melissa. welcome to a friday addition of -- iet makers" on a very am a very fortunate stephanie ruhle. >> i am the lucky one. matt miller in for erik schatzker. pleasure to be in. >> i just want to point out, as we were getting excited, you said let's goose this pig. what does that mean? crumpton says that every time he starts a program. >> i want you to know when you are sitting next to me, kicking it off with "let's goose this pig" isn't so good. >> that is a little behind the scenes there. now time for top news. rupert murdoch is raising cash potentially to sweeten his bid for time warner. 21st century fox agreed today to sell its pay tv businesses in italy and germany to bskyb. fox has $9 billion all in cash. herbalife is upping its game in washington. the company is hiring a former aide to vice president biden. alan hoffman will oversee public policy and government affairs. is currently investigating the company over allegations that it is a aramid game -- pyramid scheme. with seinfeld is in talks netflix. ph" "daily telegra reports that conversations were currently taking place. he 180-episode show about nothing has already generated some $3 billion in syndication fees. we are of course talking about the old show "seinfeld." when i first saw that i thought oh, he has a new show, but -- >> he does have a new show online that is pretty damn funny. anpretty damn funny is exaggeration. it is not "seinfeld" or "curbed." >> your dizzy as him? -- your enthusiasm. some so grating, but at point after like it is just drilling my teeth. >> that is how investors feel about amazon i think. >> oh, is it? then let's turn to the top story. it seems that investigators are simply getting sick of jeff bezos' spending addiction. a much higher loss than analysts expected, even with revenues climbing by 23%. the company lost hundred 26 -- $126 million dollars. cory johnson, our editor at large, i ordered costumes for our and jewels and devils party i'm going to tomorrow night. but the numbers be slightly skewed? >> that is a strange sound. maybe it is the greasing of a pay. the results from amazon, digging into the result is i did last night going this is a conference call eventually, initially it seemed they were not making -- selling as much stuff. the revenue numbers were not there. if you want to dig into numbers, the revenue for the retail business is pretty strong. it was the other stuff and -- that messed amazon a particularly in terms of profitability. profits were not there. this consistent decline in sales growth, even as they at all of these this is of, but a lot of it might be about price cuts in their amazon web services business. the company is lacking in a lot, of its rice cutting amazon web services, which adopt about, hurt them in the quarter as expenses ran, because they wanted to stay right competitive. don't you raise your microphone on your lapel, and point out that last time amazon presented earnings, , nows dropped the next day we are seeing shares down 7%. why this violent knee-jerk reaction a day after? talk this point, we can with the stock and the company. i can answer that. sayingas a great line this is the single most expensive stock in the entire s&p 500. he is basing that on price to earnings ratio. with that kind of valuation, the single most excessive stock in the s&p 500, you can expect price for perfection, so when there is any actual reality for investors to look at, when you look at a company whose profit margins are in this case is nonexistent, the company losing money, but regularly reporting margins of 50 basis points or so, that kind of reality does not really help support a real strong stock price, which amazon still has at this point. >> and i point out that, look, if you lose $126 million or even millionearned 126 dollars, it does not make a difference in the face of 20 billion dollars revenue. you can look at the stock as expenses as far as bp, was close , butterday at $569 investors have more faith in this company dan may have in any other company in the universe because they're willing to pay , a hell of arnings lot of war than they are willing to pay for apple, 50 times more than they are willing to pay for apple, so it means that investors -- you can say there are losing patience, but they still believe in jeff bezos like he is a god. >> it is a god-like faith, and faith cannot be proved. head ofrd to get in the where the investors are, whether it is traders betting on the quarter or people want to own this thing 20 years. what we can do is start to unpack the business and look at what is going on here. what we see consistent with all of amazon's businesses is that they are spending a lot of money whether it is building distribution centers, hundreds of millions of dollars on original content for the amazon prime video, or whether building data centers for amazon web services, they are willing to take the cash flow they receive from this giant business, plywood into building infrastructure for future businesses, and let profits be forever?ybe i don't know. >> if they got up to $200 billion in revenue every quarter and still did not make any money, it would still be awesome. as long as they can keep doing that, i guess they don't ever have to delivee if investors are buying itr. >> it is twice the stock has fallen, they might keep growing, but the stock might fall by 90% again someday. it has already happened twice. >> cori, as always, thank you so inside. bringing that our own cory johnson from "bloomberg west." let's shift to starbucks. one reason surging coffee prices and worker costs and worries that profit growth will significantly slow. bloomberg is outside a starbucks store in washington. yang? >>cks you are right, -- you're right, shares firstar backsliding, now standing third quarter, you mentioned some of the concerns. another one of course is that they are expanding too quickly and analyst are worried that opening all of these doors well affect profits. the earnings report for the third quarter, 500 $13 million, 23% gain on the year ago quarter. $.67 earnings per share beating ofimates by one cent $4.2 billion. 6% global cop store sales. u.s. got 7%the same-store sales growth, 7% for asia, largely held by china, 3% in europe and middle east and africa, and food was the standout here. food helps strike to bring percent of called sale growth in the united states. they are very optimistic about what is to come. they increase their earnings forecast for the current quarter by two cents. we are seeing shares on the decline. as great as it is and is much wonder. as they have to say, there is a concern of profits and higher coffee prices will be a concern, although starbucks has locked in about 50% of its coffee cost for the next year, so they have that one leg up on their competitors, guys. >> they clearly expressed their growth land. what else do you think they have got in the pipeline? food is one big thing. we know they introduced grilled cheese- grilled sandwiches and some stores. that is exciting. they want to bring more traffic into their stores in the afternoon, so you might not need an espresso shot. e opening more drive-through locations, more 24-hour locations. this year they will be doing mobile ordering, express ordering, and digital pay. we already know they have a successful digital payment out of. app. starbucks loyal customers can order their coffee before they go in, and have it there waiting for them. that will be a huge game changer for those with morning commutes. >> are you a starbucks person? >> no. >> me, either. what you drink that weird tang or whatever it is. >> i love tang. astronauts drink tang. yang yang, thank you. star looks at amazon both the domiciled washington staples of airboats paying u.s. taxes, both raising, both investing in infrastructure. these are companies that are doing what like good old american companies. >> that is right. theenny stocks in spotlight. think technology, the company with no revenue, no assets, not even any products. we are going to look at the dark underbelly of the penny stock market. >> straight to video does not mean what it used to. we are talking about one of the best reviewed movies of the year , and it is barely playing in any theaters. we are going to talk about that on "market makers," bloomberg television, we are digital, you can see us on demand as well. bloombergrg.com/tv, tv plus come on your tablet, and you know where we are streaming, apple tv and amazon fire because we are all about new technology. ♪ talk about penny stocks and think technology, the company with no assets, no revenue, and no product, yet it has jumped more than 20,000% in just a few weeks. market valueding a of $6 billion. it began trading again this morning after the sec halted it for two weeks. there were a slew of stories on business insiders, zero hedge, obviously on bloomberg as well. good stuff. raises a lot of questions about the over-the-counter market for penny stocks. here with us is a former investment enforcement attorney at the sec. tom, thank you so much for joining us. i did not expect this stock to trade at all, but i'm looking at the bloomberg quotes, and there are some traits, not a lot, but a little bit of volume going out around five dollars when it opened, now about $2.40, so not worth nothing. is that surprising to you? >> it is surprising. because of the regulatory rules, there cannot be open quoting and markets being made, so all of these traits would have to be on an unsolicited basis essentially, a person calling up their broker saying hey, can you help me find someone to sell the stairs to or on the flipside thing can i buy some of the shares of cynk technology? >> is there a bigger chance that this is really just investors who have been short the stock even while he was suspended, had to pay everyday -- are they just trying to cover and get out? >> that could be it. i do not think we will know the full answer until the shorts that were in the market, those people who may have been manipulating the market, until the sec finishes its investigation, which unfortunately likely will not be up for another six months two-year simple because that is how long these investigations take, so i'm not sure what economic forces are at play and are driving the trading today. >> i love, by the way, the skull and cross bones logo that goes on the otc. it is kind of a buyer beware thing. >> but the fact that this traded in the gray market, not even the pink sheets -- are you going to be an investor just trading blind here? >> you are. the trading and the price discovery is completely opaque because of the fact that the company cannot satisfy a mini registration requirement that now are allowed to do that they're trading has been suspended. >> why would the sec say it is fine to start trading this thing again? if you cannot find revenue, product, a correct address for the ceo, why bring this back up to the open market? told theunately, the sec has that is most effective is the trading suspension, and days.nly lasts for 10 if the sec wanted to do a full revocation or bring a fraud case that would likely have a bigger impact on shutting the company down and shutting the trading down, it can only do that by expending a lot of resources, bringing a full investigation, which they will do. it just cannot be done quickly. >> how would you go about that? i do not believe we can even find the one employee listed with the company. , --ent down >> to belize. the only thing he could get with roughed up by the grandfather and the brother, billion-dollar, i cannot even remember his name, but clearly there are people who have invested here who have been suckered. there is nothing the sec can do except a temporary expansion? -- a temporary suspension? >> tom, have they been suckered, or is this something the market into itself? did somebody commit a crime here? is somebody getting away with millions of dollars, or is it something like a crazy market phenomenon that went out of control? >> i think there is got to be a little bit of both. there has to be somebody behind is to try to control the shares. a small group that probably controlled the shares and then traded it around, got some interest, gruesome investors, but on the flipside, some of these investors know what they're getting themselves into. they are trying to get in early on the pump and get out before the dump, so the caveat toward these skull and cross was on the otc market -- people more or less i think know what they're getting themselves into with these stocks. >> do they? > "wolf of wall street." auto not know anybody who feels great about penny stocks. >> what is interesting is the same rules that allow these exemptions, that allow these stocks to trade without a full-blown sec registration statement are the same that allow private equity to inject funds into the companies that they invest in, so the sec is in a tough situation. this has been around for 40 years. how do you deal with the unscrupulous, small companies that you want to shutdown? but the same time not throw the baby out with the bathwater and allow some of these liberal rules that allow the injection of capital, which ironically backs up the jobs act, which the chairman of the sec has been on a self-imposed mission to get the jobs act rules finalized by the end of the year, and those will liberalize even more the ability of investors to invest very easily and companies that have not gone through the registration process. >> i am all for a liberal rules. tom, have you ever heard of anything this insane? i mean absolutely no revenue, no products, nobody can find anyone who works for the company. we don't know who the biggest holders are. >> in that case, i feel like the sec should have an emergency lever to pull. >> yeah, i have never seen anything quite this extreme, but i think the trading suspension tool that they have is that lever, stephanie. look, they are strapped for resources now. they have got the large markets they have got to deal with, the market structure to put the resources into, so this debate is going to continue to go on and these rules i think are going to continue to be out there for some time. >> what a fun, fun story. >> indeed it is. >> it enrages you, where he kind of amuses me. >> it is not an raise me, but honestly with all of the bureaucracy, with all of the meetings you have to do, clearly this company -- they are in foul play. >> i want to point out that i like "bucket shot" better than "the wolf of wall street." thank you for joining us, former investment enforcement attorney. have you seen both movies? >> i have. >> which one did you prefer? >> i loved "wolf of wall street." >> there you go, right there. more "market makers." people don't. that was hard. ♪ >> we are approaching 26th at the hour, which means it is time for bloomberg on the markets. let's take a look at where the index are trading. does about an hour into the session. ,984,&p 500 down .25%, 16 fell under that magical 17,000 level, and the nasdaq off .34% 4000 456. >> while everybody is talking about amazon, i got the music in me. let's not forget about pandora. here is what is interesting -- ♪ >> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> welcome back to "market makers." i am stephanie ruhle. >> and i am matt miller in for erik schatzker. >> taking you to d.c. now, president obama has got a new catchphrase -- economic patriotism. he is referring to american companies taking advantage of a then moving and corporate headquarters overseas. it is called a tax and version, a triple lindy some are saying, and it is a way to avoid paying high u.s. taxes. here he is yesterday in los angeles speaking about this. >> you do not get to pick the tax rate you pay. folks, if you are a secretary or a construction worker, you do not say you know what, i feel like paying a little less, so let me do that. you don't get a chance to do that. these companies should not, either. >> hate the player, not the game. they can actually do that according to current u.s. law, so there is a chance congress could pass a new law making these tax and versions much, we bring in the chief local strategist for potomac research group. greg, what is your current take on all of this? >> i think the senate could do this, stephanie. i think after this long break, a five-week august recess, the senate might act, however, chances of the house acting i think are extremely slim. >> by the way, can we point out that you do get to pick your tax jurisdiction. you could, as a teacher or a nurse or a secretary move to a different country that has a more competitive rates, and maybe like living in a country better. something that anyone could do, so i do not understand -- >> this is why some people move to florida. >> exactly. >> why business is incorporated in the state of delaware. >> of course. i point out to people -- there is a reason why derek jeter and tiger woods live in florida. hello. i mean, you can pick where you live and you can pick your tax rate post a >> that they love orlando, greg. [laughter] >> oh, right. i was on the road this week seeing institutional investors, and this was the number one question they had. there is a headline risk if walgreen has rumored does a deal in the next few yearweeks. that will add more momentum to a bill in the senate, but i still feel very strongly that the tax writers in the house, paul ryan in particular, have no stomach for a stand-alone bill. it wants copperheads of tax reform at some -- they want comprehensive tax reform next year. >> everybody agrees that we need tax reform. we need to make this a better corporations to be domiciled. why don't we get in the game and bring irish companies to california? because our tax system is so awful. why not just fix it instead of going out there in beating the patriotic drum? >> exactly. it is in washington. it is like in the movie, it is chinatown, it is washington, and we cannot fix anything this broken. everyone agrees it needs fixing, but when you look at the details, both parties have radically different ideas what would be done with what revenues, whether the bill would raise money, on and on and on. i think the chances next year are a little better for tax reform. maybe 40%, but we have got a long way to go before we get copperheads of tax reform. >> does obama think anything is actually going to happen here, or is he just playing two midterms? latter, think it is the stephanie. the democrats. immigration would be their cutting-edge issue, but that is cloudier now because of the criticism obama has gotten on the handling of the border crisis, so they need an issue, and they think this is a potent, populist issue. they may be right, but they're not getting a bill out of it. >> is this, by the way, something that is training a ton of revenue? we just did a couple of stories on the cubbies, amazon and starbucks, that are spending more and more money here in the u.s., paying their workers more, building out infrastructure, and they are getting taxed in or is thisstate, just a few big headlines that are going to help us lose, i don't know, $10 billion, $20 billion over a decade in revenue? a in the big picture, it is rounding error. for the three of us, it is a lot of money, but in the big picture, it is a rounding error. i do think you can frame it as some companies not playing fair. their response is we will pay fair when the tax code is reasonable, and the tax code now is just terribly broken. >> do you think that is a fair response from these companies? >> sure. furtherthey feel that restrictions on inversions, whether it is denying them the interest rate or having federal contracts and i to companies -- they think that would make u.s. companies even less competitive globally, and i think they have a point. >> yeah, i mean, we heard this morning, former ohio governor ted strickland saying you know you get some great benefits from living in the u.s., and as a patriotic corporate citizen, you should stay here and pay taxes, but the bottom line is when you take off the bobby sox and the poodle skirt and realize this is not the 1950's anymore, you have got competitors -- >> what were you wearing? >> you have competitors who are playing by their rules, and if our companies to play by those rules, that is of no help to anyone. i asked why wouldn't the u.s. government want to up its game and make itself more attractive for different companies, just like individual states do it? >> you guys have stated some pretty potent arguments were getting tax reform. next year. i do think a year from today paul ryan will have a reform bill through the house. whether we can get one through the senate and run three house-senate conference later next year, is still debatable, but there is an awful lot of people in this town who feel that tax reform is an idea that really is due. >> greg, as always, great to have you on. the chiefere, political strategist for potomac research group. >> we will take a quick break, and when we come back of it is one of the best movies of the year, the post-apocalyptic "snowpiercer," and it has a very unorthodox release and strategy. maybe it was forced into a? but it was a great story. stay with us here on "market makers." ♪ >> welcome back to "market makers." i am stephanie ruhle, talking about my favorite movies with my partner, matt, but an otherwise disappointing summer for hollywood. the breakout film "snowpiercer" is disrupting the film industry. this standout movie set on a futuristic train hurtling around a frozen earth, expanding in theaters and rolling out and home. i want to bring in our senior west coast correspondent jon erlichman. we need you to weigh in. matt miller's favorite movie is the "jerk." for me, we are talking "harold "rushmore," and the "royal tannenbaum's." >> at this film is getting a lot of buzz because you have a film that hit theaters about a month ago, and then two weeks after it hit theaters in the u.s., a few theaters basically, it is available on demand, and there is always the stigma with going to the second window. you think straight to dvd, straight to video and you think "stinker," yet what really happened is the weinstein company was concerned about how this would do in a massive, theatrical release in the u.s. with a massive marketing budget, so they went to basically a few screens, and then rolling out very quickly on demand. you put the marketing budget on -- >> you put that so politically nicely. i heard that harvey weinstein got in a fight with the director, the director refused to cut what weinstein wanted, so he said you know what, screw you, i'm not going to give you a big release. >> that happens all the time. in a case like harvey weinstein, he is taking films that are always going to be challenged in some way. you know, when we have talked in the past, he says that is what they like, they like to take these films that may be are seen by others, not being commercially viable, and then you make them work. sometimes obviously you will have some squabbling with the artists themselves over how the thumb should be released and all that stuff. at the end of today, harvey weinstein is trying to make money from these films, and in his case was a little bit different while a lot of times in the weinstein family it is about getting the award buzz and building it that way. in this case, it is actually about getting the marketing buzz from having it in theaters, but then benefiting from the fact that we have all got the access to these films in our homes now, and then they said basically a record for this unit of weinstein radiance in a week in terms of vod sales. >> a disclaimer that i love weinstein films and i watched them all the time. >> "the artist," that is one of your face. >> no, not the "artist." we have the editor of boxofficeguru.com. onave seen a lot of movies the on demand that have not come out in theaters , and likej -- and like jon said, i said this would be a straight to dvd loser, and then i get coming like "mud" with matthew mcconaughey, or "deadfall," and i think i prefer the getting them on demand the of i would rather watch movies at home anyway. >> something that has been going on in the last few years, so a specialty smaller films, the riskier films, and that is where comes into play. a theatrical release is very risky and expensive and just because a movie as good as not mean it is commercial in that it will sell, so a ugly that is not want to risk losing millions of dollars on marketing on a film which might be one of the best-reviewed movies of the year because people do not want to pay for any theater, are getting it at a lower price point, five dollars, seven dollars, people are willing to see the movies that way, and of course it is a lot less expensive. there is all most no marketed on the dvd platform, so becomes a more profitable route for something which may not be able to survive the big leagues of the theatrical box office. >> our sales, volume spiking for video-on-demand? movie not been into a theater in ages, and i watch videos on demand constantly. >> first of all, you're killing me by saying you do not go to the box office. com!oxofficeguru. thehe thing is, i just got newest numbers from radius and the weinstein companies as of today. "snowpiercer" is now up to an estimated 3.7 5 million dollars in vod grosses, and that has now surpassed the box office gro ss of 3.7 money dollars. -- $3.7 million. >> even though it is a much lower price point, it is so much less expensive. no marketing, no theatrical rollout. is it almost no cost for them to post this on demand? reason you have a two-pronged released with a theatrical qualified vod is the raise a prestige of the theatrical release. there are the reviews you get in the "new york times," "l.a. times," and so on. whether it is a theatrical release like all of the other fails, you get all of the cachet, the press, the great reviews, which they were banking on -- and they got -- and then you push onto vod on the third weekend where everyone a short can have a comment by then, people in the third and fourth your market have heard about it. , what does this mean for amc, for regal? is this killing them? --hey hate us, steph steph, and i'm, glad you brought this up. for distributors to say we are going to put this film in the theaters for a few weeks and then go on demand, you certainly cannot do this very easily with those big box office films that thinkk about what we about summer box office, so in the case of this film, weinstein has to acknowledge that ok, we are not going to be allowed to be in a lot of theaters, a lot of theater chains are going to say no, you cannot do this, you're not coming in. that said, there are business models that are being built now keeping that in mind. a distributor this is ok, here is the math. i am paying this for this movie, i can probably get it into these theaters, some theaters are not going to let this and if we go to on-demand earlier, and that is how the movie math is going to work. there are going to be strip doing this, and there are theaters that will hold strong and sane away, you cannot do this, and there will be a back and forth on it. vodt is funny, the way markets it when you are watching tv and clicking through the on-demand menu is that this movie is available to you now on-demand as like a sneak preview. you can only watch it for two weeks, and that it is going to go to the theaters. isn't that a different model as well? >> it is. some come out on vod first and as many as five weeks later can go to theaters. a lot of files from asia, korea, china, japan -- there is an audience here in the u.s., but again going to theaters is risky. a lot of those come out on vod first -- >> hold on, since this is an action film, wouldn't it be much better received on a big screen? for me, i can watch "love actually" on a smart phone. on this kind of a film, we want to say on a big screen. >> personally, i would want to see on a big screen rather than the small on my screen i saw it on. i am hoping to see it again. it is one of my favorite movies of the year. but it is all about risk. chris evans, he is the star of "captain america," but outside of "captain america," he does not sell. selling onrack of his own. is not ause actress grey film at the box office, does not make you pay $30, $40 a ticket. $13, 14 dollars a ticket. >> what do you love this year besides "snowpiercer"? >> this is a recent one that was nonstop, i like liam neeson movies. i did like that movie, it was fun, i like him and these kind of roles. but also what is coming out later on in the summer, you have got almost nothing big coming out on so vod is a good platform to find films on the maybe missed in the springtime. "cap america" was a good film. >> gitesh pandya of boxofficeguru.com, thank you very much. >> thank you. >> and our own jon erlichman, thank you very much, man. when we come back, the crumbs cupcake brand is on, so how is baked by melissa doing? ♪ >> wow. welcome back to "market makers." i am stephanie ruhle. in the midst of the crumbling cupcake craze, one establishment is going stronger than ever. why? the heavy founder is from the garden state. while others are cutting back, the founder, melissa bushnell is here with us. melissa, we talk about the cupcake craze crumbling. when i look at the line around the block at magnolia, who wants a six dollar cupcake? that is the case for prom. why do you still have yours? we offer the most functional desert. it is just a bite, so we give you the opportunity to try all of these different flavors without that posted desert guilt trip, and to us it is all about the experience that you have with eight by melissa. went to a sony playstation event the other day being a kind of a geek, and they had these all over the place, so i ate probably 17 of them. i really had the guilt after that. 50each one is less than calories. our tie-dye is 30 calories. >> i love the tie-dye, but you love the peanut butter and jelly. >> i love them all. >> you think the bike size is why you are doing so well? >> i think there are a lot of different reasons. i am constantly trying to innovate. i am always working on new flavors that really pushed the envelope as to what a cupcake can actually be. you have a cinnamon bun in the box, and taste a, is that a cupcake? b shutcrum down? >> they were losing money every day. >> can i does posit that maybe their cupcake did not taste very good? i did not like every much. >> i like all cupcake. >> do you? even flavorless cupcakes? >> if you do not innovate, tourists will not rest to your shop. what do you need to do next? >> we know we need to innovate. that is what we focus on. we need to grow outside of new york city. we put a large focus on our gifting. we want to be part of everybody's special moments. the happy moments and maybe the not so happy moments. we try to create something for every single occasion. have you ever seen our celebration box? >> no. >> we have celebration box is geared toward special occasions, it's a boy, it's a girl box, and we just want to be a part of everybody's special mormons because it is so much more than just cupcakes. >> do you have something for sad moment where somebody can just binge aeat? >> our pastry box. >> do you do something other than cupcakes? sizedis just bite cupcakes. it is all we offer because that is what people want. it is a bite and it is delicious. >> i assume you started baking days at home and everybody was like oh, my god, these are so good -- >> hold on, what did you do before the? >> i worked in advertising, i was fired from a job -- >> good for you! >> why did you get fired? >> because i was not good at my job probably but i was lucky enough to find something i was passionate about, which taught me how to work hard, which i did not understand at the time i was fired. >> where are you going to expand to next? >> we are slowly starting outside of new york. we are in no rush to grow. we look for amazing opportunities that set us apart from everybody else. >> who has got the model you want to in your late? -- to emulate? >> we do not really pay attention to our competition because we are unique and as long as we continue to innovate and push the envelope, i think we are true to ourselves, which is the most important thing. >> do you ever go to magnolia to test it out? all cupcakelove that i eat them. before we started the company, i would get two larger sized cupcakes everyday and eat them both. i swear. it is crazy. you was going to say do just live at the gym when you're not at work? butt offnow i work my and i have these bite-size cupcakes that are perfect for the health conscious woman. >> you have any kind of partying background? baked by melissa is a naughty title. >> i think of weed. >> i think it is so cool that i have the opportunity to get everybody baked by melissa. >> there you go! ♪ >> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> welcome to "market makers." >> i am matt miller, in for air chapter. schatzker. it is a great day. i have had like six cupcakes. bskrt murdoch is selling to yb four $9 billion. let's talk about this move. >> this is been a massive week as far as media. you have been with us throughout the week. this is your jam. this is your beat. where have you been? >> i have been with you. i was in my car, driving back from cape cod. there is a variety of people around this that i am not at liberty to share. >> it has been insane. he did not have time to get a haircut. >> that is for sure. >> what is going on> >> only no right now is that broken byis done, bloomberg about 1.5 months ago. what this means is that fox has more money to bid up their a five dollar per share offer for time warner, which was rejected. the question will be, will they bid against themselves when there is no other bidder here? will they bump this up proactively to say, you rejected $85 -- we will go up to $95. >> what have they got? >> the big issue here is how much they are willing to lever up. will they create debt rating, which is what they want to do? they may be able to get up to $95 maximum. maybe not $100, which is what it will take. >> bloomberg intelligence. >> $100 per share, i should say. >> it would be close to $100 billion. this is a guy who is pretty tenacious over the years. he does not walk away. he will put his best deal forward. at the same time, they do care about the credit ratings. they want to maintain their credit rating. if they were to get to $100 per share or more, the rating would clearly be at risk. so, we solve this deal for the european assets. the divestiture posted deal of cnn, anywhere from six dollars --$6 billion to $10 billion. you say i want cash. >> time warner said we are unwilling to do any business with fox east on their current situation. in other words, it does not matter how much you bid. based on what we foresee, they will not be able to get -- >> the question is, what is the current situation? some sources tell me that what they interpreted to be was what fox's balance sheet looked like before this bskyb deal, which means minus the $9 billion in cash. much of which goes right into t, which they shee could turn around and use for time warner. come upwarner going to with a new statement to say that fox's situation has changed and now they have more money to offer to us? or does their situation mean we do not want to deal with fox, period. and we will put the case to our shareholders and say our standalone plan is better than anything fox can offer? >> what are big-time shareholders thinking? >> they have spoken to their long-term shareholders and they say we're willing to give you a chance. >> of course time warner will say that. >> they have been very good at returning capital for years. give him a chance to say what their plan is. there has already been a 15% turnover in the shareholders. they are hedge funds. >> those are not investors. >> that is the bottom line. there is no bankrupt family here. there is no legacy that is going to keep them invested. that is all they need is money. the longer this deal goes on, the more the shareholder base will turnover. that plays over into fox's hands. we will wait as long as it takes. this is the company that will take a decade and try to make their satellite business profitable. they will buy the wall street journal. this is a company with a long-term rsn. you really have to go out right after labor day and see your big investors and say here's our plan and hear how we will create value. >> if fox does not want to bid against itself, who else could come in and bid? >> i do not think there's is anyone on the strategic side. but, there is technology companies. we have been talking about and writing about that. the googles and the apples have been dipping their toes in the media business. once in a generation type of asset. if they want to get bigger, this may be an opportunity. >> according to my sources, no one else is interested right now. maybe six months from now a tech company might decide they are ready. from what i gather, no one else without their. that has to plan to fox's hands. >> looks like alex did some work. >> on the phone. >> in my car with a crying eight-month-old. >> congratulations. >> all right. >> all of these weeks -- [laughter] earnings.eek for tech we saw from apple and amazon and netflix -- they ended with a big flood in the seattle. investors seem to be getting sort of sick of jeff bezos' massive spending. let's talk about that and much more with the managing director at rbc capital. mark, a lot of people have been saying investors are sick of it. they're tired of waiting for him to make money. they are still willing to give him 500 times earnings for the shares. they cannot be that unhappy. >> no, and the way you phrased it is right. i do not think there is an investment surprise that bezos likes to make big bets and is risksg to take multi-year in terms of new categories and markets. that is not a terrible surprise. the market has seen this before. there is quick context here. they went into a margin tailspin. the creators went into the $25 range. they came out of that cycle extremely well with a bunch of new products. investors remember that, though. >> so, for you, when you look at amazon, where's the value? >> let's see. if you divide the business into a couple of categories, there is a first-person retail business. that is the walmart or web. they have greater share on the web and walmart does. there the third-party marketplace business. 40% of theout overall sales. that is a high cash returning business. then there is the speculative investments. amazon is not that speculative. low-margin with strong growth. truly speculative investments are in devices and video content and may be expansion into china. >> do you ever struggled to keep together the long-term strategy plan? it seems that they have so many new products and acquisitions. what does this company want to look like in five years? >> well, i don't necessarily struggle with what they want to become. i think they want to be -- the everything store. they want to be involved in all things retail. i worry about the level of execution and risk. amazon -- someple of the groceries, of these carry very high execution risks. this is what i worry about. the overall vision -- there is no reason that they cannot have a lot of products. , one of your colleagues, asked the question? what if they get to $200 billion in revenue and still do not have a profit? they obviously lost a few million dollars. what if that is the case? can you imagine a world in which now, amazonars from is making $200 billion a quarter and still no profit? doesn't matter? >> i think that would matter because it would be several more years of margins at super low levels. i want to put something in context. amazon for eight years did 6% on operating margins. that should not be surprising. that is what traditional mass merchandise retailers operate at. this is a retail business. this is not facebook or google. be comfortable with the fact that it is a single-digit operating margins. but we should see is a recovery in these margins from 2% today, back up to 3, 4, 5%. if we do not see that, there's something fundamentally wrong going on here. they will not work for them. international markets should cut their losses. >> this is not facebook or google. who is feeling it in a big way? mark zuckerberg. but do you make of the success they are having now? >> he has more money than bezos, or larry or sergey. >> congratulations. that is great. >> now you can make rent. [laughter] >> this is one of the most successful pivot i have seen in the last few years on the internet. they had no mobile revenue to speak of and now it is 60% of total revenue. they got the futures and functionality right, embedded ads. that is a very impressive trick that they pulled off. way thatin a advertisers like. so, right now, the business is clicking very well. you still have two very large revenue streams ahead. you have instagram and video ads. we like the business and what it stands for. we also like that we have revenue streams that will be robust. >> facebook's margins are insane. wasine if jeff bezos looking at 58.6% operating margins. does this mean that facebook, pe, does this mean that they do not have the growth story? you cannot get 1.3 million people to look at your site every month, can you? >> that can continue to grow. there is a law of massive numbers at work here rid the number average iuser is only growing. it will continue to slide down. at some point, investors will focus on that. given the earnings growth in the -- that camp, that is reasonable. haveamazon, they will triple digits growth, like you would have with any company. it makes getting the right pe much harder than it is for facebook. >> let's talk about truly a and -- trulia and zillow. time, but ill time never know which is which. is this a no-brainer? >> hold off on that a little bit. we have identified this online real estate category as one with growth. two.a and zillow are when we have done real estate agent surveys, both are perceived as relatively similar by agents in the field. consumers tend to go to zillow more than trulia. they are perceived to be a similar. >> it does not seem like any potential homeowners are going to individual websites, wheth er corcoran --help me out. >> i can. i go to trulia and zillow also. >> if they do partner, is there any hope for these web dualations for indivi real estate companies? >> i am sure there is. it depends on the brand of the real estate broker and frankly of the agent. this is truly local. location, location, location. those people do not need any -- the agents do not need to build a national or regional brands. they can have highly focused brands in local area using tools. and trulia offer some of those. i think there are plenty of brand opportunities for individual real estate agents and brokerages. >> i love it. o. i love her to if you are looking in bronxville -- you can look at trulia and zil low, then go to local realtors. >> thank you so much for joining us. alnaging director at rbc capit in san francisco print >> we are in the heart of earnings season. can you feel it? there's an impact on the yield portfolio. they meeting with ceo paychecks. do you believe that? >> some people are excited that august is upon us. we are talking about ceo pay. and it is friday. look at this. hecks an executive in the cehc work. -- tech world. that is all we are being told. i feel like i know that smile anywhere. it is your turn to guess. tweet us your answer. @mattmiller1973. he was born the year she graduated high school. get on it. we want to know what you think. you're watching bloomberg tv. ♪ >> welcome back t. most of us are paid more when we do a good job at work. maybe that means that extra bonus at the end of the year. big-time ceos, not so much. our own bloomberg businessweek's eric has been looking at the data. this there any correlation between pay and performance? i would like to say when it comes to investment banking, there is. >> is there any at all? even a little? >> individuals do have metrics. we have seen performance metrics go up for individual ceo's. because they all have totally different metrics, when you look at them in totality, i looked at the 200 highest-paid ceos in the country. we compared them to revenue, profitability, stock market returns. when you pull up the chart, you will see that they are ranked by stock market return, stock chart. there it is. no correlation. they're all random. >> what do you learn from this? >> that. there is no overall relationship between pay and performance. there are individual metrics. some people focus on revenues. some focus on sales growth. some focus on stock return growth. they're totally different metrics. then, when we think the disclosure will solve the problem, it actually exacerbates the problem. now, ceos know exactly how much the other guy is making. >> isn't the seat valued at a certain number? i remember people complaining about bikram. somebody is going to take that job. is that worth a certain number? >> yes, that is what it comes down to. >> thank you. >> these jobs are worth $10 million or $20 million, stop worrying about performance metrics. you may not hit your performance metrics. ales growth, it was only 1.8%. they said, let's just adjusted and say it is 2%. >> i wrote my senior thesis on this issue. >> your nx for it. i it was a long time ago and was in college. i do not remember anything. i base a lot of my work on but crystal's work. compensation experts who also worked for bloomberg. i found pretty much zero correlation. we have seen compensation based pay rise through the years. >> because of tax-deductible in the. in 1993, they said we will only limit cash payments for cash deduction reasons. that is why there is a big push. the public is subsidizing the payment. >> what did you get on that paper? >> i don't remember. i graduated, doesn't matter? >> he has no idea what the grade was. it would help to put it into context how we are evaluating your research. where did you go to school? >> antioch college. i believe there was a lot of ritalin involved. i got there. >> thank you so much for joining us today. our own eric from bloomberg businessweek. we will have more in just a few. ♪ >> janet yellen is doing her job. short and president obama is running at a time to nominate central bankers. we talk about that story. and we are playing the yearbook game. take a look at this executive. in the tech world. she graduated from cold spring harbor high school in new york in 1973, the year i was born. all of our producers are telling us. sweet us your guesses. ♪ >> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> welcome that. -- back. >> i am matt miller, in four erik schatzker. he is on personal business. week to fed meets next decide the next move in monetary policy, tonight yellen will find a few empty seats. there are still two vacant seats on the board of governors and time is running out for president obama to get them filled before the end of the year. peter cook has more on this story and why can't -- i don't understand why we feel like the president cannot do this by january when it is july right now. calendar, but it is not the washington calendar. right now, effectively, time is running out to get anything done in washington, including naming two more people to sit on the board of governors. there are 12 legislative days between now and the midterm elections in november. after that, maybe they come back for a lame-duck session, about 15 days. it takes a lot more time to get some unconfirmed. a very real possibility that janet yellen will start to make more of these exit strategy moved without a full complement of fed governors at the table. without the expertise and guidance and input from two more people at that tabel. that is not a small consideration considering the changes. >> doesn't president obama wait until recess and make appointments then? >> there have been some legal rulings there. with the fed, that has not been his tradition. this is a job of such importance. the senate always gets to weigh in. they voted in a full senate. the expectation is that how -- he will nominate someone. does that happen before the end of the year? the president does want to fill the spot. there's a lot more going on here in washington and outside. foreign crises as well. it is taking some energy and attention away from this decision. >> let's be honest. from an official standpoint, he has to fill the spots. it's usually janet yellen is the one-- >> that may be true, but the full board does matter. they do other things. they carry out regulatory policies. he is looking for input from a range of voices. all of those projections that you see, the dots a much harder when the fed goes to a considered strategy, they made that public. without to more people at the table, you can get some outlier votes there. >> they have to fill up the fed secret santa. who are -- >> you need more to understand where they are going, right? >> who are some of the candidates. >> everyone i am talking to says one of the spots will go to someone either it with community banking experience or experience regulating. the two names getting the most mentions -- and associated administrator of the fba now. she has been pushed by members of the banking committee, particularly in oregon. a topohn ducrest commissioner from the state of louisiana. he is a state representative there. he is another name getting mentioned. he is a regulator of the security banking sector. >> excellent. >> there you go. thank you so much. >> that leaves one slot format. >> miller? i don't know. hold on a second -- opinion, doyour own you think matt miller, knowing what you know that hemp -- do you think he is confirmable? >> only if you come to testify with him. >> i think if i met each senator personally and got to press some flesh -- >> that, you have been up here. talking about it? >> i am sure flesh pressing isn't going to -- peter, thanks. >> the lonely hearts club says we have the founder of a new dating app. it is exclusively for the over 50 demographic. ♪ >> get ready. i am afraid of what could happen now. they say that love is blind and possibly hard of hearing tale. that is why they created this online companion site. foras been called the place senior citizens. it is not her one night stands. andrew, we just had the tinder ceo here a few weeks ago. that is a site all about people getting together and hooking up. stitch is for the over 50 set. what are they looking for? >> a lot of people compare us -- we're limited to people under 50. >> we still have a window, brother. >> but actually, a lot of people find as they get older that the social circle shrinks. people moved to florida, they die, they can no longer do activities. loneliness has become a big problem. they're not looking for hookups. very rarely. they're looking for companionship. >> in some cases they are? >> in some cases they are. we have a very broad spectrum. we have people all the way from 50 up to 86. at the under age group, they are still very active in many ways. they're looking for romance as well as companionship. as they get older, their needs change. they're not looking for someone to settle down and have kids with. it is about someone to share their lives with. it may be multiple companions. >> it is a pretty serious issue. people get lonely. >> they're living longer. >> it is a great solution to find people to hang out with and do stuff with. >> to live with. there is a big trend for older adults to find someone to share expenses. to share >> is this helping them from having to move into assisted living? many can't afford to. >> that's right. that is the big trend. people living longer and in their own homes longer. they do not have the cash or the financial assets to maintain it. we think that is going to be a big focus for us. >> how much is it? i was looking at the website and there is a section on pricing. what does it cost? >> it is a subscription-based product. there's a plan, but beyond that it is $10 per month. unlike most sites, we forced people to verify their identity. this type of group is actually a very huge group for scammers. >> really. they're not that tech savvy. do you have to make it more basic? >> basic is not the right term. >> sabr. >> safer and also interviews. a lot of people have vision impairment. you have to be more mindful of particular needs. it is not dumbed down anything. they are smart. >> are they more honest with their profiles that match.com? just because they have less time to beat around the bush and play games. >> yes and no. they have been very honest with us about what they're looking for. they tell us all sorts of detailed information. for many of them, it has been a longtime since they have dated. there are a little bit timid about what to say about themselves. sometimes they need a little bit of encouragement. >> is a huge demographic and growing. you have already started another site for senior citizens. >> we have a company called tapestry which builds products to help seniors with families, without the concerns of privacy and safety and advertising of facebook. particularly if they are in a living facility. >> why not a mobile app? >> we're just working on a. it is basically a few months. it is coming. >> in the list of priorities, what are they looking for most? how high do they put a static, looks? >> i payment the product. >> the product looks good. grannies, what are they looking for? >> looks and appearance are a factor, but not the primary one. >> tinder is about how hot you are. >> a lot of dating sites are about how old you are too. they really do not want to focus on age. it is really about what activities. what are your interests? >> what if i like an older fellow and i am not in age range? what if i am not over 50. i am 38. what if i fancy a 62-year-old? can i get an? >> at the moment, no. there are all kinds of sites for older men to find younger women. >> i am pretty sure you could handle that. but, i wonder what is next. it is a growing demographic. you have tapestry and stitch. i am sure you have other ideas. >> is what our background is. we have a enough on our hands for now. we have a few ideas that may be coming in the future. >> there you go. congratulations and great to meet you. andrew is the ceo of stitch. we now know what website this guy will be trolling all weekend. >> coming up next, one way to spend your money is on online dating, i guess. collecting is hundreds of thousands of dollars on comic books. and this is amazing. it is something that you want to see. >> it also looks like something could be a candidate for stitch. >> i think so. ♪ >> you know the comic book guy from the simpsons. here he is. one of the oddest citizens of springfield. >> groundskeeper willie? i love groundskeeper willie. >> chief way gum is my favorite, actually. you would probably be in san diego for comic con. they have upcoming sci-fi television shows and movies. there is still some there who are committed to the old-school traditional comic books. we caught up with one of them, the real-life comic book guy. >> every now and then come i think about why i like comics so much. pictures in sequence, telling a story. what is not to love? everyone loves film. you do not have to justify why you love film. a comic book is a film you can read at your own speed. i am kevin, i have been slowly accumulating comics for the last 40 years. i have about 20-30,000 of them. only 118.36, and that is before discount. >> when i think about how much i spend, it scares me. it is tens of thousands of dollars over the years. strike that, hundreds of thousands of dollars over the years. again?e are the dunes >> next one down. >> my wife also grew up reading comics. she was reading "x-men" before i was. i brought her comic books. i gave her something and "wat chman." we merged our comic book collection, which is a traumatic experience. the commitment there. we drown in comics, happily. when i was very young, like a lot of foolish buyers, i thought i was buying treasure. they're not a good investment. everyone knows the stories of someone finding an "spiderman" hidden and selling it for more than their house. my comics are worth what really nothing. 1989 to 1994, there was an investor friendly like you would not believe. sellinghat had been 100 comics per month were selling one million. the market collapsed and shops were closed within one year. marvel went into bankruptcy a few years after that. now, they are a big part of disney. things can bounce back. you could probably make a nice superhero narrative out of the comics being pummeled down by the evil speculator and g athering strips around it. that would be kind of comic booky. >> that is extraordinary. hundreds of thousands of dollars. that is a passion project. the current success could turn into be profitable. we loved it. a real love story in there. >> i have a lot of respect for that. he does not remind me of the comic store guy at all. >> who does he remind you of? ♪ he looks like jerry. >> he actually does. >> i miss jerry every day. should we give anyone the answer to the yearbook game? >> it is friday. it is sad when we do tech people, especially women. there are so few people in tech. shame on you to the person who guessed marissa mayer. graduated from cold spring harbor in 1973, when mercer mayer was not even born yet. >> not even a glint in her father's eye. is that the expression? >> are we telling them who it is? >> after the break. tweet us. @mattmiller1973. @sruhle. the smile is a dead giveaway. there are only four women in tech since >> it is number is a meyer. ♪ >> there you have it. your book game. chris conway guessed it right when he said this is too easy. it is meg whitman. >> margaret whitman, actually. according to leverage traitor. >> why is she an extraordinary leader? she is from strong island. there you go. wrapping up the week. >> a lot of successful people are from strong island. or new jersey. >> you and dave chapelle, ohio. >> both of us went to antioch. yellow springs. >> there was one tweet that i like. let's look at that real quick. matt miller -- the official substitute host of market makers and auto factories. >> ben has a campaign against bitcoin. >> our executive producer -- guess what, ben? you may have to be replaced with adam. all right, matt -- thes approaching 56 past hour. let's take you there. julie, we are dying. on the markets, let's go. >> stocks are down. disappointing earnings. dow is back below 50,000. joining me today is senior market strategist guy bowers from studio e in chicago. . talk to me about what we are seeing in terms of options trading on the s&p futures. we're seeing a little bit of a pullback here. i imagine that we are not necessarily going to stay down. >> i agree with you. we only see volatility up a little bit. that is surprising because typically on any pullback we c see the vol or the vix spike. there is a little bit of complacency in the market place. we're seeing a little bit of enough psychology or in the s&p futures. it is pretty quiet here for this pullback. dow down 130 point is not that big of a deal. >> everyone is calling for the return to volatility. it is not returning. it is not coming back. will be the catalyst for that to happen? honestly, something probably in europe or something in the mideast. given the earnings disappointment from today and yesterday, the new so far has been good across the board. economics news is good. forecasts going forward are good. thate short run, i think the pullback will come because of some geopolitical event, not necessarily something here at home. >> i want to talk about something happening here at home having to do with corporate earnings. that is amazon. shares are down by the most in 2.5 years. the company is still spending a lot of money in order to get the sales that it is getting. in terms of what we are seeing in the options market, we have seen this story before. amazon is spending a lot. investors get spooked, but they have been coming back after that initial spooking. what are we seeing from options? >> it has made its move down from 315 to the 320 level. it is stuck in this range here which is a very high congestion area. we're seeing a lot of new buying down at the 300 and 280 level. the august and september otptions -- we are seeing some brisk upside call buying. >> i did not leave enough time for your trade. you are stepping into the line of fire here with 3-d printing companies. >> love it. huge interest in the stock. i want to buy an upside call spread. the 459 call spread. $1.30.ts about $1.25 or if there is a surprise, it will be to the upside. >> we will be on the markets again in 30 minutes. ♪ ♪ >> welcome to "money clip," where we tied together the stories, interviews, and video from business. jeff bezos cheese keeps on spending money. and there is a new king of the king. he's a kick. bunsll meet the young leading the fast food chain. media, what was the producer thinking? no, really? what was he thinking when he made the second "skn

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