Saudi oil export hits a nineyear high. Bikers arrested in waco are said to be members of motorcycle gangs. Capital charges are expected. President obama has joined twitter. Erik the Worlds Largest retailer being hurt by the strong dollar. Walmart posted profits that missed analyst estimates. The company is dealing with a broader shift than how consumers spend their money. Americans spend more on homes in the last three months. That boosted earnings at home depot. Firstquarter profit beat analyst estimates. The Early Arrival of warm weather spurred people to work on exteriors. Stephanie regulators want to know if Fiat Chrysler is fixing vehicles fast enough. A hearing will be held in july. We have concerns. There will be a chance to have a hearing where we will collect information diversely from the public, Safety Advocates and it will not be a press release. We will be looking at evidence to see if they are meeting obligations. Stephanie Fiat Chrysler disagrees with the governments claims. For the First Time Since 1960 great britains inflation rate has fallen below zero. Falling food and Energy Prices depressed the cost of living. Consumer prices have fallen 1 10 of 1 . The bank of england is under little pressure to raise its Interest Rates. The force is with the star wars creator. So our disney shares. Lucas has made 2. 2 billion in paper profit on the disney stock. Disney shares are close to 70 percent in the last two years. Those are your top headlines. Erik five things you need to watch today. The European Central bank. The ecb plans to step up asset purchases in may and june. This is ahead of a drop in liquidity expected in the summer. This is from then, an executive board member of the ecb. It indicates the ecb is sensitive to seasonal patterns in a fixed income market he is telegraphing won the purchases are going to come. It is not going to be on the same time table. Stephanie the fact they are coming means the market can prepare. Erik there has been volatility in the rate market. The 10 year yield backed up in the space of three weeks. The ecb probably prefers stability. Stephanie julie, give us number two. Julie s p 500 Index Futures are up. That signals equities are on track to extend the alltime highs they reached yesterday. He goes back to what you are talking about in europe, the idea that the ecb is going to be reactive or proactive when it comes to what it is seeing in seasonal patterns just as european markets are reacting positive to that. Erik i am waiting to see how long it takes for strategist to raise year and targets year end targets. They have it at 2350. The lowest is Goldman Sachs with 2100. Stephanie fundamentals were going to come back in play. When you look, there are some S P Companies that are not that special but they continue to rise. They continue to move up. When are we going to start looking at fundamentals . It does not feel like anytime soon. That takes me to our third story. It is apple. The company is said to have ditched plans to make a tv set. Theyre working on a new apple tv box. Carl icahn is calling for a bigger stock buyback. The market is undervaluing the stock. Some people think to hire 40 is a conservative estimate. Erik 240 is a conservative estimate . Stephanie they are up for the year. Look at apples dominance versus other companies and what they have done so far. If you think about index funds they now have apple in there. It is such a big waiting in the index. Apple continues to rise and the mutual funds happen, you will be chasing apple. Erik i want to meet the people who think to our 40 a share is undervalued. Stephanie he is saying here is all of this dough and here is what i think you should do. Tim cook might not disagree with carl. Erik if tim cook agreed with carl icahn, apple would have done it already. Stephanie we do not know what goes on behind closed doors. Maybe it is someone knocking on the door to get you in the right direction. Erik an agreement rolled out on greek emergency on friday. Lets take you to hans nichols. Hans he held out the possibility you could have a greek deal in about a week. His comments come after the greek finance minister said there close to a deal and he thought they had a little further to go and they could get it done this week. The optimism we hear has not been echoed here in berlin. I want to be helpful. Hans that is the view. I apologize for sounding like a broken record. We had deadlines. I get a lot of air miles. Erik thank you. A good sense of what is going on in greece. The finance minister thinks a deal is imminent. Stephanie . They need to say that . Erik kind of. Stephanie sort of. Erik we will keep an eye on housing. We have already got a sense from a couple of reports this morning about housing. Home depot looking great. Walmart, not looking so great. Stephanie home depot it is a derivative of how the Housing Market is doing. The fact we are seeing them do well, last friday, i was impressed. Erik it has been a while since ken was pushing the buttons at home depot. Stephanie top stories, back to walmart. Shares are down more than 2 . Relatively flat sales in earnings per share and revenue that missed analyst estimates. Olivia sterns has been looking at those numbers. Many people said walmart is having a wage increase. Olivia they cut the earnings forecast for the year because they will be paying employees more. The Earnings Report was lousy of the top of the show. I am going to offer a contrarian view. It was a bit of a withhiff, but it is not that bad. Currency fluctuations took three cents off the bottom line. If you add that back in it is actually a be on the bottom and top line. What we should be focused on is u. S. Comp store sales. How is their bread and butter business doing in the u. S. Why have been why have they been losing out business to the dollar and amazon. Com . It is the second consecutive quarter of positive traffic growth. Perhaps they have turned around. I will read you a note from david. The sale was roughly in line with his model. What disappointed him was sams club. They are comp was down 3. 8 below their model of 1. 5 growth. International sales growth was below the model estimate. We know walmart is investing to fix problems that we are familiar with. Erik i know you will be back after the Conference Call. Stephanie coming up investors looking for liquidity in the bond market turning to etf. Is this a smart move or they or are they looking for yield and all the wrong places . You are watching Market Makers. Stephanie coming up this hour, the state of the u. S. Housing market will break the latest figures. 8 30. Is apple undervalued . Carl icahn thinks so. We will hear from daniel. Erik you have heard about the lack of liquidity in the bond market. Investors are turning to fixed income etfs. What is the downside . Lets ask kevin. Lisa ever mom lets lisa abra mowitz is here. Kevin this is a project that was targeting Retail Investors and we see the professionals jump in. Lisa etf, when you think of etf what do you think of . Retirees. Stephanie i think Exchange Traded funds. Lisa i think of retirees individuals looking to buy something quickly. What happens if you have a Big Hedge Fund doing a 200 million trade . Stephanie why cant etfs be like indices . Over time it is 10 times bigger than the market. Kevin the more the professionals get involved, the more liquid it is in the more efficient and should be for retirees to put in their accounts. Lisa you have bonds that trade over the market, overthecounter, if they do not have realtime pricing mechanism beyond shares, this is something people are talking about, is this a concern . Stephanie if you kevin if you look at the Interest Rate markets, you can buy futures swaps, it goes on and on. There are bonds that are hard to trade. The stock market has been hit hard from doddfrank. This is why etfs erik are growing. Erik what purpose do etfs serve . It is not a substitute for a bond. Kevin the same is true for a mutual fund. Erik do investors own funds . Kevin they are managing etfs, there is still funds and they are still managed by institutions. Stephanie they can trade without ever having to touch the liquidity of the Corporate Bond or highyield market. Kevin bonds are hard to trade. They always have been. It has gotten harder. The last thing you want to do is buy a bond by yourself. Lisa blackrock has done studies for every 10 studies traded only one dollar trades. It is a downward trend where you have to be liquidated in a fund to make everyone hole. Stephanie if you have to be exposed to credit. Kevin this gets us into the derivative debate. We dont usually talk about etf s. We show there are some institutional investors. Stephanie it is going to help liquidity more than it would. It is hard to go short. Lisa a lot of mutual funds are having a and they can put it to work and by bonds. Until they can find the bonds, they do not have to lag behind their indexes. They were looking to make a quick trade on the 20 year treasuries. Erik we will not find out if they pose risk to the system until kevin we will not find out until theres a major selloff. Everybody knows there is a problem. Time will tell. Stephanie welcome to the disaster. Erik we will be back in two minutes. Erik we will get the latest to read on the state of u. S. Housing and bring you the latest news on home starts. We will talk about home depot. Earnings offer a glimpse of Housing Market. A 16 jump in net income. Stained sore samestore sales growth. With us is carl. Welcome. I did mention this is the best place to start. This is part of the spring season. They saw better sales than they expected. It is a good sign for them. You draw what conclusion. It is a bellwether. While we are seeing is the housing sector has been slow to mend. It is turning out to be a mid to late cycle driver. The improvement tells us there is a wealth affect. Fewer and fewer mortgages are underwater. With the higher home value to tap into the line of credit. Stephanie how will it affect what we see at of janet yellen. We are not going to see these rates rise anytime soon. It is a soft start to the year. Business investment not looking good. It is not going to come back any time soon. Housing is too small to save us. It will be an important engine this year, but it is too small to offset. Erik we live in a bigger economy. Housing starts are where they were in the early 1990s. The mid to late 1990s plus the 2000s was a toxic mix of crazy policy mixed with bad lending standards. This is evidence that we are an economy that has not normalized. A simple model of housing output is where Homebuilder Sentiment is. We will get more information coming up. There is a huge disconnect. One Homebuilder Sentiment is where it is, we should see housing output higher than where it has been. Stephanie is an unintended consequence that they have to outpace the work we are expecting out of them . Stock is up. That is a red flag. The company is well run, one of the best retailers out there but the stock is up. The valuations are pretty high. One thing to note on earnings the First Quarter sales comp was the best since 2004. Sometimes there is a leading indicator. It is a good sign. We have to watch what we have to do here is watch the figures. Stephanie whether or not a factor in the history of the world. You are going to see an increased start. Watch the permits number. Stephanie it is the biggest excuse ever. I wish matt miller were with me. I cannot stand the weather argument. Guys, you want to let me do the numbers . We are seeing a 20 increase. Maybe it was the weather. I do not know. A month ago, the number was revised. The Building Permits number seeing a big increase. These numbers are much better than have been anticipated. It must have been the weather. Erik they mustve been the best number four Housing Starts since 2007. We have not normalized. This is evidence we are moving in the right direction. We have to watch the permit numbers. You can file a permanent you can file a permit if it is raining or snowing. The permit number does look good. This tells us housing is consistent with what homebuilders are saying. Stephanie you still thing janet yellen is not looking at this . She is looking at the broader economic backdrop. On friday, the cpi is going to show a washout. Import prices fall. Stephanie are you saying washout to get to me and continue the weather debate . It will be further evidence for the fed to hold off a little bit longer. Stephanie find. I like the home depot shopping experience. I have only had a great experience at home depot. They hire a lot of others. Erik time for top headlines. The government of greece is optimistic that unlocking bailout funds is within its grasp. Greek finance minister said the two sides are almost there. We are very close. Until the deal is done, no one knows when the deal will be done. Could it be a matter twice for hours . It is a matter of about a week. Erik creditors want to see more concrete action. Until that happens, they will not release any more bailout funds. Stephanie in texas, city and county government cannot ban fracking. It is against the law. Greg abbott has signed a law that prohibits local governments from banning fracking. He says he wants to protect private Property Rights from heavyhanded regulations. The Supreme Court has added protection for those investing in 401 k plans. Plan administrators must continue to monitor investments and get rid of those considered imprudent. Investors say the company violated fiduciary duties by buying mutual funds when they were less expensive alternatives. Erik tjx earnings out of the newsroom. Julie earnings coming in at . 69. Sales coming in ahead of estimates. Comparable sales up 5 at tjx. They own tj maxx and home goods. Comparable sales there were up 9 . The Second Quarter earnings is below estimates. Because of the strength of the First Quarter, the company is raising its forecast. It looks like traders and investors are weighing this as a positive report despite the negative secondquarter forecast. Stephanie thank you. When we return, why an apple tv set might not be coming anytime soon. Could carl icahns apple value be too optimistic . We will dig into that when we return. Youre are watching Market Makers. Stick around. Stephanie welcome back to Market Makers. I and Stephanie Ruhle with my partner Erik Schatzker. Apple has ditched plans to make a tv set. People familiar with the matter said apple searched for features to justify a branded tv, but executives did not find them compelling enough and apple is working on a new apple tv box. That will come as news to many including carl icahn, who said the tv market would be huge for apple. Daniel, it seems that carls sentiment is that any Business Apple decides to get into, they dominate. The ecosystem is whatever it touches, it seems to win. Daniel if apple put a local a logo on a yogurt, you would be eating pinkvery. Pinkberry. Apple watch and wearables are off to a strong start. When we look at apple tv, i believe they did shut that down initially. I believe apple will come out with an integrated tv. They need to get the streaming services. I believe the apple tv will be erik hang on a second. That is really interesting. Daniel they did shut down the initial plan. Any next year, apple tv will be part of the product lineup. Erik you mean a television set. Daniel i mean a television set. Erik how can that be the case . It seems to me reading the story, they shut this baby down. How can they bring out an integrated tv set next year if they are not working on it now. Daniel the jury is still out in which direction apple heads. I think apple is tiptoeing to the apple tv. We look forward. When you look at the integrated things, tv automotive, some of these other areas, those are potential markets that they are going to go after. Stephanie what he think about the argument carl icahn is making that apple stock looks cheap . Daniel it trades at 10 times x cash. When you think about their growth, look at china. China has a billiondollar market opportunity. The growth for apple is 6 or 7 . Theres a better chance of me playing in the nba than apple doing a 6 growth. Stephanie we know how heavily weighted, but mutual funds seem under weighted. Are they going to you saying you and nba versus apple, they will say i have to get in this game. We are going to see this thing on a tear. Daniel the key thing is them getting into wearables. The watch, you look at china, the industry is underestimating the fuel in the tank. Erik on one hand, there is how much money you think apple can make an on the other hand, there is valuation. Carl icahn is conservative. He thinks apple should trade at 18 times what he expects earnings to be. That is where you and carl differ. You think next year apple is going to generate 9. 5 dollars a share. Dean yell a number could be close to 11. Erik your report says 9. 58. Daniel what could be the upside . It is china. It is wearables. Stephanie once people are in the apple ecosystem, they never want to come out. Think about the Value Proposition is apple versus so many of these Tech Companies doing what for whom and providing value where . Erik that does not justify a higher valuation for apple. Stephanie all of the evaluations out of control do we see them normalizing . Apple makes a time of dough. Daniel apple is the standard. Larger ipad, they will give some breadcrumbs on the apple tv. These are key ingredients in that recipe for success. China is front and center. It comes down to a 150 billion market opportunity. China is going to be the number one market for apple. Stephanie how many people do you know are wearing them, but they do not know if they love it. People want to touch what apple makes. In china, it is extraordinary. Erik people loved apple as much as they love today. Stephanie carl is saying lets realize it and take a closer look at how they are performing and realize the value. Erik he is pounding the table for a bigger stock buyback. Everything is noise. Daniel it comes down to is it to how do you see the stock go higher . They continue to deliver. Stephanie why make the argument it is too low if they did not make great products, which they do. Daniel apple has set a standard. Every other company marvels at how look at china apple has taken china from 14 of revenue to 40 in the next two years. Tim cook will be speaking mandarin in the next two years. Stephanie i dont care how much siri hates me it is hard not to like an apple phone. Erik eye am not talking about the phone. Daniel, you need to come back soon. Stephanie when we come back, we are talking sanctions. Erik and russia. Stephanie coming up, we will hear from russias richest man. Why pimco decided to get out of the trafficking business. Erik time for the top headlines. Home construction soared in april. It rose to the highest level in more than seven years. It is the biggest since 1991. Construction fell 17 in february. A decline stephanie blames on harsh weather. According to an imf report about 80 of subsidies are the result of environmental damage. Coal accounts for the biggest subsidies because no company imposes meaningful taxes on coal consumption. Bacon is a bargain. Wholesale prices have dropped two thirds from a year ago. The result, delicacies like this one. A veggie patty topped by two strips of real bacon. You can buy one at fat burger. Stephanie there are a lot of people who are not vegetarians that like veggie burgers. Erik you are the first nonvegetarian i have met that like veggie burgers. I am looking for realtime twitter feedback here. If you are a nonvegetarian and you love veggie burgers, i want to hear about it. If you do not, i want to hear that, too. Stephanie i had a veggie burger in west village. It was delicious. Then i ate the rest of my sons hotdog. Scarlet fu has real news. Big calls on the street. Here is scarlet. She is breaking down analyst action and what needs to be on your radar. This tastes like a combination of sub and garbage, but over time, you like them. Scarlet the analysts at jpmorgan saying Royal Caribbean is more profitable in highgrowth markets. Asia. Erik i love win an industry is newly focused with one thing. Stephanie not just Royal Caribbean, core customers need to be cruising more than ever and are getting closer and closer to dying. Scarlet you have a new group of consumers that want to spend their money. They are trying to find ways to appeal to them. Erik i do not know if i buy this theory that everyone who wants to go on a cruise is two days from dying. My children look at the cr uise ships. Scarlet lets move on to lumber liquidators. Too many risks at this juncture. We are catching up a little bit here to all of the brouhaha. They suspended sales of chinese made laminate flooring and put together a special committee that the formal that the former fbi director is heading up. Erik they are down 61 . Scarlet the damage has been done. It has lost more than half of it market value. Erik it is less than a billion dollar stock. Scarlet lets talk about netflix. They did not change their rating. They are the secondhighest after the Capital Markets call for 900. They said forget valuation. They are misleading. There is a lot of cost involved in bringing up the subscriber numbers. I thought that was interesting. Erik you would have to tack on a pretty sizable premium. Stephanie if you are alibaba erik the problem is the valuation. Right now, it is trading at 371. Stephanie we are going to be saying it is a steel. Erik it is hard to make it pay any time soon. Stephanie scarlet fu bringing sense to the room of chaos. Erik International Sanctions russias richest man still getting wealthier. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and Stephanie Ruhle. Erik if you are just joining us you missed a great first hour of Market Makers. I am Erik Schatzker. Stephanie i am Stephanie Ruhle. In the next hour, we have an exclusive with russias richest man. We will talk about the executives who make the most dell dough in the united states. Erik straight to our stop top stories of the morning. The government of greece is optimistic that a deal about locking up bailout funds is within reach. European creditors are not quite social or. Greek finance minister Yanis Varoufakis said that the two sides, the greeks and europeans, are almost there. I think we are very close. Of course, intel the deal is done until the deal is done no one is sure. Could it be a matter of 24 hours . A matter of about a week. Erik creditors want to see more concrete actions from greece. They want to see labor market deregulation and the Pension System overhaul. Until those things happen, they say they want release bailout funds. The Worlds Largest retailer is hurt by the strong dollar. Walmart posted profits that missed and estimates. The company is doing with a shift in how consumers spend their money. Shares are lower in premarket trading. Stephanie americans spent more on their homes in the last three months. That boosted earnings at home depot. First quarter profits beat analyst estimates. The company was helped by the continued rise of housing prices and the Early Arrival of warm weather spurring people to work on their home exterior. Regulators want to know whether fiatchrysler is fixing safety defects quickly enough in millions of cars. They say the automaker has low recall Completion Rates and inadequate fixes. We clearly have concerns. This is a chance publicly to have a hearing where we will collect information from the public, Safety Advocates including chrysler. It will not be a press release. We will look at evidence to determine if they are meeting obligations. Stephanie fiatchrysler disagrees with government claims. The company says its Completion Rate for recalls is better than the industry average. Erik more than a year ago, apple suspended plans to make television sets. According to the wall street journal plans for a settop box have been widely reported. I will point out that dan ives who covers apple and has a price tag of 185, was with us last hour. He says he Still Believes apple will come out with an integrated tv set next year. A big jump in Housing Starts last year. Home construction rose to the highest level in more than seven years. The increase of more than 20 was the biggest since 1991. Construction dropped 17 in february. The decline was blamed on bad weather. Stephanie look sexy controversy over Hillary Clintons emails as secretary of state will spill over into the election year. The government has proposed releasing 55,000 you heard me right. One more time 55,000 pages of the democratic president ial candidates email in january. That came in response to vice news. In the National Hockey League Playoffs Tyler Johnson had a hat trick to lead tampa bay to a win over the new york rangers. Sorry, scarlet fu. That leads seized Eastern Conference Finals at 11. The rangers committed seven penalties which led to six tampa bay power plays. Those are your top headlines. Erik with wealth estimated at about 17 billion, Vladimir Potanin is russias richest man. Also the country of the the ceo of the countrys biggest mining company. His personal fortune has short. Ryan chilcote sat down with him in an exclusive interview. Ryan, should we be surprised that some russians have been getting richer even as the country thanks to sanctions has been getting poorer . Ryan i think it is a bit surprising. If you listen to the treasury it was basically about how the sanctions were ruining the economy. You have to keep in mind, they are in exporter. He owns 30 of the company, with 10 billion right now, and the fundamentals look good. Nickel demand from china is really high, and you have tesla electric carmakers, hybrid car makers, they need batteries. Batteries need highend nickel. That helps him. Then, the devaluation of the ruble perhaps a bit surprisingly, has helped them. Because they sell nickel and palladium in dollars. Vladimir potanin thinks the results of the sanctions have been mixed, but he thinks the worst of the sanctions are pretty much behind him. Have a listen. Mr. Potanin in my opinion, nobody wants more sanctions. I dont think we will be able russia and the countries that implement sanctions, to leave these behind very quickly. But i dont think anyone is interested in going further, in terms of sanctions. Which means we have reached a certain stable level of tension. Ryan look, the sanctions are still in place. But even today, the Russian Foreign minister in brussels met the eus top diplomat and the head of nato. So we do appear to beginning to a bit of a stasis. At least nobody is talking about increasing sanctions against russia. Erik i want to know what Vladimir Potanin thinks of Vladimir Putin. Ryan the two played hockey in sochi a few days ago. Even if you do not like putin, it would be taboo for him to say that. But he said he likes him. He even addressed the rather taboo subject of life after prudent putin. Have a listen. Mr. Potanin right now, he is the only leader of the country. There are no political rivals. Not a single politician, even of the same side. At least comp arable comparable. Which maybe is a challenge for putin because he needs to think about growing some younger people who will continue, lets say will continue to lead russia for many decades. I think it is part of his job. Ryan to come up with a successor . Mr. Potanin i believe in competition. I believe in leaders and competition. In order to find a leader, you need people to compete. In order to understand who is really more efficient, who is a strong leader. Thats what i think we will need in russia. That is a challenge for everybody. In business, in politics, in sports, everywhere. We need more competition. Ryan more competition. You heard it there. As we look beyond sanctions, if we will see a lessening of tensions between russia and the united states, maybe mr. Potanin has raised the next job medical question, what comes after putin . Erik i found that comment from Vladimir Potanin to be fascinating. Of course, it is nice to see competition for leadership, but how much competition can there be when youre wouldbe competitors keep getting taken out, like nemtsov . Ryan thats a very good point. Im sure the political opposition in russia, which has been weakened to the point that it is almost nonexistent, im sure they will be happy to hear Vladimir Potanins words. I would suspect that he will be asked to interpret what he meant. I know the ft went to him after the interview with the interview in hand. I doubt he will say that means he is calling for more democracy. But certainly there is a deficit of choices when it comes to successes for Vladimir Putin. After scoring six or eight goals at the age of 67, doesnt look like Vladimir Putin is heading anywhere anytime soon. Ryan chilcote, with an exclusive interview with Vladimir Potanin russia is richest man. Stephanie from one dollar to almost 300 million. What top executives made last year, and why the numbers keep getting bigger. We have that next. Stephanie welcome back to Market Makers. There are two votes on executive pay today. At j. P. Morgans annual meeting shareholders will weigh in on pay packages. They will be a similar vote at morgan stanley. Critics say the heads of some of the Worlds Largest banks are over the are overpaid. How these packages compared to other industries. The median paper chief executives at big banks has grown from 3 million in 2009 to 11 million. Jamie dimon has been the head of jimmy Morgan Jpmorgan for almost a decade. Last year, he brought in 21. 5 million. His colleague at contemporary, 24 million. If you look at the bloomberg pay index, the highestpaid executives in the Financial Sector are not from big banks. William foley, executive chairman of fidelity 104 million. Stephen schwarzman who heads the Worlds Largest private equity firm, 85 million. Of the 100 highestpaid executives last year, only two of them were bankers. Lloyd blankfein brought in 31. 8 billion, and gary cohn brought in 29. 6 million. Who topped the list . 283. 5 million. Something you have to keep in mind, he is the founder of his company, meaning he was paid a lot in equity. Number two the head of Liberty Global 139. 9 million. Keep in mind, media compensation tends to be very high. Les moonves at cbs made 58 million. Bob iger, 51. 4 million. Most executives stand to make a lot of money when they step down. Jack welch, the longtime head of ge, got a severance package which in todays dollars would be well north of 500 million. Stephanie i want to bring in Bloomberg News managing editor matt miller. Ceos being overpaid is subjective, but we love to say that bank ceos are public enemy number one. Nick whitman widman versus jamie dimon . Matt a lot of that was equity, a result of getting paid for the ipo. You have to look at what the board intends to give someone in a given year. Nick widman got a lot of equity deferred into the ipo. If you look at someone like martin franklin, the third guy on the list, 113 million of that 75 million is an award that they say is unlikely will ever be paid to him. The targets are based on eps. But they have done it before, and he got the award. Erik lets talk about the difference between intended and actual. Why is it important, and why do we care what a board intends to pay a ceo, or another person . Matt it does not include any stock or cash or bonus that was deferred mother years. If you look at the financial crisis, you have a lot of people being criticized for being paid 75 million during the financial crisis. The board would say, we only awarded him one dollar in compensation, but because they made money from 2004, 2005 thats when those compensation awards were realized. So thats why reported pay can sometimes be misleading. It is not inaccurate but it is misleading. What you want to look at in terms of payforperformance, economic profit riskbased decisionmaking, riskbased profit over awarded compensation, what the board intended to pay. If the profit is a big share they are overpaid. If it is small, they are underpaid. Erik one problem with that. Companies dont actually think like that. If you look through the compensation tables the annual proxy filings you see so many of the compensation programs are based on stock performance. Not economic profit. They made no economic profit yet all kinds of stock performance. Matt thats a problem, in a number of ways. Number one a thing done by the ceo or the other parts of the economy can affect the stock performance. Also, a lot of big investors once the stock to go up, so they look at return as a way to measure it. It might not be the best dollar for dollar metric in terms of actually measuring performance. Erik at the very least, how much money you make is unknowable thing. Matt it is. Erik how much money investors should be prepared to pay for any companys earnings particularly in the distorted environment we currently live in, that is not a noble thing. That is a guessable thing. Matt so you have variables going into this thing. Companies dont actually think about that. They think about total stock return, far beyond economic profit. Very few mention economic profit in their proxy statements. Erik matt, thanks for joining us. Matt my pleasure. Stephanie a lot of money. Erik you lucky bloomberg subscribers can see it on your terminal. Stephanie when we return, walmart is lousy . We will tell you what the Company Executives are saying on their Conference Call. Stay with us. We have that, and a whole lot more. You are watching Market Makers on bloomberg television. Stephanie welcome back. You are watching Market Makers. I am Stephanie Ruhle, with Erik Schatzker, but i will send you to the newsroom, where julie hyman is monitoring premarket action. Julie im looking at panera bread, upgraded to outperform from market perform. Cowen says they are bullish on overall sales improvement and they have greater confidence in cost controls coming for the company. Shares are higher. Take2 interactive, the video game maker behind grand theft auto, is benefiting from a game called evil released in february youve evolve released in february. The opening bell is coming up in a few minutes, so stay here on bloomberg Market Makers. Erik we are just a few minutes away from the opening bell in the united states. We will have a look at a couple things. More than a couple, that you need to know right now. Michael reagan is here, and so is jonathan golob. What is number one . Michael the top story is the ecb basically giving the bond markets the summer off, saying they would frontload bond purchases in europe in may and june. The reason he gave was that liquidity just disappears from the bond market in the summer everyone is on vacation. So they dont want buyers in those months to distort erik with such little trading the ecb shows up with 60 billion a month, you drive german yields again. Michael thats the theory. Some people might believe it is a reaction to rising rates we saw in europe recently. He says it is not that, but obviously that could be a concern. Stephanie does it matter to you . Jonathan not that much. If you look at the european stocks it simply upset the currency move. U. S. Stock futures almost ignored the whole thing. But if the ecb is not buying this summer, that means it is injecting less liquidity into the market, and some of that liquidity has served at least in theory to raise u. S. Equity prices. Jonathan im a little doubtful the market has moved because of money printing. But to the extent of the market likes this, sure. It is a nearterm positive. But at the end of the day, they committed to a certain amount of printing. They are not telling you they will do anything different. Thats the most important thing to me. Stephanie you better deliver with number two. Michael the dollar is taking off, the euro is down. That is having an impact on oil prices. Oil prices down almost 2 . Theres a lot going on. Saudi arabia released production numbers. Pumping more oil than in almost a decade. Goldman sachs is producing crude will return to 45 a barrel by october, basically saying that drillers in the u. S. Still have access to cheap money. Any increase in prices will go back any increase in prices can be met with more drilling to compensate. Jonathan you see the story behind the oil market. It is all about the currencies. Oil is priced in the dollar. My read is that the dollar is going to be weaker, not stronger , through the remainder of the year. I think you will see higher oil prices. If you look at supply and demand data for the last year, oil was moving all over the place. It really did not tell the story as much as currency did. Erik a good segue to number three, walmart earnings. They see a 14 billion hit to sales this year from a stronger dollar. You think of walmart as a quintessentially u. S. Company but they have a huge overseas presence. Taking a big hit. Jonathan considering not only the sales but the cost of their goods and buying cheaper goods than they are selling in the stores you have to be careful if people use currency as an excuse. If the things you are selling are cheaper for them even if the sale is less. That is something to watch on both sides. Erik lets take you to julie hyman for some of the early movers. Julie initially, and looks like we will not be rising to another record. You are talking about walmart. I want to check on how the shares are trading. We are seeing a pullback. They are down 2. 3 in sales. Theres a lot going on in retail today. Things are looking better on the housing side as we know from this mornings housing data. Home depot has numbers topping estimates. This is the busiest time of year for home depot. One of the things that was tipping the scales negatively was that the companys forecast left room for miss estimates for missed estimates because they set the dollar would remain at its Current Exchange rates, that doesnt seem to be the case. Illustrating things are not universally bad in retail, is tjx. Comparable sales up 5 , 3 in marshalls antibiotics, 9 in home goods, 11 at tjx canada and looking at Urban Outfitters which went down sharply. It completes the retail picture if you will. Stephanie you know why the sales at tjx canada are leading the way. Canadians are thrifty. Julie so are americans. That is the change. Most of target sales dont come from closing. If people are buying clothing they are going to places like tjx. The west coast port shutdown, they got a lot of merchandise when others did not want to accept deliveries. Erik the Conference Call started at 8 30 with walmart. Olivia sterns has the headlines. Olivia i want to disagree with jonathan. If you take out the fx hit, add in the three cents and to the 3. 3 billion, they beat. Things are nowhere near as bad as people say. Erik that assumes that every analyst on the streets did not factor into their earnings estimate for walmart, any currency effects. Olivia the bottomline results were a little lower than forecasted, but within the range. I would forecast they had store traffic up for the Second Quarter in a row. The u. S. Cant sales were little shire forecast, but they still had a growth of 1 . Walmart is spending a lot of money to fix problems that we have well televised, but theres evidence and the results that the turnaround is underway. Maybe the answer is not that it was lousy, just how you are interpreting it. International. You mentioned canada. International sales were positive in four out of five markets. The u. K. Is their biggest problem. The grocery business in the u. K. In particular is competitive. They are having price inflation. Targeted out of canada is a big opportunity for walmart. Ecommerce is the other thing. If anyone is big enough to actually compete with amazon. Stephanie that is what they are trying to do. If walmart really does step to amazon, it will open up a new world for them. Olivia that is what they are hoping. They confirmed they would roll out a 50 per year shipping service. It would rival amazon prime. You heard the ceo of walmart say that the key is what they could do with the retail foot print. If they can transform those into Distribution Centers for the ecommerce operation. People are shopping less in the metal walmart, use them as warehouses. Erik jonathan, is walmart as much as a bellwether as a used to be . Jonathan a bigger issue is retail across the board is having a tough time. Partially because of online, partially because the consumer is spending money on different things. Iphones, media, so retails having a problem everywhere. One area where theyre doing better is groceries because of highend healthier food with higher margins that is driving success at a number of grocer s. Then you have other areas where they are more challenged. That is the bigger issue. Olivia wired people spending the money they have been saving on gas . They said they are spending the money. At walmart. They are saying evidence of people they are up 1 . Home is doing well. Health is doing well. Walmart basics are doing well. Apparel in walmart is basic. Not fashion. Donovan if youre are not doing 3 or 4 for sales, it is a retail problem. You obviously want to go for better quality and higher prices for a store if your wages are up. If you have more shops. Is that part of the problem . Jonathan i would say yes if the stores doing well. Housing activity whether it is remodeling or what have you, groceries is doing well competition online, if they can address that, that is the whole week real that is the holy grail. Erik jonathan, i want to come around to a point that is worth making. You have a price target for the s p 500 of 2325. A lot of that is based on the expectation that publicly traded companies will deliver earnings growth. You are looking for 125 and s p earnings, more than most of your peers on the street. You see evidence out of the First Quarter with a backward looking results in the forwardlooking guidance, that we will get it . Jonathan at the beginning of the year analysts start to optimistic and ratchet numbers down. Strategists are students of history. Typically, we have estimates below the analysts bottomup numbers. Every wall street strategist has numbers above the analysts right now. As a group, we believe that this is all overdone and you will see the numbers lift up. I was up to say this just rbc, but i believe it is a broad thing. Second, oil prices took the biggest chunk it was not the dollar, it was oil. Oil is up 40 . It is still down that it is better. We think that will cause earnings to come up. How much a valuation expansion do you estimate as part of your forecast . Is it all just and earnings story . Jonathan if i look at it as a multiyear trend, i believe you will see some thing in the neighborhood of half a multiple point for three or four years. We believe you will be up a trend for a couple of multiple points. The economy is weaker, no question so revenues are lousy. Companies are delivering 7 or eight or cent eps by squeezing stronger margins. Stephanie we will have to leave it there. We will be back in 2. This was jordan sans ninth straight victory as she finished ahead of australia in second place. Third, is the columbia rankings on 3200 points. The mens race in yokohama was decided in a dramatic sprint finish as the reigning champion gomez is now leading great britain. This was gomezs second straight win in yokohama. Gomez topped the columbia ranki columbia ranking. Erik you are watching Market Makers i am Erik Schatzker here with stephanie Stephanie Ruhle. Just last week pamlico through a mattel in an effort to build the stockpicking business. How long with its Parent Company stay patient with pimlico. Lets ask the director of Manager Research for picked him strategies. Do you detect frustration on the Parent Company is part of the trials that tomoko has been through, not just since september, but back to the conflict between bill gross and his colleagues that they are beginning to wear thin on the germans . Michael we have the opposite impression. We believe alianz stands behind the management team. Clearly, pimlico has had clearly pimco has had troubles. We think the concerns are overblown. In the three months since they have closed accounts for less than 1 for the assets under management. Most people do not realize the firm has 50 billion worth of equity related assets. These are not actively managed equities. They have a dividend oriented suite under grand chemical are and the long short strategy under jeff johnson. The bulk of the remaining assets are in the strategic data related strategy run by research affiliates. And also the, stocks plus suite that has been managed inhouse. Stephanie did you look at shutting down the equity businesses as a net positive. Michael that has been our view. We did this more as a shifting of tears rather than a throwing and of the towel. We would not be surprised to see the firm throw more support between the rob arnott strategies. We know the portable strategies the pimco stock pluses of the world are in good hands because the investment teams remain largely intact. Erik what about large clients. Institutions, wealth funds, who look to and are interested in doing business for a large percentage of their business with one money manager . They can go to black rock and get all of the above or turn to pimco and say i cannot find everything i need. Michael there are certainly going to be some institutions that may be put off by some of the issues that have hit pimco, but i would offer that many large institutions are required or strongly interested in spreading interest across multiple managers. We believe the fixed income capabilities of pimco are largely unimpaired by the departure of bill gross and if anything, on stronger ground that they stronger ground than they were when he was inhouse. Stephanie are the outflows of people going to bill gross done . If people were going to leave to go to janice, they would have done so . Michael the decisionmaking cycle for many 401 k keepers is largely over. Our impression is that most of the institutional assets decided to either start or go either stay or go. The outflows were heavier than many anticipated, but we would argue the bulk has been out of the 401 k space. Erik it may be a good thing if you believe the outflows have stopped, but we have seen pimco shrink by the equivalent of the western asset management. Pimco used to manage 2 trillion in assets and is now down to 1. 6. At the same time, black rock which has made no significant acquisitions, has grown assets at an unbelievable pace. Michael that is true. There are two perspectives that we would keep in mind. , the cost structure of pimco, and this is where alianz comes in, the cost were under the industry average before the departure of beer gross of bill gross. They are taken some of the asset base and revenues have dropped. Arguably, we would say that the cost structure is still manageable. That is where alianz is going to give them time to write the ship to right the ship. Even though the outflows have captured the headlines, the performance of the fund has not been impaired. The investors that have stuck with pimco have done quite well. Stephanie thank you, michael, for joining us and giving us your view on the health and status pimco. Be sure to tune to Bloomberg Markets at 11 00 a. M. Erik wall street untamed. Why bankers may not have put bad behavior behind them. You want to hear this, stick around. Stephanie welcome back to Market Makers. We have a lot of great stuff ahead. The former chair flows claiborne and the founder of usa networks will be here to talk retail, including walmarts worse than expected Earnings Reports. Erik and the reaction to housing in the fate of the Housing Market. Bloomberg television will take you to the peterson event in washington dc two discussed with a 16 hopefuls and a divided washington, and much more. Eight years after the financial crisis spotlighted the more than occasionally murky practices of wall street, the industry liked to point out that bad behavior was behind it. That is not true according to a report that surveyed Financial Professionals abuse of their industry. They found half think their competitors have engaged in all or even illegal activity to gain an edge in the market. A quarter to believe coworkers have engaged in similar activity, and the third or more making have a Million Dollars or more have witnessed wrongdoing in the workplace. Jordan thomas is here. Jordan, what do these findings, in your opinion, tell us about wall street . Jordan wall street has lost its moral compass. Erik pointed wall street last have a moral compass . Jordan they are still looking for it. The survey, almost all of the statistics when we did a similar survey to now have gotten worse. Stephanie who is being surveyed . Jordan financial nationals in the u. S. And u. K. Stephanie these are people who have stayed in their jobs . They were therefore the crisis during the crisis, and are they are now and have not changed their behavior . They are being unethical, but not doing anything about it . Jordan one thing that we see in the Financial Services industry survey, many people feel pressured to engage in wrongdoing, but they are not speaking out. Stephanie Financial Institutions are led by individuals. If all those people think the behavior is bad isnt it upon them to change it . Jordan absolutely. One of the issues that was not known until today, was that corporations have been using secrecy agreements and policies to prohibit their employees from speaking about wrongdoing, which may explain why erik it raises an important question. There are people who know that the baton sutro files lawsuits on behalf of shareholders. You have was a blowers. They might be saying, these are convenient conclusions for firm like yours. Jordan they should have comfort knowing that notre dame can but notre dame conducted the survey. At the end of the day, what people should be focusing on is that there is a problem on wall street. Until we accept that we will not see significant change. Stephanie good one make the argument, that it is not only wall street if you are not looking at other businesses how can you say it is worse than any other business in Corporate America . Jordan we focus on the Financial Services industry because they are the stewards of trillions of dollars of citizens money. We wanted to focus on that group. Stephanie they are stewards of individuals money, how about government officials . They should be protecting and representing citizens. You are not evaluating their honesty and wrongdoing . Erik American Voters do that every time they go to the ballot box. Stephanie they might not know all that goes on. Erik we ask questions of their industry and their assessment of Law Enforcement officials. The good news is that their views are getting better. Theres is still room for improvement, but the other positive sign is that erik we have to and there. So sorry. Jordan thomas of labaton. We live in a pick and choose world. Choose choose choose. But at bedtime . Why settle for this . Enter sleep number. Dont miss the memorial day special Edition Mattress with sleepiq technology. Sleepiq tells you how well you slept and what adjustments you can make. You like the bed soft. Hes more hardcore. So your sleep goes from good to great to wow only at a sleep number store. Save 500 on the memorial day special Edition Mattress with sleepiq, plus 36month special financing. Ends monday know better sleep with sleep number. Olivia good morning. Erik welcome to bloombergs market day. Olivia great news after months of poor data. Erik a walmart selloff underway. Shares are down more than 3 in early trading. That may not be as bad as it sounds. We will be talking about walmarts strategy. Olivia apparently we millennials need our own tick tax. Iacs. We do not have the patience for just one taste. Good morning. Im olivia sterns. Erik im Erik Schatzker. It was a recordsetting day for u. S. Stocks yesterday. Today, flatlining. The stock market picked up momentum and we saw the records set. They are still hovering near record highs. The big story is in europe. A big pl