of trading in the reaction to, missed analyst estimates, it does not look good to me and my partner. It is rare that that happens. Chris it is not so much about facebook, it is about the expectations. Stephanie but facebook is the latest example. Lunch, dinner, dessert, breakfast. Chris the question is, what do you pay for that . We are value investors. We do not want to pay up for prospective growth. Prospective Growth Investors like to see acceleration, not deceleration. Erik to what degree you are a value investor, so i have to presume you do not care. Why does anybody care . If you are not a day trader, why does anybody care if they beat analyst estimates . I am not trying to insult, but they have done it wrong. Chris i care because they are opportunities in my mind to pick up for cheaper. Stephanie that is not about fundamentals and how you view a company, that is market technical. Chris our portfolio, we are a very lowturnover investor. We truly are longterm investors. We are looking through the quarter, three to five years out. Stephanie so it is not how the market response if you can pick up stocks on the cheap. Are you influenced by them . Chris we do our own work. Again, we do not care so much about the penny or a couple of pennies in the quarter. We are looking longterm. Erik that surprises are bad surprises, good surprises are good surprises. Chris we are ingesting these press releases and trading the stock based on that. A lot of these aftermarket moves are based on that. Erik how do we fix it . Chris more value investors. Erik i like that idea. Stephanie i dont know if that is going to happen anytime. Chris, thank you. When we return, the verdict is in for Deutsche Bank, and it aint good. Regulators impose record fines. The scandal has not gone away. Stephanie i realize im a broken record, but again the most special treasures come from my partner, Erik Schatzker, when you are not with us during a commercial break. How about we bring you up to speed on top stories . In brazil, the National Oil Company has put a price tag on a widespread corruption deal. Petrobras says the scandal costs more than 2 billion. It also costs the company ceo her job, shut off access to the bond market, and destabilized brazils politics. Petrobras was linked to a decade of kickbacks, bribes and inflated contracts. Pimco says the bond market will not be ready if the fed raises Interest Rates in september. Pimco runs the worlds biggest bond fund. Pimco is taking advantage by cutting its positions in shortterm treasuries. In puerto rico, the Government Development bank i will slow this down because i want you to Pay Attention warns that the government may have to shut down in the next three months because it is running out of money. The bank says puerto ricos fiscal problems will keep it from selling more bonds. Puerto rico is trying to reduce its 70 through in dollars 73 million in public debt. Coming up in just a few minutes amazon reveals one of its secrets, just how much it takes from its cloud services. Taking a museum into the 21st century. We will see what new yorks Whitney Museum did with 400 million. Erik Deutsche Bank is paying the price. Regulators ordered Deutsche Bank to pay 2. 5 billion and fire seven employees, the largest penalty yet in the investigation of Interest Rate rigging. Edward evans is with us from london. The this case is different from cases that have been brought against ubs. What is at the top of the list for you . Edward the first is the size of the fine. This is larger than what ubs was fined. Regulators take issue with the widespread nature of the manipulation that was going on at Deutsche Bank. Secondly, the way that Deutsche Bank handled the investigation. They were being sharply criticized either british regulator by the british regulator and for on occasion misleading the regulator. That is rare criticism from the british financial regulator of a bank like Deutsche Bank. Stephanie do they name specifically officers, executives at Deutsche Bank, not just to potentially manipulative libor, but who may have been involved in the coverup . There is no mention of a specified office. Regulators today asked the bank to terminate seven employees obviously not office of the company obviously not officers of the company. Stephanie hold on a second. They did run the organization, and i take us back to jpmorgan and the london whale. During that time, obviously jp dime jamie dimon did not have anything to do with trading stakes erik i would not say that. Stephanie jamie dimon was 100 held accountable by the board, by the media, by u. S. Regulators. What will this mean for his lieutenants . I have not heard any of their names mentioned. Edward antigen is running this during the time that some of this is going on. He has had support from his lord from his board. He has had support from the local area. The bank came out and manipulated admitted to manipulate libor. We have not seen a political push to remove him. Also he has the second part of this that is going on at the same time. They are doing a big overhaul of their strategy at Deutsche Bank to be announced in the next few days. What are they going to do as part of that . Erik i have had to read through some of what the Financial Conduct Authority documented and i come away with the impression that what they found a Deutsche Bank was more pervasive, more widespread than what they found that ubs and barclays. What does that step what does that say . Doesnt that tell us something about the culture of the bank . Edward that is exactly a question for jane and the board to answer. They are being sharply criticized over that cultural issue. This is Libor Stephanie is it noteworthy at all that jains backgrounds he started originally at Merrill Lynch as a salesman. So he knows this business better than anyone else. Edward correct. You also have to balance that with the fact that we have had how much more appetite is there for regulators and politicians to remove another ceo . Making this investigation last so much longer than ubs, barclays, and have a dozen other banks, it it may help his position. Erik is it possible the german regulators are concerned about interfering too much with Deutsche Bank because it is the national championship. It is all of those in one, at least in the german context . Edward the german regulators investigating libor have not reported in todays settlement. We will see what they have to say about this. Erik edward evans, great to have you on the show this morning, from our london bureau. Stephanie we are waiting for a long time for the shoe to drop. It was a shack it was a shaq sized shoe. The conversations that we will have right now is going to be a good one. Erik coming up, amazon shines a light on the cloud. It is finally going to reveal how much it makes from web services. Stephanie plus, bringing the whitney up to date. One of new yorks bestknown museums gets 400 million. Look what they did with it. Announcer live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Stephanie welcome to Market Makers. European markets are closing for the day, so lets see how they have ended up. Scarlet fu is in the newsroom. Scarlet you can blame it on a series of weak economic reports. Come inside the bloomberg terminal. You will see citigroups economic surprise index for europe. It tracks the extent to which the data exceeds or trails analyst estimates. It reflects a data surprise to the upside. Economic data was surprising to the upside, coming in better than expected from late january through most of february before it tapered off, eased off and made a run higher in late march before plateauing through the first part of april. This big drop is today. We had pmi and Services Data for france and germany that came in weaker than expected, and also showed a slowdown. All of that hurting european equities. It did fall as much as 1 in the first 90 minutes of trading, and pared its losses throughout the session but never recovered. Down half of 1 . The dax wiped out most of this weeks gain, and we are keeping an eye on motive we are keeping an eye on Deutsche Bank. It paid a record fine to settle investigations in the u. S. And the u. K. The fine is equivalent to one quarter of Deutsche Banks revenue last quarter. Stephanie that is a wow. That is such a big number. We already know the bank is going to go through changes. You get a headline like this how are they going to react . Internally, the board has to be saying we have to reshuffle the deck because at this point erik the board had better be saying something. Stephanie scarlet fu giving us the latest out of europe. Scarlet is looking at the markets, i am looking at the terminal. Yesterday we did an interview with the citigroup economist that just moved to the u. S. He said we should stop worrying and start worrying about the grimbo. You are not familiar with that . You are. Erik we may find ourselves in this uncertain time where it may not the a matter of either staying in the euro or exiting the euro staying in under Current Conditions or exiting because of its faults. There are some gray scenarios that would allow greece to say default, for example. Default to the imf or the ecb or the esf s. Efsf fund. Stephanie the issue for investors, the limbo of gray area they do not want to be in 50 shades of anything. They want black or white so they can make a decision. I understand you saying they do not mind chugging along. Erik that is kind of my per usual in europe. Years at a time of limbo and eventually it all worked out. Maybe if you are trapped in limbo for a period of time, it buys you the time to sort it out sometime down the road. Stephanie i guess if you are an investor you can figure it out, but if you are greek, if you are running a business and living your life erik it should be good for the greeks because they do not need more austerity. That is what the greek government, the leftwing government, has sworn it will not submit to, more austerity. To the degree that the europeans do not win, it means that the greeks are not submitting to those demands. Stephanie you were in greece how many weeks ago . Erik end of february. Stephanie so your waiters, your hotel concierges, your cab drivers how are they feeling . Erik it feels like after five years of austerity, it is time for something different. They feel crushed by the terms that the european lenders imposed upon greece. And now some of those european lenders acknowledge that the calculus that went into determining scale of austerity that was imposed upon the country was mistaken. It was far worse than anybody thought it would be, and greece did not learn a lesson and things did not recover, and austerity was ultimately not the route to growth. Stephanie is it fair to feel crushed . The ec you had to come back in and help them. Erik i get it, but do you punish them for the sins of the father . Stephanie way are we are getting existential up in here right now. Erik is the Cloud Business growing . It is a mystery until today. Erik im Erik Schatzker. You are watching Market Makers on bloomberg television. Amazons Retail Operation gets most of the attention, but amazon has a fast going Cloud Computing division used by some of the worlds biggest and smallest companies. After nine years, web services has become so large that amazon for the very first time is going to be breaking out its numbers of its separate operating business. Cory johnson is in san francisco. What are we going to see when amazon reports Web Services Revenue and operating profit . Cory how big is this business that they have quietly grown . It has really transformed business, particularly in Silicon Valley. It has gotten to the point in the last couple of years talking with Roger Mcnamee he had the common sense to invest in things like facebook in the early days. The question isnt are you using amazon web services, the question is, why arent you . This business is a big business. They put this into their services business. They have lumped it into this other business category, so we do not know what these numbers are specifically. At that business with well over 6 billion in the last quarter of last year we do not really know what that is. The growth there has been terrific. It has been much better than the growth they have seen in the rest of amazon. Stephanie how much did amazon have to grow its masses . Is the bigger issue their margin, not growth . Cory that is kind of the ultimate question, when did they turn off the profits and turn off the growth. They keep trying to find new ways to grow that business. Clearly jeff bezos is only focused on business, and all about that growth and dealing with the fact that they are in fact running into a headwind. Their growth rates are coming down, and it is an issue for them. Amazon web services has helped them fight it. Their margins are collapsing. They have always tried to keep right around break even, but they have been rough the last two quarters. There was a consistent trend down there. Get big and get big and get bigger. Guide the analysts to tell them we are not going to have a profit, and then when we do not they will not the surprised, and then someone will buy our stock, even though we are not creating much in the way of Free Cash Flow. Stephanie well, that works. Cory it has worked for the stocks, it has worked for their ability to grow the business. They have been able to occasionally raise capital through debt, but they have not sold much in terms of stock. It has let them keep the stock price up not pay the employee is much, but keep Stock Options in the hope that they can get rich someday. The Free Cash Flow generation has not been great. The free cash generation yes there is Free Cash Flow, but the Free Cash Flow margins the Free Cash Flow as a percentage of sales to me, that is the governor of this business. This is how you can see how just days ofs runs this company how jeff bezos runs this company. Have just enough cash to keep the business growing, but do not generate a profit. Erik cory johnson, our editor at large out west. Everybody is looking forward to the big bloomberg west interview tomorrow. Emily chang will sit down with Carl Sandburg of with Sheryl Sandberg and richard branson. You can watch the whole thing and 8 30 p. M. Eastern on bloomberg television. Stephanie coming up, it is one of you new york of new yorks most wellknown museums, and pretty soon, the newest in my hood. The new 400 million whitney. Erik this is Market Makers. I am Erik Schatzker with stephanie ruhle. This would bring you this would be a good time to bring you up to speed on top stories. A court in spain has refused the u. S. request shares of General Motors are following today. Gms strong sales of light trucks were offset by continuing trouble with the company in russia and brazil. Most of that is economic. First quarter profits almost tripled. They did, however, miss analyst estimates. The senate plans to vote today on whether Loretto Lynch will become the next attorney general. Thank goodness this is family on whether Loretto Lynch will become the next attorney general. Republicans insisted that other bill first be completed. If confirmed, she would be the first black female to become attorney general. Stephanie if our producers are going to send me an extraordinary story, i am going to need to read it and share this with you. Before the break we were talking about Deutsche Banks 2. 5 Million Dollar fine they will have to Pay Associated with the libor rigging. Look what happened to bob diamond at barclays. I need to share a quote. This just came out, written from gavin finch. Here is a direct quote from a Deutsche Bank derivatives trader in london. There were more than dozens pulled and given to regulars both in london and new york. I need to share it. Ready . Could we please have a low sixmonth fix today . One trader asked to employee. His u. S. Counterparts were more blunt. Strap on a pair and jack up the 3 million peter . Lets take a minute. I love to say the financial industry is extraordinary, fuels the economy, you should not judge a whole bank by a few bad apples what are you kidding me . This is 2005 and this is 2015, 10 years later. How can we possibly say that this is just bad behavior, slap them on the wrist . People have to be held accountable at this point. I do not have the names of the traders and i do not know who the employees are. Erik if they are still working there, they may be among those Deutsche Bank was ordered to fire. Stephanie is firing enough . Strap on a pair and jack up the rate, old mate . Are you kidding me . Wall street wonders why people do not like them. Next time somebody asks, i will forward this message. Erik lets move on to whitney. It has made a big bet on a new building. They wanted more gallery space and more visitors. 400 million bucks in a new home from a theater to restaurants. First visitors can see it next friday. Bloomberg got an advance look and here it is. After almost 50 years on the upper east side, the Whitney Museum of american art has a new address. It is moving back to lower manhattan. It is a huge deal, just in terms of the size that we have now and the availability as a collection to show many more people. It sits at a park that gets nearly five hundred million 500,000,000 visitors a year. We have to figure out how you are going to have a wonderful experience in the galleries. The whitney wanted to expand for decades, and in the last 25 years there were three plans to add on to its old home on madison avenue. What was it about this planet made it appealing to you . The director. Alan one bird Alan Weinberg is a true visionary. He had his work cut out for him. About seven years ago is when we began, and it was a bit more of a protracted process than we would have hoped. After we began, 2008 came. We had raised a certain amount of money, but we basically put the project on a pause at the time. The economy started to recover, and in 2013 the boards former chairman gave the museum 130 million. We wanted a building that got large enough that we could do an expander program, show more of our collection, have more education programs, but at the same time have a building and a circulation that people would not feel lost or overwhelmed. For museums, expansion is a tricky thing. The American Folk Art Museum could not afford the payments on its building. Ultimately, it moved to a space 1 6 its former size. But whitneys director is not worried. We have a good Financial Model that should stay the institution for the next 100 years. Part of that model is finding new ways to make money. Hardly know any museums anymore that do not rent some aspects of their space at some time. It is a necessity. We do not have ongoing government support. You have to earn income. A nonprofit art museum defined success differently. Weinberg says it cannot be all about revenue and reviews, it is about who and what the museum has championed. 10 years ago, were they with the right group of artists ideas . Stephanie david is here with us. Besides being neighbors to hogs and heifers, why did you like it so much . I was impressed with the space there. It is 22 but the proximity is nice. Erik does a make as much of the statement . Some are upset with how it looks david some are upset with how it looks outside. Stephanie that is it for Market Makers. Scarlet it is 56 minutes past the hour. Bloomberg television is on the markets. On d of individual stocks reacting to earnings, but when it becomes when it comes to the index, the nasdaq has made a brandnew record high 5049. 11. It is up by one third of 1 . The s p up one third of 1 as well. Oil is getting a bump up by 3. 5 to 58 once 58. 17 per barrel. Lets just focus on the nasdaq for a moment, making a new record high. Surprising giving that there does not seem to be momentum in the stock market. There is so much activity in the last couple of weeks where we got close to that level and then we backed off. It has been a range bound market for the most part. Everyone is waiting for it to break one way or another. It has been hanging out at the top of the range in the nasdaq and the s p, and i think a break in that range will be significant for some people. Scarlet now that we have had a new high does it break us out of the range, or have we just widened the range a little bit . We need to see a more meaningful breakout for everyone to draw any conclusions. Scarlet in terms of data coming up, we have been getting triples in, and it is not doing much. Why is it so difficult to craft a narrative around the stock market when there are plenty of individual stories arriving equities . There are a lot of idiosyncratic moves coinciding with a dearth of macro news, so so there is not a lot of drivers from a macro perspective. Everyone is waiting on the fed and data points to see which direction the fed goes in when they meet this month. Scarlet you have a trade that focuses on utilities. These are bond proxies. A lot of it has to do with they are not really correlating with treasuries. We are decent living in the 10 year this week, up 11 basis points. One would think utilities would be down on that move. But the utilities are holding in quite nicely, which is a little bit of a head scratcher. I think the trade is to look at inflation rate data, which is what the fed is looking for to craft their next move. We get a lot of that data this month and early may. Scarlet give us the exact trade then. Going up to may 8, that captures the pricing data pce as well as the jobs report on may 8, i am looking at the may 8 44 put for about 37 cents, spending about 75 basis points to get downside exposure in utilities, which are a yieldsensitive sector. Scarlet you can see how you can profit if the price goes down. We have amazon, google, and microsoft reporting earnings. Could it be a decent quarter by these guys to protect to project the nasdaq higher . Those are the titans of tech. If you get the stars aligned and they are all positive reports certainly the nasdaq could have a meaningful breakout. Scarlet we will see if that comes. In the meantime, the nasdaq has made a record high, surpassing its. Com level high now. Thank you so much. We will be back on bloomberg television. Pimm welcome to money clip. Im pimm fox and heres the rundown. Your opinion European Union leaders address the refugee crisis of people trying to cross the Mediterranean Sea to reach europe. Comcasts 45 billion acquisition of Time Warner Cable may face revelatory obstacles that could scuttle the deal. In politics, republicans compete for the endorsement and money of multibillionaire casino mogul