Transcripts For BLOOMBERG Market Makers 20150501

Mike we have been waiting for improvement in the manufacturing economy. Its not getting any worse of that could be taken as good news. 51. 5 for the eye is some figures for april which is the same as it was in march. Its a little disappointed because we were looking for a 52. That was the consensus of analysts surveyed. Michigan sentiment comes in exactly as it was the prior month at 95. 9. A little bit down for what happened forecast at 96. The fed wants to know what people think about inflation. They have looked at Inflation Expectations as part of their gauges to whether to raise Interest Rates. Americans still think inflation is going down. The oneyear inflation forecast is for 2. 6 . The thought the 10 year inflation forecast is 2. 6 which is the same as it was in the prior reading. It suggests we are not looking for any kind of inflation breakout. The fed has been watching these survey numbers rather than adjust the tips numbers and things like that. It looks like the u. S. Economy you can say starts may in an unchanged position from april whether people consider that good or bad. That is to be determined. Stephanie our own michael mckee. Thank you. Erik lets bring in michelle meyer, the deputy head of u. S. Economics at Merrill Lynch from her office in new york. As michael just told us, not much of a change from april. What does this tell you about the economy . Michelle i think the manufacturing data was pretty disappointing. We were hoping we would see some acceleration. The trend for the last six months has been sliding lower and we are now in april. We are now past the weather excuses. The hope is that things would start to pick up a little bit and it seems the early indicators for the spring have been on balance, bit soft, after the q1 numbers came in at only. 2 percent. We are not giving up on the hope that the economy will be on better footing to the end of the year but the data remains pretty soft. Stephanie clearly, the data looks soft but if the u. S. Data is better than it is abroad, couldnt investors still say who cares . Michelle sure, its all relative. When youre are considering what it means for fed policy and thinking about what it means for the fed funds rate relative to the movement of other central banks, i think the key story is that the central bank might be easing but the fed can be approaching a hiking cycle. They could take a step toward normalization. With the tone of the u. S. Data, we are all wondering whether the fed will have the ability to start normalizing before the end of the year. It still our baseline forecast that the federal start to hike in september of and better data but we need to see the improvement to begin vents. Erik the First Quarter gdp report on wednesday was kind of hideous and the fed later that they attributed that to transitory factors. Do you disagree . Michelle i think you can argue that there were special factors. You can say maybe weather conditions in february, the port shutdown probably impacted the data flow. Is the stronger dollar hitting trade flows can . Could that be transitory . I suppose of the dollar reverses and we start to see stabilization are weakening, you can also argue the drop in oil prices is hitting energy. That could be perceived as somewhat transitory. The key is how big some of the shocks are at the beginning of the year and what are the multipliers and how long will they be with us . There is a lot of uncertainty. Erik if the dollar is a factor in the fed suggested it was a factor in exports and inflation through imports, how long will it take before we see the recent weakness of the dollar this quarter play through into some of the bigger Economic Data . Michelle most of the trade models suggest there are some lag by which the movement in the currency impacts the real activity data. It seems to us that there will still be a case for a widening in the trade deficit. Certainly, it could go into q3. If you get a big reversal, it might not play as big a role. You can argue the move we see in the dollar will still have implications in the near term of economic numbers. Erik i want to play an expert an excerpt of a conversation i had with bill gross. We were talking about the rationale for a fed hike and when it will be and why would the fed do it. Would it truly be data dependent or might it have to do with Something Else . Bill i think its often june. If some say we get a strong employment report, perhaps its back on but i think its off. They want to get off the dime. They want to prove they are not healthy but that they can stand on their own two legs matt means 25 basis point increase perhaps in september or december. Erik do you agree that even if the data does not look that strong at september that the fomc would raise 25 basis points to prove they can stand on their own two feet . Michelle i am a bit more skeptical. I think that that is very careful and very cautious and they dont want to make a policy mistake. A policy mistake would be to go to early before the economy actually is being strong. That said, it is true that federal officials have changed their language this year. They changed it to make the case for the beginning of the normalization process. Unlike this time last year when the fed still wanted to commit to low rates for a long time, they have taken that out. I think it is truly data dependent. I think the fed wants to be reasonably confident that the economy will be on a higher trajectory and i want to see momentum build. You dont need to see a closing of the output yet but you need to see indication that that trend will continue. Erik to improve. Erik thank you for joining us. Stephanie next, we will stay with the economy and talk homebuilding and the impact of the California Drought a new home sales. Erik a 350,000 ticket to the manny mayweatherpacquaio fight. Scarlett weve got some breaking news on yum brands. Third point is sending out a First Quarter investor letter where he talks about how he has been finding opportunity in u. S. Stocks and japan. He holds a sick of can stake in yum brands. He did not quantify what position he has taken on this Restaurant Company but he has begun a position based on the view that yum brands is in the early stages of turning the page. On its troubled china business, specifically their food safety issues with regard to pizza hut and kfc and taco bell. He says that investors should want to yum brands in china and it strong and growing franchiseled cash flow. This is the move in yum brands shares this morning. This was the last two days. It gyrated along the bottom and then the big up this morning, up 3 now. That was on the disclosure that third point has begun a position in yum brands. Additionally, dan loeb says the firm began a position in dev on energy. Saying that value is increasingly difficult to find in the exploration sector of energy companies. He says the company has significant scope for execution as management focuses its capital on fewer high return areas where the stock is not making much of a move. It got a little boost of the early going when trading began but now it is down marginally by 2 10 of 1 and we will keep an eye on these stocks for you. Erik im kind of surprised that he did not take a position in yum brands purely on the basis of the frequency with which the Hubbard Family visits kfc and taco bell and pizza hut. Stephanie i just sent dan a message. There is no way dan loeb if anyone has spent more than 30 seconds with a guy, there is no chance he has ever eaten in a tocco bell or kfc or pizza hut. Scarlett maybe he visits those places. In china when he is gone there how about that . Stephanie again, i will bet you dinner at pizza hut kfc or pizza hut that there is no chance mr. Dan loeb has ever been to one of these three establishments. I, on the other hand, have definitely been to all three. Erik we will bring everybody up to speed on the top stories of the morning beginning with linked in shares. They are tanking, down almost 20 . They missed estimates for the first time ever. The annual sales also fell short. One reason is a strong dollar. More than 1 3 of their revenue comes from outside the United States. Tesla is expanding beyond just the car business. Elon musk unveiled a of batteries to store electricity for homes and businesses. Says the technology could transform how electricity is delivered and leave the way to pollution free energy. Elon we want to show people that this is possible. That is the future we could have. The curve will slowly roll over and go to zero from co2. That is the future we need to have. That is something its the path ive talked about like solar panels and batteries its the only path i know that can do this. Erik deliveries will begin in late summer and begin at 3000 for the athome version of the battery. Disneys avengers age of ultron is expected to be the Biggest Box Office smash for this weekend. The first one grossed 1. 5 billion. Those are your top stories. And under armour executive who survived the avalanche on Mount Everest will tell us about his story of survival. Plus, the 350,000 ticket to the mayweatherpacquaio fight. Stephanie i just dont think many people are spending that. The flowers are blooming and the home buyers are headed to open houses. Its spring and it has been a strong start for the year. New hand sales new home sales hit a high of february before slipping back in march. Existing sales jumped to an 18 month high in Homebuilder Confidence is rising for the first time this year. Lets take a closer look at the state of the housing market. Jerry howard is with us, the ceo of the National Association of Home Builders. Welcome. Whats the score . Jerry things look good but you have to realize that during the housing boom, we were over 2 Million Units per year. Stephanie when was that . Jerry 2005 2004. We had a 73 decline over the next four years. We have been edging back up to just about one million starts. Its not the kind of recovery we are used to in housing but it has been a consistent recovery nonetheless. Stephanie many people are worried we were approaching a bubble. Compare the situation we were in in 2005 to what the recovery looks like now in terms of similarities. Many people are looking for signals that this is a bubble. Jerry i dont see that happening. Credit restrictions are still so severe for homebuyers. You dont have anywhere near the type of home buyer coming into the market that we had in 2005 they are highly qualified and that is an important component. I could make the case that it was the lax lending standards that led to the hubble in the last downturn. I dont think thats an issue. You also have severe supply constraints of the same time. We are not building the way we were at that time. Supply constraints, i dont think we are in that situation at all. Erik why isnt demand for new homes stronger . When prices plunged, after the financial crisis, existing homes were available at way below replacement costs. That is a killer for the new home business. Now the prices have come back, i would have expected to see demand for new homes stronger. Jerry its a market by market situation but new homes are purchased generally by move up buyers. They are the ones trying to get sales moving again but there are still situations were the have not recovered all their equity. Just as importantly, move up buyers sell to first time homebuyers and the demand is not as robust as we would have liked. Stephanie does that have to do with firsttime homebuyers having student debt issues or the argument that millennials dont want to own stuff . Jerry i dont think thats the issue. As people get married and form households, they still have the traditional american dream, singlefamily house with a backyard in a good school district. That has not changed. It may have been proper a while. Stephanie no backyard for me. Im an urban creature. Jerry you may not be the typical american. The situation is still the same for most people. Erik she was a cheerleader. Stephanie i am not typical. Im sorry, typical homebuyers still want to buy the house and picket fence. Jerry it has been put up during the course of the last recession because it was kids coming out of school for the least likely to find jobs. They have been living with their parents and have not had the expense of living like you in an urban neighborhood in a trendy time. Most of them are starting out now. When they get married and come back into the fold so to speak they will want to buy houses. Stephanie i was going to ask erik new Home Builders are responsible for some of the greatest abominations that we have seen in southern california. You have seen the photos these tract homes in the desert with Swimming Pools and lawns sucking up californias most valuable resource, water. Will that end . Jerry i have to take exception to your statement. Do you agree that homebuilders are in the business to make money question Mark Stephanie why else would they be in it . Jerry do you think any homebuilders would build massive subdivisions if there was no demand . Stephanie they might have a plan but it does not mean its a good plan or smart plan. There are fashion designers that put up close but if theyre ugly, no one buys them. Erik hang on, that argument justifies the sale of the leak of illegal drugs. Why not give it to people . Jerry builders are not building for the sake of constructing things. There are checks and balances they have to go through. I disagree with you that the situation was caused largely by homebuilders. Erik i agree. Somebody has to want to buy the home with a Swimming Pool and the lawn in the first place. Jerry right, like the people in california. Erik two homebuilders have a responsibility to perhaps try to develop different kinds of properties . Jerry absolutely, new homes are among the most energy and water efficient we have had. The real problem with California Water is in the existing homes that were built prior that do not have the access to the new technology. I think the most efficient way to address the crisis would be to retrofit the existing houses to match the standards of new homes. Stephanie the grotto at the playboy mansion is not Energy Efficient . Jerry i have no knowledge of that if kids are watching. Stephanie thank you so much. What did you just get me into . Thats what happens on a friday. Thanks to jerry howard, the ceo of the National Association of Home Builders and he will be back with us hopefully. He is just running for the door right now. Erik we will be back. Stephanie lucky you. Scarlett this is Market Makers. There was a selloff yesterday with the nasdaq rising for the first time this week. Lets get to some nasdaq companies. Expedia gained as much as 8. 8 ending a sixday losing streak. They beat analyst estimates and gross bookings rose 19 and there was no change to the fullyear outlook. The fact that it did not reduce its outlook like other tech companies, thats good enough for a big gain in the stock, up 6 right now. They say they plan to close orbitz by the end of this year. Altera went above 44 on reports that intel wanted to i it and it is above 45 on a report that talks between the chip may begin again in a few weeks. There were several reports that indicated intel had discussed offering 58 per share before it had access to the books. It was after it signed a nondisclosure agreement that intel revised its offer lower reportedly to 54 per share. We will have more on the markets when we return. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and Stephanie Ruhle. Erik you are watching Market Makers i am Erik Schatzker. Stephanie it is friday, and especially good day. Erik time for the bulletin. Manufacturing in april at the weakest pace in almost two years. The index unchanged at 51 and a half. The lack of improvement reflects lingering effects of a strong dollar and low oil prices. A separate report out of the u. K. Shows factory growth there dropping to a sevenmonth low. The cme has suspended to traders tito traders. The cme says that they and engaged in a practice called layering. The regulator has criticized the exchange for taking too long to complete investigations into improper trading. Chevron fell in the First Quarter as Falling Oil Prices took a bite out of earnings. The ceo has slashed billions of dollars in spending and put much on the auction block. But he says that chevron is sticking to plan to raise prices by 20 in the next two years. Some words from one president ial candidate to another. Commted cruz welcomed Bernie Sanders to the race on an interview with mark halperin. Hillarys Economic Policy often ends up pretty close to Bernie Sanders command will get interesting having her explain whether or not she agrees with policies that he will describe a socialist. Erik focus mostly on the middle class. It is overshadowed by the mayweatherpacquaio fight. If you do not know, the Kentucky Derby is this weekend. Stephanie there is a fight brewing, not just in vegas, but in the isles of your supermarket. He has made it his mission to get Big Food Companies like pepsico and craft to start labeling whether their product contains gm owes. But these powerful include giant have plenty of money to fight back, and they are spending to combat labeling. How does this food fight and . End . What is the whole premise here . The whole premise is that 64 nations around the world give their citizens the right to know what is in their food. Were not like about the skull and cross bones, if acorn or soy ingredient was genetically engineered, it says so. China, russia, japan, most of our trading partners for vice that, and we would like that here in the United States big food has spent over 10 million, biotech has spent over a billion dollars to stop labeling efforts because stephanie what is their rationale . It is not based in fact. The patent holders, the Camel Companies Chemical Companies who own these products have persuaded these large products that labeling will increase their food cost. That is not true. 64 nations around the world, we have the area. Brazil gmails were in the marketplace for 10 years before the implemented labeling, and there was zero increase when they did. We have no vote at the table, and effectively that is what this is all about. We want the right to know. We have this right over sugar salt, fat, calories, this is an angel the. With industry is told to label, they fight. You may have seen this week, a federal judge in front ruled in favor of the mandatory labeling law. They have a year from july to implement, and companies change labels two or three times a year. I question what the deal is all about. I think these companies and these brands are going to quickly figure out that with 92 of consumers saying in National Polls that they prefer labels they would like to know, and that 92 americans usually do not agree on anything they will find that the fight of not labeling will be more than labeling. Erik what is the argument for the fundamental argument in favor of transparency . Why is it so important . Theres a lot of exaggeration on both sides. Really common is this great line it is really hard to keep up. What is unassailable is that while gm owes may one day feed the world, and indeed there has been advances with medicine that lead us to where that might happen, the truth is we do not have those advances. It is promised, not yet delivered record what we do know is that since 1996, over 90 that have been introduced have been introduced to enable farmers to use more herbicides of a because they are engineered to be herbicide resistant grade what they are allowed to do is that herbicide can be used as much as they want. Over one billion pounds of herbicide, now determined by the who to be probable persons are being used because of gmos. We think the average consumer should know that. The others i will say that they should not have to label because they are safe. Erik the carcinogens are not going to end up on the fritolay bag of chips is it . There is not hard evidence we are starting to see roundup increasing in levels in. That is not our point. Our point is that when it is raining pesticides in the United States, that is a problem. I have to hasten to state that Food Companies will say that they are safe and we dont have to label. We do not label if they are safe or unsafe, if they are found to be unsafe, they are banned. Just because people want to know. Stephanie do the Food Companies think that labeling only looks at organic buyers . We know that the big guys want it, but are they just categorizing it . You have a Market Segmentation happening here. The organic already is gmo free and the Big Companies wants to play. Nearly everybody in the country has an organic subsidiary. Erik i have to challenge you on one point. Transparency is so important, why not go for extreme transparency on your own products . Like Natural Flavors for example . I know that Natural Flavors are very complex organic compounds and we could give people a little more transparency into that. We are complying with fda law, and that is what we are asking for them to do. You list the ingredients and Natural Flavors, and i would have to have a couple of pages. Were all for it, and we welcome consumers demanding that kind of thing. That is what has enabled i started this in 1983. The industry did not even exist. We had a Wonderful Company but when we had no supply no demand. Today organic is almost a 30 billion segment. The reason General Mills paid for annies, is because of growth. What were saying is that you cannot have it both ways, you can either fight labeling and conceal. Stephanie give me the gandhi quote. So good. We will be back with more. Stephanie six days after the devastating earthquake in nepal, the death toll is now more than 6200. Thousands of people are still missing. An executive at armed armor came facetoface with the avalanche that roared down the antlers Mount Everest. Many of his team did not survive. I spoke with him this morning. All of the people from camp one and two are being evacuated down to the base camp, and all of a sudden we have these people that are completely shellshocked and working with them, and walking through the glacier with them, and they are fighting the shoes and boots and have centralized and did something they were not finding anything. We had some people stay with us who had no clothing, no boots just what they landed in. It has been a nonstop, every day has been a new experience of running on adrenaline. Stephanie what is your plan from here . I thought you were going to do six peaks in total. Are you going to pack it in and head home . He has always taught us to find a way. We are not going to give up on the whole challenge, we are backing off on these repeat. I do not know what is going to look like going forward. We need to get back to kathmandu, what we do and where we go from here. But were going to try to set a new world record and the tragedy is huge, and for us, i am glad we were here to help the people that we could help. We actually served as sleeping bags for those who did not have any. For us we are continuing. We dont know what it is going to look like, but our goal is still the same. Stephanie what is the most reporting to you right now . Important thing to you right now . Sleep. [laughter] today was the first day we crashed around 3 00 in the afternoon and realized there was actually nothing more to do. Everybody just disappeared into their tents, and so that was probably the most important. Anything now the big thing is to pack up and head back to kathmandu and to do it in a way where we dont impact the villages along the way. There is almost 20 of us, and by the time we pack in the food as guides, we actually impact the communitys severely. So were trying to do it in a way where first of all we can give away all of the excess food that we are not going to use on this expedition to the local villages along with medical supplies. Admin trying to work our way through these communities as lightly as possible. Once we get back to kathmandu it is still a bit of an unknown what happens what it looks like mobile infrastructure is there. We do not know how long we are going to be there. Everybody is trying to change flights and so on. So us right now, the big thing is the next four days to work our way down the valley and everything beyond that is a little bit in the dark. Stephanie do you think you prefer your life as a designer rather than a hardcore athlete . Im glad i had that moment of design because it was peaceful and it was structured, and i knew what i had to do every day. But having come of this experience, i really enjoying this kind of life. It is very fluid. Even before the accident, it was fluid. You and in a completely different set of life skills to get through each day. For me, i am traveling with my wife who has never been here before. So there is a Family Dynamics that we have to manage. It has been an absolutely oneofakind life experience. Stephanie that his neck from under at the base camp of Mount Everest. We will take you to the newsroom and scarlet fu is giving us update. Scarlet maryland prosecutors are holding a News Conference right now, and they are following them death of freddie gray. They are saying he was illegally arrested, and that the police established no probable cause. They say he was put in a lake place, and he had a lawfully possess i. They added that he indicated he cannot breathe when he was cap, and that it was a homicide. They probable cause to press charges. That is not mean they are definitely going to press charges, viewed the findings that they had released so far in this News Conference. This comes after the maryland eight attorney met with freddie grays family. The context here is that at least 20 officers were injured and 235 people were arrested in the violence that followed the funeral of freddie gray. Once again, the headlines here for maryland state attorney is that Frederick Gray was illegally arrested and that his death was a homicide. They add that we have probable cause to file criminal charges. We will be back with more. Erik las vegas will be highroller happen this weekend. They were all jumping in for the fight of the century. The business of the society that creates experiences for wealthy individuals. Ellis, if i had to scratch from if i could come up with the joe, how much would it cost me . I could definitely get you info but a general never kisses and tells. [laughter] everything is customized. In the market we are in, there is a lot of different details of what goes in what we do. You put a standard rate, put us in a position of no negotiability. When you get to a point of lastminute that comes with a cost. Stephanie hold on. Just gives us an idea. Lets say you have a ton of dough in my pocket, and i want to go to vegas for the weekend. How do i get the experience . What does it cost me, and what is involved . And how do i outfit myself like you, because you look fantastic . I can give you an example. Do you want a rolex . You want a religious experience preview going to start with no less than 150,000 for the entire experience if youre wanting to sit fifth floor ringside, directly in front of the ring, right now are tickets are being sold at 350 thousand dollars, 360,000 for a ticket. Select comes to convenience and access, can you put a price on that . When we give this sequel were going to wrap that around this. Not only are you going to receive parliamentary bottles of champagne when youre going to be escorted behind the locker room, with private access to these fighters. As close as we can get you without interrupting their time. Stephanie that champagne would not feel complementary. We have heard that one of the reasons tickets are going at Center Fielder man is because in mayweathers contract he was allotted a day slog of tickets for him and his crew, and they have been holding back. We are a secondary market. But we are certified to do what we do. When it comes to the mayweather, he is the guy. We organize ourselves accordingly. We are certified, we are we are. When it comes to complementry, i would dare to say that somebody buys a ticket off of stuff up, we are not getting what we are getting. Stephanie our prices going down or up . Going up, because of the intensity of the situation. The way it is today, something we get exclusive access to. This is the hype. You continue to generate buzz via social media and there is a lot more intensity that goes into this. I do not see those prices going down. Whoever is waiting for that to happen, youre going to have to wait even after the fight. Stephanie how much of this is in opportunity for you . Erik the super bowl tickets sold out in one minute. This is a great opportunity to promote our platform. Not only are we give you a ticket, but we are wrapping and greens around it. Stephanie with the super bowl, i know how long the game is going to last and i have a halftime show. This could be over in a minute. I am not playing you either way. I just know that when you make that request, i make it happen. Stephanie im free this weekend, you might want to give me a call. It is hard for me to understand. We will back with more. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and Stephanie Ruhle. Stephanie welcome to Market Makers. Erik it is friday. And you know what that means. Your book game yearbook game. Stephanie back to baltimore where charges have been filed in the death of freddie gray. He has died from a spinal injury in a police man last month. Scarlet the headlines are still rolling. Maryland has filed charges against Six Police Officers in the death of freddie gray last month. Secondary three manslaughter, assault, negligence, and this contact is this follows the states findings that freddie gray was illegally arrested, police failed to establish probable cause, and that his death was a homicide. This is a quote from the state attorney of maryland. Warrants have been issued for the rest of the archers for the arrest of the charged officers. Apparently they had told us he had told them twice he needed a medic, and it was not provided. The death sparked the arrest earlier this week. A curfew was imposed and 20 officers were injured, more than 230 people were arrested following the monday funeral. The Maryland Attorney has said that warrants have been issued for these six baltimore Police Officers that they are calling a homicide. Stephanie it is now time for the bulletin, the top business stories of the morning. Manufacturing in april hold that the weakest pace in almost two years. The imf with changed was unchanged. The lack of improvement reflects lingering effects of a strong dollar and low oil prices has cut into capital spending. A report out of the u. K. Shows factory growth there dropping to a sevenmonth low. Tesla motors is expanding just beyond motors. The ceo last night unveiled a of batteries to store electricity for homes and businesses. He says the technology could transform how electricity is delivered, and be the way to pollution free energy. Deliveries will begin in late summer, and will start at 3000 or the athome version. Linkedin shares are plunging after quarterly revenue missed analyst estimate the first time ever. Its annual Sales Forecast fell short. A strong dollar is the reason. More than one third of the revenue comes from outside of the United States. They also blame new Sales Representatives which cause losses among its customers. And alibaba is withdrawing a job in the wake of a whole lot of princes and criticism. They said they were looking for a employee who looked like a popular form start to motivate coders. They said it was a failed attempt at humor. Erik electricity manager at the Rocky Mountain basis looking at alternative energy. Good morning to you. Let me begin with you, what ive heard this morning so far is that the better the elon musk talked about last night, the residential battery, seven kilowatt ours for 3000, that that price based on Current Technology and the cost of Current Technology is incredibly cheap. Is that true . That is absolutely true. If you look at some of the cost to systems that have been installed over the past couple of years, the price point he announced yesterday was mind boggling loanw based on analyst estimates. Erik we have heard about the giga factory. Can it produce batteries that cheaply, that they can sell residential consumers eye 3000 battery and still make money . That is the plane. He says the giga factory, this massive 5 billion factory they are building a reno is supposed to bring down the cost of these lithiumion batteries that have been very sick is only used in the model s in the tesla roadster. They bring them into the stationary usages and costs down by about 30 . We will see how that works out. One of the things on the price, i think i read that that price does not include is a lesion and an inverter, see maybe looking closer to 7000. Stephanie lets say they install it, and you have it in your home. What service will need . What is the longterm cost . What is really likely to happen is that tesla or solar city comes to you and says i will sell you a solar system and a battery pack. He will sign a contract, and what they will do on the backend is use that battery for one of a dozen Different Services that they can earn additional revenue one. Tesla cannot do not right now, with their wood to do right now is that if the dispensary in your home it is going to provide backup power. If your commercial building it will cut your peak energy charges. But in the future, they will be able to network together thousands of these batteries and additional revenue by participating in wholesale electricity markets. They know that is the future and that was going to be a big revenue opportunity for them moving forward. Erik is it fair to s\ay that they see this is a bigger opportunity than the electric car . I would not go that far yet, but it will depend on how it develops, especially globally. At this point, they are getting to billion dollars to 3 billion a year in revenues that you have ascribed to automotive including selling greeting credits and opponents to other components to other makers. At this point the battery sales have been about 1 10 of 1 of that. Theat is going to grow significantly. He has such ambitious growth projections, if you were only to be a 500,000 unit automaker maybe this Stationary Battery business would be better, but he is talking about going to through 2 million auto sales a year. And that would still be the bigger part of it. But it is very nice to have two disconnected revenue streams. Erik back to you for a second one of the potential flaws in this grand design is that most homes cannot go off the grid. They still need to be plugged into the grid, they still need to have service from the phone utility. Public utility. It assumes that those prices will stay the same. The public utility that loses the revenue, it may change its mind when it will charge you for peak demand power or whether it will be a Monthly Subscription fee. What do you think . It is a different dynamic. And with this announcement it will force the conversation between the industry and the utilities much faster than they were anticipating. We have looked at this dynamic, when will they will go off grid and our cost assumptions we never use anything that is as aggressive as elon used yesterday. They could embrace things like lowcost batteries, they could work with the customers to install these on the customer side of the meter, and use these batteries that will provide services to the grid alternatively they could do what they have been doing, which is to put more infrastructure in the ground and carry on and pass those costs on to us. There is a lot of regulatory proceedings going on that tesla is involved in and it certainly have been there, this conversation between industry and the utilities is going to get more and more visceral and heated because the price point has gone so competitive. Stephanie why does he need to get into this business . He is already a revolutionary pioneer in terms of what he doing with tesla motors. Why at this to the mix . It seems so complicated for 3000 product. It is complicated, but the size of the price is a mess. He is all about Climate Change. He says that 2 billion of these packs could transform the Global Energy landscape and that is a big statement, but he is onto something there. If you compare Energy Storage with wind and solar across the world to make you saw this Renewable Generation problem. Erik thank you. One thing is for certain, elon musk is a disruptor. Stephanie what happens if youre the salesman in florida, and youre not allowed to say Climate Change . Erik those people who just and Climate Change might still want to cut their electricity bill. Stephanie he is a rare democratic ally to the president when it comes to trade. He will tell us why liberals are wrong to oppose a huge deal with asia. Erik and it is time for the yearbook game. Tweet us your answer. Stephanie be creative. Erik not just the name, tell us some stories about this person. Stephanie welcome back. It is time to bring you uptodate on the top stories in the morning and chevron profits fell more than 40 in the First Quarter. Just like rival exile in it smashed analyst estimates. The ceo has slashed billions of dollars in spending and put natural gas fields around the world on the auction block. He said he is sticking to plans to raise her outfit by 20 over the next three years. According to the wall street journal the ecommerce site is expressing into brickandmortar locations. Warby parker already has 12 Retail Locations in nine cities in the united date to those locations employ about half of the companys 500 workers. And marlon i in las vegas, and know what is happening the 300 million man will climb into the ring. That is the expected take when mayweather and pacquaio square off in the ring. Many status five years too late. Mayweather is two years older than pacquaio and he is in the underdog role that he likes. I like that. Being the underdog, i love it because it gives more encouragement. Determination. Stephanie he loves it. He lets it. We will see the loves it tomorrow night. Watching it on paper you will cost you 99. That is a lot cheaper than 300 350 for a ringside seat. Thats 350,000 for a ringside seat. Erik they argue that Transpacific Partnership with open more markets and will more standards on all members. Senator tom of delaware is a democrat who agrees with the president. He is with us here in new york city. Thank you for your time. Why has the president failed to persuade other democrats of the virtues of the tpp . Our friends and organized labor are very much opposed to this. They say it is a bad deal, there is a concern voiced by labor. Erik hang on a second. Your fellow democrats are not actually thinking through this problem on their own and coming to the same conclusions you did on the merits of it . It is just malfeasance of organized labor . The governors are meeting with president clinton in the white house, and i asked a question, and i said we are hearing from our friends in labor that they do not like this deal, why . He basically said, the end of world war ii we worry goliath with the rest of the industrial basis destroyed. We allowed a lot of other countries to sell without barriers and evidence. Now these countries are rebuilt and the reason we had free trade deals is because we wanted to have other countries to sell himself to us, but we want to sell to them. Whether it is cars, pharmaceuticals, chicken, we want to sell to them. Barack obama has taken up the same call. We are Free Trade Agreements because we want to sell our stuff to other countries, they are not about allowing other countries to sell to us, they already do that. Stephanie two they just not understand . I have not had a conversation with her about this. We focus on the 80 we agree with. One of the nice things about these partnerships is that we can sell chickens into canada and do another couple of things but labor provisions in this agreement will have environmental enforcement, in which we did not before. You can fix it in the context of this trade agreement. Erik one of the opponents say that there is not enough transparency in the process. Raising the case, why can we not see the text of the agreement now, like we did before . It is pretty hard i know governor, and im used to good openers negotiated two governors negotiated ing. The reason why we have this fast trade motion authority is so that we, as members of congress can say to our trade representative and the rest of the only countries where negotiating with, these are our primaries. We want access for this. We do not kno go in negotiated all of us with the other countries. That would be stupid. We would never get anything done. Stephanie some critics have said that president obama has devoted more effort and attention to pushing this through the minimum wage hike. One of the minimum wage hike cap more of an impact . I am all for doing the minimum wage hike. A year and a half ago they propose raising it to nine dollars hour over two years. I thought it was a good idea and we shall should have done that we got sidelined and said lets raise it to 10 an hour and that was a bridge too far. We do not need to have this battle every three years. Erik did you go to those opponents and saying, im not sure it is, that free trade actually work . This is the tale deal we signed with these countries, and youre the benefits we did that here on the benefits for america. The reason why they supported the Free Trade Agreement is because they wanted to sell americanmade vehicles. Japan is even worse. We have millions of japanese nameplates that are sold here, and we sell almost nothing there. The reason we want to have her Free Trade Agreement is because we want to replicate south korea. Erik is there Economic Analysis that without a shadow of a joke that if we sign those deals, that the net benefit is positive . With south korea, there is a phaseout of nontariff areas, and we will see if that actually works. We can look right now in panama. We had a panama deal three years ago, and when the reasons we wanted to have a deal with pamela is for every late quarter or drumstick or thigh that sold for 27, we do not sell any. We will know if it works. Unfortunately, it will already be after we do the tpp but we should see it. Erik thank you. Stephanie Market Makers will be right back. Keep looking at that yearbook game. Stephanie coming up a former top ally of Chris Christie is pleading guilty to visit role in bridge gate. There is words he will cooperate with prosecutors in their investigation. Erik it is friday, it is the yearbook game. Tweet us your guesses. Stephanie welcome back to Market Makers. Im Stephanie Ruhle and im Erik Schatzker. [laughter] during the commercial break i cracked my knuckles and eric punched me in the face. You know what we need to do is go to the one sane person in this building, scarlet fu. Can you believe that just happens . I just said im Erik Schatzker. Scarlet the antics on a friday afternoon when most of the world is celebrating a holiday. There is one European Market to tell you about and that is the u. K. Early losses in the rally into the close, ending at the high. What was surprising was trading was a percent above the 10 day average. Data showed growth at u. K. Factories unexpectedly cooled last month. The pmi was held to a sevenmonth low to this comes just raise before the general election, british pound weakening. Lets return to some news at home. April auto Sales Numbers rolling in all morning long. Most everyone reported smaller than expected teams. General motors posted a 5. 9 increase. Nissan even came in with sales figures below estimate. This is the big picture of auto sales in the last six years. You see that spike from the White House Program and then the steady higher. Interest rates stayed relatively low and consumers began replacing their aged vehicles. We got to 17. 5 million last august, topping the previous high set in july 20 july 2006. All that has done is change the cars people buy. They shifted away from small fuel economy vehicles and toward suvs and gas guzzlers. Analysts are looking for a dip to 16. 7 million. Not just gm but ford and chrysler and japanese automakers. The consensus estimate is for a dip in the seasonally adjusted annualized auto sales rate. Erik a former top ally of Chris Christie is pleading guilty to his role in bridge gate. He ordered the closure of the George Washington bridge between manhattan and new jersey back in september 2015. Was shortly before Chris Christies reelection. Peter cook is following this story. The scandal has been swirling around the governor. Sometimes he seems to be distant. This doesnt sound optimistic. The significance of this plea as we learned from in Court Prosecutors that david while steam is cooperating. He is working with their investigation. If anyone knew where the orders came from disclosure it would be him. Up until this point we know there was a correspondence between the former deputy chief of staff and david. The question is how far up the chain did it go . That is still an open question. Now he is talking to prosecutors. With these lane closures and this infamous email, to which you are referring come a for some traffic problems. Peter exactly right, he said in that famous press conference that he was line cited by news of this, humiliated by the actions of some of his staff. He did fire that deputy chief of staff. He has maintained all along he did not know this was happening. He said yesterday to reporters he is not necessarily worrying about this plea from david while steam. Nothing has changed as far as his knowledge. Two former high school classmate. The governors maintain he did not have a lot of correspondence or a lot of interaction. That has been the distance the governor has maintained. Stephanie i am from the garden state so anything Chris Christie is bit is a big deal in my house. How much of an impact could this have . Peter he is a wrong he is a long shot because of this. This controversy has hurt him and a time when his president ial prospects were rising. Timing definitely not what he wanted. He was here talking about some National Issues with members of the Consumer Electronics community. The kind of event where he should be focusing on that national stage, his ability to reach a national ali national audience. Maybe Chris Christie had the time to recover. He promises a decision may or june. Erik have yourself a great weekend. Stephanie a little highlight reel. We spent the first half of this week in l. A. I want to say more than just across the financial industry. Politics, media, finance, medicine. The milk and Global Institute comes to new york for a while. Stephanie Veronica Corning stone are back coding stone and i are back in new york city. One of the most beautiful places you can be in the United States with an extraordinary roundup of guests. Erik hes a character for sure jeff of double line capital. We were talking about negative fields negative yields. Jeff lets say we leverage up the german to hear, we get a 20 return. If you can hold it for the two years even the present volatility along the way are you doing that . Im thinking about it. Erik what happened the day after that interview . European yields backed up by the most in two years. So either somebody is anticipating it will go 100 times short or stephanie the entire world watches your interview . Erik the rationale behind the trade makes sense. Why would i be holding two years on the german yield . Right now they are only 35. Stephanie we had a chance to sit down with tom barrick, a founder of colony capital. Its surprisingly i didnt waste all of our time talking about neverland ranch, which colony does . Does oh. Tom i have six or seven professionals around to me, i feel pretty confident. When the masses start entering the water and think they can navigate those foot waves i get out. I dont know whether they are good or bad. When amateurs and to the marketplace, you are going to get an abundance of something erik has the market for risk acids become a market filled with amateurs . Tom absolutely. Everybodys outside their own asset class Peter Stephanie when some of the like tom barrick says you are seeing so many investors outside air asset class, that is a warning sound. Do you not remember where we were leading into the financial crisis . Central bankers are pushing assets into wielding your assets. Erik treasury and investment grades are now in high yield. Lets move on to rick snyder. Governor of michigan. There is speculation he will enter the race for the republican nomination, because he has proven he can unite right, left, red and blue. Rick Governor Snyder the other is to see who else is running. Look at michigan, look at a washington. The where the bottom of the recession by far. Cut our Unemployment Rate in half. Stephanie they didnt reunite but they were obviously in a desperate situation. Hopefully other states arent in a stitch arent in a situation that bad. Stephanie erik we pressed him on what it would take for him to enter the race. He mentioned family matters. A great deal of attention. Its on another level. Who else is going to enter the race . Stephanie i hope if he decides to run he will choose d snider to sing whoever his Campaign Song is. He may end up going with kid rock. Eminem also at detroit guy. I got a chance to sit down with the one, the only swoon pickens. He has more than spunk. We had we talk about oil prices, we talk about carl icon. We take we cover a lot more. The New York Times asked me about carl icahn. Now they are activist shareholder is. I said carl has made more money for companies that any ceo i have ever known anywhere. I said he is a moneymaker, a serious man, and he is as smooth as a stucco bathtub. Stephanie priceless. Oferik i wish i could come up with lines like that. Stephanie next week we are leaving town again. We are going to have a whole 45 minutes with boone. That was a warmup. Erik Consumer Confidence is at the second highest level since 2007. That is according to numbers out of the university of michigan. Sentiment rose to 95. It is exactly what it was last month, holding at 95 point five at 95. The bloomberg comfort index fell for a third week in a row. The man arrested in connection with a flash crash, the cme says these two engaged in nature in a practice called layering in which orders placed orders were placed and quickly taken out. Disneys of ventures hits theaters in the United States. This expects to be one of this is expected be one of the Biggest Box Office hits. The first avengers film grossed more than 1. 5 billion worldwide. The third most ever. Stephanie he is a ceo graduated from Charleston High School in West Virginia back in 1967. At Market Makers. Im going to give you a hint, he may have gone to high school in West Virginia. He lives on the west coast and may or may not have graduated from duke university. A lot of Extraordinary People went to duke. Erik he graduated from West Virginia in 1967. Stephanie ruhle stephanie it is john chambers. The winner gave us john chambers, who was trying to bring cisco back to its glory days of the late 90s. So many of these big tech companies, investors dont get a chance to get them to the next chapter. He is a positive force. He participated in march madness. He said whenever his team is down, he has duke basketball. They look for some positive energy. The internet of things, a lot of other people do. Erik it is hard to move a company that big that fast. Stephanie maybe hes the guy looking to buy salesforce. Erik john is very conservative about doing deals. Stephanie have a great weekend. See you monday. Scarlet Bloomberg Television is on the markets. It is the first day of may. Bio techs and small caps are recovering thanks to scientists and inflated earnings reports. Manufacturing held at the weakest place in almost two years. Joining me is dan of equity investments. We are one day intimate and no sign of the old out it of the old adage. We are seeing the volume and the interest waning. We are seeing a bit of a rebound so maybe some reallocations. It doesnt have a lot of conviction behind it. The s p flipping a little bit midday. It doesnt feel like there is a bounceback. Scarlet Health Care Shares were the worst performers come energy was the best. Those companies were set to report the biggest increase while Energy Earnings are set to creator or about 65 . What does that say about what price did to share prices already . Dan they are recognizing the trends in the marketplace. You are seeing oil popping higher. Ultimately what you are looking at is the fact that you are just seeing all of these earnings rollout. The expectation continues to be ratcheted down. Anything is looking over price and theres going to be some Downside Pressure moving forward. Scarlet i mentioned the Economic Data. We dont get much visibility into what the fed is going to do next. A i want to get your trade explain to us what you have in mind. Dan it is a bit of a decoupling of what we have seen of the the last couple of years. Trending down toward the lower end of the range and potentially breaking those march lows for the 20 year treasury, there is some weakness. There are some undercurrent that could lead to further unrest or volatility moving forward. It appears the bond market is pricing in the probability of the fed moving sometime this year. Stephanie scarlet what would you buy a echo debt what would you buy . Dan a could push to the 120 level. Basically kind of protecting myself going into that june meeting. It allows me some fairly cheap protection in the bond market in general. Scarlet does this say anything about your conviction . Dan the Interest Rate by a mover just because the fed has made it clear they are potentially moving toward a different type of cap different type of platform. I think that leads to further unrest in the market. We bring you the best stories come interviews, and videos. I am pimm fox. Teslas new charge is not in the car but could be in the living room. In motors another big month for the automobile makers. It is trucks not cars leading the way. It is a sports extravaganza from a prizefight in the loss that prizefight in las vegas. We are going to hear from the ceo and our design series