Transcripts For BLOOMBERG Market Makers 20150512

Stephanie and it has already been a busy tuesday morning. This verizon and aol deal tops our news in focus. Verizon to buy the house of two moms Tim Armstrong. 50 per share. Stephanie greece will pass another hurdle this week. Other payments between now they may not get that far. John kerry is in russia for his first meeting with Vladimir Putin in years. The company throwing in to the money market ring. In competition with two maybury major tech names. The most expensive painting ever sold in auction. An anonymous telephone bidder for 160 million. Stephanie a lot of news this morning. For the second time in three weeks, nepal has been rocked by a killer earth quake. 7. 3. Centered 50 miles outside of nepals capital. The jolt was felt five hundred miles away in new delhi, india. The click caused landslides in remote areas. 36 people have been killed and more than one thousand injured. We spoke to that under armour climber who rescued 20 himself. Its test vote in the senate on the controversial trade deal. It holds a procedural vote on whether it gives president obama authority to negotiate the agreement. The president finds himself at odds with his own party. Some democrats argue the trade deal will hurt american jobs and wages. We spoke about that friday with one of those outspoken senators against the president , Elizabeth Warren. President obama made it clear he disagreed with her. President Obama Elizabeth Warren has got a voice she wants to get out there and i understand that. On most issues, she and i deeply agree. On this one, her arguments do not stand the test of fact and street and scrutiny. Stephanie warren has argued giving the president fasttrack on the trade deal as held wall street after the financial crisis. Erik raising its offer for a reinsurer, worth about 2 billion. The partner turned down the original offer. The new one is 7. 5 per share higher. John says he believes the new bid will eventually succeed. It is a much superior offer. It is by far superior for all shareholders of which we are the largest today. Erik and a time Holding Company is pushing for the deal. The new England Patriots and tom brady will pay the price for deflategate. The nfl has suspended brady for the first four games for the season. They also lose a couple of draft picks. A report last week found brady was likely aware the football used has been partially deflated. He plans to appeal. Stephanie many people said four games is too much. But here is a big difference between that and ray rice. They did really unethical things but they had nothing to do with the game of football. But tom brady has allegedly done is change the outcome of the game. Some people said, if you would suspend him, why not make it the super bowl . Erik changing the outcome of a game. Pete rose allegedly changed the outcome of games. The man is banned from the game for life. Some take this seriously. If you put this into perspective, it was after the balls were checked they then took some of the air out. We should not count tom brady out. There are so many people, me included the think he is a Great American and a great athlete. People made mistakes. Maybe this is his chance to learn a lesson. Erik we must get back to the big deal of the morning. Stephanie verizon is buying aol for 50 a share 4. 4 billion. Aol is soaring on premarket news. Yesterday yesterday, eric and i spoke with deck, who oversaw the merger. Check it out. Deck there used to be thousands of consolidations and now there are a few that it will continue. My own view is there is probably room for two big cable companies. Stephanie lets get straight to cory johnson, who is in the house and alex on the phones. Lets start with you. Cory alex, props to you. Alex thank you. It was poopooed by the ceo. People paying attention realized he was hedging his words when back in january, he had to have a significant acquisition talk with aol or anyone else with that matter. What is significant is the buzzword or we were early breaking this story back in january. There was a little fingerpointing and then came back around. Aol, 50 per share, a low was trading at 50 per share a few months ago. The deal comes together at this point in the two sides are fairly happy with each other because a Large Company that buys them out and to some degree ends the misery a little bit. A great job turning around the company. He may be thought while we have so much here. Stephanie you mentioned the sexiest term out there, programmatic advertisement buying. Too many, it means a whole lot of nothing. To every cmo at a Major Company out there, that is so important. Cory johnson, when people talk about wellbeing this company, that is the business he has created there. Over the course of the last couple of years, cobbled together the bricks in the wall of programmatic advertising. Think of it as everything it takes from the moment a product is manufactured and created, all the way through creating a content, finding the place where the consumer is ready to see the concept, identifying that consumer end bidding on those ads. All of those pieces are things Tim Armstrong have tilt or bought that allows them to serve advertisements across anyone who uses the network for advertising. This business is much bigger than the a low content business currently. Erik what does this say as his strategy as an acquirer . They have never bought anything like this for anywhere near as much money. Every other deal verizon ever did is to acquire a Telecom Business like the rest of Verizon Wireless or spectrum. A completely different business. Alex a great question. To some degree, you have to harken back. He thinks the world will end up could verizon by sprint and tmobile . We already know because at t there are not that many more Wireless Telecom carrier apps that verizon could buy. Verizon probably does not want to go into the landline business. If they want to grow again into any other business, they have to diversify little bit. They tapped out on their current model. A huge deal from vodafone. This is pointing in a huge direction because verizon has to go on a huge direction. A small acquisition when you look at market caps. Aol, something they could do on a larger scale later on. That is a very small bite and the content remains to be seen really if her eyes and even wants to own this websites. We will have to see. Stephanie i want you to get out of the shower and into the office. Alex im an beautiful miami. Stephanie we have got a bureau there. Take yourself over there. Looking at the performance of these names and some of the other names out there. Many people thought yahoo and aol were headed to the dance together. They are not. What you looking at in terms of egg movers . Yahoo is one of the stocks were looking at to not see negative reaction. We are seeing a little bit of an increase in yahoo shares in the p market. It looks like maybe there was not at this point a lot of hope those two would get together. Were looking at the other big Telecom Companies at t, sprint, to see if there were repercussions in the minds of traders and investors and what this means for them. We have not seen a lot of movement on their part. Verizon is trading a little lower. We have been looking at comcast and vodafone over at the u. K. We did see some movement when the headlines came out. A bump up in the shares. Take a look at others in the premarket and where they are trading care not a whole lot of reaction but it looks like most of the Market Reaction is censored centered in central players involved in the deal. Stephanie thank you for all the latest. Verizon news this morning. Erik may have given away 700 million, a Blackstone Steve shorts men will talk about his latest gift, a big one, to yell. Yale. Stephanie welcome back. Steve schwarzman on why he is giving 150 million the 150 million to his alma mater, yale. Plus, we will be asking Sports Management experts whether he thinks tom bradys punishment over deflategate is enough and what it will do to the allamerican brand. Erik top stories this morning. Verizon is making a big statement about where it wants to go on the web. It has agreed to buy aol for 4. 4 billion, 50 per share. It will give them access to technology aol has developed selling as delivering video on the internet. A 17 premium over yesterdays closing price. Shell has gotten approval to drill off the coast of alaska. The bureau of Energy Management gave its ok. Still needs to get permits from other federal agencies. Opponents say the drilling will damage the environment and put wildlife at risk. No one ever paid this much for an auction. A world record 179 million last night here in new york city. The painting depicts a group bought by an anonymous collector. Christies took in more than 700 million last night and expects to sell as much as 1. 3 million this week. Stephanie become temporary art market is in a bubble. If it is, this is the point where that biggest publishes moment, that is a time of dell. Im asking myself, steve cohen he just took down a major house in l. A. I could see it. We know he loves some temporary art. Im just saying, it might be his jam. He probably has a cool 70 million sitting around. We will take you back to the markets. Quite the selloff in the bond market globally. Julie, what does this mean . Julie people are resetting expectations. The Federal Reserve official is saying were seeing a regime shift where expectations will change because were looking at higher rates, even if it is only slightly more accommodated. I expect this will have implications for financial asset prices, even if it is mostly anticipating. Obviously, the Federal Reserve has been telegraphing what it will do. A fivemonth high. The german yield at its highest level this year. We are seeing bond prices lower to the 10th time in 11 days. We have seen a global bond selloff again as investors and traders are trying to reset where trading will be. Stephanie ive speak into a Credit Investor saying there is no fundamental reason for this. He thinks this could be an unintended consequence of the fact there is poor liquidity. As soon as liquidity starts to look shaky is actually in the highyield and Corporate Bond market, then no one is there to catch the falling knife. Erik if that is happening that is fascinating because the expectation around the quiddity is that we would see gapping. This is an orderly selloff in the bond market. Stephanie one big guys decide to sell, they are not necessarily selling in of way. Hold on. Erik if they need to sell, they see a reason to sell beyond the quiddity. Stephanie the big guys have only gotten bigger and when they decide even to hedge Corporate Bonds to reshuffle their portfolio even a little bit, it is so difficult given how massive they are. It is very difficult because they are saying, there is really no fundamental reason or it. Erik maybe it is not the liquidity itself, but the fear. Stephanie that is all it takes. Erik we will continue the story and also have more for you on verizons move to aol. Like the company that was supposed to buy and well yahoo . 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. Erik the countryss biggest banks are bracing for ways for entry in the 2016 election. According to the wall street journal of thanks of our gathered to devise a strategy to fight back. What are the banks so worried about . Heres your answer is a man who advised them. The reality is president obama got it right talking about Elizabeth Warren, that she is fundamentally a politician. A lot of what she is saying is really about politics. Stephanie what message does wall street have to put out there . If you speak to Jamie Dimon Lloyd blankfein, they have reduced risk. It seems theyre getting their ducks in order. Main street does not care. A big problem facing not only wall street but companies more broadly is the slow growth of the economy. We have seen over time the increase in gdp and then it retracts. Good jobs numbers which you have seen more recently but it entails some sort of pull back. The reality is voters on main street will not care to hear what the exceptions are and what people have done until they are seeing jobs growth and Economic Growth in their wallet. Stephanie i think main street sure loves the Tech Community and Silicon Valley and it is banks they hate so much. It is a classic example of where everybody hates congress but loves their congressman. People go to their banks and value the Services Banks provide. A lot of times, you get miss portrayals painted by people like Elizabeth Warren who have a vested interest in attacking wall street and financing. What youre seeing is some of the implications of that. Stephanie thank you so much. I am not sure i loved a congressman in quite some time. Erik staying on wall street bill grossss attitude is, you cannot take it with you. The investor has already given away 700 million of its fortune. What it plans to do with the other 2 billion that is one of the things bill gross and i spoke about in our exclusive interview. Bill we have given everything we have a way for either philanthropic causes. Erik tune in and we will have more for you in the next hour. In the meantime, i have found someone else who is no stranger to philanthropy and he happens to be sitting right here. Steve schwarzman. He announced he is giving 150 Million Dollars to his alma mater, yale university, to establish Cultural Health and renovate the Historic Building there. It is one of the largest gifts of its kind ever. Philanthropy is something you have made your name and. Lets start with the l. Why the gift to yell . With yale. Why the gift to yale . Stephen i knew literally no one at yale. Literally no one. They had 4000 graduates, plus faculty and administration. I had never been in a large place where i knew no one. Erik you feel indebted to the experience you had there . Stepehen more than indebted, i learned all kinds of things in terms of giving back. Stephanie how did you learn that it yell yale . Stephen it has a tradition. I was not aware that was an obligation for people who had done well so i internalized that and it teach to me how to think. Stephanie when you were in high school, was it your gene to go to yell yale . Stephen it was harvard, but i did not get in. I actually dialed the dean of admissions at harvard and got him on the phone. It was like dialing god. And suggested maybe he wanted to accept me, and he said, i am sorry, we not taking anyone off the waiting list. I told him at yell and he said you should go there and you will have a great experience. Stephanie dont you want to call him and say, how do you like me now . Stephen he wrote me a few years ago saying, i guess we got that one wrong. [laughter] stephanie it is amazing he would remember a 17yearold kid called him and 35 years later, he still calls you and says, i guess we should have access to view. Stephen he told me he does not get calls. I was nervous making the call from the High School Gymnasium with a bunch of quarters on the payphone. Erik how does a gift like this come about . Do you decide i want to give Something Back to yell, or presumably the folks at yell, do they pick up the phone, or have dinner and say, we really need a social and cultural hub . Stephen it is both. Ive looked at giving substantial money to yell over time. I found in life, people tend to find me now. This is not a surprise. They approach me with a few alternatives of things that might be of interest. This one in particular was of interest of may. Stephanie youre one of the most successful people in the financial industry in new york. You must get calls every single day from universities, worthy causes. How do you decide where to put the money . Stephen it is a great question. It is not exclusive to make, but people in my general situation. We do get calls like that all the time and it is very difficult to figure out which one of the many worthy things you support. Everybody needs to have some focus and that means some things do not get supported. Erik i mentioned i went out to see bill gross and heat home he for the first time he ever tallied it up for anybody that over the course of his life, 700 million. Do you have any idea how much today . Stephen i do not keep score and i do not view it as a game where we keep score. Erik 300 million plus more recently, this gift, the public library. It adds up. Stephen it is supposed to add up. If you do well, you have an obligation to society to help other people. I think my grandfather did that and you cannot take all of this stuff with you. Erik bill plans to give it all away. And in their kids will be in charge. What you do the same thing . Stephen ultimately, you have got to find a way to dispose of your wealth. The tax system encourages that. If you create Large Companies and own significant ownerships you have to dispose of that in some way for the good of society stephanie . Stephanie society. Stephanie at what point in your career did use that say that philanthropy would make a difference . One of the issues robin hood faces is the biggest dogs on the street give so much to robin hood, but they have a big gap under people who do not have tons of money. When did you really make a commitment . Stephen it is like a habit. If you watch her grandfather do things like that when you are a little boy you can start doing this, really, as soon as you graduate from school. At blackstone, we have many programs were people can be actively involved and also give money. One of our guys just hit me up for a bunch of matching money for some competition for leukemia. We have these things constantly and the amount of money people can give is geared toward what they can make. We do not pressure anybody. Stephanie does it disappoint you popular opinion still is at the financial institution, public enemy number one, and does not think about the social responsibility or all that you do . Stephen we have come to get it politicals desk politics in todays world and we are just one part of it. We do not get the airtime, we do not get a chance to really control the dialogue. Erik your ability to give depends in large part on what happens at blackstone, ache firm a firm you cofounded and run. What were looking at in the bond market appears to be something. It is the beginning of the bear market and bonds, but there has been a selloff. I wonder if you look at what is happening in debt markets, do you worry at all about blackstoness ability to generate returns in the future, because of how rates rise leverage becomes more expensive, and is one of the key tools to make money. Stephen it depends why Interest Rates are going up. If theyre going up because economies are stronger the way they are in europe, erik do you believe that is why it is happening . Stephen it is a combination of economies strengthening and markets that were really driven to low Interest Rates by quantitative easing. Sometimes markets overshoot. Erik is that what happened in europe . Stephen i have been doing this for over 40 years. His only the second time in my life i have met negative Interest Rates. The first time it was just in switzerland and that was a long time ago. Seeing a lot of countries with negative Interest Rates is really quite odd. Stephanie what does it mean to you . Stephen that you have relatively fragile markets with a giant buyer called the ecb. They were busy buying. That drives yields to unrealistically low levels. The idea that you pay somebody interest who issues a bond, as the buyer of the bond, actually sort of almost completely unprecedented. Erik your investors put off by it. Top 17 billion. Stephen i do not think we are allowed to comment on that. My lawyers would do something bad to me so i cannot comment. You can comment. Stephanie i can say, that is a whole lot of money. Congratulations with yale you lucky dog. So great to have you on. Blackstone ceo, steve switchman. Steve schwarzman. Erik tom brady. The quarterback will have to stay home. We will be talking about the suspension. Erik tom brady will miss the first four games of the season and 2 million of his base salary. New england is getting to five getting find Million Dollars. Has the league fumbled another delicate situation or was this just . Codirector of the University Sports society program, lee what is the best way to frame this . New england cutting corners or cheating . Whether or not they were cheating or just coming quarters, there is a lot being talked about what is and what is not in this report. I do not think it is a legal discussion and that is a lot of talk. This is not a question of legality. Is a question of morality. It is now really a question of nfl and disciplinary policy and the disciplinary process. Stephanie if it is not legal not illegal then is it just, do the right thing or not . Erik there is some of that. Really, you have got to read through the report. A lot of mass in there, greek symbols. A lot of activity in there. For those looking at it from a legal perspective, it is tough to make a legal case about it. The public is going to judge based on a legalistic analysis. If they see that tom brady refused to hand over emails and phone records, they will think about the way the jury will think about it. I will not guess as to why or why not and what is in his Text Messages or any of that but i think there are a few things to look at. They are drops in the bucket. One is what happens in the field and another is what happens off the field and the other is what happens in the middle. What happens in the middle is the boiler room stuff. This is a boiler room kind of discussion. Erik the balls were deflated halfway through the game. If the nfl were to replay this, take us back in time, what should they have done differently . It might have changed the outcome of the game and we do not know. Stephanie an affected whether they would go to the super bowl. That has major impact. Tom brady can throw a football very well. Stephanie if he could throw it better than anyone in the world, why engage in this at all . He is a professional and he has his way of doing things. If we were to go into a locker room or clubhouse, remember professional athletes are at the top of their profession. They know what it is they like and how they prefer things. Stephanie how about doing that before the rest checked the ball . By doing it after, is it really about a professional athlete perfecting his game or Monkey Business . That is a great question and one to work through. There is a story about tom brady and what he did and who did what and when he know it, but there is also a story here, the nfl and its responsibility. Im wondering why it is the nfl did not have those balls in their control the entire time. That is a question we should be asking and it is tied to the policy in the process. Erik if it is about morality of in of the day, is this just punishment for an immoral draft immoral act . Stephanie when ray rice got two games initially. It is the nfl try and figure out how it disciplines its players and it is doing it in real time and trying to figure it out sometimes, if you look at the structure of the league it is a Public Relations Oriented Institution organization, enterprise. Sticking the thumb out into the land of figuring out which way does going when you have got to look at the values the basic things that make your business what it is. Stephanie his actions affected what happened in the game. Ray rice might be the most unethical guy on planet earth but what he did was in a hotel in Atlantic City and had zero impact on whether or not the ravens would win a game. The patriots cannot say that. If it happens off the field on the field, or theyre in that boil over death boiler room, something that affects the onfield product. That is where things that is where we are and that is what people are trying to make sense of. Stephanie thank you for joining us. Erik a pleasure to have you here. Stephanie heres a look at top stories of the morning. Verizon, the largest wireless carrier it has now found a way to expand its footprint into video and online advertising. Verizon has agreed to buy aol for 4. 4 billion. The company owns the Huffington Post and a collection of International News sites. Verizon is also getting a lot technology for delivering video and advertising. That is Tim Armstrongs a be right there. The Parent Company of giant and food lines. They are in fact in merger talks. If they actually merge, they would create the fifth largest Supermarket Chain in the United States and the fourth largest in europe. Both Companies Say the talks are preliminary and may not result in a deal. John kerry in russia meeting with president Vladimir Putin for the first time in over two years today. Ukraine is on the agenda, the iran nuclear deal, and syria. Peter cook joins us from d. C. With more details. Peter is this chilly relationship thawing a bit . Peter it is interesting if nothing else. It is a big deal right now the john kerry is in russia. At this hour, he should be sitting down with Vladimir Putin. He has already met with his counterpart. This is the first time in two ears that a u. S. Official has met with putin on russian soil. The last one to do it was right before Edward Snowden touched down. In moscow. There has been a lot of disagreements particularly over ukraine. The consensus is this is an opportunity for the u. S. And russia to engage in what they could cooperate on Going Forward. We know ukraine has been a big area of different but are there other areas of agreement where they could make progress . Erik peter, the white house is watching a big vote in the senate today the ongoing battle over trade. It has become an argument between barack obama and Elizabeth Warren. Maybe it should not be but that is where it has ended up. Peter this is the other big issue on the white house radar today. A battle among democrats in the battle of president obama versus Elizabeth Warren. There is a lot riding on it. A procedural vote and so much more at stake here for the president. The entire trade agenda could rest on whether or not they get 60 votes to day on the senate floor. Arguably, the remaining 18 months or so of his presidency this is the single base biggest economic issue he can shape in the final time in august. Elizabeth warren and harry reid they oppose this deal and are urging even the democrats do not back him right now because we will get more leverage if we push the debate off a few more weeks. Erik thanks, that is peter cook. Stephanie up next, we will look at how the deal will affect streaming. The ceo of one of the pioneers of the video is next. In the meantime, im looking at twitter blowing up over the tom brady debate. People who are attacking the nfl theyre kind of fit it figuring this out as they go. Stephanie verizon has agreed to buy aol. Lets see how this will affect the streaming business. Brad is here with is now p at what you make of this . Brad verizon has been building out one of the largest mobile networks in the world are a lot of infrastructure that people do not know about. For them to buy aol and get into the advertising space and a mobile video space stephanie if they do not know about it, what is so good about it . Brad once you spend on that money come you have to figure out what to do about it. The Advertising Market is 600 billion industry. Verizon has aspirations. Erik how does that affect you . You are partners with aol. Brad it does not affect us directly. Aol is in a more stable position. It is a long ways from 1999 when they were a 200 billion company. They have been deliberately going to mobile and deliberately into video. For Companies Like us, who are partners with and well, it is a good thing. Erik lets put it into perspective third verizon is a big company. For you, is it better to see aol be come part of verizon question mark verizon . Brad sounds like it will be a standalone business to hopefully the speed continues. A well, anymore resources, it is probably positive. The top of the food chain youre competing against google and facebook. Suddenly, a low has the resources to do that more effectively. It may put them in a better position. Stephanie Live Streaming business is competitive as well. When you see the opportunities . Brad mobile seems to be strong. You see what happens with Companies Like twitch. We are really focused on the Business Market and that is where the growth is. These are our customers. Stephanie thank you so much for joining us. Brad is the ceo of you stream. Erik we will be back in a couple of minutes but a lot more to come third stick around. To come. Stick around. Live from bloomberg headquarters in new york. This is Market Makers, with Erik Schatzker and stephanie ruhle. Stephanie good morning. It is tuesday, may 12. You are watching Market Makers. Are you wondering why we are on so early . It is our new time spot. Im stephanie ruhle. Erik im Erik Schatzker. Today verizon agreed to buy a well for 4. 4 billion. We will discuss the early mover advantage in advertising which some say is a key motivating factor behind verizons takeover. Stephanie i had a shake ahead of the shake shack earnings, we will take a look at whether burger king can take a bite out of competition on the west coast and what investors want to see out of its first quarterly report. Erik no slowing down for janice capitals bill gross. My one time interview with the bond king on why he needs to prove to himself and others that he can once again Reigns Supreme over the bond market. Here is a look at top stories this morning. Verizon is shaking up the communications industry. The company agreed to buy aol in a deal that is valued for 4. 4 billion. It will create a path for mobile video. That is 50 a share for a wealthy as a 50 premium over aol stock price yesterday. It will give access to verizon on demand media clips and technology. The death toll is now 42 in nepal second earthquake in three weeks. It hit 45 miles south of kathmandu. More than 8000 people have been injured. Tremors were felt 500 miles away in india. It was centered in a mountainous region. It has already toppled quick damage buildings and triggered landslides. Helicopters are on the way to the hardest hit areas. They are still reeling from the quake last month that killed more than 8000 people. Stephanie secretary of state john kerry is in russia right now to speak to Vladimir Putin. It is their first meeting in two years. Kerry arrived this morning at the black sea resort of sochi. He took part in ceremony is at a world war ii memorial. Hopes for any diplomatic breakthroughs are pretty low. The u. S. Wants to push prorussian rebels in the ukraine to honor the ceasefire. He will also ask prudent to bask Vladimir Putin to back a solution in syria. Mus people think the probability is low. A controversial asian trade deal is up for deal today. The vote in the senate will decide to give president Obama Fast Track Authority to go ahead with the plan. The president is fighting his own Party Members and one of them is outspoken senator elizabeth born. President obama makes it clear that he disagrees with her. Elizabeth is a politician like everyone else and she has a voice that she wants to get out there. I understand that. Almost issues, she and i deeply agree. On this one though, her arguments dont stand the test of fact and scrutiny. Stephanie pretty aggressive claim. President obama said excuse me senator warren said, giving the president fasttrack authority on the trade deal will also help wall street rollback rules imposed after the financial crisis. And we know that keeping those rules in place are a major priority for Elizabeth Warren. Erik italys Investment Group is ensuring its offer for partner read. They turned down the original deal. The sweetened bid is seven that half dollars per share higher. In exclusive interview, the ceo says he believes he will eventually succeed. It is a much superior offer. We are proposing 157. 5 u. S. Dollars all caps with certainty. That is by far so. For all shareholders of which we are today the largest, having applied more than 9 of partners for employees and for its kind. Erik exor controls fiat crisis it it is controlling this deal to reduce exposure from the industry. There is a shortage of barrels used to age the lovely liquor. Barrel makers cannot find enough white oak because lumber industry has not recovered from the housing crash. Some smaller distillers may end up making less bourbon. Bourbon sales are up 35 in the past five years. Stephanie now to the big acquisition of the morning. Verizon is set to purchase a lull in a deal valued at 4. 4 billion. Aol is in premarket trading off of this news. Cory johnson, normally on the west coast is here in nyc with more on the deal. What do you think . Cory i think it is interesting from the advertising side. What Tim Armstrong has been quietly doing at a well is building the tools to serve across any property. While we think of the Huffington Post or other content aspects of aol, the real secret is spending hundreds of millions of dollars to build all the tools. They want a Company Called a. Tv. Stephanie what do they do . Cory think of it as the New York Stock Exchange for video ads. The bilayer and seller the buyers and sellers of ads can determine what the sales are evenly. It is fascinating and those are things that will really make them marketplace for advertising in the future across all properties. Erik theres nothing like illustrating this with a chart. Let us bring it back up with a chart. Cory look at the advertising growth in the platforms they have right now and you can see the growth has slowed down as they put the tools together. One can expect the growth rates are about to pick up again. Tim armstrong certainly knows what they look like for the next couple of quarters or so. This is not the worst time to sell. Erik we havent raising the question of whether it is better for aol to ultimately be a part of verizon or to have joined forces with yahoo . That is a deal that star board value and both companies have in trying to engineer. Im going to posit a crazy idea. Verizon has now demonstrated its willingness to go out of its core business in telecommunicationswirelessfibe r, decreasingly landline. Now its in the advertising business. What if it decided to get more into the Media Business like comcast and bought yahoo . Cory i wont say such a horrible idea. It is interesting to look at the difference between the Media Strategies of the guys on the pipes like the at t and verizon and comcast. There is a big belief in Silicon Valley that the guys who on the pipes are going to be the pipe holders. Stephanie why does that leave exist . Cory content is getting much disbursement cord cutting going on. This has numbers of subscribers going down. People say they are going to use netflix or hbo over the top and im not going to need the tiein of content and Delivery Systems that Companies Like comcast. Curious if this is an advertising play or a content play or contemplated the reason yahoo might not make sense is that. Who is yahoo is having a lot of the same tools. Erik i dont say is a good idea. Stephanie Stephanie Cory a maintenance it might not make sense for an acquisition. Erik thank you for calling my eye dst could idea stupid. Stephanie shake shack can it went over the west coast . Especially over the one and only in and out . It is not just l. A. , have you seen the line for an and out burger in las vegas . We are going to preview the new yorkbased restaurant chain ahead of earnings shake shack. Its the wishes. Its the. Delicious. Erik at last weeks salt conference in las vegas, we sat down with Cliff Robbins to talk to him about why m and a matters to activists. We found out more about where cliff is investing right now. Have a listen. Cliff mma matters because it is one of the tools that companies have strategically. That Means Companies that you have are making acquisitions or sometimes it involves selling the company. We are in a period of tremendous mma. This year will be more. This has been driven by lots of things. Number one is confidence in the boardroom. It is so much better than it was three or four years ago. Ceos are confident in business. They want to be aggressive in building businesses. A lot of ceos had not done anything for many years. Now they are faced with the dilemma of building a new retail plan of making an acquisition. Because caches cash is so available, this is a very important point. A company is using cash and buy it operating earnings, they are created. In blue harbor, we have a lot of Companies Making acquisitions. Some companies are also going to be acquired in this next segment of the markets. A new area of interest to us or what we are prospecting is the defense area. I think there will be at him and his of m a in the defense area. Erik why . Cliff we live in a dangerous world and that is not going to change it in Cyber Security and defense manufacturing, we going to see a lot of consultation. Called fathers and. Consolidation. Erik which side are you going to be on . Cliff i cant say. Its going to be bittersweet. We have companies where they are making acquisitions. In the Defense Sector, we will get ourselves positioned in a few exciting situations where we could do a quiz at acquiring. I see that as being a vital area. Stephanie his health care and pharmaceuticals interesting to you . Cliff it is, but those areas have tended not to be right for blue harbor. We see the high yields. We like to see the study and of businesses. Thusteadying of businesses. They often dont trade valuations that have been a tractor to us. I think the Defense Sector will be very right. Mna generally will be very important in the next cycle. You will see more m and a in the next cycle and in the boardroom. Erik what if you are wrong . What if they have a major correction . What if theres a raging fire of m a that gets doused . Cliff it is important to have a good investment first and then have the valley. If we invest in the company and believe in the business and the value goes down, we will buy more. We are investing for two or four years at a time. If the market were to go down it would be an area of opportunity for us. Erik how much of your total assets would you ever dedicated to a single acquisition . Cliff about 15 . The largest acquisition was a 15 acquisition. They are in the six to 8 range of our capital. 10 to 15 is profitable. Stephanie that was Cliff Robbins. He is the ceo of blue harbor group. That was me and white pants. I never wear pants. Erik they were kind of myrtle beach and not so much biggest. Stephanie myrtle beach . I dont think you have ever been to myrtle beach. Unless there was a french hanging from them and written across the back summer 2015 maybe, im saying is a new look. Erik shake shack, will it be welcome on the west coast or is . Can shake shack duplicate its success in new york city . We will take a look at earnings coming up. Stephanie you are looking at a live shot right outside of bloomberg World Headquarters here in new york city. Hazy and hot but it is not hazy and lazy. There is a lot of business going on today. Verizon, aol, treasury markets flying. If you get a chance to go outside, it is pretty humid. And schatzker who is always hot, is just living next to me right now. He is not sweating while eating a burger. We are asking the question erik that wouldve been very ed miliband of me. Stephanie can a burger place in new york city thrive in new markets . That is what investors are wondering as shake shack looks just take a claim on the west coast. The burger chain will claim earnings. Joining us now is cory johnson who knows little about shake shack, but each a lot of burgers. Cranked covers Consumer Companies here for us. Christ, let us talk Profit Margins for a moment. We saw the shake site ipo shake shack ipo. New yorkers love shake shack, but lets get real. There are six or seven items on the menu and the average six dollars apiece. Can a growth back of dash cam they grow . Can they grow . Craig we see the long lines, but as they move was the mississippi, the one in vegas is the only one west. The numbers say that they will not be doing much better. Stephanie i think it is part because they are new york celebrity and danny is like who . Craig that is where he is known. He is known here. It started in Madison Square park as a hotdog kiosk. Other cities and local players who we have never heard of. Cory we have in and out all over the west coast. It is a known secret. It is a treasure place. It is one the reason that it is treasured because it used fresh ingredients. They dont make burgers and square and squares and ship them all over the world. Stephanie we dont have anything like shake shack and no one is taking their kids to mcdonalds once a week. Cory what is the path to growth as they look for more franchising Going Forward . They have indicated its not part of their future but americans love their burgers. Stephanie should they broaden the menu . Look at the success of chipotle. Should danny meyer start thinking tacos . Craig i dont think they will go talk is. That menu is why they do love it if you look at mcdonalds, that has been part of the problem. They say we have burgers, fries shakespeare we do it well. Erik i just want to point out that when you talk about shake shack we have to talk about valuations. Shake shack is now trading at more than 10 times of current fiscal 2016 sales. How does the burger chain grow to that value . Stephanie sell tacos and dumplings feedback is always one. Erik cory johnson, lets not forget about him. We will be back. [baseball crowd noise] [x1 chime] [crowd cheers] oh i cant believe it [cheering] hi, grandma 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. Erik we are just a few minutes away from the opening bell here in the u. S. Let us recap for you the biggest Global Market movers of the day. Tracy halloween is here. We collectively have our eyes on three things. What is happening in the Global Market . This aol person purchase by verizon. Stephanie the 10 was at 234 this morning and it is now flat on the day. Erik its a volatile market. Stephanie it is craziness. Tracy theres Something Interesting going on here that investors to not get their heads around just yet. We had a dramatic selloff in Government Bonds in the past couple of weeks. We have a three day repeat. Many people thought things had come down. Everything was ok. It starts up again yesterday. It has continued today. It is really dramatic and volatile. It is painful for big investors who have to worry about things like value risk models which measure volatility in portfolios. It is really surprising and Government Bond markets that are supposed to be safe. Erik there is a big debate about why it is happening. It is because german goons were overbought . People were factoring too much demand on behalf of the ecb. Maybe it is growth and investors are waking up to the threat of inflation. Stephanie we have the corporate on market issuing coming. We have a lot weighing it down. Tracy that is a great point to make it it is the treasury quarterly funding this week. They are selling 60 billion worth of treasuries. Theyre selling it to a market who says that made we may not want treasuries just yet. Erik verizon aol and greece. Tracy i would say they are starting to suffer a bit upgrade fatigue. Of greek fatigue. The ecb is thinking about emergency liquidity to the country. That will continue to rumble on. And well and verizon is a big talking point today getting a lot of attention. Erik even though its not that big of a deal. Tracy no it isnt. I think everyone has a soft spot for aol and everyone remembers the old dialect modems of your. Stephanie or thanks youve got mail, with meg ryan. I want to point out that tracy brought up value at risk models. Now you know youre on bloomberg. Tracy i will try to keep it light on it. Erik that is Bloomberg Markets executive editor tracy alloway. It is were talking about this because we will see the evidence when the New York Stock Exchange and nasdaq officially open for business. The degree to which there is still risk parity. Stephanie they are ringing the bell. Erik bonds are selling off. If we are going according to the way that things have been working for the past several months, stocks would sell out with lawns. The degree which stocks are selling out does not match the degree with bonser tsonga. Does that match the model . Tracy where things are happening in markets now and we will just have to see how the spare out. People thought that the selloff would be over last week. It is still continuing today. Stephanie tracy getting technical with us. Weird things happening in the market right now. Welcome back to bloomberg. Stocks opened for trading. We saw people on the floor. Equities are failing away from the bond market. Let us go out to julie hyman who is monitoring all the action here at the open. What are you looking at . Julie we are seeing selling and stocks but it does not match the magnitude of what we are seeing in the bond market. It is off for tens of 1 . When we get right out of the gate, wings change. Things change in the first moments of trading. I have to bring up bill dudley again. The Federal Reserve official who was speaking this morning and zurich was pointing out that no matter how prepared markets are for the eventuality that the Federal Reserve is going to be raising rates that there is still going to be in effect when it happens. As we see, everyone is trying to read jager ahead of that. They are trying to readjust. This is happening in europe as we speak. It is on the bond market there. It is the view of some investors that it wasnt overbought market. That is triggering the selling that has spread to here in the u. S. For erik that is julie hyman. Let us go to the verizona little story. Verizon is buying and 44 . 4 billion. We are asking what does it mean for verizon . What might this unlock . Paul is with us from princeton this morning. What kinds of conclusions have you drawn so far . Paul this is the end of a love. This company was one of the first Internet Companies to go public in 1993. This is arguably the end of aol. A great job by Tim Armstrong to maximize value for shareholders. Rison is looking for two things. Number one is greater exposure to online video advertising. When you look at online video advertising, it is arguably the fastestgrowing piece of advertising. Aol has a lot of video on its site. A cell and a lot of advertising against that video. I think that verizon is looking for greater exposure to the advertising stream. I think that verizon is also looking for some exposure to the expertise that is programmatic at buying. It is a new form of buying and selling for internet advertising. About two thirds of internet ad buying is programmatic. And well has made investments on that side of the business and have really established themselves as a leader who i think verizon is looking for some of that expertise as well. Erik is there any major president among the major telcos to get into this business . Has at t, comcast, Time Warner Cable done anything like this . Paul i think everybody is putting more content online. What is whether it is netflix or hulu or going directly to consumers. We have seen hbo with hbo now. Cbs and nickelodeon a lot of Traditional Media Companies are putting more content directly to consumers over the internet. As a result, they need expertise. And tried to get access to those nonpaying bundled cable tv viewers in the u. S. They are tried to get exposure to online video advertising. We are going to see more interest in online video programmatic ad buying. I think verizon looked at aol and said that these are small investments for us. It will bolt a couple of these decibe it will bolt a company in this business. Erik bill gross will tell me why he did not hang up the states after leaving pimco. Erik youre watching the new Market Makers on bloomberg television. I am Erik Schatzker with my partner stephanie ruhle. Last hour, i shared some of my interview with bill gross. Philanthropy is now how bill defines personal success. He has already given away 700 million, figures he calls staggering even for him. He made his fortune at pimco, an Investment Firm he founded in 1971. Last september, he stunned the financial world by leaving forced for Janus Capital. When i sat down with bill to talk about his new life, i had to ask why is he even doing this at all. Bill one of the reasons that im still doing this is to prove that ive still got it. Maybe like a 38yearold quarterback that still has an arm and can take his team to the super bowl. It feels great. Erik to whom do you need to prove anything . Bill that is my particular problem. I understand that intellectually not many people care. My wife does because he has the put up with me at my. It is an obsessive thing that has informed me and help form pimco. When you get to be 71 even though you can figure it out intellectually, you dont necessarily lose it. Erik there are people who wonder why bill gross after building a track record as the most successful bond manager ever would be doing this. Bill i didnt like how i left so to speak, pimco. And i didnt care for the aspersions that somehow i might have lost my touch. I dont think ive lost my touch. I am in the seven days a week, 18 hours a day believe it or not. That speaks to interests. I hope the performance numbers speak to confidence. Erik how do you define success for yourself a Janus Capital . Bill moore by performance than by assets. I will love the assets to grow. When i came to janus, it was not the intent of creating a pimco two. Erik is there a point where big b comes to the best big b comes to bed. Is there a link where big b comes too big . Bill other institutions are big too. It is easier with 2 billion to move money. The liquidity is obviously better. It is less onerous in terms of organizations and decisionmaking. It is definitely a situation here where i can do things that that i think will make money a lot quicker and in a larger frame. Stephanie is it really bill gross needing to end on a high note . How old is he . Erik 71. Stephanie he is basically deciding that starting over for him isnt impossible. Is it just the competitive spirit . Erik yes. If you spend time with bill gross, he is an intensely competitive individual. He is obsessed with the market. He spends the weekend with the bloomberg terminal reading what Eunice Appelbaum funds to buy for his Family Foundation best Municipal Bond fund to buy for his Family Foundation. Stephanie when you look at the bill ackman, theyre still just as investment. Erik he identifies himself with the market. Remember that bill gross has stephanie im sure stan and george do, too. Erik he had a track record built for investing in the public unlike george soros and stanley druckenmiller. There am people who had money with soros, but that was a very indirect relationship. You and i can buy shares in the pimco total return fund. Bill feels not just an obligation to them, but an obligation to himself to demonstrate that the last few years at pimco which is returns were absolutely no comparison to what he did earlier in his career. They were an aberration and that he could come back more nimble managing less money without the headaches and the squabblings. Stephanie the drama. Erik and to be as good an investor as he ever was before. Stephanie if you are crowned the bond king, i get it. You dont want to get off the throw. You live in newport beach. Chill out. Have a drink. Erik he is building. He overlooks the parking lot of the pimco building. Stephanie he sits in his office looking at them. Erik much more of my interview with bill gross on bloomberg television. Tune in for the full thing. More of his life after pimco why he is giving away his multibilliondollar fortune. That is a pm eastern time on a special edition of bloomberg encore. Stephanie a record for the art will last my. We will speak with the state of the art market. When something sells for 171 million, i say it is pretty healthy. Erik heres a quick look at top headlines of this hour. Mcdonalds drivethrough choices will be shorter. Mcdonalds plans to offer more items in the dollar and a half and three dollar price range. The Robin Hood Foundation gala will take place tonight at new york city. For the first time ever, there will be satellite parties for folks who cannot fit into the venue. They will be allowed to drink, dine, and donate. The benefit is expected to raise millions of dollars to fight poverty. Stephanie that is last year. Bono and mary j. Blige performed. Im not sure who is performing tonight. Paul mccartney will be there, but it is usually a big surprise. John sykes usually delivers whether it is aerosmith. You have mary j, rihanna, lady gaga of i. Erik the highest price ever paid for artwork is a cosco sold at christies. The painting was bought by an anonymous collective. It smashed the previous record of 142 million held by african they can work offensive work. The auction brought in millions in total. Stephanie a lot on the recordbreaking price. David joins us now. I want to start with the art for sale. Who is in the audience. And who is bidding on it . Katya he sold at the cosco. Apus at the cost of it of picasso. Stephanie did he say why he was selling . Katya the prices were to give. Steve wynn and michael of us was there. Erik from blackstone. Katya i did not see him for the first time in a while. Stephanie i know its an anonymous buyer, but this is your jam. What do you think about this . Is he american, chinese russian . Katya there are probably a half dozen people in the world who can afford such a painting. Some assume it is a saudi family. There is a list of collectors it could be. Asia has been very strong. It is interesting. People who are seasoned collectors steve when was bidding on this painting. He said at 125 million he stopped. At 180 million, you sell the picture. Stephanie let us talk about auction season. These are two crazy weeks. This was a sale added to the schedule. I saw a preview and i went to go last night because it was packed. There were 35 pieces that went for more than half 1 billion. In these next couple days, yet leading to art sales around the world. It is an incredible time for artists in your. Stephanie one of the commission . What you make off of all this . Katya at sometimes, you make very little because they are so competitive. Just to get it think of the commission on the consigning agreement. Those are not the moneymakers for them. This is just incredible publicity. Stephanie you dont need an advertising budget. We are talking about them. Erik no marketing and no advertising. Selling patents best paintings for 179 million will solve the problems. Talking about the contemporary art auctions. Stephanie we love talking money so we will keep doing that. Profits continue to soar for legal weed dispensaries across the United States. The Treasury Department is pressuring banks to take on the cash that they do not want. We will have that story next. Erik if you have not had a look at your screens, you will see right now that stocks are in the red, dropping for a second straight day. Let us call this breaking news. Let us go to julie hyman for more. Julie were seeing the stocks down. Nasdaq is down 9 10 of 1 as Technology Leads the losses today. Materials, utilities, Telecom Services selling off. Just a few minutes ago, we saw the major averages down even more. Bounced off the lows of this very early session. I wanted to talk about some of the movers we are watching today. The best performer in the s p 500 is having its best day ever. It is at an alltime high. This after the wall street journal said it was near a deal to sell itself at evaluation of 10 billion. On the downside today, we are watching rapp space their shares are lower. Worst day and about eight months and the lowest level since november. Of particular Sales Forecast the lows what analysts were anticipating. This was after Amazon Web Services broke out the numbers and showed rapid growth. Rack space has not been keeping up. One of its clients is moving operations to africa. It lost that business in the second quarter. Look at gap as well. One of the worst performance in the s p 500 today which is trading at a sixmonth low. The company came out with comparable sales figures for the month of april. They trailed estimates. Gap came down 15 last month. Globally down 12 . Still having a lot of issues. I want to check on yahoo . You talk about will there be any fall how fallout from verizon buying a low nope. Figures are little change. Stephanie as long as they have alibaba. Moving on, a growing number of states have approved the sale of pot. Marijuana remains illegal under federal law. Totally confusing. That legal limbo has set up a titanic struggle for washington and wall street. What is the center of the debate . How to account for the mountains of Legal Marijuana cash that are piling up in warehouses and basement vaults across the United States. Keri geiger has more on this cash conundrum. Walk us through it. People are making money i dispensaries and cannot find money to banquet. Keri this is a crazy problem. Marijuana is not legal federally. It is legal in 23 states. It is a fast industry which is about 3 billion a year, mostly in cash generated by Legal Marijuana businesses. That cash is having a hard time finding a banking system. Thanks which are federally regulated as you guys know cannot take that money. Even though there has been help from other various agencies like the Treasury Department and the department of justice to provide a roadmap, they still cant do it until they get a green light from federal regulators. Stephanie it is not their fault. Banks are desperate for new revenue streams. Isnt it in the hands of the government to give them the green light . Get it . Green light. Keri totally. Federal regulators are going to have to provide some kind of exemption. Our congress is going to have to step up and change the law. Marijuana is a class one drug. If you are buying and selling it, even in states where it is legal, you can still be prosecuted under federal law. Until there is a law that says marijuana is easily legal federally or ok for banks to take this, they can really not touched this business. Erik i love it. Great story. Stephanie keri geiger. I love that she works you. That does it for today on Market Makers. One awesome show for us. Erik we are back at her new time with mark mobius. We will be talking about emerging markets. China and lots of interest what is happening to chinese stocks. Stephanie eric and i will be hitting the robin hood benefit. Highlights to market if someone could find 175 million on our last night, let us see what the ultrarich are going to do at the robin hood gala tonight. We will see you tomorrow. Betty good morning. Welcome to the Bloomberg Markets. The Main Attraction is aol technology. Erik the global bond selloff is accelerating. The 10 year treasury spike. German bond yields have rocketed from a visits points to 70. Newly Legal Pot Companies need access to banks, but most banks dont want to get burned. Good morning. Im olivia sterns. Erik im Erik Schatzker. We are 30 minutes into trading on the New York Stock Exchange. The big story today is in bonds. It has nothing to do with stocks. The 10 year yield is climbed to its high miss level its highest level. Olivia a huge moves in the german yields