train, though. michael lewis wrote a best-selling book about trading and said u.s. markets were rigged and now everyone cares. and congress is paying attention. a senate panel is holding a hearing this morning into high-frequency trading, asking whether the business is riddled with conflict of interest and if it is responsible for the loss of investor confidence. megan hughes is covering the hearing on capitol hill. it is a who's who in the industry at this point, right? >> that is right. i will tell you the star witness is in his first panel, brad cap zeyuma.a -- brad kat blew the uncovered and whistle on a lot of these high-frequency trading frat -- practices. his testimony, there seems to be agreement that on some level the market is rigged. >> new technology should not erase enduring values. financial markets cannot survive on technology alone. they require a much older concept, trust. and trust is eroding. the next panel, we will have quite a juxtaposition. that is what we will hear from some of the executives that you mentioned. we will hear from executives from the new york stock exchange as well as others that do not necessarily agree with each other. opinion differences of about the impact of high-frequency trading on the market. >> definitely looking forward to that. >> you can always count on senator levin for some theatrics, but what we want to know is what, if anything, congress should do about high-frequency trading. from here in new york, our cofounder and partner. and kevin from greenwich associates. it may help for senators levin and senators mccain to draw attention to high-frequency trading and raise questions of conflicts of interest. but should congress be stepping in? >> i will jump in, if you don't mind. first, i think we -- i think kevin will agree with me. we are pleased to see this debate move away from high-frequency trading or -- traders being good or bad and into the much more meaty topic of serious conflict of interest embedded in the system that we trade within. >> or whether there are. >> yes, but there are issues around the border routing. it is very telling that the title of this panel is starting off with "conflicts of interest. i -- "conflicts of interest." the debate has definitely shifted there. on brokersing routing, border routing behavior. ,n a speech last week commissioner cara signed referred to the conflicts of interest. it seems like they are all telegraphing that we are on the same path. >> my question is, do regulators really understand what the business is all about anyway? thisems nobody knew what was really about. >> there are two main thoughts that i have about this whole debate, some i agree with and some i do not. off by and large than 20 years ago. the market is definitely complicated. and i think practitioners have a hard time understanding. i think the regulators do have a pretty good grasp at this point. they have been looking at this since at least 2009, 2010. they have been examining this deeply. congress has more of a step back approach and they have bigger fish to fry in the u.s. economy. but i think the core thing that people need to take away from --s is, yes, we can investors are better off and we it trade in the market, but is way more complex than it needs to be. >> i do believe congress has stepped up their game. if you look at senator levin's history, he has a history -- his staff member, tiger lost, is the senior staff munger -- senior staff member under commissioner kaara stein. and senator reid and senator levin have been delving into this for years. what is interesting is you do have the right people who are really well versed. they know what is going on in the broker routing and the conflicts of interest. and they are in the positions of power now. this is not just one of your congressional market structure panels looking into--- into high-frequency trading. >> one thing that is frustrating is that it is very political. it has to be. whether they like it or not, they are politicians. it is about what is clinically viable as opposed to what is best for the marketplace. the idea of closing everything and scrapping what we have today , and get in a room and don't let anyone else out until we come up with a decision. but that would be a union negotiation. >> and the need of jpmorgan in the 1920's when they locked everyone in the room and made them find a way forward. that would be great. >> both of you gentlemen are familiar with an op-ed published in the "wall street journal" by andy gensler who, i think, proposes a really -- a very interesting solution to this problem. the practices put into place in 2007 are right big knowledge to be the source of the perceived problems in computerized trading. he says it all comes down to two words, best price. why not change best price two x -- two best -- why not change best price to best execution ech? >> i agree. what is interesting is why we an interesting market averagee to change 300 exchanges a year, if you are most american to have their most money and 401(k) funds and mutual funds and index funds, those orders tend to be t. rowe price or fidelity or putnam buying 800,000 shares in a pool for everybody. this market structure with all of the timing differences between all of these different technologyll the differences, there is a lot of built-in arbitrage and unwanted touching. >> there he goes again, confusing high-frequency trading with teenage dating. [laughter] >> at a mean to bring him back to the topic, but there is a great parallel in europe. they talk a lot about best execution in europe. they give a little bit of freedom to the brokers to help their clients decide what is best for them. and this is true in other markets, the bond market, the soft market. the best price is not necessarily the best. >> help people understand what you're talking about exactly. the way i understand it, and correct me if i'm wrong, is let's say, if i'm with t. rowe price and i'm putting in an order for 100,000 shares -- maybe that is a lot. say00 shares of ibm, let's post-up and the best price available is 1000 shares posted by some high-frequency trader. if i try to execute at that price, i have exposed myself because i did not subsequently have additional orders to fill out my 10,000 shares. i might be better served if i could just buy 10,000 shares at a slightly higher price. is that more or less --? >> let's make it even simpler. if you've got to online account and you want to trade 10 shares and you can buy them a penny cheaper from broker one then you whatrom broker two, then is the best execution echo the one with -- the best execution? the one with the lowest fees and highest return. on a seems to be focusing small investor issue and taking into account the true explicit cost of one particular trade. when you are trading 100,000 intos, that is broken up orders. what does the broker do with that hundred thousand shares as it is routed into an algorithm? the go sit in the brokers pool first? then does it try to bid on a high rebate change? witness in that hearing named robert italiano andis a professor at game showing that the outcome and the execution for the client is vastly different, given the same --mvbo at the time. is splitting that up and sending it to their proper exchange where it is most likely to get thebest and cheapest price best thing for the investor or not? >> really quickly, andy kessler raises another important point in his op-ed, which is that wall street journal -- which is that wall street wants to get paid. trading firms and operators of dark pools, etc., have introduced frictions in order to get paid somehow. this is what michael lewis complains about, the scalping that goes on. if it were fixed in such a way that it was best execution, wouldn't the street want to get paid in just another way? in other words, we would end up paying the same amount for trading, invisible or visible, but maybe we would just know it better. is true with nonprofits. we are already seeing our research showing that evolving working this in trade. clients are willing to pay for information, especially if it is obligated. they want someone to help them understand how to navigate the markets. if it isally complicated. they want someone to help them understand how to navigate the markets. do we need more regulations or do we let the market sort this x is theselves? if ie answer, then the market will move that way. if the market is not terribly upset, things will continue on as is. there is a free market solution to the whole problem. >> and i surprisingly agree with kevin. >> every once in a while. the best solutions are not going to come, certainly from congress. i think there does need to be a rules of the road that comes down from our regulators, from the sec and from sandra -- finr a. but the market shares are increasing, even in this environment. another speaker on the panel is changing the way they view their responsibility in the market as a way to facilitate investing as opposed to a short-term trading. the wheels are moving. >> a market-based solution for the market. great to see you. back in ang to be couple of minutes here on market makers. -- and coming up, congressman sander levin the so-called tax debate. u.s. companies are avoiding taxes by basing themselves overseas. plus, do you finally have world cup fever? watching some of the games might be easier than you might think. ♪ >> president obama has a new plan to boost u.s. manufacturing. today, he will offer vendors to use federal equipment and research facilities to test their ideas. it is a small step, but one of the white house hopes will create more jobs. last month, manufacturing employment reached 12.1 million as the highest since the financial crisis. the co of the national association of manufacturers, the industry's lobbying arm, is in washington. what is the potential for the u.s. to add on manufacturing jobs in the next few years? >> i think the potential is great, particularly if you get our policies right. it is tremendous to have the president and members of congress focus on manufacturing and focus on building a strong manufacturing base. but we have a few problems in washington that have to get resolved. that is the issue of taxes and regulation and trade and energy and infrastructure. a few issues on the agenda that need to be addressed. >> what about the economy? how do you feel about the pace of the economy right now? is it accelerated? are you in the camp that thinks that the federal reserve will have to raise interest rates sooner than 2015? or perhaps with christine lagarde and the imf, which yesterday cut its forecast for u.s. economic growth? >> our futures are very optimistic. there is a survey we just did with industry week that shows a great majority of manufacturers are optimistic about their economic future. but any cool number also say also sayn equal number that we do not have the right policies in place in order to create sustained growth in our sector. our executive committee was in town last week. and we met with fed chair he janet yellen -- fed chair janet yellen and we talked about the noncompetitive tax policy, our regulatory structure that is adding costs onto manufacturers and make it more expensive to do business here, and several other issues. we've got to get those fundamental issues right if we're going to see sustained growth in our sector. >> you are skeptical on the current policies, but there are so many things going right. you have the cheap rice of natural gas, and a game changing easierogy that makes it for utilization. and there are postrecession highs showing that companies like to invest money in order to keep growing. those are good things. >> you are exactly right. i have to say that the energy revolution in this country, specifically natural gas and fracking, has really enabled manufacturing to grow. energy is a huge cost input for manufacturing. we use one third of the nation's energy supply. been a good few years with natural gas prices becoming much more affordable. is not to reverse regulations that end up increasing the cost of energy. we want to make sure we keep this renaissance going, and that means lower energy costs for the long-term. >> what kind of regulations are you talking about? i you talking about the changes that the president has asked the environmental protection agency to make, for example, to clean up some of the pollution from coal power? >> the presidents climate regulatory action plan will impose massive costs onto manufacturers and other sectors of the economy. through its regulation of coal. that is one of the reasons that the effort leading to challenge those regulations. we will be in court on those regulations, as we have others. if you think about it, manufacturing is creating one third of this nation's energy supply. we rely on affordable and are liable supply to allow us to compete. >> could you define massive? even the u.s. chamber of commerce has studied the impact of those epa regulations and come up with a number. and the number, while large, is not massive relative to the size of the entire economy. >> a lot of coal plants will be retired. >> you have to look at the regulatory environment in total and say exactly what those costs are imposing. you have the climate plan. you have the ozone regulations coming out later this year or early next year, which by the around $100timates, million. and that is their least expensive form. keep adding costs onto manufacturers, as costs in other countries -- and i >> is it better just to destroy the environment? is that the alternative? >> no, that is not the alternative. everyone wants clean air and clean water. we want to make sure we have the right timeline to allow us to create the technologies that enable us to clean up the environment. manufacturers have been responsible for the largest increasing greenhouse gas sector of the any economy. that is because we have become more efficient so we can drive down the cost of doing business for ourselves. a newll see that embraced technologies in the future. we just don't want to be forced into a situation where technologies are not available. for instance, carbon capture and storage technology. the companies producing that is saying, wait a minute, we don't have that technology yet to be viable on a commercial scale. we want to make sure we have the technology available to allow us to do things that help benefit the environment and also be productive. >> thank you so much. >> coming up, you don't have to watch the games in a bar. there are plenty of seats available for the world cup. ♪ >> we are approaching 26 minutes past the hour. we will be talking about one of elon musk's companies, the largest provider of solutions him. it rents use solar panels and over a a monthly fee number of years with no upfront cost. they are becoming integrated for about $200 million and possibly an additional $150 million. -- alexgo is a salute valeo is a solar panel manufacturer. or might possibly become a manufacturer. >> they are looking for a city that could have gigawatt production in two years. they are to beef up their presence. latest move.s he is a busy guy. coming up, a senator will be with us to look at talking about companies -- ♪ >> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> good morning, once again. >> i'm alix steel in for stephanie ruhle today. happy tuesday. >> thank you for joining me. >> thank you for having me. >> let's talk about what may be the hottest thing on wall street, immersions. these are mergers and cutisitions designed to taxes by heading overseas. we told you about medtronic buying covidien for about $43 million and in the process moving to ireland. at least 40 other companies have done similar deals and some in congress want put an end to it. the top democrat on the house ways and means it in its tracks. thank you for joining us this morning. i need to ask you this question to begin with. orther it is medtronic pfizer, doesn't really matter. if you are the ceo of an american corporation looking at the u.s. corporate tax rate at 35% and seeing an opportunity to reduce that, however you do it including through an inversion deal, wouldn't you do the same thing? >> first of all, medtronic is not playing -- not paying 35%. they are paying about half of that. >> congressman, that is partly because medtronic has also been very active and determined to become a more tax efficient company, which has helped it to reduce its tax rate to 18%. but as you know, there is another appeal to the inversion deal, but -- which is unlocking or releasing the so-called overseas profits that are isapped overseas," and that really what medtronic has in its sights. part of thehat is problem and we need to look at that problem. inversion is not the way to do this. the inversion process has been accelerating in this country, and in the last years it has multiplied. essentially, companies are keeping major operations here and they are combining, but doing that in order to pay fewer taxes by essentially setting up the domicile in other places. i think we need to very seriously look at the inversion issue. my brother and i have introduced legislation to do just that. it is interesting. apparently, in the contract between the two companies, they indicate their deal is off if congress acts. i think that shows that the basic purpose of this related to is to taxes and not the other aspects of their operations. this is an effort to lower their tax rate. >> congressman, it seems like your track would be to increase the foreign ownership, perhaps to 50% from 20%. if you have x amount of employees here in the u.s., you cannot really qualify. it is making it more difficult for companies to these tax inversion deals. awant to share with you response from orin hatch of utah , saying broadly speaking, there are two ways to address the issue of inversion. the first is to make it more difficult for u.s. corporations to invert. the second way is to make the u.s. a more desirable location to headquarter one's business, and i believe the latter is the way. what do you think about that? >> i think you have to do both. .ou have to have tax reform you also want to make it more attractive. but you also don't want companies to leave the u.s. and simply change their domicile in order to pay lower taxes. we could have a lower tax, but still ireland would be lower. and come -- and companies would continue to invert. -- keep their operations their major operations in the u.s. you don't want to do things that will hurt the tax structure of hurt thetry, and also effort of companies that are basically american companies to stay here. r&dmber, medtronic uses an tax credit in this country, a rather significant one. we do not want companies to move their headquarters overseas, while retaining all of the benefits they get from being an american company. r&d is just one of them. they get other benefits from being here. you should not simply say to them, ok, change where you are ,ocated, pay much lower taxes or you maintain the benefits of being essentially an american company. >> by making it difficult for these companies to do the so-called inversion deals, aren't you hurting the american to our shareholders? -- who are shareholders in these american companies? they benefit if medtronic, for example, is able to pay less overseeing --to oversee transactions in other countries. movinge is a benefit overseas, but that has a major impact on the economy of this country. shareholders have a stake in the structure that american companies not only essentially keep their roots here, but also do not essentially move overseas in name in order to pay lower taxes. that has all kinds of economic consequences for the u.s. and our economy. we need to look at this. we are going to meet with med tronic in a few minutes, with some of their officials to discuss this. that is what is going on. i think democrats and republicans should join together and say, look, this is an issue, and we need to deal with it, and deal with it effectively. and that is why we have introduced this legislation. >> what kind of conversation you think you will have with medtronic echo what kind of -- with medtronic? what will you offer them to keep them here? with them to discuss why they are doing this and what their plans are. they say they are going to invest more in the u.s., essentially by moving overseas. but we have to remember that unless we have a tax structure -- if companies can simply invert and move their name overseas, it will have an impact on this country in the long run as well as the short run. to sit down and ask them why they are doing this. and also, i would like to ask them why they have a provision in the contract between the two countries that if this legislation is passed, the deal is off. >> can we go back to the 35% tax rate and tax reform as an issue? why not, instead of specifically targeting inversion deals, why don't you take your standing, your seniority, your influence and join with the chairman of your committee, the house ways and means committee, to try to push through, rented tax reform and make the american corporate tax code more competitive, such that companies like medtronic and pfizer do not want to move overseas? >> i wanted to do that and we began to. the chairman and i set up some working groups. democratic and republican members sitting down to discuss different aspects of tax reform. but then chairman camp and republicans in the house decided to go with -- go with their own way. and we were not involved in the putting together the tax reform package after those initial working groups. we said to him very clearly, and to all of the republicans, you have to do this on a bipartisan basis to make tax reform work. they decided to do it otherwise. i am more than willing, and anxious to continue this effort of bipartisan tax reform. but they made the decision to go it alone, and as a result they have a package that is not even acceptable within their own ranks. the republican party does not appear to be willing to negotiate on matters of taxes at the moment, it can you get enough members of the house to work with you on this bill to get it passed? >> i'm not sure of that. but i think these two bills have helped to spotlight that this is an issue that needs to be seriously addressed. way, the package that the chairman put together, the house and ways -- the house ways notmeans package, it does address the whole problem of these companies changing to essentially lower their tax rates. we need to look at that, and these bills are intended to open up the subject. question as we did with pfizer. it was different than this one. i'd knowledge that. you have to look at each of these -- i acknowledge that. you have to look at each of these seriously. >> thank you for the understanding of the issue. democratigan, the top on the house ways and means committee. bloomberg crunched the numbers to see what tax inversions meant for investors. and the government may not like the companies like medtronic going to ireland to escape the u.s. tax system, but it -- but investors seem to love them. since 2007, companies that have shifted overseas, the average outperformance, 15 percentage points. for medtronic, you could argue it is a no-brainer. almost $14 billion in cash the company holds outside the u.s. and is not able to get reprieve -- repatriation. >> tax reform is a complicated subject. >> understatement of the day. >> coming up, if you really want to see a world cup game in person, no problem finding one. ♪ but some people say anyone can pay -- play soccer because the cost is minimal. biggest tournament of them all is a totally different story. expensiveown the most world cup. >> the most expensive would be the one that has not even taken ine, that would be qatar 2022. i have seen -- in 2020. i have seen estimates at $160 billion. >> well. >> the share of gdp for the world cup for qatar, 54%. estimate 12 time the cost of brazil. >> y? -- why? >> because there is nothing else -- nothing there. >> and it has to be built from the ground up and there is controversy about it being there. not to mention that when the world cup is played, the temperature is at least 100 degrees, sometimes 112 degrees. so far, some workers have died in the heat trying to build this. >> it is a catastrophe, really. want to haveally at their? >> and we have not even touched on the allegations of rigging. -- there are allegations that brazil pay off officials to bring the world cup to his country. afa -- fifa president was aarding to qatar mistake in one of his not rehearsed moments. >> unbelievable. thank you so much. versus team mexico, the second-most expensive world cup game is underway today. the average ticket will set you back nearly $2000. but in brazil's more remote stadiums, seats are as low as $10. i cannot believe it. it boggles my mind. and they are still not telling at that price. the cofounder of a search engine joined uss for sports now. what is the breakdown in this area that we are seeing? >> there are some cities that the fans want to be in and attend and those are along the coast. and there are those that are less exciting parts of the country and not necessarily to her is destinations and they command a lower ticket price. -- not necessarily tourist destinations and they command a lower price. portugal has one of the most popular players in the world. they will play in a smaller town in the central part of the country and the result is that ticket prices are a fraction of the cost if they were to play someplace like rio. >> i have been there not long ago. it is more than in the middle part of the country. it is in the north of the country and pretty much only accessible by air. you're there -- look, if going to get to brazil in the first place, you're probably going to land -- this is a picture of it. this is an impressive structure. and the city itself is a city that i would go so far to say has roads better than new york city. the getting there is the problem. you have to land in são paulo or wrote -- or rio and then get on another flight. >> isn't it team driven at the end of the day? >> sure, but there are many american tourists who want to go and arethe -- to brazil interested in seeing their team play. >> ticket prices have improved, though. in the days leading up to the world cup, you could get seats in the northeastern part of the country for something like $15, well below face value. seems that things have improved since then. >> yes, ticket prices have gone up. but how does this compare to other world cup event in the past? the disparity? >> in brazil, it is really interesting. they only have to have games in a different locations. they chose to put 12 different sites for the games. that has had a huge impact. they spread around the games much more and picked some destinations that we are scratching our heads about a little bit. >> like one city that has only 8000 people. >> exactly. >> what country buys most and pays the most? >> one thing that we have seen is -- >> i like that question. >> south american teams are heavily represented. the average ticket price per game, the top seven games, all of them involve some south american team, and not surprisingly, brazil is number one or number two. >> that is partly because they are favored to win. match or not to be a bit of a sticker. >> will the popularity last after the world cup? or is that because of those buying tickets right now? >> what do you mean you are >> in terms of brazil continuing to be popular in latin america. >> i think so. not watch the games. have you? >> yes, lots. >> who are you rooting for? canada? >> canada is not in the world cup. my prediction is that argentina will win, though their first performance was not particularly inspiring. germany yesterday looked invincible. my bracket is set. i'm locked in. the germans looked amazing. >> thanks so much. >> we will be back with more market makers after a short break. ♪ >> dallas bill de blasio looking pretty uncomfortable on the jimmy kimmel show singing "i love l.a.." clearly not squelching on the bed he made. he didn't even know the song. greatdy neumann is a songwriter. i cannot tell whether he should feel good about bill de blasio having to sing it -- it is kind of a cheeky song to begin with. >> the kids were mining and they had all of their song. they were trying to help him out. props to him for doing it. you make a bed, you've got to see it through. >> true to your word. >> exactly. it is 56 past the hour, which means it's time for bloomberg's "on the market." netflix, today morgan stanley thatit a price target could get to 20%. that scale would give it leverage and of course, drive margins for the company as well. a nice triple whammy for netflix. >> let's not about elon musk. two of his companies are doing great today. -- let's talk about elon musk. two of his companies are doing great today. tesla, just across the river here in trenton, a bill approved that would allow them to manufacture cars. they have to be zero emissions cars. new jersey threatened to block tesla sells but directly through a dealership network. that may change. and solar city making acquisitions. ♪ >> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> domestic dealer in the spotlight. the legal saga involving martha stewart, macy's, and jcpenney comes to an end. >> a war in outer space. you know what russia is saying, "nyet." >> dead broke no longer. bill and hillary clinton have been supporters of the real estate tax, now they are worth millions. finding ways to avoid paying. >> this is "market makers," i am erik. >> i am alix steel. exciting hour, now it is time for the news feed. make itand mitsubishi official. an offer for alstom's energy assets, when they say that is better than the one offered by general electric. the siemens bid is valued at 19.3 billion dollars, ge offered $17 billion. pressure ige. a sign real estate taking up, and may builders broke ground in more than a million homes for a second month in a row. a strong job market and lower mortgage rates helping the housing market. militants 30cking miles from baghdad. the obama administration considering the options it has. the administration might send in teams of special operations to advise forces. gm ceo mary barro will be on capitol hill to provide lawmakers with an update on her companies recall scandal. as of yesterday, three point three million more recalls pushed the total number to more than 20 million. barra's testimony was released a full day early, matt miller has been coming through it. based on the prepared testimony, what can we expect? >> i am not sure we're going to hear a lot of answers that congress wants. we will hear more details that have been slowly leaking out. i am looking at the committee of energy and commerce memorandum here that has a number of details that are fairly interesting, if not groundbreaking. one is that can feinberg will start accepting claims on august 1. aside from the lawsuits, this is the most important issue as far as resolving the admissions which scandal and moving forward -- as far as resolving the ignition switch scandal and moving four. gm is prepared to cut a check as determinesn feinberg it to be. they will be willing to do that. >> 13 families. not only the 13 families that have lost a loved one in a fatal crash, but the injuries are well. personalg whether our injury concerns with regard to the ignition switch problem. not the economic issues that gm is also being sued for. ken feinberg will deal with that. >> is there a fair number of those injured? -- firm number of those injured? number, is not a firm the sauce number is growing. yesterday they recalled more vehicles. 3.4 million vehicles in total. crashes are linked to those new recalls. 8 injuries are linked to those. as more and more recalls come out come more and more accidents and injuries are linked. >> i can only imagine -- a whole new legal industry has sprung up of lawyers looking for potential victims of accidents. has been hireds by general motors. it ist memorandum referred to as an "internal investigation." congress is not going to accept this being labeled an independent investigation. mr. valukas is going to testify tomorrow, he is going to say he had unfettered access to gm. his scope was fairly narrow. he was asked to come in and look at how and why it took so long for gm to issue the recall for the chevrolet cobalt. this is one model. the ignition switch -- >> not at all affected by yesterday's recall. >> exactly. yesterday we were talking about buick, cadillac, pontiac, even saturn. well, you might have guessed. >> saturn fan. if you were to write the mandate for anton valukas and general block - -and -- if you were to write the mandate for anton valukas and jenner and block, what would it say? >> people need to be held accountable. does not look like any executives are going to be arrested. no one has called the actors and -- dan ackerson or ed whitacker. no one has called the government czars. ven ceo at the time when these vehicles were produced. a lot more people should be questioned in this. they will not be. i am sure the families of the victims want to see people go to jail. that probably won't happen. you are not going to shut down or bankrupt the company. out a fewfford to pay billion dollars. that went up yesterday with the new recalls. how much can you possibly do besides extract $5 billion from them and let them move on? new company post bankruptcy, people hate to hear that. they will use that as a defense for the, claim. -- for the economic claim. andou say i owned a recall because of these recalls the value has dropped. it has not, they still go for thousands of dollars on ebay. still goes for $4000. >> matt miller once cobalt -- matt miller wants a cobalt. >> if they fix the potholes, if i hit a pothole i can shut down the car. >> alix? year brawl between macy's, jcpenney, and martha stewart is over. a new york supreme justice says jcpenney interfered with macy's. very unceremonious. we were expecting fireworks. >> a lot of strong language but there was not any monetary damages awarded to macy's. the judge kind of punted that. he said we're going to have a referee decide what the damages. he said himself i don't think jcpenney owes anything to macy's. strategy was a failure. he says that the fact that they did so badly is a sufficient deterrent to jcpenney and other companies from acting in a similar way in the future. ron johnson coming in and signing the deal with martha stewart, trying to insert these stores to try to get more traffic. they worked so badly. he says you have suffered enough. >> kind of interesting. in terms of macy's not being able to show any kind of loss on their end. they could not show loss of sales or anything. >> it is unclear. jcpenney clearly was not gaining anything from this relationship. that is the thing here. by breaking the exclusive macy's had. both of these companies still carry the products. jcpenney will end its relationship with martha stewart years earlier than planned. but they both still carry the stuff right now. that is another anti-climatic element. >> is macy's going to keep this going? >> before the special referee, yes. macy's said we are very happy with this ruling. >> but give us something. theyey would be happy if got monetary damages. if you look at the dichotomy and companies have performed. macy's has struggled to some extent and closed some stores, relative to the rest of retail, macy's has done well. back froms crawling the depths of underperformance, even in a tough retail environment it did worse than others. >> that's the takeaway, is this the last of the ron johnson mistakes? is finally put to bed? jcpenney has been getting less bad. >> last quarter showed positive sales for the first time in several years. yes, it is getting to the end of that. changesron johnson's that were executed poorly or to quickly, maybe those are still sticking around. but the unraveling of the johnson mistakes are nearing the conclusion. >> the drama ends, sort of. >> i'm sure there will be more. >> thanks for the update. coming up, roadblocks in space. if the russians refuse to take american astronauts to the space station, there is no way for them to get there. taxary clinton's personal strategy. do not try it unless you are one of the 1%. ♪ problem.we have a tensions between russia and the u.s. have spilled over to the space program. the u.s. relies on russia's rockets to send astronauts to the national space station. russia says it will stop taking american astronauts with them by the end of the decade. the deck area -- the deputy prime minister tweeted "i suggest the u.s. bring astronauts to the iss using a trampoline." with michael, he runs the commercial spaceflight federation, a private industry group. he is a former astronaut. how seriously do we take these words from russia? they are going to be losing $70 million per seat. >> it could be a big deal. the comments of the deputy prime minister are a little bit of a loose cannon. my colleagues back at nasa are close touchre in with the russian space agency, they claim all is good at the working level. sometimes politics get in the way. i would be surprised if this threat materializes. the pressure on the u.s. to create its own way to get astronauts into space. that will rely on the private company level. >> right, nasa has a solution, which is called a commercial crew program. they are funding three competitors to produce vehicles that will take our astronauts to the international space station. thus relieving ourselves of the pending on the russians. >> how competitive is that going to be? is that richard shelby has introduced a bill that on the surface appears to favor boeing in that contest. interesting interpretation. the bill is the appropriations. they are funding it at a high-level, much higher than in the past on the senate side. still a little bit below the budget request but a very positive sign. probably due in part to the saber rattling going on over in moscow. the language you are referring to does ask for some pretty onerous restrictions on the competition for the nasa contract. then we as a federation think that is a bad idea. not just for the companies we represent, but more important for the american taxpayer. >> who do the restrictions favor? is to dostriction with a call for us accounting. they favor companies that have mechanisms in place to produce that kind of information. of the three companies you mentioned, boeing, spacex, and is bestevada, boeing equipped. they have thousands of government contracts. notex and sierra nevada do have the army in place to do the calculations. >> it sounds as though it does favor boeing. >> i think the most generous way i can describe the senators language, he is attempting to provide for greater transparency. that is a very shortsighted solution. what will end up happening is the current contract does not reflect that idea. atthe language is adopted, the very least, any contract awarded will have to be renegotiated. isthe worst, if the language adopted before those contracts are awarded, they will have to reissue the request for proposals. which is a huge delay. as we pointed out, that is not good. of who is favored, at the end of the day, what is the relationship in russia? and sierraboeing nevada are still dependent on russian supplies to make their products, isn't that a bigger issue? >> that is a big issue. the russians have said they do not want to sell a particular engine to us, the rd180. for military purposes. the commercial crew program would not be military use. the engine price would go up if they are selling fewer of them. that could be problematic as well. >> from your perspective, is america better off looking at space as a contest with the russians and possibly the chinese, or a collaboration with other nations? i spent a lot of time on the international space station, which is a collaborative effort with -- not in the least case -- the russians. i think that is a better way to go than to have a redo of star wars or the space race of the 1960's. to hedge yourmart bets and have your own organic capability. particularly for a country in a space agency like nasa. that has such a rich history. it is a shame we are in the position we are in. my answer would be a little bit of both. i like the collaborative idea but i think we should also have our own capability wherever possible. the spacetion, yes, race of the 1950's and 60's seem antiquated. but there was competition. competition drives people to do interesting and technologically marvelous things. cannot argue with that sentiment. back in the day, nasa had about 4.5% of the domestic budget. today we have less than .5%. that is a dramatic change. part of it is given by the fact that we do not have a that guy out there we are worried about. that is not really a great way to live life. it would be better to have a robust space program with a healthier budget without worrying about what is going on overhead with sputnik or the like. >> at what point do you think the u.s. has independent in its space program? >> i do not see us breaking off ever. spaceture of human exploration is international. there's no doubt about it. the question is who is going to be in that partnership and how it is mechanized. establish ourt to own independence because geopolitical things happen and you want that possibility. you don't want to be held hostage, it seems like we're in that position today. i am advocating a dual path here. >> give us a sense of what the kind of distant future holds in store, beyond getting people up to the international space station. how long is it going to take before we send humans into outer space to do something else? >> that's a great question. the white house has a plan to send some folks to near-earth asteroid, something they want to capture and bring into lunar orbit. then send people to check it out. there is some political debate about whether that is the right estimation. what is clear, low earth orbit is becoming a place we can establish a commercial footprint. right now, it is cargo to the iss, soon it will be people. not long after, we might have commercial destinations in low or the orbit where we can send people, companies interested in doing research. a before and entities -- maybe foreign entities. or a hotel like environment one day. space,tion in terrifying. michael, commercial of -- michael, president of commercial spaceflight federation. >> coming up on "market makers," we check in on capitol hill. a senate committee trying to figure out whether investors are getting hurt. ♪ >> approaching 26 minutes past the hour, bloomberg is "on the markets." year noteies, 10 falling the most in two weeks. the two year yield at the highest level since september. this boils down to inflation. cost of living rising more than forecast in may. .he consumer price index rising inflation is right around the fed target rate. about raisingion interest rates. however, you still need higher wages and more hiring to be able to pay for stuff that costs more. we will see how that plays out. >> i went to talk about a fascinating story around coca-cola. it has to do with warren buffett against one of his biggest fans, david winters is a longtime buffett-ologist. he has owned shares of berkshire hathaway and the companies in which berkshire hathaway makes investments, like coca-cola. parthas been moving in because david winters has raised concerns that warren buffett might do a "sweetheart deal" to take coca-cola private. partially -- possibly with the assistance of a brazilian billionaire with whom he took hines private last year. the concern would be that shareholders would fare poorly relative to some of the incentives offered that google: management -- some of the incentives offered to coca-cola management. there is a perception that heinz manld've done better if leh and buffett had struck a harder deal. >> hillary clinton's tax strategy when we come back. ♪ >> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> good morning. you are watching "market makers" on bloomberg television. i am erik schatzker. >> i am alix steel. stephanie ruhle is on assignment. click high-frequency tradesman -- underh-frequency trading the microscope in d.c. megan hughes has been at the hearing. let our lawmakers saying, what are they indicating with questions and comments? said, theyple have welcomed the attention congress is bringing to the issue but they are concerned congress would act here. more law is not necessarily the right approach to fixing the problems treated by hft. members of congress also back what we are seeing, the actions from the ftc. what arerket rigged, members of congress proposing to do? heard some hens. he wouldlevin saying be on board, some kind of pilot program that would do away with rebates brokers currently receive. with lawmakers, you have a lot of opposing viewpoints. we heard from senator johnson, he says he is wary of any government intervention. i am concerned about is creating a sinister atmosphere. words like "dark pool" and "conflict of interest." we are talking about $.30 or trade, miniscule amounts. >> we heard from a researcher that said those numbers really did add up for brokers and were not insignificant. we heard from brad katsayama, the main character in michael lewis' "flash boys." regain the trust of the general public, talking through these issues and adjusting these conflicts, that is the way to restore that confidence. >> that is what we are doing today, talking with these issues in congress. investigations at the sec, the cftc, the fbi. >> the hearing is being held in two parts. coming up, we will hear from some of the executives at the exchanges. summary from the new york stock exchange, right? >> that's exactly right. that is just getting underway. starting with the second panel with that testimony. a very different perspective. hearing from the new york stock exchange and we are hearing from rade and vanguard. it is not a unilateral panel in terms of what we are hearing. written testimony from the new york stock exchange, we're hearing a lot of openness to the idea that there are conflicts that need to be addressed that are hurting the public markets as well as the individual investor. a leader andbe support some of the changes. the representative from bats saying the market as it is right now is the fairest and most liquid in the world. ding the status quo more. we are seeing differences of opinion not just with lawmakers but also on the panel. >> absolutely. grossld be a overstatement to say that commercial interests are aligned . the new york stock exchange at war with bats. they do not know how they feel about the payment for order flow ameritrade is-- td getting. i doubt the panel will come up with an easy answer. megan hughes in washington. when we come back on "market makers," bill and hillary clinton have supported higher taxes for wealthier americans, particularly the estate tax. they, however, are doing what they can do -- legally -- to lower their own tax bill. when we come back. ♪ >> the clintons -- bill and hillary have publicly supported the estate tax for their lives. hillary has argued it is the right way to keep america from being dominated by american well. it does not mean they went to pay it. like other millionaires and billionaires are using the tax code to their advantage. it is legal but serves as a reminder about how the first family has become wealthy since leaving the white house. richard rubin has taken a look at the tax strategy. he is in washington. tell us what you found. >> what you find is the clintons are using what is known as a residence trust. they took their home in westchester, new york, divided into two parts and put each half into the trust. they set the trust aside. that lets any appreciation in the house's value happened outside the estate. it lets them claim a discount on the five of the house when they put it into the trust. they will not ultimately have to pay as much in estate taxes. every dollar they save outside the estate, you save $.40 on the tax. how unusual is this, how many people actually pay the estate tax? >> moves are very common like this if you are very wealthy. a qualified principal residence trust is gobbledygook for many americans but if you have $8 billion it is common. to astate tax only applies sliver of americans. of the people who will die in 2014, only about .14% will pay it. >> i would emphasize the point, what the clintons are doing is legal. legally wrong.g we could argue about the fx and -- we could argue about the ethics and the optics of it. from a legal standpoint, shielding some assets from the estate tax is fine. >> the estate lawyers i talked to say this kind of planning they have done is very vanilla. youirs lays out the steps need to take to make sure you are following all the rules to do it. be challenges, the irs can always look at a retirement and say you value the house wrong or weird going to challenge you on this. the techniques are not anything sure.or a legal, for >> how cognizant are the clintons about this kind of deal? is this their financial planner doing something smart or are they involved in the process? >> they have to be involved enough to sign the document. they are aware enough where they are involved in signing. in newve estate lawyers york, people who really specialize in planning for high net worth individuals. they have hired some of the best and they are following their advice. >> i mentioned we could debate the optics of this, why don't we do that? we will bring al hunt into the conversation, bloomberg view columnist and host of "political capital." is this the right thing to do for hillary clinton? >> is part of a larger problem she has. first, it does show that the estate tax is not about intergenerational or entrepreneurial transfers as supporters say. it is action for wealthy heirs. as irwin seltzer once said. anon't even think there is ethical problem, the optics are terrible. once you put that together with hillary giving speeches for two hundred thousand dollars at goldman sachs, people say is she one of us or not? i do not think people have problems voting for somebody who is wealthy. problems with somebody who talks a great deal about a struggling middle-class and working-class and seems to spend a lot of time with the rich and privileged. >> what american in his or her right mind would want to pay one cent more in tax that he or she owes? this is a country that was born in a tax revolt. >> i do not disagree. i believe we should pay more taxes. i believe social security benefits for upper income people should be curbed. i think my social security benefits -- i take my social security benefits and do not pay more taxes. you asked about the optics, the optics are bad. >> what does hillary clinton need to do? >> she should stop giving speeches to goldman sachs. [laughter] if she is worth $50 million a year, she does not need to hundred thousand dollars. onvia straight -- on the estate tax, my guess is they are not going to do much about it. if they are asked, they will say you ought to get rid of the loophole. >> i'm not sure where to go with this. the optics are terrible. rich deserves credit for bringing this to light. what is her alternative? do you not tax shelter some of your assets, as you should -- i have a hard time arguing that you should not do it. everybody should be trying to reduce his tax bill and pay only what he or she owes. >> erik, you are right. what you should do if you are hillary clinton is say what i want to do is real tax reform that does not allow a multitude of shelters for people who do not need them and are not economically productive. and really do not help us create jobs -- >> then she exposes herself as a hypocrite by saying i want tax reform but until -- she is in a no-win situation. >> bill clinton has been saying i had to pay more taxes for years. he does not, but he says i ought to pay more. >> tries not to at the same time. >> i have a feeling we are going to discuss this again. thank you so much, al hunt enbridge ruben -- and rich rubin. bringing to light tax sheltering thetegies the clintons, former first family and potentially the future first family are putting to work on their behalf. legally. >> you should see my itemized productions. >> the former ceo of bp says coming out of the closet would have changed the way he did his job. ♪ >> you are watching "market makers." john brown spent decades as a top executive in the oil industry, including a dozen years as ceo of hp. he never revealed publicly that he is gay. he says he would have been a better leader if he had come out of his own closet on his own terms. this is a courageous book, why do you write it? i didn't want anything to go through the same thing i did. i wanted to encourage leaders to set the right talent to make it safe for people to come out in business. >> who are you trying to reach? the people who have yet to come out of the closet or the leaders who you believe could create the environment for them to do so. >> this book is aimed at the straight majority. i would like them to read the book and say this is what we have got to do, we have got to set the tone and have role models appeal can feel good about. and they can come out in business and productivity can improve. this is about business. value revelation of prompted you to leave british petroleum in 2007 -- the revelation about you prompted you to leave british petroleum in 2007. could you have written this years ago? >> probably not. it takes time to think about my situation and other people's situation. i talked to a lot of people, wereding young people, who still concerned about coming out in business. they thought it would get in the way of their career progression, give someone a munition against them. but all some clients here or there. >> let's talk about the kinds of people who hold jobs similar to the ones you held. is coming out easy for an executive in the u.s. or the u.k.? the same.t the u.s. is more varied, as you travel from new york to l.a. there are plenty of different attitudes. the u.k., it is one in the same place. out at thenot coming top of companies. the 700rprising that in largest companies on the s&p, there is not one out, out gay ceo. >> you know of ceos who will not come out of the closet? >> i do not. i know of some senior people who are thinking about coming out. one of them read the book and said i think i am going to come out. which is very good. >> i would agree. when they explain why they have not done so thus far, what do they say at the >> mostly people when they are older, they say i have not come out so far so i cannot. i have built a legend of the in at least -- i have built a legend of being at least straight, and i can't get out of it. that is what i did, having two lives. control ofrs took the situation. the subtitle is "why coming out is good business." a persuasive case for why it boosts productivity and gives companies access to a wider pool of talent. what percentage of companies truly understand this? what percentage have taken steps towards this or are paying lip service? >> a lot of people have it on the agenda. it is the hr department agenda. >> it should be an executive management agenda? top agenda. be a companies like ibm have had a big history of putting it on the top of the ceo's agenda. >> before we go, how is this playing out in the oil industry? how are they responding to the challenge echo >> a bit. my old company is doing pretty well in this area. some of the oil industry, one company in particular, is at the bottom of the ratings. but shall we name the company? >> exxon mobil. >> he's called eczema will -- he has called exxon mobil out. former ceo of bp. "market makers" will be back in a moment. stay with us. ♪ >> that will do it for "market makers." thank you for watching. >> thank you for letting me be here. >> you will not be with us tomorrow. >> i will be watching. chief economist at goldman sachs will be here talking about the fed policy meeting. the most important economic item on the agenda. i will ask about goldman's predictions for the world cup. the economics of the world cup. jan will be singing " deutschland uber alles." >> germany is the team i have to root for. the hour,tes past bloomberg is "on the markets." scarlet fu has some breaking news on oracle. >> oracle is near a deal to purchase micros systems for more than $5 billion. designsystems enterprise solutions for the global hospitality industry. oracle is a perennial acquire. trading higher. micros systems surgeon on the news. it has just resumed trading. up by 14% to $66. we will keep an eye on this news. none of this is official. oracle is near a deal to buy micros systems for more than $5 million. after inflation picked up. a decided reaction in treasuries , the two year at a nine-month highs. joining me with a look at where traders are betting on the first day of the fed policy meeting is max. bond investors have reacted so decisively to the inflation data? equity investors, not so much. >> bonds are reaching a ceiling or a floor as far as yields go. not that much room to the downside for yields. inre's a natural convexity the bond market that is not present in equities based on where it yields are. >>equities have more room to rise. >> volatility is low, the vix has been low for some time. most asset classes are showing low volatility. there's a bit of complacency but no major risk factors to shake things up. when we look at complacency, it is not obvious what would cause that to come undone. >> one company is the williams company in the energy sector. up today after surging 19% yesterday following the announcement of a proposed merger with access midstream partners. >> seeing call buying. before theis proposed merger was announced. this is a low-volume stock, 20% move in williams is a large move for this type of stock. it is a play on the energy infrastructure. there is a huge supply shift coming online in the u.s., both anderms of natural gas crude. what is lacking is the infrastructure to move that energy around. this is a play on the infrastructure pipeline and transportation of energy plays into what williams called a super cycle. with the energy sector. your trade has to do with an etf that tracks energy companies. etf with mid-cap and small-cap energy companies in its than the ship -- its membership. , growthrything in iraq coming back in china, they matched the 7.4% gdp. there's a lot of reason to be bullish. >> plenty of headlines to come in the days with iraq. thank you for joining us. "on the markets" again in 30 minutes. "money clip" is next. ♪ ." welcome to "money clip i'm adam johnson. g.m.'s mary barra is ready to share some news with congress about another recall. in sports, world cup joy, but there could be another victory of a kind for soccer fans. and who actually earns wooden wage -- minimum wage, and will a boost make a difference? and a guide to social meetings. we k

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