On a high note. Next week we are going to be joining you from the conference in a late. Got to live it up in new york city while we can. Time for the newsfeed. Federal prosecutors what bank of america to pay a record amount to resolve investigations into faulty mortgage loans. Than 13is more billion. That is in addition to the 9. 5 billion dollars that they agreed to pay last month for a similar case. [indiscernible] with three small cable tv operators. Adding a service on par with traditional networks. Heres a be able to search for shows on netflix3. For president it is business, not personal. The president made clear that the u. S. And europe are on the verge of imposing more sanctions on russia over ukraine. The president also played down reports of animosity between him and latin american. Listen to how he answered and usual question. Putin ifd say to mr. You were drowning, i would like to think that it in a buddies out there drowning i am going to be a pretty good swimmer. I grew up in hawaii. A little out of practice. The president may be out of this. If you have seen the pictures of Vladimir Putin is not out of practice. I have someone near he was an amazing swimmer. Big deals in big pharma. Busy week for m a, the judge industry has announced more than 140 billion dollars worth of deals. That is six times last years total. Have Good Chemistry . I want to bring in a pharmaceutical analyst. This is a site developed and improving the patients experience. We times the amount of deals saw last year. Why . What is going on . There is a race to get focused and bigger. Everyone wants to be number one or number two. That is what you are seeing now with eli lilly becoming bigger with animal health. Scale,e trying to get to synergy and really dominate each other. Sit, when we you look at what happened this week valleiant, it looks like what bill ackerman has was on talk. They got the patient and. They can get her in for botox, fillers. They have contact lenses covered now. It is really important. Howor pharma it comes down you look at the industry. I wanted to replay one excerpt that we had with bill ackerman and also mike pierson. I think what is happening is the entire pharmaceutical industry is changing. Dynamic happening. Why theres so much opportunity for synergy . There is a lot of cost. It is one of the few industries that has not been forced to operate with the same kind of economic is a fun as other industries. When he talks about synergy, do the synergies apply better . An effort tos have cut some of the costs associated with marketing. Are the jet companies thinking about it differently . Is better to be vertical them brought . Yes. The synergies come from the sales force. You just need one person calling on the dock are. They used to have. He dr. These to have three or four people. The synergies come from the sales force. A lot of these companies are doing duplicate clinical trials. Now there is a lot of leverage that comes. Pricingkind of power does this give them . If the patient came in for breast reconstruction, the office is arty selling botox. Good to offer the allergan implants. We have to be careful in letting these kind of deals influence our decision. What is that dynamic like . It clearly becomes easier for the jet company, for the pharmaceutical, when he, to make its case to you. Company toutical make its case to you. It is a time factor. Theyre making the decisions that are best for patients. Doctors have favorites of what they like to use and what turns out better in terms of reconstruction. Being a big by goliath and taking over the whole industry itll be problematic. Do you agree with that . Yes. Out again gives you a discount a you allergan gives you discount if you buy them together. They are trying to encourage a greater sale. They may take a slightly lower margin in exchange for the volume. There is a lot less the reps can do. If valiant comes and theyre drug reps. T the there are ways of making a much easier for physicians to use one brand. Walk me through the perks. When you go into a Physicians Office they will botox andoffer people love to get breast augmentation. Most women would not say no to those offered for free. It is a very appealing procedure women. Ots of for Breast Cancer patients is becoming much more, now to have an implant reconstruction rather than no reconstruction. It is really coming forward in terms of what patients want. Im not sure how to add to that thought. I think shes picking about cancer patients. I dont think using anyone because goes to an office once implants. I think that is what she said. When you walk in the door, it is easy to have these things freshened up every three months. If you are going for a followup for a reconstructive procedure or breast augmentation, you might have a little botox. Ill give you that. Shes looking at me like you know where. Mike pierson said they have no integration team. He says they interrogate gate e enter intergrate with the salesforce. This is the flat organizational structure. There is no middle management. Show more companies do it that way . The Drug Companies are moving in that direction. They have cut a lots jobs in layers over the last several years. Mostnt has been the direct. Reputationtheir among doctors . They do not have a huge r d budget. Three and a Million Dollars is not going to get one drug to market. And you talk to oncologists physicians that are treating patients with fibromyalgia they lead mostly at the big names. Those are drugs in the pipeline that are valuable. You likeoctor, do hearing mike pierson say it is not our business to develop new drugs. We are happy to take something in phase three and bring it to market but we would rather have universities and other less financially disciplined Drug Companies to the hardware. It is interesting. I think more and more there will be a role for this. It is hard to take an idea of a new drug and bring it through r d to phase one and phase two trials in through the fda. He is pretty smart. Dois saying let someone else that and i will come in when it is an established project. Let me sell it to the patent. Eyelashes, wrinkles, breasts. If he gets erectile dysfunction and hair, he owns it. Thank you for joining us. When we come back, a surprise earnings miss for ford. One of the reasons all that bad weather. Unfortunate. Get ready to talk racing. The Kentucky Derby is a week for rom tomorrow. Were on Bloomberg Television in streaming on your tablet and phone. We are live on amazon fire and apple tv. Welcome back. It looks like a tough quarter for ford. It shares continued slide down after they reported a egg drop in firstquarter profits. Expenses andrranty the boehner matt millers bad weather. I know firsthand that bad weather did effect afford. If you remember, i ordered an f1 50. It was three weeks late because the trains were not running the cousin of the weather. It is interesting. They have ups because of the weather. It is interesting. They have ups delivering. The more interesting thing i think is the warranty and recall costs of 400 million in the quarter. I was in a conference call. The cfo seven it was an it wasly large said an unusually large cost item. I think what is going on is they are taking a kitchen sink approach. Companies have some latitude. Now we know fields is coming in to replace mulally, they are throwing it in. Ford is taking all their lumps in the First Quarter to make it easier for mark fields. The opposite of what gm did with mary barra and so they waited until they hired her and then dropped the biggest ill monitor. Biggestopefully bomb on her. This will hopefully make him a better ceo Going Forward. The margins tell the whole story. Or has very high margins for an automaker. 2 is what the margins were. In this quarter, seven point three percent. They say they are still going to get to the eight percentnine percent level for the full year. Analysts were like did you misspeak . Their hitaking all of now. They will do better in the next three quarters. Was there anything on the call that surprised you . The one thing that surprised me is that they have 9. 5 billion in net cash which compares to the gm report yesterday at 27 billion. Famous fory is gathering up as much past as he possibly could to make it there any downturn. Im going to ask off when i talked to him and in our what they plan on doing to raise that. They do want to get more credit lines secured and get more cash war chest in case anything bad to happen. More recalls or litigation costs if lawsuits pick up in america against carmakers. No detail, and so when he is rolling . No. That is the hot issue. I was hoping to focus more on the earnings. I know the are going to not comment on that. Anything on mulally and when he will comment . They said no comments. Although we all want to talk about it, we know mark fields is coming in. We know alan mulally is going out. Is it that interesting . I dont think so. Time for youro dopey questions. I care about the auto industry. Like i cannot believe that happens. The roles are reversed. Onit is switcheroo day here Market Makers. Coming up, time to break out the urban and make some meant juleps. The Kentucky Derby is a week from tomorrow. The ceo with us next. Exciting two minutes in sports. The Kentucky Derby is just eight days away. This is the first leg in horseracings crib will crown ple crown. Short hills down as a publicly listed company. The ceo rang the opening bell this morning on the nasdaq. Good morning to you. Good morning. Another thing people may not know about Churchill Downs, horseracing provides only about a third of your revenue, down from 75 five years ago. Explain to people why you have transformed the company the way you have. Right. Numbers are it probably surprises and a lot of people when they hear Churchill Downs a think of horseracing. We decided we needed to diversify the business in order to find growth. We love horseracing. At the same time, theres not a lot of growth opportunity. He started to get into regional casino gaming. We built the largest legal online wager on platforms which takesraces on grass measures on winning. Are the prospects for horse racing that dem . It has to disappoint some people to think course rating is not a whyth is no spirit why not . It is difficult for Companies Like yours and others to get more americans interested in horses . The biggest problem is theres just too much horseracing. If you look at the numbers over thelast 10 years or so, handle is dropped by about 28 . The number of forces that are available has dropped by about 38 . In the number of races has only job by about 19 . Theres too much product chasing too few dollars. Theyll have to rationalize over time. I think there is a Bright Future for racing. What about the image for horseracing. On the big month story about allegations against one trainer over the mistreatment of animals. There have been lots of stories over the years both in print and elsewhere about the usage of drugs to try and juice up a horses performance. Its the sport need to clean image . Will it help . Ive two responses to that. That story was a bit overblown. The vast majority of people i know in horseracing are outstanding people in a three horses like her own children. Some of this is just the media picking up on a story that was very unpleasant and hard to watch and difficult to listen to. I think it overstates this. Is there some truth to it . Those allegations may be overblown. In parts of the sports, do those things hold true . If they were eradicated . I do not have any firsthand knowledge of those true. I ensure in horse racing there is cheaters just the way there isnt anys work. Just as there is in any sport. Biggers talk about the part of your business. Online gambling is where it is out for you. To what degree would it help Churchill Downs if more states were able to legalize Online Gambling . Right now there are not that many. I think that would be huge for us. Im pretty confident that is going to happen. The hard part is picking the timing. Im sure that Online Gaming whether it is poker or other they of games, i ensure will come to pass in various states. I do not know what the timing will be. Do you have a better idea of which states are most likely to make Online Gaming legal . I learned a long time ago not to make political addictions or guess what state legislators are going to do. It is a tough game to play. Fair enough. Where would you like to expand . States with the largest population centers. Lets start there. The californias and floridas. What about the competition . There are a lot of people that say we want to build a business in Online Gaming. I what part of the market become saturated . Long way to go. If you look at how Online Gaming developed in europe. It became huge over a couple of decades. We are in the early stages. Thank you very much. Chairman and ceo of Churchill Downs. The company that runs the Kentucky Derby. Bypstarting the economy using the tax code . We will hear from a former white house chief economist. Amazon sticks it to netflix. The implications of the deal with hbo. This is Market Makers on Bloomberg Television. We are streaming on your smart phone, tablet, bloomberg. Com and platforms, amazon fire and apple tv where we have been for a while. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. You are watching Market Makers. Does not seen anywhere close to a deal on tax reform. Everyone agrees one is needed. Many folks have different ideas about how to do it. Here is one idea. It relates to corporations. Give them an Immediate Tax break for longterm investments. That plan are set would supercharge the economic recovery. That is with us from Stanford University where he is an economics professor. Michael mckee is also here. To some people accounting is chinese. Explain your proposal in laymans terms. Explain your proposal in laymans terms. The goal is to remove impediments in the tax system. The idea is not to subsidize investment or give it a break but rather to remove the current structure that impede investment because it taxes investment at a higher rate than it taxes consumption. The easiest way to see it is this. Some income and you spend that income right now, you are taxed on it because your tax when you are in the income. Notou invest it, you are only taxed on when you are in the income but when you are in the returns to it or interest, dividends, capital gains. That is an impediment to investment. Most people who have studied this, and this is not a new idea, most economists believe that by removing that impediment you can move the economy in the right direction. We have tried this a couple totimes we have accelerated come out of recessions. What has that todd does other than companies timeshift to take advantage of the breaks . The timeshift is significant. That is not the goal here. The goal is not to move things over time. You have to make that a permanent change. Are estimated to be quite to the games. There is a large literature on this. It goes back well before my time. Many people have estimated that the effect on gdp is anywhere between five percent and 9 . We are not talking small potatoes. This is a big deal. If primary reason is that you put the impetus on giving deductibility to future rather than lowering Corporate Tax rates, you put all the power on new investment rather than old. That is a really important point. Lowering tax rates would be fine. The problem is when you lower the tax rate to give breaks to investments that were made 10 years ago. You may want to do that for other reasons. It does not stimulate investment. When you allow deductibility, you are putting all the power on your investment. That is the reason most tax like this particular approach over lowering corporate rates. If your proposal were to be adopted, i can understand how there would be a stimulative effect in the short term if companies would be able to expand all of this. What would happen over time . If this were to happen now, this year or next or the government would get less tax revenue. With the government get this under the current depreciation schedule or more . The goal is not to maximize the size of the government. I would not claim this is a tax break that pays for itself. The calculations that we did when i was involved in president bushs tax panel where we actually looked at this, we were able to make it revenue neutral. Able to do it by making changes at the same time. Do isou would have to create efficiencies in the tax system that changed the way the Health Expenditures are created. Orange duct ability was one of the sacred cows. We do not get near that win. There are some other changes. Maximize theot to size of the government. The goal is to maximize growth in the economy, make sure you have high productivity. The reason is not so much to get a reword to capital. Although there is no doubt this does that. Even the people on the left agree the only way to get wages up is to make sure that productivity grows. In order to get productivity to grow you have to have higher levels of investment. Why do we think this is going to promote additional investment because opposed to what question . What do they do with the cash they are not spending . It is not that theyre going to stop investing. If you look at what happened during the current recovery, this recovery has not been as strong as we would like it to be. Investment has not been as strong. Can we do something to allow wouldment to revert what the its normal level and then undistorted system . Is is not a subsidy idea. Remove the impediments and distortions and then what youre going to have his higher. Vestment here g you might see it tapering off in the future when you