We are live on the salt conference in las vegas. I am Erik Schatzker. Stephanie i am Stephanie Ruhle. Day two and we had an extraordinary run already. We will be speaking with the one and only jim cahanos. Leon cooperman at 11 00 and john burbank at 11 30. You better sit down, strapping and dont go anywhere. Erik that is one heck of a lineup. Lets start with a bulletin. Stephanie Erik Schatzker in vegas, a whole other level. Erik top business stories of the morning. Alibaba has a new ceo, daniel zhang, they chief operating officer for the past two years. He helped turn the companys single date shopping day into the biggest revenue. He replaced jonathan who will remain as chairman. He spoke earlier to bloomberg about alibabas strategy. Daniel we manage our business by creating value for longterm customers. By creating values for the disappearance for the participants, so we believe that the investors will like us as long as we continue our belief and continue creating value for customers. Erik will investors like alibaba more . The stock is up eight percent and alibaba reported 5 increase in quarterly revenue, beating analyst estimates. The market by you has dropped by more than 70 billion since november. Shares of tesla trading lower. Morgan stanley came off with a report calling for cash, i watering. The report says the current rate would use of remaining cash in about three quarters. Income, tesla did sell a Record Number of electric cars in the First Quarter and they are standing by the full years sale forecast. They just in unveiled Stationary Battery packs for homes and businesses. Elon musk says harper demand is overwhelming. Elon musk we had request for companies that wanted it distributed. We cant even respond to them. We have to triage our response to those who want to be a distributor. It is crazy off the hook. Erik tesla also says their data factory is on track to start making battery cells and storage packs by next year. The biggest threeday loss in two years, the shanghai, visit lost more than a percent in the past three days. Meantime, for the first time in more than seven years, Morgan Stanley chief asia strategist has downgraded chinese stocks. Jonathan garner points out profits are the weakest since 2009. Lumbar liquidators is still reeling from that report on 60 minutes. They are suspending sales of the floors in china. Former director, investigate suppliers certification, and labeling processes. They sold laminate flooring that contain levels of from all can cause cancer. Hedge fund manager dan loeb says he likes reading Warren Buffett annual letters because he finds them filled with inconsistencies. Speaking right here at the salt conference in las vegas, dan loeb said yesterday, i like kelly criticizes hedge funds and he really had the first hedge fund. He criticizes activist, he was the first activist. He thinks we should all pay more taxes, but he loves avoiding them himself. Buffett is not commenting on dan loebs comments. Election underway, David Cameron has already cast his ballot. One of 50 million britons ready to vote. He challenges the labor party leader. We are subject to strict british laws on what we can actually report until the polls close in tonight. Election underway and we know who the Party Leaders are. That is where we will leave it. Stephanie jim chain us has a lot to say. He is part of our allstar lineup. Jim collins i have to start with dan loeb and Warren Buffett. What do you make of dan, erik hes not shy. Stephanie he couldnt avoid a fight with a none. What do you say . Jim good morning, first of all. In the short, i will defend almost any right of anybody to say things that they have opinions on. I think that shortsellers had french managers, activist, and icons are all covered by the constitution. I think the problem and the reason the story has exploded this morning and last night is because i think we are all to blame. It is about personalities. People like to talk about soandso versus soandso as opposed to ideas. We see this over and over again. I think it is too bad because a lot of interesting ideas are out there. Warren said that a lot but when it gets down to personalities, i think the investor in the public is shortchanged because we call this one every great short we have ever had has said really really smart people on the other side and conversely we are wrong on off a lot of the time. When we think we have a good idea, it just does not work out. If you are shorting an idea because choanos is in it, you have not done your work. Erik even if it is more about dan loeb versus Warren Buffett and something else, because some of that is true . I have observed over years that sometimes you have to watch what Warren Buffett does and not what he says. Stephanie do we give him a free pass . Erik he says he will zig and he zags. Jim i hope when i am 85 years old i get free passes, too. We have looked at companies that buffett has been involved with. Again, they rise and fall in their own merits. I remember cocacola in the late 1990s, they were playing some of the most egregious accounting games i have ever seen back then. Between itself and bottler. And you know, a very wellknown name you are talking about this morning was on board. Defensively, complaining about accounting at the same time. Im sure there is justification, but who is engaged in text hypocrisy . Erik could you ever see a rationale . Erik jim yeah, if the numbers get bad. Stephanie youre not taking a look at berkshire . Jim sure, we look a lot at companies. Stephanie this is a name people talk about herbalife but this is a name you have shorted. We have seen it in a big way blowing up over the last two days. Should we be paying more attention to it because it seems all he talked about his herbalife . Jim in the multilevel marketing, it is all about the bulls versus the bears. To us, you talk about personality. Stephanie and the 50 million. Jim you know what . If you want to do shorts i can do the less for 50 million. I will do them for 40 million for you, all kidding aside. We were short herbalife back in 2011 and into 2012. As we were looking at herbalife, we saw that new skin with the china exposure, given our views on china has real risk. That had been lost in the shuffle and his down quite a bit. The bulls and bears battled out. Erik what happens next . Jim we see. They announce an fcc investigation last night. We will see how it plays out. Erik jim, i know you have been taking a hard look at some of the oil mergers for a long time. Where you short . Did you have any significant short positions heading into the oil . Jim we did and still do to a lesser extent. We have been short of not only the majors but of north american emp few years. We have been talking about it for a few years. The majors are much different story than the north american factors frackers. Earlier this week, the majors have a much difference different problem and that is replacing reserves in difficult and expensive costly places. The north american fracking story is an Economic Business model story. Erik why is the short position now . Jim they have gone down a lot. We covered some shorts in the First Quarter but stocks have snapped back quite nicely and they will do it again in this area. In the majors, they are all unique because they have their own geologys, locations, and stories. Erik some like the arctic golf, middle east. Jim exactly. I dont want to give anything away. Stephanie ok, lets talk about another iconic guy with quite a few super fans. Not warrant buffet but elon musk. Tesla is a name people love to love. Jim i more skeptical in tesla. We focus on personalities and fax. You referenced the Morgan Stanley piece this morning on cash burn. The higher the cash burn with more sales. That is not a position you want to be in. Gross margins in the auto business, tax credits are dropping. Not going up. As an auto manufacturer, you want economies on scale and margins to be flat to up. Then there is this nonsense about the battery. He basically, mr. Musk, referenced the fact that the smaller of the power wall units is really not economic and he acknowledged it in the u. S. [indiscernible] we had done some work on that last week and penciled the numbers. With the exception of peak hours in california, it would not be economic. This story is all about 2020 20 25. I keep pointing out that analysts who have been precise evaluation support 2025 on this company cannot seem to get the support. Erik you have to get elon musk some credit for inspiring people to suspend disbelief. If they can suspend this belief for long enough, can he get to a point where he is generating enough cash with this company low on the risk . Jim anything is possible, but i am in the business of trying to bring believe back into suspension scale. Stephanie any updated thoughts . Jim it is interesting, it came it seems to be the gift that keeps giving for the skeptics. You know, it is a troubled company. It is far more tumbled that we got far more troubled than one euro when youre in half ago. The corruption in has proven to be deeper than we thought. They have problematic issues. Again, a lot of the value of their is on the production and exploration Going Forward in the next five years. I think it is interesting that the stock has also bounced around oil. The numbers are pretty grim. We have covered almost all positions. Stephanie jim, such a pleasure. Jim my pleasure. Stephanie one of my faves. Founder and ceo of kynikos. Erik coming up, much more when we talk about alternative money. Stephanie we have a whole lot more to come after that. Larry summers, leon cooperman and john burbank. Stick with us. Erik welcome back. The special edition of mark it makers of Market Makers. We are alive at the salt conference. I am stephanie wrote along with i am Erik Schatzker along with Stephanie Ruhle. Stephanie i hate when you say your partners name. Just telling you how i feel. Erik i will respect to Going Forward. Sometimes she says she is me. All right, tenenbaum is here, the ceo and founder of 5th street management. A firm with more than they do direct lending and has short credit hedge fund. Talk to us about over the last couple of weeks, both here and biggest and last week in los angeles, we have heard Credit Investor after Credit Investor say there is no value in Public Markets. The only place we can make any real money is in private markets. Do you agree . You have the regulatory arbitrage, the banks pulling back from the market and ge capital under 900 billion and selling their Business Unit and that creates an opportunity. The regulators created an opportunity in credit. The other side is Corporate Bond market. The quote that you get from banks are not right. You try to sell out of the hedge fund and it is quoted at 9495, the real quote is 83 or something really wide. Stephanie the price is very different. Len that is a problem for transparency. There are no reportings of trent actions. You can take that and be on the inside spread. [indiscernible] erik what you say is interesting because, again going back to his credit specialist, they have all been warning about liquidity problems. You are saying there is already a liquidity problem. Len only 5 of Corporate Bond trade in the middle market is traded by appointment. You have to call the agent, saint i would like ask who you should sell to. Isnt it amazing that this is the last market really . Wall street cannot put up capital. Stephanie would they ever . Len they did a little bit. Thats a very good point. When the market this locates it is a liquid anyway. That in liquidity is incumbent. It was six when others side. The market this locates and it is guys like us that will buy fundamentally good credits of the 70 even though it may be worth 100. Stephanie if someone said, he does direct lending, ceo business and most private market, i would say, are you kidding me . I would you ever do that . You are right back in that jam are you not worried that we are facing the bubble and how you are going to get out . Len i will point out that in 2008, we took one of our Public Companies one of our companies public. We had capital window no one had capital and that was really one of the reasons i was able to build 5th street to the credit asset manager it is today. Today i totally agree that the upside is unlimited. There is a significant downside and you have to wait in order to swing. It is coming. For the credit alternative providers, we are going to have real, real edge in the market. We can capture all the when it this locates. Erik if there are no risks in the migration of Credit Investors like yourself from Public Markets to the private markets the credit analysis that you bring to the problem is the same whether you are buying security or a derivative instrument or whether you are underwriting alone, but the characteristics of that investment in the way we perform equity liquidity is different . Len Public Markets are in a bit of trouble. Over 75 less than 1 and we have providence and all ideals because we control them. Be structure them. When the market this locates, when the market this locates erik what about the loans to underwrite directly rather than the ones you buy in Public Markets. Len the Public Markets have really expanded to the highyield market. The hedge fund idea is short the xyz. Stephanie killing highyield bankers are facilitating deals that are knowing liquidity is so poor and you have taken businesses from tanks the from banks because of regulations, when you ever invest again . Len when we talk to institutions, people say, can i understand your business . I say, it will take a lot of work. The allied capital collapse and i am privileged to be in the acknowledgment section. In reading his book, you can see the level of detail you need to be able to go through and the analysis to understand the financials and even Business Development companies. I say, unless he will apply the time to understanding them, it is probably very difficult. Erik credit etfs, tremendous innovation or a bomb waiting to explode . Lnelen i think it is another vehicle for those who are not doing a full evaluation can put a valuation of credits and call it something. I think fundamental analysts is what you want to invest in. Whether 5th street or another house, there are several that originate structure and create loans. Stephanie the credit etf solved a liquidity problem for those that want to get into the credit game and civic can navigate those waters. Len not would markets turn. We talk about the role of alternatives yesterday on the panel and it was great. What is the role of alternatives in the market . The role of alternatives are to act as shock absorbers and act and without all other alternatives, there will be no liquidity. Erik thank you. Len kennebunk, the ceo of 5th street management. Stephanie we will be back with more from salt. We have great stuff coming up. Erik we are live at the salt conference in las vegas. So much coming. Larry summers, leon cooperman of omega advisors. John burbank of Passport Capital at 11 30. Stay with us. Stephanie and i will be here all day. Live from bloomberg headquarters in new york. This is Market Makers, with Erik Schatzker and Stephanie Ruhle. Erik welcome back to Market Makers pickup by Erik Schatzker. Stephanie i am stephanie role. We are at the salt conference in las vegas. Erik top business stories of the morning, we will give that to matt miller who was in new york with headlines. Matt exchange at the top of alibaba. The Biggest Ecommerce Company will have a new ceo, daniel zhang who replaces a jonathan who will stay on as advised chairman. He told Bloomberg Television he hopes to build a Global Platform beyond china and called alibabas strategy a long journey. Daniel by creating value to longterm customers and bringing value to participants. So we believe that we will that investors will like us as long as we continue our belief and continue creating value for customers. Matt john herb john helped turn out a bob is singled a promotion into the biggest day for sales. Shares of alibaba are up more than 60 more than 60 . Sales rose 45 . Cable tv and movies are driving profit. 21st century fox earnings rose thanks to higher fees for paytv distributors. The fox broadcast is hurting. They have fallen 21 this year among younger viewers. Fox president says there is still plenty of value there. Fox network isnt a turnaround on the entertainment side. Nonetheless, it continues to be a driving force. Matt fox had a couple promising hits, hiphop drama empire, and gotham. An eightweek low the comfort index fell for the fourth time in a row. Those at the bottom of the income ladder, things are going to her. The weakest quarter in one year. Forget about nationwide tv mergers, timmy dolan wants a regional merger. He spoke at the internet and Internet Television expo. I think consolidation of that marketplace would provide one great deal of ingenuity and much more access to resources for the customers and lower prices. I think it will be great business. Matt comcast decision last month to scrap merger with Time Warner Cable has led to speculation about what is next in the industry. Going to college is still the fasttrack to making a good living as long as you pick the right major. A study from Georgetown University analyzed earnings of graduates. Architecture has much higher salaries than teachers but they but the Unemployment Rate is twice as high. Thus, not all science degrees are worth the same. Earlier and careers, biology majors earn about one third less than physicists. What does las vegas think about the scandal over new England Patriots underinflated the balls . At least one sports book wont take bets on the patriots opening game next season. Speculation that tom brady could be suspended for his role in that scandal. A report for the nfl says brady probably knew the team intentionally underinflated calls for the League Championship game. The patriots are denied claims. Back to you in las vegas. Erik thank you, matt. Not only the top names on wall street in las vegas, some of the most important people in washington are here as well. One of them is very summers, he served as president obamas chief Economic Advisor and before that, press advisor under clinton. Stephanie true global citizen. Erik thats true. What is going on in the economy . A hideous march hideous First Quarter and march drop. Larry summers we have had a selloff in treasury markets for a 10 year yield of that has got from 185 all the way up to 21. 221. Larry summers i will not predict the job market. Who knows what that number will be . Markets swing and they often slingk too far. That may be a bit of the story on what happened. I think waving i think what is more notable than the 185 to 222 is that over the last year and a quarter, treasury yields are down and not way up. Everyone expected, almost everyone expected, the beginning of 2014 with the economy recovery that we would see treasury yields back way up and they are still way below where they were at that time. I think that is because of a dawning and growing awareness in the market of the idea that i and others that have been pushing for some time, that we may have a chronic excess of savings over investments over the economy. The phenomenon known as secular stagnation. With that chronic excessive saving overinvestment, we will intend to have deflationary pressure, we will tend to have on a global basis, pressure downwards on yields. We will have low real rates and it will be a bit of a challenge to maintain the momentum of economic activity. I think that is what we are seeing. Yes we can enjoy reasonable growth and yes, we can enjoy reasonable Interest Rates, but it is difficult to enjoy both of them at the same time. Stephanie what are you most worried about right now . You brought up secular stagnation 16 months ago and was one of the people who set a bond rally is coming. What has got you concerned today . Larry im concerned that growth will not pick up. Im concerned that we have seen a fair amount moderate amount of growth in the u. S. Over the last five years but it has all been cyclical. It has all, a decline in the Unemployment Rate. It has all come with a decline in the and implement rate. Im worried that the number will be low in the United States coming forward. Some of that is due to lack of demand and some to issues on the supply side. I am worried that part of what we have to do and the part that is not getting discussed centrally in the political debate is that we are not going to succeed as a country unless we get the underlying growth rate of our economy up by a significant margin. Erik would you say then, if you are right and beyond the Structural Conditions are such that we will be in a low period for a while, but folks who was my people here yesterday talking about the bear market bonds and possibly larry im not going to make trade recommendations for you. I dont think the days of normal being a 4 Interest Rate are going to return any time in the foreseeable future. I dont think the economy has the underlying strength to maintain a basic momentum of growth at a 2 real rate plus a 2 inflation rate. I think the increasing awareness of that in markets is going to act as a restraint that keeps medium and longterm yields low. I also think there is a danger, a quite significant danger, that people will confuse the one off adjustment when our economy gets competitive and stronger because of, for example, a weaker euro with underlying growth. I think the supposition that we are out of the woods in europe is not awarded supposition. Stephanie what you think of china right now . Larry i think theyve got a very difficult set of challenges. They have proven themselves highly competent so often in the past that you cant write off the prospect of success. But normal is a new version in growth rates and that would mean a very substantial slowdown for them. Normal is that is very difficult to fight simultaneously financial bubbles and credit induced slowdowns. Because of what you do to reduce credit induced slowdowns can exacerbate the bubble and vice versa. You are seeing growing signs of fraud in their equity markets, even as you are seeing signs of a slowdown. You are seeing them move toward the exhaustion of the easy growth that comes from moving from rural areas to more productive and urban areas. I think they have a very serious set of challenges ahead of them. And that what we have seen again and again is that when debt fueled growth and, whether it is in the United States in 2007 or in japan in 18 1989 or perhaps whether it is in china today, it rarely ends gently. Stephanie if i was running for president , i would want to have you by my side. To understand the Global Economy would seem to be so important. What you make of the criticism against Hillary Clinton that maybe she is too close to you or to close to wall street . Larry i will let mrs. Clinton speak for herself. I have known her for 20 years. I have enormous admiration for her. I certainly dont have any formal role or expect having any formal role at all with respect to her campaign. I certainly think she needs to be listening given the novelty of the problems we face to a whole range of new voices and new perspectives because i think the constellation of economic challenges that we face right now is really quite different than the constellation we faced in the past. It is too little demand rather than too little supply. It is the inflation. In this centrally got to do with any inequality, something that is also rooted in our politics. Weve got a quite different constellation and we all need to been the benefit of all the thinking we can possibly get. Erik we could spent all morning talking to you, thank you for talking to us. Stephanie an honor. Larry thank you. Erik larry summers. Stephanie Market Makers will be back in a few. We are live at the salt conference in las vegas. Stick around. Stephanie welcome back to Market Makers. I am Stephanie Ruhle. A lot of people we hear from this week are talking about europe. They are safe assets are ripe for the picking. He recently launched a brandnew fund focused on distressed european credit. Welcome. We will start with europe. And your mortgage focused correct . In the u. S. , mostly. In europe, a host of other. Market lending, Bank Regulatory capital deals and other aspects. Stephanie it seems like it is getting a bit crowded. Every person who has sat in your seat for the last two days was in the hedge fund stages and said direct lending, middle markets, regulatory changes make assets right for the taking. Are there enough feels to be done . Philip i think there are interesting opportunities in europe that i think it is more hype than reality. I think there are plenty more opportunities we find in the u. S. Our fund has probably 25 of investments in europe, 75 in the u. S. The u. S. Is full of opportunities. A lot of people talk about european banks shedding 2 trillion in assets i was just going to say we have been hearing that for years. It is not happening. There are specific opportunities we are finding in europe but i would not say that is where people should be spending all of their resources. Erik what are you buying over there and why is it mispriced . Philip we are buying tank regulatory capital deals which are basically banks selling thanks entrenched in risk that enables them to free up the capital against their portfolio. I would not say it is ms. Price but i do think it is priced cheap predominantly because of very complex negotiation between the investor and the bank. As a result, you can get a coming yields. When you look at commercial real estate, there are a couple things you have to consider. Commercial real estate wants, one, where are we in the commercial real estate cycle . And where are we in the credit cycle in respect to lending . And where in the capital structure are you buying . People have said recently, is a commercial Real Estate Lending standards loosening of it or are you getting worried . You cant look at that without considering where we are in the cycle itself. Commercial real estate cycle is a 10 to 15 year cycle and we think we are in the early stages. Stephanie so they are getting deals right now . Philip i think there are lots of opportunities for commercial real estate to appreciate. Erik what about resident what about rosie Residential Real Estate . Philip it fell 32 in the cycle and has probably recovered 55 of that. It is down 15 . It has been constrained a bit by lending whereas on the commercial side, it has more of a rebound because you have more in lending. Stephanie we know what the battle between hedge fund and the lack in those versus fannie and freddie are, but what you think it should look like . Philip there was all this talk about the gf seat reform and it entailed privatization. Obviously that has not happened and i dont think it will happen. They have repaid all the debt to the u. S. And they paid handsome dividend. I think now the profitability is huge. I dont think the political winds in washington will be Strong Enough to close it down. I think they stay where they are. Now the question of is the equity worth anything or is it not . We just saw the Quarterly Earnings and all of the earnings were swept to u. S. Treasuries. That is a battle that they are play with that option now the and maybe there will be value in the equity of the gfc, but my guess is it will keep sleeping to the u. S. Erik two philip i dont spend time studying that we are observing the sun from the sidelines. Stephanie when i look at the business you are in, specifically, i think, didnt we say just five years ago we are never going to be in this state again . Phillips i dont know if we said that. Look, clos we are very active in stephanie there is a need for a four letter word. Philip many of them have rebounded and they have done well. When you look at the clo, you have a diverse whole about 125 credits. The double betroth you will need to have 23 percent and 25 of the credits in the pool before he loses one dollar of principle. They are yielding 650. The probability of very good investments. Erik if janet yellen was right and shortterm rates start to rise, we may see a selloff, how about effective business . Philip most of the bonds are floating rates. We swapped real estate bonds to flow. Look, i do think if you have a rapid increase, there will be a bit of a selloff. I think that will be a temporary selloff. Is it merely as rates go higher we will be in an environment where there is additional drop growth with a could be inflation and all of these are great for assets. Stephanie lions, tigers bears mezzanine, tranches, seo lows it is all coming back. Thank you for joining us. This guy runs Capital Management and i used to work for him. Erik leon cooperman will be with us at 11 00, john burbank at 11 30 and the one and only boone tickets. Boone pickens. Scarlet almost 90 minutes into the u. S. Trading day. Fairly modest moves in u. S. Stocks. After swinging 286 point yesterday which was the most in the weeks, the dow only up 45 points. Moderation is that game. A 75 point from peak to trough. As for the dollar, the euro weakened and the dollar is recouping some of its earlier losses. Crude oil getting about 52 and has backed off and now below 60 once again. Thats about to the tenure, treasuries catching a bit after their twoweek selloff. Lower prices mean higher yields and the 10 year yield today we just a higher 2. 0 2. 31 percent before coming down. Recent weakness in treasury driven by the rotten european government bonds especially did you come inside the bloomberg terminal, this is a chart that the company gave to me and it shows the yield of the 10 year treasury and the 10 year food over the past past 10 years. Treasury in blue. You can see the movement was dictated by the safe haven european trade where prices move higher and yield lower. Pay attention to the spread because that has been inching higher and up until recently, it was lifetime highs. According to michael purvis, it is now starting to roll over just a little bit, so you will look for some decoupling between treasuries as it goes on. Of course, any news flow may drive the next move. We have payrolls tomorrow and any kind of update on the greece debt negotiation. Erik . Erik thank you. Lots to come from las vegas and a few minutes. Lee cooperman from omega will be here at 11 00 and after that john burbank at 11 30. Stephanie and then, the one and only. Nobody has oneliners like Boone Pickens. Announcer live from bloomberg World Headquarters in new york this is Market Makers with Erik Shatzker and Stephanie Ruhl stephanie can the oil rally last . Erik finding untapped value in china. One investor says enough internet stock. Stephanie hes 90 one years old and still in charge Sumner Redstone is the man on cbs and mtv. Welcome to Market Makers. Erik we are live in las vegas. John burbank, one of our faves will be here. Stephanie Boone Pickens joins us at 12 00. Erik we need to talk about some of the top stories. Stephanie jobless claims in the last month are at their lowest level in years. First time claims rose less than expected last week indicating employers are holding onto workers. Taxpayers keep collecting from the government takeover of fannie mae and freddie mac. Fannie will pay the treasury 1. 8 billion, almost all the profits reported in the First Quarter. The two Mortgage Finance firms must turn over all profits above a minimum net worth threshold. So far, fannie and freddie have returned 138 billion to the government. A new ceo at alibaba he has been the chief operating officer for china plus Internet Company and has helped the single day shopping promotion to its biggest day ever. We spoke to him about alibabas current strategy. Guest we have a very Clear Investment strategy and focus on three areas to make our strategic investment. We try to acquire new customers and second, we try to invest to expand our existing business to new categories of new areas. Last, we try to invest in disruptive and innovative technology. Stephanie shares of alibaba are up 6 . Whole foods are going after millenials the chain known for organic foods has been losing shoppers to kroger and walmart. So whole foods will introduce a line of lowerpriced stores aimed at younger consumers. Shares of whole foods are down as much as 10 . Samestore sales growth slowed down. Game companies zynga wants to make sure that he make sure the hits keep coming. The video game maker is cutting 18 of its workforce, more than 350 jobs. The move will save 100 million a year, money that can be used to develop new games for mobile devices. Its part of the new plan from mark pincus who returned a ceo. How are they going to develop new games of safe fire 350 people . Erik i guess they wont be developing as many games. Our next guest is one of the worlds most successful investors. Lee cooperman has almost 10 billion under management. Heres my question do you love zero Interest Rates or do you hate zero Interest Rates . Guest i love zero Interest Rate. Zero Interest Rates forever would make the stock market work a lot more than it is trading for but i dont think Interest Rates ought to be where they are. Employment has been growing about 200,000 people a month. It doesnt seem to me that interestrate ought to be zero so they are penalizing savers. I sympathize with the individual to work an entire lifetime and what are they going to earn and their savings . Erik arent they helping to support valuations in the stock market . Leon the question is whether its appropriate to start changing the policy. What they figured out in 2008 when the economy was going down at a rapid rate, and they did the right thing, the best thing to get consumption of is to get wealth up in the best way to get wealth up is to get the stock market up. Guys like myself have made a great deal of money. Home values are greater, but the time is come to change policies. Its not appropriate to have zero Interest Rates in the economic environment we are in. Stephanie you have said you think the stock market rally could last more than a year. Where can it go . Leon bear markets dont materialize out of an immaculate conception. Ive identified for reasons that typically lead to a bear market. Reason number one is the stock market stars to smell recession answers to decline. All the data we look at is slow and steady growth. Europe is starting to get better and theres no sign of recession. If you want to be scared about something, we dont see a recession for two or three years. A forecast for more than year is more about politics and economics. Second, the market has become very sloppy in its pricing. Pension plans are less than 50 equities and individuals have been slow coming back into the market. Theres no sign of euphoria in the market. Third, which i cannot forecast is a geopolitical event that knocks you out of the box. Yet the cuban missile crisis and you cant forecast that. The fourth thing is the fed takes the punch out of the punch bowl. Everyone is mesmerized and fearful of the fed raise rates. Im fearful if they dont raise rates and what that portends. The statistics are as follows since the mid50s, in every market cycle the on average raise is 30 months in the shortest is 10 months. On average, after the first fed rate hike, the market was higher by 9. 5 a year later. Rising corporate profits and stock markets only one rates can get to a level where they compete with common stocks that its a problem. Stephanie do you give president obama any credit for that . He has been the president. Leon i would say sure. I dont want to go down the political road. I think the recovery rests in the hands of an bernanke and the reason Interest Rates are as low as they are as because we cannot get fiscal policy clicking. The burden should have been carried more evenly between fiscal policy and monetary policy. But because of gridlock in washington, the burden fell on ben bernanke, who did a superb job. The truth is they are destroying savers in this country. The bubble is not of the stock market, the bubble is in the bond market. 17 of the Jpmorgan Index was showing negative returns. Could you imagine giving money to germany for 10 years at 20 basis points . Erik if theres a bubble in the market, that suggests its going to burst. Leon maybe a burst last week. We are an interconnected world. Erik if the bond bubble burst we have seen risk rarity. How can a bursting of the bond bubble be good for the equity market . Leon i didnt say it would be good for the equity market. Without stand without sin without sounding like a statistician, the s p moved about 15 times. The multiple market average, about 17 times. If you go back and look at 50 or 60 years when the multiple on the market is 15 times, currently 2. 25. The Treasury Bill averaged close to 5 and is zero. When you look at the statistics, you have to say the stock market is discounting higher Interest Rates already or its allowing for slower economic growth. Some combination of those expirations are probably correct. Erik we have some breaking news in new york city. Scarlet bloomberg is reporting that lack stone the biggest alternative asset manager has raised 17 billion for its blackstone, has raised 17 billion. Blackstone was targeting 16 billion and set a maximum of 17. 5 billion according to president tony james. Blackstone executives are meeting with Fund Managers during an annual event. They have declined to comment on the fundraising but according to people with knowledge of the matter, blackstone has managed to raise 17 billion for their latest buyout fund. It is the Blackstone Capital partners seven and it will continue to gather commitments according to people Bloomberg News has spoken with. Erik what does it say to you when blackstone can raise 17 billion and is still going . Leon its a Great Organization and has done a fabulous job for their investors. But do i want to put a lot of money into lbo today . My instinct would say no. Part of the returns that generated was to refinance their debt they took on at much lower rates. You are doing a lot of lbos now at a time when the stock market is at historic highs. Generally speaking, you have to pay a premium to get it and if you put financing in place today at these Interest Rates, what is the probability you will refinance at lower rates . Its a Great Organization and theyve done a fabulous job. Stephanie oil prices, are they going up . Leon the historic comment is the solution to low oil prices is low oil prices. Great incremental production has come out of fracking. We were producing 5 billion barrels a day and went to 9 billion barrels a day, but fracking is high cost production. They are going to have to cut back drilling rigs are down 50 . Erik would you short the frack ers . Leon i would have to look at it company to company. Erik what is your favorite new position . Leon we havent done much new. We did start buying google. Growing much more than the market multiple and the interesting thing was and what got us interested in the last Conference Call is they said dont lose back dont lose sight of the fact that the stock price is important to us. Apple, in terms of taking liquidity it had an effect on the price of apple. Erik do you think google is going to be the target of an activist attack . Leon its not reductive to sit on all that cash burning zero. Given what they said on the last call, they could take steps to add to shareholder value. Employees their own a lot of stock and the competition in silicon valley, they want to make money. I think google could do a lot to help them make money. Stephanie you mentioned that you agree with Warren Buffett. Dan loeb came out yesterday very critical of Warren Buffett. What do you make of that . Leon i know Warren Buffett and have a norm us respect for what he has accomplished. You dont go from flinging newspapers in omaha to being worth billions of dollars without being a smart person. Two or three years ago, he was getting a lot of people saying the rich should pay more in taxes. I called him up and said what do you have in mind . I hope im not violating the trust he said if you make over a Million Dollars a year, if you make over 5 million year, you make 40 erik that was one of dan loebs complaints. Leon hes more knowledgeable on the tax code than anybody out there. People dont give him adequate credit because erik you dont think Warren Buffett gets enough credit . Leon his record is tax efficient. He showed and contrasted what you would earn if you were an astute money manager. If you sold the stock, pager texas paid your taxes and held another company thousands of times different than what is left after tax. He runs his life to be cognizant of taxes, not typically for hedge funds which are looking at top line return. I think he should get credit. Hes bound to have his peccadilloes. He is allowed that. He has earned them. You dont go where hes gone without having a certain level of really intend i find little to criticize. I probably shouldnt say this he should have given more money away earlier on in his lifetime because i think you is focused on making it and not giving away. I think you failed to recognize society was compounding at a more rapid rate than he was compounding his net worth. Erik better to give it away late than never. Leon absolutely. He was focused on making it and the complexity of behaviors who do you know would take 60 billion and say bill and melinda, you give it away . I have a game plan. Im going to give away half of my money in my lifetime any other half, and to put in a foundation for my children and grandchildren and support things that make sense. But for me to work like ive worked for 46 years and give it to someone else to give it away i just wouldnt do it. Erik thank you for spending time with us. We have much more coming. Erik welcome back. Stephanie we are now joined by a Founding Partner of Latino Latigo youve got a big idea. What is it . Guest i will be talking about i heart media, a broad platform of media assets, radio, digital we have two different trades we think are exciting. Its one of our biggest positions right now. Erik what are the trades . David one is a bond in the capital structure and the other is in equity. Stephanie why do you like them so much . The Radio Business . David old media. Radio is still an 80 market share across the country, things like pandora has 8 . Satellite radio has 10 . Radio has much broader distribution. 94 of 25 to 54yearolds in the u. S. Is reached through radio. It is the least expensive advertising medium that there is. Erik lots of margin potential . David lots of margin potential and lots of reach. What im going to talk about is how theyre using the whole platform not just radio or billboard, but putting it together and why that creates so much value. Stephanie have advertisers been sleeping . If you think about how much people listen to the radio, it seems like advertisers are not buying into it. David part of it is the company was taken private in 2008 right before a very larger session in advertising. Local advertising dollars have not returned to precrisis levels still. Fighting that headwind and having to retool thinking about what they should be paying for advertising for the value of this platform. Stephanie since the recession, advertisers have 70 more platforms where they can spend their money. David they absolutely do. What im going to show in the presentation is radio followed by billboards are the two most costeffective means for advertisers. Erik you are an event dripping kind of guy. What drove you to i heart media . David we have been involved since the lbo. These are the sorts of situations we like. This company has been active in liability management, buying back Debt Securities hitting the market where they can, so we found a lot of different ways to play over the years. Now for the first time, we are investors in the equity as well. Erik four months ago, oil looked like was going to represent the greatest distressed credit opportunity since the financial crisis. What does it look like with oil at 60 . David weve been very involved in oil we started with a short in transocean before the price of oil began to decline. We are looking at companies that are under pressure from activists and fighting some business headwinds. Transocean was fundamentally challenged. Rates had been declining and carl icahn put the company in a condition where they were paying a billion dollars in dividends a year that they could not afford. The company said we are going to defend the dividend in the high grade rating. Both were not mathematically possible, so we shorted both the debt and the equitys. Then the price of oil collapses and that accelerated the decline and rigs are getting stacked. That got us focused on energy early. The second trade was in the big selloff at the yearend. It was almost as though managers were selling anything related to energy. You could buy good quality pipelines being sold off like a baby with the bathwater. Bonds were down 15 points because investors were selling indiscriminately. Stephanie you go after companies that activist investors are targeting, but that those companies will not be able to fulfill the goals activists want them to do . David if you think about the activist agenda, no manager walks in they dont want to pay off the debt. They want to pay they want to buy stocks and do things that are harmful to creditors. It makes an interesting area to go looking for short ideas. Erik have you done it elsewhere . David we started with jcpenney. Stephanie you are taking a view of where you want to be in the capital structure. David in the case of transocean, the debt was yielding under 4 . It was a very asymmetric short. Stephanie thats confusing to the audience. Its not an overall view of the company, its what the activists will do depending on whether youre looking at their debt or equity . David it depends on whether the company is already fundamentally challenged. Erik apple is buying back more stock and taking on more debt. Stephanie go short apple. That sells like a great idea. David you need companies that are fundamentally challenged. Jcpenney is where we developed this eases. You are borrowing from the creditors to fund some sort of transformation. You have a potential for a very asymmetric short. Erik great having you here. David ford. Stephanie thank you so much. When we come back, we have john burbank at 11 30, Boone Pickens at 12 00. Erik joe torre at 12 30. Just because im away from my desk doesnt mean im not working. Comcast business understands that. Their wifi isnt just fast near the router. Its fast in the break room. Fast in the conference room. Fast in toms office. Fast in other toms office. Fast in the foyer [pronounced foyyer] or is it foyer [pronounced foyyay] . Fast in the hallway. I feel like ive been here before. Switch now and get the fastest wifi everywhere. Comcast business. Built for business. Announcer live from bloomberg World Headquarters in new york this is Market Makers with Erik Shatzker and Stephanie Ruhle. Stephanie welcome back. Erik we are live here in las vegas at the bellagio. Stephanie i havent fallen off my chair yet today. We are going to take you back to new york where in the newsroom scarlet fu is going to give us enough data on todays market. Scarlet the european markets are closing. Writtens are heading to the polling stations today. Ahead of that, we see the ftse down. It has fallen as much as 1. 8 but it did parents declines. It did tear it kleins. You can see the pound weakening versus the dollar for the first time in three days. Lets move on to the euro coming off a two month high against the dollar. The route in european bond markets seems to have eased a little bit. It was fairly uniform the for it diverged a little bit. Italian and spanish bonds have caught a little bit and are higher. We see very little change when it comes to the stoxx 600. The euro stoxx 50 is only marginally higher. Not a lot of action there. We will keep an eye on what goes on the german bond market because it has been so much of a driver for what happened here as well. Erik the parade of allstar guests continues here in las vegas. Our next victims john burbank the chief Investment Officer at pass for the capital. Welcome. You are having a great year. Whats working . John what was working until march 18 was the dollar and anything correlated to the dollar. We organized our portfolio around that believing we were going to have a strong dollar. The fed said there was more economic weakness. The dollars the biggest factor and since then, the euro has rally and has rallied and a pullback in european equities and weve had a pullback in u. S. Equities recently. I think that is because bonds have been selling off so much and risk parity guys are blowing up. This is a forced leveraging of credit and i to gets pulling down equities with it. If the dollar is not going to be strong, im positive on u. S. Equities. If and when the fed indicates they are going to start raising, everything is going to change. Its going to be somewhat deflationary as the dollar rises. You are going to want to be back in european equities. Things that are leveraged, the rest of the world will not do well. Stephanie we know rates are going to rise, so why not position yourself for that today . John we actually dont know that rates are going to rise. Stephanie you dont think its when, you think its if . Don i think its later than expected. We have hedged our portfolio by receiving the rates. Erik that is an important point to make. When you are talking about rising rates, you are talking about a series of rate hikes. John they are expecting a rate hike and the dollar would be strong if that did happen relative to qe in europe. If that happens, everything is going to change around how the dollar trades. It stops because of the march 18 fed meeting where they backed off. Yesterday, janet yellen was hawkish in a warning they were going to hike sooner. Its not good for market confidence. Erik is it possible to make money in stocks without having these kind of macro views . John its actually a great time for hedge funds. Differentiating what should do well in the market and what should do poorly. Its not everything up anymore but the dollar is the number one factor. Other than the dollar, you have significant changes in china which we think are secular. I believe china is going to come through this strong and positive. China is generally under owned by investors. Stephanie even now . John yes. But they kind of made that happen. But now with this slowing and they are easing, its a powerful boost to equities for the chinese. It is volatile, its in their interest to keep it going. The other market we like is saudi. Weve been talking about this for a good six years. June 16, saudi is going to open up to investors like india did. June 15, you will be able to buy a saudi equity in your schwab account without doing a peanut. Without doing a pnote. Whether you like it or not people are going to back into owning saudis. You should be buying it now before a 50 billion liquidity is forced into the market. Stephanie is there a specific investment you like . John our favorite is an cb. The way saudi does ipos is they give it to retail accounts. They price it cheaply and it goes up for a few days and then you can start buying institutions or anybody else. There are not many institutions and saudi. The second biggest ipo yet nobody owns it. This is why we like saudi. The other things about banks and saudi an cb is going to have an almost 50 increase of earnings because 70 of their deposits require no interest. That is sharia. They are going to have a huge spread if that happens. Erik there other stuff going on in saudi arabia the war in yemen. Theres new king who has been making changes as of late, and they are doing things like tax unused land which has been a bone of contention for many saudis. Do any of those factors function as a gate into what you could get . John the succession was a big risk when it happened. The new king has new policies which i think are good. The negative factors are what is keeping the market so inefficient. We still have not seen any endowments for the United States put money into saudi. Its just one of those things. Its a trade sitting there. Erik hiding in plain sight. John exactly. For all the reasons everyone should know you should be skeptical. Stephanie what is the liquidity like . John i think its pretty good. I would say its better than india in general. Financial culture is very conservative in a good way. The country and everybody is under leverage, its tied to the dollar say dont have that risk. It is an anomaly. Its the kind of thing that happened 20 years ago as em companies came into the index. Egypt,qatar uae the Biggest Country is going to enter. Erik would you hold Kingdom Holdings . John we have chosen not to. Its not levered to the domestic economy which is growing fast. They have different ambitions. Stephanie i want to go back to china because you said its underinvested and a great opportunity. Where in china . John we have chosen to play through leading Internet Companies listed in the u. S. And hong kong. The moves you have seen, you should not be skeptical of it. The slowing, the lack of inflation, the low unemployment has allowed a big boost of liquidity. Erik arent there dangers in the chinese stocks carson block Stephanie Jim chanos says dont touch china. John china is changing. Its going to end up being the greatest consumer story in the world for the sheer size. The question is how do you participate in that . A lot of westerners dismissed china. Psychologically, they dont want china to succeed. The leaders are quite smart and they have a lot of incentive to get this right. I think what will happen is they will try to become part of the sbr. They want to be a reserve currency and then they will open up the market to allow foreigners to own more probably at much higher prices which will allow them to recapitalize. Stephanie thank you so much for joining us. John burbank from Passport Capital. During the break, were going to get him to say china is changing 10 times roll fast. Erik shareholders want to know who is coming next after Sumner Redstone. Erik time to bring you uptodate on the top stories of the morning. Consumer confidence has fallen to an eight week low. The Consumer Confidence index shows its all about how much money make. Those who make less than 15,000 fell to the most in four years. Lumber liquidators is trying to win back customers after a devastating report on 60 minutes. The chain is suspending sales of laminate flooring in china and a former fbi director will investigate certification labeling processes. Lumber liquidators sold lumber from china that had excessive levels of from aldehyde, which can cause cancer. Dan loeb is firing a shot at Warren Buffett saying he likes reading Warren Buffetts letters to shareholders because he finds them filled with inconsistencies. He said he likes how he criticizes hedge funds yet he had a hedge fund and criticizes activists, yet he was an activist. Buffett has not responded to the criticism. Back to you in las vegas. Stephanie thank you, matt miller. Erik now its time for the endless sumner. Our next guest, Sumner Redstone and the upcoming issue of sanity fair. Vanity fair. You had a correspondence with Sumner Redstone, a man few people have seen in years. Guest the last interview he gave was to the hollywood reporter. Its the first time hes answered questions in a year and a half. Erik im not trying to spread rumor, but people have wondered given his absence from the public eye whether he was still around. Bill he is still alive. I did not see him myself that he did answer email questions or they were answered, lets say. It took three weeks for them to answer them. But they were somewhat monosyllabic answers which you could have done faster than three weeks, but im sure there were a lot of help that he had in answering it. Stephanie what did you learn . Bill the just of the story is the incredible relationship that these two young women, each 50 years younger than he is have with this guy. One is a livein girlfriend named Sydney Holland. The other is a former girlfriend who has come back to the scene. Its the first time that either of them have given on the record interviews about their relationship with Sumner Redstone and is riveting. Stephanie what is his relationship with these two women had what is their relationship with one another . Bill this is a family station, a family event. Stephanie we are all adults here. Bill as long as it stays here. Theres no question sumner has always had an i4 for the ladies, so to speak. He was married to his first wife for more than 50 years but always had a roaming eye during that time which led to his divorce. Then he had a string of beautiful girlfriends after that. His second wife was a Public School teacher from new york city. At last to the few years and now he met Sydney Holland through the woman who does millionaire matchmaker on a rival network, i believe. That is how they met. Apparently, his grandson helped him put together a profile. Stephanie he paid 10,000 and had a bevy of young beautiful women meet him at a Cocktail Party . Bill he was not on the show. She has a second, private service he availed himself of. That is how he met sydney. He met men well manuela there. He will be 92 and a couple of weeks. What they find attractive about him is hard to fathom. Hes supposedly worth 6 billion. Stephanie its not hard to fathom. Did you just say six billion dollars . Its not hard to fathom. Bill thank you for explaining that. I can never understand why Bruce Wasserman has these women around him. Stephanie do both of the women live with him . Bill sydney lives with him, the other comes and goes. He bought her an apartment in a fancy new york city hotel. Her daughter plays one of the children on madam secretary which is a cbs show. Stephanie what is the relationship between sydney and manuela. Bill a very close friends. They both expect to get money from his will when he dies. This is an incredible story. Stephanie do they want to have children . Bill its staying here. Sydney has adopted an infant child, alexandra read, which some people thought she was trying to name redstone but only got half way through. Sumner has not adopted that child but they live at his house. Hes got a huge house. Stephanie if he has not adopted that child, then there will not be a claim their. Bill sumner has said hes going to live forever. If in fact he doesnt if the grim reaper does come and get his way, there will be a Battle Royale between Sydney Holland sherry redstone, the daughter one of the main trustees of his generationskipping trust. I cannot believe these women were so open about their relationship. Stephanie career women . L career women in a sort of vegasy sense. Erik your turn on the stages tomorrow, but what has caught your attention so far . Bill im not wild about vegas. I like to come here and go hiking. But i love this conference. Theyve got together some of the most interesting people who get up there on stage. I dont know if we are allowed to talk about it, but yours yesterday was absolutely riveting and you did a great job. Erik what do you make of the conversation with anthony and dan loeb . Bill you know i wrote a vanity fair story about that. Then by going after Warren Buffett was seeking attention and new that would get headlines. Hes been a little quiet lately. He did not have a great year compared to his rival, bill ackman, so this is his bid for attention and it worked. Stephanie you have written a lot of exposes on a lot of people. When you wrote about dan, what was his response . Bill he was so angry at me but the great thing about dan is he still wanted to go to the Vanity Fair Oscar party. Erik thank you. Stephanie i like you even if dan doesnt. Scarlet it is 56 past the hour. Were midway through the trading day and u. S. Stocks recovering from a twoday decline. Treasuries also in recovery mode after an early signs that the 10 year yield above 2. 3 . Crude Oil Consolidating after reaching a fivemonth high yesterday, reaching below 60 once again. What have you been doing because u. S. Stocks are the least interesting asset class right now. Guest watching the bond market. Scarlet what are your thoughts . Guest bonds are in flux on a global basis. The peripheral bonds in europe are all moving lower which is a phenomenon we havent seen before. Generally, theres a flight to quality but this time we see an exit across the global bond market. Scarlet where is that money going and when will we see it put to work . Guest thats a good question. Its been a crowded trade for a long time now, so the disorderly types of outflows sometimes feed on themselves and the not clear if the moneys going anywhere. Scarlet going long u. S. Stocks it was a good value. Guest the fact that stocks have held up so well probably emboldens the fed given that we havent seen higher Interest Rates. Scarlet you have a trade that plays off the recent route in lawns. Guest given the elevated volatility in the bond market its going to be a volatile catalyst, but more so for bonds. The trend resumes to the downside. I like an equity etf that correlates with the bond market. I think 2030 year bonds, that puts for about 87 cents that expire tomorrow i think its a good way to play downside to the bonds. Scarlet you think the numbers we are seeing are pushing the fed to move . Guest i think so. The cpi mark was above consensus. If we get another number, it could push the fed to a september rate hike. Scarlet the profit would be made here for it to decline whereas the losses adjust your cost. Lets talk about lumbar liquidators, the biggest gain in more than a month with the company saying they would suspend sales of laminated flooring from china as a puts together a committee to determine what is going on. What are you seeing on this stock . Guest we see a lot of fast money options trading. Guys that like to play names like lumber liquidators, mostly bearish bets. It has been a fun name to watch. Scarlet thank you so much. Announcer live from bloomberg World Headquarters in new york this is Market Makers with Erik Shatzker and Stephanie Ruhle. Stephanie welcome back. Erik we are in las vegas live from the salt conference at the bellagio. Top stories of the mornings one of the largest i o funds raised since the two has made financial crisis the worlds biggest alternative asset manager, the Blackstone Group raised 17 billion in seven months. People familiar with the process say blackstone is continuing to raise money