Transcripts For BLOOMBERG Market Makers 20150504

For hours and thats the first time ive looked at him. Your hair looks good. Erik lets look at the headlines and manufacturing. Scarlett an increase of 2. 1 , and the consensus was 2 , so slightly better than economists were looking for. I believe this was the first increase since last july as well. This was the month of march. What is interesting here is that the previous rate of a gain of 0. 2 has been revised to a drop of 0. 1 . February was weaker than anticipated and march numbers were slightly higher than economists are looking for. If you back out transportation orders, factory orders were unchanged, 0 . Whereas for the february numbers, it was revised down from 0. 8 to 0. 1 . The Financial Markets are coming off of their highs, still a by 0. 1 . It is hard to say if that came out right after factory numbers of coming out. If i look at the dollar right now, the u. S. Dollar index slightly higher here, 9537. We have seen manufacturing numbers softening for the past few months now, so the fact that we have an increase for march is encouraging will stop stephanie is encouraging. Stephanie thank you, scarlet fu. Erik some of the top stories we are following right now, a changing of the guard at cisco. John chambers after 20 years is stepping down as eeo of cisco. He will continue to be chairman of the companys war. The news eeo will be Senior Vice President chuck robbins. Yet been with the companies in 1997 and is currently in charge of worldwide operations. Chambers decision to set step down is knows the rise. Chambers decision to step down is no surprise. And Steve Easterbrook says he is stripping away layers of bureaucracy at mcdonalds so they fast food coveney can keep up with changing tastes. Steve we will work on running great restaurants. Simply speaking, a recommitment to hot, fresh food, fast and Friendly Service and contemporary items at mcdonalds. Erik there were no big announcement about a new menu for example, or a marketing change to help with mcdonalds worst sales slump in more than a decade. Investors are not too impressed. Shares are slightly down. Call it a consolation prize for comcast. 10 days after dropping his bid for time warner cable, they posted firstquarter earnings that beat estimates. Comcast also signed up more internet customers than expected. For the first time, comcast now has more internet subscribers than cable tv number cable tv customers. Tmobile is poised to become the nations third biggest wireless carrier. They leapfrogged sprint. They have increased their Subscriber Base by 36 in the past seven quarters. Ceo john ledger john legere has done away with twoyear contracts and has added benefits, such as rollover data. In the meantime, sprint has been losing subscribers. Dow chemical plans to limit eight 1700 jobs around the world, representing a 3 cutback. The company had planned to do cost savings measures after a split off of its marine business. It estimates saving 700 million a year once it is done cutting jobs will stop and two more republicans join the race for the white house. Carly fiorini said she is running on abcs good morning america. She said her business experience would give her an advantage. Carly yes, i running for president. I think of the best person for the job because i understand how the economy actually works and i understand the world and who is in it and how it works, and i understand bureaucracies. And that is what our government has become, a giant unaccountable, bloated bureaucracy. Erik and ben carson announced in detroit today. He has become a favorite of grassroots conservatives and is a fierce opponent of president obama and obamacare. Stephanie more now on corporate reorganization over at mcdonalds. The chief Information Officer from 200405 joins us now from boynton beach, florida. Larry, we went from loving it to not liking it at all. What do you think about what is happening at mcdonalds right now . Larry i think its sad. The announcement that was just made, the theme should be to quote george harrison, if you dont know where you are going, any road will take you there. Stephanie i like that line. Larry the one thing that is missing thank you. The big thing that is missing is the focus seems to be the reorganization is the solution. We organization for what customer defined purpose is the solution reorganization for what customer defined purpose is the solution. Mcdonalds is confused. They have not defined the brand focus, the relevant differentiation, and if you dont know where you are going, as i said, any road will take you there. Erik larry, what would you have done differently . What should Steve Easterbrook be doing instead of just corporate reorganization . Larry he should be first focusing on the brand destination. What does he want mcdonalds to stand for . And only then, how do we organize to achieve that . Saying that mcdonalds brand stands for a modern, aggressive burger company, it may be nice in an annual result annual report as a mission statement. It provides zero direction for product development, for marketing. In the press release that came after the announcement, there was absolutely nothing, nothing at all about the brand definition and about marketing. If you dont change the mind of the customer, you will not have sustainable profitable growth. Stephanie in mcdonalds defense, are they in a tough spot . Because specifically what they market is no longer what people are as interested in as they were just a few years ago. During your im loving it time, there was no shake shack orchard will let or chipotle. Larry mcdonalds had different challenges there. Going back to 2002, the stock had reached an alltime low and were losing market share. Franchise around was terrible. Franchise morale was terrible. The fundamentals of a good turnaround strategy begin with the customer. Stephanie how did you turn it around during that time . Larry we focused first on the customer. We focused on restoring customer satisfaction. We focused on loving the customer we had before we focused on the customer we didnt have. We defined the competitive set and asked ourselves, if our share is to grow, where will that come from . All of that started with a clear marketing definition. And then we focused on financial discipline and restructuring the organization. We are staff on a sinking ship reorganizing the staff on a sinking ship will not prevent the ship from going under. Erik larry, the way you just phrased it you are accusing Steve Easterbrook of rearranging the deck chairs on the titanic. Do you think that mcdonalds is headed for the bottom . Larry that is the trajectory. Do i feel it will end up there . No and i did not feel that in 2002. Mcdonalds has certain competitive advantages. They have scale and they should leverage that scale more effectively. Erik how do you do that . They have a huge franchise system. They now want to engage in refranchising, move some of the companyowned restaurants over to the franchisees. That is one of todays announcement in addition to reorganization. Is that how you leverage scale in your words . Or would you do Something Different . Larry i think the refranchising is right. Because the quantitative evidence right now is that the franchisees run better more efficient, more effective restaurants than the companyowned restaurants. Its hard to be credible as a leader when the restaurant you own the restaurants you own dont perform as well as the franchisee managed ones. If the franchisees can do a better job, let them do so. I endorse that step. But from a scale point of view, it means that all can take risks and be more innovative than a smaller chain. If a smaller chain is bold and risktaking, takes a serious innovation, it might put them out of business. Mcdonalds should be an innovation leader. Instead it has been a follower. And without clear brand direction, how to you decide what those innovations should be . But they have a huge advantage in being able to take bigger risks, because they have bigger resources and bigger scale. They have an opportunity, because of their scale to be a learning organization, and there i endorse what steve is doing with the new reorganization, sharing the learning will be an asset that legault will have compared to some of the smaller that mcdonalds will have compared to some of the smaller competitors. Stephanie larry, think is a much. Clearly, you are the secret sauce when you were there. Erik coming up, bill icon carl icahn goes after blackrock. He says guys like larry fink make it harder to turn Bad Companies into good ones. Stephanie and then carson then carson joined the race for the Republican National erik nomination. Stephanie you can watch it speak watch his speech right here at 10 30 a. M. On Bloomberg Television. Stephanie welcome back. Im Stephanie Ruhle with my partner, Erik Schatzker. It is time to give you the top stories of the morning. In china, the Manufacturing Sector is growing weaker. The hsbc gauge of factory activity came in less than expected. At the same time, new orders overall the client, and this is declined and this is speculating fueling speculation that china will do something to bolster its economy. Janice the janice capital fund said gross said im merely have a sense of the ending ending with a whimper not a bang. He admitted he got it wrong called for an end of the bond rally them february, 2013 in february, 2013, and begin searching months later. Prince william and their and his wife kate will name their new daughter, Charlotte Elizabeth diana. Her middle names to honor her late grandmother and greatgrandmother. She is fourth in line to the from phone fourth in line to the throne. That is also the name Chelsea Clinton picked for her baby last year. Erik carl icahn versus larry fink. Last month, fink wrote to chief companies in the s p 500, urging them to resist the pressure to buy back stock or raise cash dividends. This past weekend, carl icahn fireback fired back at larry fink. Carl the most important thing in the company is the ceo, by far. There is nothing close. I dont believe they should get 750 times what the average worker gets, but i dont begrudge them that money of the stock goes way up also because of a gets the stock up, let them have some good money. But look what you have. You have this club system and a lot of them feel they can do what they want because of guys like larry fink. Erik who will win this battle the man running the Worlds Largest asset manager, or the grizzled critic . We are joined by foggy own. Stephanie thank you. I was not sure we were going to do today. Erik is it carl icahn or larry fink . Guest on larrys 4. 6 trillion about 1 trillion or so is in passive etfs. Well await you can perform, you cannot sell the dogs in any gf. You are stuck with them as much as you cant rely on for management to do a better job. And that matters, but in reality as much as you can rely on for management to do a better job. Theres a tremendous amount of all capital that should be available to build things and pay workers. If the ceo is paid based on options, he wants to see the share price up. They dont move my strike. Keep it where it is and shares go up. Stephanie lets break that down in english. Fabio you are a ceo and there are 100,000 shares outstanding. Stephanie im fat, american, and im white, and im a man. Fabio youre halfway there. You do the Share Buyback price owing to the fact that shares will go up and in many cases you do not see the management option changes instruct price. The 100 that had been your strike, maybe the stock is up 10 because you bought back 10 , not because you actually did anything. Then you have the socalled activists that you could use an excuse to summer some degree. Something is motivating that carl icahn. Erik a way to ask plane that carl icahn kendrys, released the ceos interests or at least the ceo interests are more aligned with shareholders than they are at blackrock. Fabio to some degree, but 17,000 directors went up to vote in 2012. Of those 17,000, only 60 did not get majority approval. And of those 60 only six actually quit. So icon carl icahn must be going crazy. You want to see the turnover of six guys . Come on. Stephanie larry fink runs blackrock, the large largest asset manager in the world. He can get a meeting with any ceo of any company. He will get the biggest, if not the top three, allocations out there. Is he really looking at what its like to be an investor, and activist investor . Larry can do whatever he wants. Fabio there he takes pains to not be able to be in a position where hes ever seen to vote. He has 120,000 plus corporate actions per year. Wideout why . When one of his client comes up its also going to be the same person that the activists are going after. He will get a call from a client that is the target of a pension fund. Hes never completely innocent. His Small Cap Value fun runs a turnover of 130 to 140 per year. He can also take the elevator down if you stories and a few stories and telephone managers not to be so concerned. They are looking at what carl icahn does and deciding whether to pile on and enjoy and join him or not. Erik who does affect this the relative shortterm is in a buyback and dividend increases they implement . Fabio look at the holdings of carl icahn, ebay, apple. He is not a pump and dump guy. Stephanie and there are pumped and dump activist investors that are giving a bad name to the whole posse. Fabio very few, and all of the studies indicate, do they perform after the activists sell . How much do they pop before hand . And you have found no correlation to performance before and afterward. Stephanie people argued dan loeb was out of yahoo by the time Marissa Mayer by the time she sat in her seat, he was not in the trade anymore. Fabio he may well have got not one wrong. Have gotten that one wrong. He mightve also wanted to do some other things. Stephanie i think people were criticizing him saying, you are out of the trade, but you know, it still works. Fabio it might never have happened alone. Stephanie always a pleasure to have you on. Erik coming up, we will be talking with some of the most successful activist investors. Stephanie im headed to the zone Investment Conference at 1 00 p. M. I will be speaking to Barry Rosenstein from jana partners. A very wellknown activist. And then at 1 30 p. M. , the one and only bill ackman. I better have an herbalife shake to get my Energy Levels up. Quick this is market makers, with Erik Schatzker and Stephanie Ruhle. Erik you are watching market makers. What are you laughing about . Stephanie i love the show. I love being on the show with eric. In one minute you will find out who else is here and he is almost a special. Erik we need to bring you some news right now. John chambers is not really going away. After more than 20 years he is stepping down as the ceo of the Computer Network Gaming Company and his replacement is chuck robbins, who has been with cisco since 1997 and has been in charge most recently of the cisco worldwide operations, chambers will be the executive chairman, chairman of the board, of course and he will have to do deal with new arrivals. The new ceo of mcdonalds says that the key to ending a sales slump is improving cooperation. They are restructuring the chain. Mcdonalds is also going to shift more of his restaurants towards owners cut costs and return cash to shareholders. The company is trying to rebound from its worst sales slump in a decade. Lets take a look at how the market feels about this. Underwhelmed, i would say. Greece is playing beat the clock again three days before the next decision on emergency aid. The two sides just wrapped up four days of talks, the greek government is still opposed to cutting pensions while raising the sales tax. The socalled red line, still Officials Say the degree should have enough cash to make its 243 million payment to the imf week. Investors must believe that it cannot get any worse for gambling stocks in macau. Shares rose anywhere from 3 to 5 today after we learned their gaming revenue fell 39 last month, the second month of decline. In pro basketball the Associated Press says that Stephen Curry will be named stephanie thank gosh, think goodness im here. To show how big a basketball fan i am. Erik im breathing a big sigh of relief that stephanie is here and has her game on. Stephanie you are not on the floor yet, stop talking. Erik what on you finish this, coruy . Stephanie the Golden State Warriors beat memphis yesterday in game number one of the western conference semi finals. Cory wait, it ends with stephanie you are not on this Television Show and are not allowed to speak. Cory it has been if thrilling season 14 thats been horrible the whole time ive lived in california. Erik its not enough to get me interested, im afraid. Cory what if it was on rollerskates . Erik basketball on skates would be something else. Stephanie we did not bring you here to talk about basketball even though you live in california and are abnormally tall. Cisco, the big chain a cap John Chambers is moving upstairs to the chairmans job. Im not sure if you are aware, i would like to bring in our bloomberg west editor at large cory johnson. And from idc research we have more from singapore. Crawford, lets start with you since corey has the home team advantage. What do you think . Crawford i have been following this for a long time and i think they have gone to the stage of knowing what they want to be and they are kind of testing where they want to go with things like consumers and i think that now is about rallying the sales force and execution. They are steadily gaining shares in parts of the Server Market executing well with new acquisitions and i think that they want to get a larger slice of the pie. Chuck is the guy to keep them executed to go after that vision. Erik do we have any idea who is on the short list . What was his name again . Stephanie my homegirl . Erik not John Chambers. Chuck rogers was on the shortlist a couple of years ago right . Stephanie as was bob cory as was bob lloyd. As coo chuck was sort of the guy, as you mentioned. Externally and internally i know that people at cisco thought that she would be named cpl. Keep an eye on her but thats obviously not the choice they made. Chambers did say back in 2012 that those three dudes were going to be in the running. Erik crawford, what do you think . Could cisco run into the ge problem here . When jack welch named his successor, the two other guys on the short list left. They left ge because they had better prospects elsewhere and went on to have pretty successful careers. Could the same thing happen to cisco and threaten the continuity that you just said is in store . Crawford look, theres always a risk of turnover when these things happen, but theres a pretty big pretty deep bench below chuck. I dont see it. I see that they are, again, john has been there for a long time. I dont see gary going anywhere as a result of this. I think that gary has been very loyal to john over the years. In my mind even if there is turnover i think that cisco will be just fine and i think frankly it is a stable peace. I dont necessarily see that as a huge scenario here. Erik stephanie do you think that john is ultimately staying at cisco . Crawford i think that over the years he transitions himself out. It is similar to the Sun Microsystems role in which schwartz became much more involved in the daytoday operations. Even after oracle bought son i think he stayed involved for a long time and i think that is more and more of a Business Development to be called upon when needed but in the near term you will see a lot of John Chambers finger prints on this company. Cory lets take a moment here to realize what John Chambers did. Starting in january of 95, lets take a look at what he did over that time frame. The competitors then . 3com . Three networks . Thats where he came from. I mean, look at the competitors who have come up over those years. I send. Remember when they thought that it would burp and the market would freak out . All the wallowing, all the competitors they have encountered in 20 years they have dominated and mastered and i think that John Chambers absolutely deserves credit for that. Erik so much of that ascent happened in the late 1990s. So much of what cisco became was the company that it was in the late 1990s. Crawford would know certainly much more than i do about this, but cisco has not been innovating. I would say that the products and services that they offer have incorporated some things like security that they have done very well with the changes in networks. Stephanie what, they have products that are not in our site line . Erik the most sophisticated services, like amazon, facebook google, they are not shopping at cisco. They are going out and buying white label routers. Crawford so, i think theres some of that, but keep in mind that cisco has kept the kenai and where the market is going. For example when you look at the whole converged Systems Market to bring together compute and storage, cisco has bet the forefront. Not only the forefront but the most rich part of that market. I would say that when everyone thought that Enterprise Networks and was dead, cisco went out and bought. They basically founded a company and moved it to the cloud and they made that deal over the last two years. Cisco has done a number of very good deals. I will also say that john and his team are one of the first of not the first to recognize the power of the internet and get ahead of the internet of things trend. Why . Loading up the network means good things for cisco. To corys point, these guys have continued to innovate in a number of areas and been very inquisitive and a number of areas. Yes, they have had their bombs. Whether it be in the home networking space or whether it be pure digital with the flip camera, but i have to give them a lot of credit these guys have mostly been hitting singles, doubles, and home runs and they have continued doing it. Stephanie gentlemen, thank you so much. Cory you love talking about wireless lan. Stephanie so much. Cory johnson is here for on the west coast. Erik cory we will get some quality time this week. Stephanie i was not planning on it but now im going to vegas. We will be back. Scarlet lets give you a check on how the markets are trading right now. The dow industrials are coming off of two days of triple point moves, it has not gotten there today yet, up 92 points again a 4 10 of 1 , treasury starting to wick off gains covering from last weeks selloff, pushing yields to a 12 week high a bit of decoupling from the german trade led by the german bund spreading to the u. S. Last week pushing the tenure bund yield. Look at copper futures, off by one third of 1 thanks to disappointment and chinese manufacturing, the pmi missed estimates and showed shrinkage in many factions, although if you look at how shanghai stock performed they rose as they played catchup after being closed on friday and also on speculation of more stimulus ahead from the peoples bank of china. Lets move on to cognizant technology, which has seen the biggest spike in readership among bloomberg customers, up 11 in three years volume after 74 minutes of trading is already more than the fullday average after the cognitive boost in the 2015 earnings forecast. They provide outsourcing services, Tech Consulting and accountants for its big clients. Erik stephanie in just a few minutes i am heading to an Investment Conference. It is where some of the Worlds Top Hedge Fund managers come together to talk about their best investment ideas. Lets bring in our single earmark correspondent, julie hyman, looking at last years pick. Julie, people dont just to get people dont do to just show up for free, they have to go get that idea first were good cause cancer research. Are the ideas any good . Julie some of them are, some are not so much, one last year came from someone who was not a household name. In the morning they have the next wave of upandcoming managers. A guy named his actual driver, the Duncan Miller protege he came out last year very strongly saying you should short oil. He says that if you are long on oil, im sorry for you. Obviously that turned out to be a very good call because we have seen crude oil collapse since then. They reported 1 billion last year on that call. That turned out to be a probably one of the most outstanding ones. Stephanie in the morning is when there are these up and comers, sometimes you have not heard of them, the bigger hedge fund meant managers are invested in them, they did not come in for a long time and people definitely show up for that. Julie and that is what people Pay Attention to, no doubt, that was a big home run. We also heard from Larry Robbins at glenview and he did pretty good too he was talking about humana, wellpoint, and monsanto. We saw that all of those stocks had rallied. Monsanto the least, from about 3 , but humana is up wellpoint now anthem is up to 50 , so hes done well on all three of those calls, so that was another one that was sort of uniformly pretty good. Stephanie you and i have spoken to larry about monsanto at length. It is one of the most hated companies out there given the sort of antigm moment, but larry makes the argument but your politics aside people need to be fed and this is the way that it happens. Julie as of the good ones, we have some bad ones, too. Ackman repeated his fannie mae call which has not worked out well because it is contingent on the government sharing profits. The same call that Bruce Berkowitz made. Stephanie erik that was a reiteration, right . We asked earlier, could you please come up with new ideas . Stephanie julie jeff dunlop wanted to short the homebuilders. The second was down not as much as he said it would be. Erik that is one special ceo. Thank you are a much. Stephanie you will stay with us all they long, ill be there in a few hours. Erik stephanie this is my lucky day. Hedge Fund Managers and chrissy snow. Women in hollywood have never been more powerful but even now they must fight to earn them same as their male counterparts. One of the earliest counterparts to take control of for career Suzanne Somers was fighting for womens pay way back in the late 1970s while starring on Threes Company as the iconic character chrissy snow. She says she was fired from the program after asking to be paid the same as her costar, john ritter. I set down with her to talk about that and more. Suzanne my fame was first is chrissy snow and i did not own her. Getting fired for me was devastating but at the same time freeing, because i could go and be Suzanne Somers. Stephanie back then, getting a role like that was iconic. When you lost that job or you ready . Did you think youd made the biggest mistake of your life . Suzanne yes, yes, but in retrospect that igo is right, i was on the number one show with the highest demographic of women at any show that at that time. Stephanie was it just tradition, were they trying to keep you down . You had all of these ideas that they did not want to do, was a just linear thinking . Suzanne i remember getting a call from an insider friend who said that they were going to hang it on the marketplace and it is going to be a them a thought its not, they would not mess with that chemistry. But they did. And then women became afraid to ask for parity. And then when the ratings went down so low by losing battle that original chemistry, women started to be paid commensurate with their ability to sell tickets. Stephanie did it surprise you with superstar headlining acts or system getting paid less . Suzanne i was very surprised by that. I made a decision that i was not going to work for anybody anymore, i was going to work for myself. I think that as long as you have a boss you have to kind of stay within the confines of what they are willing and not willing to bend with. Stephanie how did you make that transition . You went from that character to building your own name and brand. How did you do it . Suzanne a guy came to my house with this device, it was not called the thigh master. It was called the need toner. K n knee toner. He was showing me how it was great for your pectorals and her biceps. I asked if it was good for the inner thighs. He said everyone was interested in the upper body and i said not women. We called it the thigh master that day. How it actually happened was kind of an interesting story i bought a pair of Manolo Blahnik shoes. At that time in 1990 it was like paying 2500 and all they were worth skin colored and nude i loved the way that they made my legs look long. I was in my dressing room and thinking that my husband will think i am so stupid for paying 600 for a pair of shoes so i walk out in my underwear and new shoes and i said howd you like my new shoes and he said great legs. I said it was the commercial. If you watch the original commercial its on its on those shoes and a comes up my leg with my husband and me off camera saying great legs and it became this iconic thing. Stephanie why make the jump to fitness . Today Everyone Wants to be in a fitness video, but we are talking 20 years later. In the 1990s we were not thinking that way. Suzanne if you realize you can put it between your knees ands wheeze you dont have to go to a gym and i could own it . I owned the product . For me it was a nobrainer. Stephanie there you go. She is in her 70s, how good do she look . She walked in here head to toe leather. She is extraordinary, so impressive. When people realize that she is the woman behind the final asked her she gets her own resort in vegas and is a huge proponent of people not using any kind of Plastic Surgery or drugs, shes a naturalist. Stephanie erik erik summing i was wondering stephanie are you a larry or a jack tripper . You are more of a mr. Roper. Erik all right, all right. Stephanie come on. I have to leave, unfortunately. Stephanie louise used to have a fire master. Totally. Okeydokey, im leaving. From Suzanne Somers to some of the most notable investors on the planet, what a day im having. See you in two minutes. After the break. This is market makers. Erik good morning once again. I am Erik Schatzker. Stephanie has gone off to a conference and you will see her in less than one hour. Lets start this hour with a bulletin of the top stories we are following right now, including the changing of the guard at cisco. John chambers is stepping down as the ceo of his Computer Networking company and he will be continuing chairman of the board and the new ceo successor will be the Senior Vice President , chuck robbins, who has been with cisco since 1997. Chambers was planning to step down already, so its not a huge surprise, but it does come early was cisco has been cutting jobs and overhauling hardware. Investors dont appear to be too impressed by the mcdonalds restructuring plan. Shares of the Worlds Largest restaurant chain are down by half of 1 . Steve easterbrook promised to remove and listen to customers as they try to reverse a sales slump. Mcdonalds is promising to return more cash to shareholders. Now this, the republican president ial field is getting more crowded. Carly fiorini and retired neurosurgeon, ben carson, both entering the race. Ben carson is speaking right now. [laughter] ben carson if you guys would not mind sitting down so that i could introduce our sons. My oldest son, murray, and his wife are right here. Stand up, please. [applause] murray is an engineer and his wife is an end analyst for a polling company. My middle son, dj, is right here. [applause] dj is an entrepreneur and they own a company that does placement and a lot of things, they own a lot of stuff, very cool. My youngest son, royce, is right here. His wife is at home with the baby. [applause] royce is a cpa and they all three got married in 2011. Thats fantastic. [applause] ok, now ive introduce my family , you are saying who are you . I will tell you, im ben carson and im a candidate for president of the United States. [applause] thank you. Thank you. [applause] now america remains a place of dreams. And a lot of people are down on our nation and want to point out all the bad things that have happened here. Have you ever noticed that there are a lot of people trying to get in and not a lot of people trying to escape, you know . It says something. It was a place of dreams for my mother. My mother came from a very large, rural family. She was shuffled from home to home. She always had a desire for education. But she was never able to get beyond the third grade. She married at age 13 with the hope of escaping a desperate situation. She and my father moved here, to detroit. He worked in a factory. In fact, i remember one Christmas Day right here in this auditorium, sitting right over there where poor gm employees they had a christmas program. Some years later my mother discovered that he was a bigamist and had another family. That occasion her to divorce him. She only had a third grade education and consequently we were thrown into a situation of dire poverty. She still maintained that dream of education, but now it was for us more so than for herself. We moved in with her older sister and brotherinlaw in austin. Typical tenement large multifamily quelling, boardedup doors. Gangs, murders. Both of our older cousins who we adored were killed. I remember when our favorite drug dealer was killed. [laughter] he drove a blue cadillac. They used to bring us candy. The rats in the roaches. You know, in the more upscale areas they call them water bugs, but we knew what they were. [laughter] my mother was out working extraordinarily hard. Two jobs, sometimes three jobs at a time as a domestic. Trying to stay off of welfare. The reason for that was she noticed most of the people she saw go on welfare never came off of it and she did not want to be dependent. She wanted us also to be independent and decided she would work as long and hard as necessary leaving at five in the morning, getting back after midnight day after day, doing what other people did not want to do to maintain her independence. She was very thrifty. She would try the car until it would not make a sound. And then she would go collect all of her dimes and nickels and quarters and buy a new car. People would say that how can you afford a new car . She knew how to manage money. If my mother was secretary of treasury, we would not be in a deficit situation. [applause] and, you know, there are many people who are critical of me because they say carson wants to get rid of all the safety nets and welfare programs, even though he must have benefited from them. This is a blatant lie. I have no desire to get rid of safety nets for people who need them. I have a strong desire to get rid of programs that create dependency in ablebodied citizens. [applause] we are not doing people a favor when we pat them on the head and say theyre there you poor thing, we are going to take care of all of your needs you dont have to worry about anything. You know who else says stuff like that . Socialists. And their programs always end up looking the same. They want to take care of people from cradle to grave but they want to be involved in every aspect of their lives. And they want most of their earnings. But they say itll be a utopia and no one will have to worry. The problem is, all of those societies end up looking the same with a small group of elites at the top controlling everything a rapidly diminishing middle class and a vastly expanded dependent class. That was not the intention for this country. This country was envisioned by individuals who wanted everything to be surrounding the people. Of, four, and by the people. Not of, four, and by the government. The government was to respond to the will of the people, not the people to the will of the government. We have allowed the whole thing to be turned upside down. I am not an antigovernment person by any stretch of the imagination. I think that the government as described in our constitution is wonderful but now weve gone far beyond what our constitution describes and we have begun to just allow it to expand based on what the Political Class wants because they like to increase their power and their dominion over the people and i think it is time for the people to rise up and take the government back. [applause] now, the Political Class wont like me saying stuff like that. I will tell you a secret, the Political Class comes from both parties. And it comes from all over the place, ok . It includes, unfortunately, even the media now. You know, the media, the press is the only business in america that is protected by our constitution. You have to ask yourself the question why were they the only ones protected . It was because the founders envisioned a press that was on the side of the people. Not a press that was on the side of the democrats or the republicans. Or the federalists or antifederalist. [applause] this is a direct appeal to media. You guys have the almost sacred position in a true democracy. Please dont abuse it. [applause] now, you know my mothers dream was to move back to detroit and we were eventually able to do that, but i was a terrible student. My brother was a terrible student and she did not know what to do, so she prayed. She asked god for wisdom. You know what . You dont have to have a phd to talk to god. You just have to have faith and god gave her the wisdom, in her opinion, my brother and i did not think it was that wise turning off the tv and making us read books and write book reports that she could not read, but it didnt matter because it worked. That was the key. I started reading those books which i really didnt want to and i started reading about people of accomplishment. I began to recognize the person that has the most to do with what happens in your life is you, not someone else. You dont have to be dependent on the good graces of somebody else. You can do it on your own if you have a normal brain and you are willing to work and have that cando attitude. Youve got to remember it was the cando attitude that allow this nation to rise so quickly. We had people did not stop when there was an ought obstacle. That is how those early settlers were able to move from one seat to the other seat across a rugged and hostile terrain. They knew how to do things. There were many communities separated from other communities by hundreds of miles but they tried. Why did they thrive . Because people were willing to Work Together to work with each other. If a farmer got injured, everybody else helped with his crops. If someone got killed, everyone else pitched in to take care of their families. That is who we are. We americans, we take care of each other. Thats why we are called the United States of america. What we have done is allowed the purveyors of division to become rampant in our society and to create friction and fear in our society. People are afraid to stand up for what they believe in because they do not want to be called the name. They dont want an irs audit. They dont want their jobs messed with or their families messed with. But isnt it time for us to think about the people that came before us . And what they were willing to do . So that we could be free . Nathan help, a teenage rebel caught by the british, ready to be executed, saying his only regret was that he had only one life to give for his country. A couple of nights ago i was in mobile, alabama. There were several world war ii veterans there in uniform. I took pictures with all of them. They were thanking me. For being courageous enough to do what im doing now. And i said no its you who we must thank. [applause] we think about all of those brave men and women who have sacrificed life and limb over the years so that we could be free . And we dare not spoil their efforts. By being timid now. And not standing up for what we believe. We have to recognize that one of the rules in first radicals is to make the majority believe what they believe is no longer relevant. No intelligent person thinks that way. The way that you believe is the only way that intelligent people believe. That way they will keep silent. I will tell you something, they dont care if you dont believe what they believe. As long as you keep your mouth shut. That is what we have to start doing, we have to start opening our mouths to the values and principles of america. [applause] and ive got to tell you something, im not politically correct. [cheering] im probably never going to be politically correct. Because im not a politician. I dont want to be a politician. Politicians do what is politically expedient and i want to do whats right. We have to think about that one together in this country. You know, this past couple of weeks . There has been a great deal of turmoil in baltimore. Where i spent 36 years of my life. We see the turmoil in our cities all over our nation. We need to start thinking about how we get to the bottom of this issue. I believe that the real issue here is that people are losing hope. They dont feel that life is going to be good for them no matter what happens. So, when an opportunity comes to loot, to riot, to get mine, they take it. Not believing that there is a much better way to get the things that they desire. Interestingly enough many of these people by hook, line, and sinker the idea that our economy is getting much better. And that you know, the Unemployment Rate is down to 5. 5 . You know what . If the Unemployment Rate was down to five point 5 the economy would be humming. Obviously its not. It is one of the reasons that our founders said that our freedom and our way of life was dependent on a well informed and educated populace. What you have to know is that you can make the Unemployment Rate anything that you want it to be based on the numbers that you include and exclude. You have to look at Labor Force Participation rates, the number of people eligible to work for actually working. That number has been steadily going down since 2009 and is now at a 37 year low. Unless you understand those kinds of things, its imminently possible for slick politicians and biased media to convince you that everything is wonderful when your eyes tell you Something Different. Im saying to people around the nation right now, stop being loyal to a party or to a man and use your brain to think for yourself. [applause] that is really the key to us as a nation becoming successful again. Not in allowing ourselves to be manipulated by people who think that they are the kingmakers. Who think that they are the rulers of thought. They are not the rulers of thought. We, the people are the rulers of thought in this nation. We get to determine the kind of nation we have. Other people cannot dictate that for us. We have never allowed anyone to take that away from us. We do that when we submit to silliness. For instance, the majority of americans were opposed to the socalled Affordable Care act. They just rammed down our throats and said this is the waves going to be and if you dont like it, too bad. That was never supposed to be the way that this country was designed. And if we accept it, it will continue that way and it will get worse. And we have to get the right people in place. We need to take not only the executive branch and when i say we are not talking about republicans, im talking about anybody with common sense, you know . [applause] we have to have another wave election and bring in people with common sense who actually vote actually love our nation and are willing to work for our nation and are more concerned about the next generation and the next election. Thats was going to help us. [applause] we also are going to have to concentrate on fixing the broken economy. 18 trillion in National Debt. We have representatives who applaud themselves if the deficit doesnt go up as much this quarter as it did last order. They are completely out to lunch. We have got to drive that thing back down. But it is our responsibility. You need to know who your representatives are how they voted, not how they said they voted, and if they voted to keep raising the debt ceiling, to keep compromising the future of our children and grandchildren you need to throw them out of office. [applause] 18 trillion. Think about what that means. If you tried to pay that back at the rate of 10 million per day, it would take you over 5000 years. We are putting that on the backs of the people coming behind us. This will be the first year that the National Debt seeds the gdp. Economists will tell you that when the debt to gdp ratio reaches 90 at that point economic slowdown is inevitable. We have been doing this for a while now. From 1850 to 2000, our economy grew at a rate of 3. 3 at least, even during the wars. From 2001 to 2014 it grew at a rate of 1. 8 . That seems to be the new norm. You probably saw the headlines recently in the last quarter, we were like. 2 . This is not good. I dont care how anyone tries to spin it. This is what happens when you have a gdp to debt ratio 103, which is what we have now. This is what we have got to fix. Weve got to that immediately because we cannot continue along the pathway. It will have dire consequences on the long run and i will be giving an indepth economic speech in the weeks and months to calm with a lot of details about things that have to be done, but we need to fix it. We cannot just talk about it. How do we fix it . Well, recognize that we have the most dynamic economic engine the world has ever known right here in america. We need to use it again. We cannot work it when we rampantly change the regulations that come out all the time. It doesnt work. It doesnt work when you have high taxation rate that are absurd. You know we have the highest Corporate Tax rate world, yet sit there at least some of our officials do they wonder why people do work out do work overseas. They obviously dont understand business. People do not go into business to support the government, they go into business to make money. [applause] we obviously have to create an environment that is conducive to them making money. That means lowering the Corporate Tax rate, making it competitive, and if we were really smart we would do another big stimulus. You are saying what . What did he just say . Remember that big billion dollar stimulus that we were supposed to have it the beginning of the Obama Administration . Whatever happened to that . I know where we could get a big stimulus. Two dollar chilean and offshore money that we can bring back because the tax at 30 two dollar billion in offshore money 2 billion in offshore money that we can bring back. [applause] that is the kind of thing that we have to start thinking about. Think about if you go to a Financial Advisor and, you know youre in trouble, they will tell you they will ask you for questions. What do you own and what do you of . Well, we go a lot. Its not just the 18 trillion its the 211 dollars trillion in Unfunded Mandates as well. We also own a lot. I mean, just in terms of land and mineral rights we are probably at least 50 chilean. We owned dams. We only these. We own railroads. The government owns 900,000 buildings. 77,000 of which are being not utilized or underutilized. How about that . At the same time, the government is leasing over 500 million square feet from the private sector using your taxpayer money. It is horrendous when you look under the hood. You want to shut it back down. It is that bad. But i want to tell you what we are going to do. As god ordains it, we wind up in the white house, i tell you what were going to do. We are going to change the government into something that looks more like a wellrun business. [applause] and when i say we, im talking about our team. When i started this endeavor i am familiar with the man who started over 30 companies he is extraordinarily successful. I asked him to put together the rest of the team in order to be able to do this that do do this. His name is terry jobs. Where are you, terry . Right here. Now that we are transitioning from an exploratory committee, ive asked him if he will take the lead in helping to select the people who will be able, who have had enormous experience with business and with making things work so that we can transition our government from this inefficient thing that we have into something that really works and something that works the way it is supposed to according to our constitution. [applause] we also have a great team. We have our lets see, who do we have . [laughter] we have our chairman, Barry Bennett who never wears a tie but you will get used to seeing him, he does a terrific job. And we have our director of communications that rocks. [applause] he does wear a tie. And we have our treasurer and finance director, logans eleni logans eleni. [applause] and we have our national spokesperson, [indiscernible] [applause] and we are going to be doing Different Things than you have seen before. Because its not political, as i said before. There are people who said look, you can do this, you dont have any experience. Let me tell you something i dont have a lot of experience busting budgets and doing the kinds of things that have gotten us into all the trouble we are in now, but i do have a lot of experience in solving complex surgical problems that have never been done by anybody before. I do have experience Corporate Board experience for 18 years with costco and a biotech company. Candy and i do have experience starting a National Nonprofit scholars fund. Nine out of 10 of those fail. Ours is thriving in all 60 states and has won several national awards. So, the point being that you can gain experience in other ways. It doesnt have to be just in politics. I can name a lot of people in politics who have been there their whole lives and you probably would not want them to polish your shoe. We need to be smart enough to think for ourselves, to listen for ourselves. In terms of the pedigree that we need . You know something i have to tell you, everyone has been telling me are you ready for this . They will come after you with everything under the sun, they will look through every record that you have, said you are a horrible dr. Everything you could possibly imagine i know that. Its the way they are. I expect that. Its ok, dont worry, just listen to what is being said. Im not even asking everyone to vote for me. Im just asking people to listen to what im saying, listen to what politicians are saying and make an intelligent decision based on your intellect. The real pedigree that we need to help to heal this country to revive this country someone who believes in our constitution and is willing to put it on the top shelf. [applause] someone who believes in their fellow man and loves this nation and is compassionate. Somebody who believes in what we have learned since we were in kindergarten. That is that we are one nation under god, indivisible, with liberty and justice for all. God bless you, god bless the United States of america. [applause] the dr. Is in. Ben carson, one of the countries leading neurosurgeons at the center for the arts in detroit saying that he wants to be president of the United States. Formally declared a republican in this race, someone that americans will get to know he already has quite a following and he shared today why. I think of the five who have gotten a speech and he is the only one who has worked completely without teleprompter doing his very folksy very approachable, very conversational kind of announcement free of a lot of the rhetorical flourishes of most standard candidate to run for president. That is the personality of the man who has enjoyed has attracted the intensity of the following. He does come across like a there is a pundit like quality to him. He is talking about it in a way that you can imagine a conservative columnist talking about whats wrong with america. You can see why that resonates with a certain segment of the electorate. Carly fear rina also got in the race today in an even more unconventional way. No public event, but rather an interview on abc with good morning america, a video on her Facebook Page and a press conference by telephone with reporters. Both of them prostrating themselves as outsiders and neither very specific about what they would do as president. As we said before carson started, the outsider thing is a very potent trope, they are in fact outsiders, neither one of them has ever Held Public Office before. Carly fear he ran once and lost during the senate for california, but to illustrate your point i think about the lack of specificity on that conference call. I know there was a question about some specific ideas on the economy, supposedly her strong suit, and she answered in a wholly vague and unsatisfying way. She had some words to say about that, but no real substance. She has time to do that. Many people are not specific on their announcement day. But many candidates will need to be more specific if they are to be taken seriously. Not in the first tier as far as we measure these things but if you look at the current field of announced and likely candidates in last place from 0 is about 15 at most, so i think that both of these candidates have a chance to be part of the mix and considered if not as front running candidates at least in the context of the debates in the early states candidates to be reckoned with and putting forward ideas to be taken seriously. Ben carson and Carly Fiorini in very different places in those respects. Erik coming up here on market makers, we will be turning our attention to an issue that will be a target for the republicans the president ial race the minimum wage and why it may be a better deal than you think for employers, a higher minimum wage, that is. Erik you have all heard the moral argument for a higher minimum wage. Heres the economic argument underpaid workers are costing american taxpayers billions of dollars, so says berkeley professor ken jacobs who argues that the government is effectively subsidizing companies that pay employees just 7. 25 per hour in the form of things like medicaid and food stamps. Professor jacobs is with us now from berkeley. Professor, elaborate on what i just said. Encapsulate your argument for us. When businesses do not pay enough for workers to get by and pay their families, they rely on public assistance to make ends meet. When we look at enrollees in the program, 74 are in working families at a cost of about 153 billion per year to the u. S. Taxpayer. The case that you are making is that we taxpayers in Subsidy Amount to 123 billion per year because if employers paid those people a socalled living wage they would not need the government Subsidized Health care . They would not need the government to pay for stamps and that kind of thing . Professor thats right, they would not need to rely on food stamps to put feed their families. Its fairly basic. We have looked at the evidence and when you increase the minimum wage you do decrease foodstamp utilization. It makes sense. Right now we have a situation federally in which people make far too little to meet their basic needs and support their families. What about the argument then that these companies if they were to pay 15 per hour say they would not be competitive and in some cases they would not be profitable enough to raise capital, they might not even be competitive enough to exist . Professor we look at that with a few points there. One, most of these lowpaying jobs are in place specific service sectors. We are talking restaurants, retailers, security guards. If everyone has to raise the wages across the board firms will be able to compete and what you do see is people staying on the job longer in terms of training costs in terms of the cost of minimum wage getting absorbed that way. And then the firms raise prices. The actual price increase is very small and spread across a wide range of tumors while the wage benefit is quite large and concentrated. Erik ok, there are a couple of things that we need to raise in response to what you just said. If companies raised prices to accommodate or account for the higher cost of operations, 15 minimum wage, they are going to have to pass some of that on to some of these companies they have some skinny margins and they are going to pass that cost on largely to the consumers, as you just said. The problem is that the consumers are the same people paying the taxes. Isnt it the case that we are we the taxpayers, will pay for this one way or another either through taxes or the higher cost of things like a mcdonalds hamburger . Professor whats important here in terms of basic fairness is that people can earn enough money to survive and get by. In los angeles if they raise their minimum wage to 13. 25 per hour, cost of goods would go up one time. 15. 25 per hour, a little less than 1 . Again, a onetime increase. We are talking very small increases spread broadly with a concentrated impact on those workers in terms of the amount that they would receive in what it means for their Family Income is quite significant, which has big, important longterm effects on Childrens Health and educational prospects which also say the economy money in the long run. Erik even if it is a small amount of money if you make most people pay for that increase isnt that in a sense more unfair . Because right now lets call them the wealthy, poor people do not pay much in the way of taxes. Wealthy people do pay taxes and those go to subsidize, using your argument these underpaid workers, so the better offer paying the subsidy where if it became effectively like a user tax, if you will, for buying hamburgers or, you know, staying at a hotel a larger group of people would wind up bearing the burden. Professor first of all, poor people do pay taxes. Payroll taxes and the like sure. Sales tax and etc. Not much in the terms of federal income tax, thats right. Overall, though, the question is what will happen to the longterm economic benefit . Do people have enough money to survive to support their families . The data is very clear in terms of what that means in the longterm impact on children and educational achievements on their Health Status in the long run. So, it becomes a question of basic fairness and dignity. People should not have to survive on food stamps when they are working hard. Erik i think that most people would agree on that. Professor jacobs, thank you very much. Ken jacobs there with the economic argument for a higher minimum wage. Coming up you notice that stephanie is not here . Shes live from the conference in new york city talking to some of the biggest names in the investment industry and you will hear from her in just a moment. Erik stephanie left about one hour ago and now she is at the conference here in manhattan with some of the worlds biggest Hedge Fund Managers are offering the best ideas. Why . To raise money for charity, of course. Whats coming up . Stephanie its not just to his speaking this afternoon. We discussed this earlier, we will have jeff dunlap, bill ackman, david pepper. At 12 00 streaming on bloomberg tv we will have the entire blue David Einhorn presentation. This is the guy who as soon as he utters the name of a company you start to see the stock move. The audience are not just hedge fund enthusiast looking for a great idea, its also their peers. I spoke to whitney chilton, dan goals, many other hedge funders are spending the money to come here because think about the last few years a drought of good ideas they have all come here today and are all going to hear from some of the best investors out there. I am excited to be sitting down with them. For me Barry Rosenstein is one of the most effective activist out there. You know this as well as i do, this guy get so much done and he does it without getting bill ackman style and the timing could not be better. Just yesterday carl icahn commenting on the larry fink approach about how activists have hurt Corporate America its great to hear from him and bill. Erik you raise a good point. It makes me wonder if some of the popularity around activism is more than just a trend, right . People will argue the asset class right now and it is because these Asset Managers genuinely have new and different ideas as opposed to you know some of your to your point crowded trades of the last few years. Stephanie listen, activists have always existed. Carl icahn has been in business for decades. We spoke to Duncan Miller a few weeks ago about the map the amount of people who are attempting to follow activists and are turning it into an asset class. When you no longer have investors trying to influence companies with that second and third tier merely chasing things around and putting pressure on ceos to make that decision thats when there are really Big Questions around activism. Listen, you cannot they that bill ackman pumps and dumps. He stays with trades for a long time. Carl icahn might want to get out of herbalife, but he cant. These guys face significant stakes. I am going to be seeking to Keith Meister in a few hours an activist you did not hear about a few years ago but hes making himself more wellknown in the industry. Think about this, verbal life earnings are out tomorrow and im pretty confident that hell will have a few comments. Stephanie erik stephanie, i cannot wait. I will see you in las vegas. Folks, that does it for market makers. Stay tuned to Bloomberg Television all afternoon. It is 56 minutes past the hour. Im scarlet fu. We are midway through the u. S. Trading day on this monday afternoon and the dow industrials are up by 68 points coming off of two days of triple digit point moves gaining four tenths of 1 . Treasuries are currently rebounding from last weeks selloff, the yield on the 10 year actually 2. 1 3 . Let me change that, treasuries a spending last weeks selloff, that yield is moving higher. Conference futures the theme all morning long under pressure the latest pmi showed a contraction in april coming right now it 291. Joining me for the options insight is the derivatives strategist at m camp holding. The uks on holiday, a lot of the markets last week ended with a holiday after friday. We had the big jobs report on friday. Is the essential that it may go away, is that the theme for Equity Investors right now . Collect as much as the people may be talking about selling and going away most professional investors want to continue to participate as we breakout. Scarlet we have factory orders this morning showing some strength a bit of a surprise because that weekend was a team of late. Is that encouraging . It is if you look at last week where new orders bounced after being down very sharply in the mid 60s towards the end of last year. Obviously First Quarter last week came in very weak, up 2 10 of 1 but our house view is that it is temporary and we expect acceleration of u. S. Economic growth akin to the 2014 First Quarter real gdp being down with the next few quarters averaging positive. Scarlet we will be playing catch up later on, but what is your and interpretation of what happened in the treasuries . A reflection of the fact that the weakness and you act that u. S. Economic growth is only transient. We are obviously also talking about the employment part this week. U. S. Economic growth is going to reaccelerate, including the long end of the curve like the last week. Scarlet keeping all of that in mind you have a trade for us that links up with the macro outlook for the United States on the powershares etf that tracks the u. S. Dollar, tell us about it. For everything we have talked about, dollars and dollar index is coming in 6 over the last couple of months we think that the broader more long term is for a strengthening dollar, particularly into fed tightening some point this year in september. We want to express that through, as you said going all the way out to september options expirations capturing the fomc meetings in the near term with a potentially stronger, more in line influence for friday being a shortterm catalyst to reverse the dollar for the next several months. We again want to express that through september with 26 straight calls and volatility lifting a little bit but not so much that you would not just go out and buy those dollars. Scarlet capturing that fomc the basic thrust is the dollar in april being temporary . Exactly. Scarlet thank you for joining us. We have much more Bloomberg Television, coming up. Pimm welcome to the special edition of money clip. I am pimm fox. Hedge fund manager David I Horne Einhorn is asked scheduled to give a presentation. Investors are sharing their latest ideas but we will take you live to those remarks as soon as they begin. Stephanie ruhle is at the Investment Conference. Julie hyman is in the newsroom to follow market reaction. Stephanie, lets begin with you. How much