ornween the prince of p and legalizing marijuana, who better to have as a partner than tom keene? >> you are so twisted. [laughter] >i don't know how to type. i'm doing typing. i want to type like adam johnson. >> one of the most beautiful weakens of the summer. the first weather ever. you did typing this weekend? >> just a little bit. gin and tonic typing. >> you have to get your typing game on. >> my bowtie is set for radio. m$a dayand mende day -- -- m&a day. >> zillow has agreed to buy trulia. they are the two most visited property sites in the u.s. i use them all the time. there was also a deal and discount retailing. buy family will dollar. the deal has an enterprise value of $9.2 billion. carl icahn has a 9% stake in family dollar. has agreed to settle claims that it manipulated benchmark interest rates. to u.s.pay $370 million and british regulators. nine financial firms have been fined a total of $6 billion. a new airline can sin that the public market. virgin america filed for an ipo today. it has become a popular way to fly here in the u.s., thanks to its trendy designed and solid customer service. it has had some problems making money. who better to bring on that around adam johnson? he follows the industry for us. virgin america. people sure seem to like to fly them. i do. >> cash flow in the march corner him in $9.9 million. it is hard to imagine it making a whole lot of money. this is a small airline. it has been a very good time for the airlines. betty liu was talking about the former ceo of american. it is my quote of the day. consolidation has worked like a charm. avenue passenger miles is funny statistic. revenue times passengers times miles has been up consistently for four years in a row. they are making money. >> up from where? >> up from the depths of despair. you look at earnings forecast for this year, american airlines just completed the deal with us airways, it is going to more than double. united, southwest, jetblue, anywhere from 30% to 50%. >> what kind of ownership stake is richard branson have? how much money does he stand to make? >> no non-us entity, mr. branson , no non-us entity can own more than 25% of a u.s. airline. owns 25%.bal he is the majority shareholder there. you will find this fascinating. it is called virgin america investors. cyrus holdings. that is a no-name. the former chairman of american airlines, sam skinner, the former secretary of the department of transportation, dave cush. >> i've interviewed david kushner number of times -- david cush a number of times. virgin america started flying people around 14 days before the beginning of the financial crisis. , she is in the front row. fees, i don't get to take the surveillance gold stream. cush majoravid credibility for the class and character to stay with this airline. he had eight reasons to bail along the way. he had a ways to bring it in. let's continue this conversation. we do this with joseph denard i. joe, is virgin america a pipsqueak? how do you compare and contrast virgin america with jetblue on the east coast, particularly with the three major u.s. to mystics? >> -- domestics? >> one of the smaller carriers. the strategy will be to grow and their high price point -- low price point, good quality product throughout the country, focus on business travelers. growth slowed down last year, but i think that will pick up a little bit. the outlook for the industry is pretty positive. that kind of ties into why they are doing it now. i let me ask you the question have always wondered. why haven't they been taken out by somebody else? >> their strategy doesn't really fit with anyone else other than jetblue perhaps. but i would really see a lot of andrest in their product price point from the network carriers at this point. >> were could you see a deal like this coming and when? >> what? >> this type deal. yes, they have filed. when could we see them come to market? is still ahink that little unclear. our expectation is sometime toward the end of the year or early next year. we don't have a great around the -- amount of color around that. >> i'm curious. as a look at the different airlines in the ratings, delta is the one airline out there that has only buys. what is delta doing right? , obviously. buy we think they are the industry. they are the furthest along the transformation curve, as we call it, in terms of getting the integration with northwest behind them, returning capital to shareholders. they have a good management team and a good operating margin. if you are bullish on the industry, like we are, then you have to be bullish on delta and their prospects. >> explain to us mr. branson's relationship with david cush and virgin america. what does sir richard gain with this transaction? >> my understanding is that virgin america pays a licensing fee to virgin group, about 70 basis points of their sales go to virgin. assuming virgin america continues to do well, i think mr. branson or sir branson will do well. >> you mentioned you are bullish on the airline industry. will the recent string of very tough headlines like the malaysian crash deter people in any way from flying? >> yes, i don't think so. i think the industry has a very good track record of very high safety marks. tragicecent instances of -- as tragic as they are i don't think will impact the way that customers and travelers view safety. their sense of safety when they fly will stay. >> if airlines effectively have to pay higher insurance to cover very unpredictable times, are we going to see higher fares as a result? >> in my view, it is not a big enough piece of the cost structure were it would flow through into higher fares. but sure, if they see pressure on that cost line, which they may, they will probably look to pass that through a little bit. i would not expect any meaningful or noticeable increase. we all know on global wall street that virgin america has tried any number of times to monetize their good work. if they can finally do an ipo and you mentioned delta airlines, does this signal top of the moment for the airline industry? >> absolutely not. still hasis industry a few good years of margin expansion ahead of it, which we think has been the key driver for the group. our view is that once margins flatten out a little bit for the end of this decade that the amount of cash will be the next leg for this industry. we do not see this as the peak. outlook is very strong. >> thank you so much. lot.ming up, we have a and thank you to adam johnson. mentionedme back, tom it has been merger monday. we will see what all of the takeover talk means for one strategist. time for congress to legalize marijuana? to "the new york times." that high a profile media voices making the case. this is "market makers." a special day. tk is in the house. we are also digital. check out bloomberg.com/tv. stream, youectors are in luck. apple tv and amazon fire carry us as well. ♪ >> welcome back to "market makers." i'm stephanie ruhle. with tom keene. blackberry, a company near and dear to my heart. trying tohas been raise the smartphone giant from the ashes. he expects to turn a profit next year with the sale of blackberry in the cards. emily chang got a chance to ask when she sat down with him for an exclusive interview. >> you sold to sap. are you going to sell blackberry? >> there is an extended answer. >> give me the nonstandard answer. >> the nonstandard? look at valuesto before i contemplate that. a duty to you have it shareholders to consider offers. >> also to the employees. >> there has been a lot of speculation about the offers that have come across your desk. what kind of offers have come across your desk? offers to buy blackberry? >> no. i don't have any offers to comment on. people like to talk. talk is not an offer. >> would you sell to a chinese company? >> the answer is probably we are unable to do that. biggest bases is in government. g7. i think there would be a lot of regulatory issues and concerns. i appreciate that. >> what do you give your own chances for success? >> if you are talking about being able to create value, i thick i could do that. >> 100%? >> everybody likes to do that. 80/20. say better than i am happy where the company is with how we managed our technology, our businesses, the margin, the distribution channel. all of the new product that is coming out, the strategy that gets into communicating in a secure manner over time. i think there is enough runway here for us. levelle our expenses to a that allow us to stay back and make money. with generating more value. whether it is going to be good enough to be iconic again, that is something that i need to chew on. i don't know the answer to that question. >> that was emily chang's interview with the blackberry ceo john chen. you can watch the entire interview on "bloomberg west." ,om, given your social media there is no way you use blackberry. >> i thought that was brilliant that he said. he is hugely regarded within the tech business. they were lots of little nuances in his answers to emily chang about not becoming iconic again, about lining up expenses. you go to the bloomberg terminal and you look at the collapse of this business model, the collapse of free cash flow. there is no dream. it is total triage. this thing in business because of the canadian government? is it still here because of his huge prestige? about the action apple has taken to get into becoming used by enterprise, more and more companies are using and want to use iphones. i use an iphone because i need social media, because i need twitter, facebook, maybe not snapchat. people are addicted to the blackberry because of the keypad. once the value of the keypad is gone -- >> there was something about the encryption of the e-mails and such. i would suggest that this new idea, just fomenting here in the talkingthe ecosystem, about how this is going to be the android ecosystem, the apple ecosystem. do you have a clue what the blackberry ecosystem is? let me know. >> no. but i will say that sam sung that galaxy came out of nowhere. was not alike there cool, young, interesting tech savvy person that would ever leave the iphone and the next thing you know, you going to write and there was galaxy. >> absolutely. .ut i adore john chen they really picked the right guy to try to get through this thing i canthe only say constructive is that they have some cash laying around. >> there you go. more than i could say about myself. that is what we have. you can watch the full interview what 1:00 p.m. on "bloomberg west." >> there are the manolo blahnik's. [laughter] >> times they are a changing. a major change in marijuana law is called for. ♪ >> welcome back to market makers. i'm stephanie ruhle. with special guest tom keene. the pro marijuana legalization crowd got a big ally over the weekend. "the new york times." the paper compares current law to prohibition back in the 1920's. olivia sterns is taking a look at the issue and just how much cultural attitudes of changed in the last few years. just a few years ago, the only name brand, the only iconic figures to get behind weed, where the likes of snoop dogg. >> i thought you were going to say cheech and chong. >> cheech and chong would be more like 15 years ago. snoop is in the last 10. >> he claims to have recently smoked up in the white house. much to tom keene's dismay. it is a profound cultural shift that has taken place. the numbers are being tracked. in the last decade, you have seen a major change in sentiment among the american public to read the majority of marijuana. you are not just seeing it because of attitudes have become more liberal. it is become -- because there is a shift toward becoming more libertarian. governor norquist wants the tax revenue. pat robertson has come out in support of it. to smokeple are going at either way, why not tax it? >> why not tax it? grover norquist. it really is incredible. "the new york times" came out and said on balance there were no perfect answers to what you should do. ultimately, they think he should treat it like alcohol. to answer legitimate concerns about marijuana. neither are concerned about tobacco or alcohol. we believe the balance falls squarely on the side of national legalization. >> why are the laws so strict in the first place if you are comparing it to tobacco and alcohol? why is it treated differently in the eyes of the law? washe substance control act passed right after the 1960's, when then there's -- there was a strong cultural stigma. you had one senator stand up in a platoonnd say that had been shot down in vietnam because the commander in charge was on marijuana. immediately after that, in congress, everybody voted to make it a schedule one drug, which is up there in heroin. >> doesn't that seem extraordinarily subjective? were ok with scotch and cigars in congress, but it doesn't really make sense today. cocaine, meth our schedule 2. marijuana is schedule one. people say it is a racist law because the people who are punished via, a lot of americans who smoke hot, the people who end up in jail are disproportionately black young man. people to watch our interview this morning with david firestone from "the new york times." comment onhe national legalization, when two states rights. this will be battled out state to state. you have real cultural differentiation on the topic. i thought it was a very well-written op-ed. what anybody's belief is, you could tell that they really worried and thought about every sentence. i thought this is a firestorm debate. >> yes. rights,ssue of states it goes back to what we were talking about. the mood has not become more liberal in the country. it has become more libertarian. washington and colorado are out in front. >> maybe people have mellowed out. get it? get it? [laughter] >> thomas like, what? i don't know what you're talking about. >> olivia sterns. tom is shaking his head. regionals on a roll. some of the smaller banks are raking it in. ♪ . . >> live from bloomberg headquarters in new york, this is market makers with erik schatzker in stephanie ruhle. >> welcome back. i'm stephanie ruhle. >> and i'm tom keene i'm in for erik today. let's take a look now at the regional banks. fail, sotoo big to let's look how they are performing as the fed has driven us to a zero interest rate policy. it has been one giant headache. this is the chief executive officer of prosperity bancshares out of texas and oklahoma. does it drive you nuts how people like us only look at jpmorgan and that small upstart citigroup? >> are you kidding me? yet -- just aren't there ya'll just aren't there yet. >> he just sentences school there. -- sent us to school there. forbes says you the best. why? >> i guess they know their stuff. we have been nominated because of the metrics we have. if you look at our numbers, returns on tangible equity, return on assets, probably be asset quality we have is one of the best in the country. i think that's 15 basis points of art total assets am a $25 inlion in consistencey earnings. we have been first in all those categories. >> are you doing first because texas is blooming? other people in the country to start at what you have? >> it's good to be lucky sometimes. if you look at oklahoma and texas, oklahoma doesn't get as much credit. is 4.5%.mployment rate texas five point 1%. it's just a booming economy we are at right now. >> forget about best practices. what's the worst practice you tried not to do h everyday -- each and everyday? >> make bad loans. >> is a return of long growth design we shall be looking at to say banking has gotten screwed back? >> we have seen on a lien quarter basis, on an organic basis, we have grown 1120% this -- 11.8% in the first quarter. we are seeing signs that we did in 2008 and 2009, i call it bubbleistic. the terms are getting a little more lax. >> that makes me nervous. that makes me feel like -- are we returning to 2006, 2007 when he look at some of these terms? >> i sit in loan committee. you're saying exactly what i said 25 people in the room. we need to be more cautious right now because the terms and conditions that everyone is offering is becoming so competitive. every wants alone so bad that i think we are letting our guard down. >> where the mergers -- where are the mergers? the midsize banks are sort of to beg to dodd-frank done. small banks don't want to merge because everyone is having too much fun being bank executives. where is the consolidation? >> i probably disagree with you on that. i think there are a lot of banks , with the regulatory environment that we are in, it's just critical. i don't know that bankers really like being the executives. if you look at the regulatory exams we have. i think it's an issue of how many banks that are out there buying other banks, that the regulators are allowed to by the banks. they eliminated your jpmorgan, your wells fargo's. they're just a handful of people i can go out into the market. in my opinion, there's more sellers than there are buyers. just you can buy, who can get the transaction closed. >> what does increased regulation and man doing to the bottom line? jpmorgan morgan stanley can't afford to hire another 500, 5000 people in the compliance department. that has to be a tough move for you. >> you are getting me started now. ago, we grew really from a 10 million dollar bank to a $20 million bank in the last couple of years. , it used tothat consist of a small group of regulators coming into the bank. 42 oute have regulators of 50 weeks a year. we have all these exams. >> how can you afford to do all that? >> the amount of costs -- >> comedy basis points come off your income statements about this? >> it's in the millions of dollars. special teams and modeling, and we are a part of dodd-frank in our size. we have all these exams. >> does the government understand what this is doing to banks of your size? >> i want to be careful, but i don't think they really do. in banking, i think they are missing where the deal is right now. in banking, when i was growing up, you word about your earnings, your asset quality, and your efficiency ratios. and the fundamentals of the bank -- would it survive the downturn? in today's market, we are more involved. much more of our time goes to bank secrecy, compliance, other modeling and esoteric stuff that i have seen in my career. that's not going to kill the bank. >> there's a lot of holes. there a few buys. how do you rationalize the next leg up to the sell side? silly right now on a higher stock price. ratio is a lot lower. >> compared to a commercial bank? you canook value -- criticize because we trade at a high book value. a tangible book value. probably over three times. when you look at our 20 ,omething percent growth analysts have us making $300 million a year. earningsremendous capabilities. >> which are best advice to jamie dimon? he is very ill right now. what is your number one advice for him? them get you down. i think he is one of the best bankers. these are great guys. to be beating these guys -- sometimes i get really obsessed because they get mad because a guy makes to $20 million and hundreds of thousands of people are working for him. if you can sing, dance, or play ball, you can make $100 million. there's a problem with that. yourw much is it hurting business now that private equity firms and big hedge funds are getting into the direct lending business? itright now, i'm not seeing -- is not impacting us like it was in previous years. i haven't seen that. >> thank you so much. longhorns? >> u t. 78. david zelman with prosperity bancshares. there's a newke global crisis to worry about everyday. we will look at how worried investors are. ♪ >> welcome back. there's been a while since there were so many global crisis is happening at once. right now cometh not having much of an impact on u.s. equity markets which have been hitting record highs. we have the director investment matt welcome. it has many of a somewhat flabbergasted that it is not a good headline after negative headline, and the market keeps trucking on. why is that? >> we believe it is the fundamentals. the fundamentals are quite attractive today. to political risk is out there. -- geopolitical risk is out there. what's going on in ukraine, and gaza. i think the market is overlooking it. valuations are reasonable. i think earnings are coming in better than expected. of the earnings you've seen coming, this quarter, we have seen -- we have been very impressed. >> how far behind you people feel right now? it has been four and five years of bull market. we had the upper risk hedge funds last week. >> that's a good question. you mean from a portfolio management perspective? >> mutual funds. people investing staffs -- steph's millions. >> from their perspective, is manager to manager. it's been done exceedingly well in this environment. it's been a difficult time for active management. as we have seen over the course of this year, as correlations of come down, within individual stocks, a lot of the gap is closing. it continues to close. >> when we say it has been a difficult time right of management -- why? >> it has been a risk on, risk off environment. >> i kind of feel like don't cry for me argentina. if you are getting paid to in 20, or even less, if you are a were manager and mutual funds -- tough nuts. people are paying you to manage, get it done. >> i agree. see it getrting to done. clearly, you go through phases in the market where active means more than passive. passive means more than active. i think we are at a point in time, given where we are in the market cycle, given where we are in the business cycle, the record to begin to see active management work and make a difference. active management is not only beating on the upside, it's just as important as protecting capital on the downside. something that investors often overlooked in raging bull markets that we are in today. >> where's the value trap right now? >> a value trap right now, i think you have to look at the market broadly and security by security. i don't think there is an asset class per se, that's drawing you in as a value trap right now. most of our concern is within the fixed income arena. again, if you look at where yields are today on high-grade corporate bonds and government they did. we need to be very flexible there. clearly, i think investors are going there for safety and for yield. very trend are in a environment. if i were looking at it from asset allocation perspective, that's where my concern would live. >> you speak to investors all day, what is their biggest concern? geopolitics doesn't seem to be one. >> and my underinvested, and i miss it? and when you get more into the equity market. we have seen such a huge move, and i'm sitting way too much in cash, i'm sitting way too much in fixed income. hattaway bring down the duration of my fixed income portfolio and at equity risk to the performing of -- to the portfolio? are we in that bubble? are we beginning to see that bubble inflated? and are we overly allocated to risk? i believe the market has more to go. but the way we address investors is investor vinedresser -- investor by investor. does it seem responsible, when the call you are getting is did we miss it? that seems like people racing to get in the game, and that's never the way to win. getting't like you are in this game in the ninth inning. you're getting in this game with more to run. shockk clearly, post 2008 , investors were horrified. everyone ran. they're just starting to get active the market today. the other thing people ask about is the vix. witha big some muted -- the vix some muted, as does that mean there is no fear in the market? when you look at other indices, and other metrics of fear, there is a lot of folks out there who are still questioning the validity of where we are in the market. >> we are using flows going -- where are you seeing flows going? money is moving in, but it's not moving just end equity's. -- just into equities. when people doing with their money? >> everyone wants to be tactical with their money today. >> long-term has become what -- six months? next bonus? [laughter] >> a couple of years. at the same time, it's tactical. short-term it. whether you invested over bonds -- in bonds or equities, you want someone to be overlooking the portfolio. >> is that a case for buy-and-hold? >> it is. but do it prudently. i'm not suggesting it out of the market, i'm suggesting having somebody oversee the day-to-day opportunity in the market place. risknk this geopolitical will create up to read -- opportunity on the buying side. >> because of slight dips? >> absolutely. they're based on things that are not relative to be individual companies you might be investing in. tech for ast talk second. if we are saying, don't sweat it, maybe it's time to get long -- we look at tech valuations, when you look at where these companies are coming to market -- valuations through the roof. is it really not a time to say i want to get out of the craze, pull back, look at real value? it doesn't seem like that's the case when it comes to tech stocks. >> clearly, as we heard chairwoman yellen mentioned that we are to ago, there are certain parts of the market that have become overvalued. at the end of the day, you want to look for value here. you want to look for relative value between sectors and. you want to look for opportunities. the market will continue to make opportunity going forward. as long as we can differentiate that opportunity and invest the right way on behalf of our clients, i think we'll see a successful 2014. >> matt, thank you. berman,in of newberger director of investment strategy. proposed, that takeover of time warner. everyone is still talking about it. what the media moguls had to say? what will see her -- we will hear from the chairman of univision and the guy who brought thompson cartoon -- the mighty martin -- mighty morphing power rangers. he loves the blue one. for me was pink. ♪ >> welcome back to "market makers." he is the chairman of univision indications, known for great power rangers to u.s. tv screens. went to smog capital with mli. what is he had to say about fox and time warner? estimate the first thing on every media guys mind. >> 100%. last week we were talking about snow piercer, which is this film it will look at vod and traditional the edge of the leads. they're doing the same thing with the new film venture. he is obviously thinking about how film is changing. we are thinking about how the media landscape is changing because of this box deal. -- fox deal. foxas a relationship with that was sold to disney and became abc family. disney buying a lot of stuff, and in the case of time warner, trimming down over the last couple of years. surprised, because trimmedthat jeff has the company to the point where he is unprepared for the takeover. >> does not necessarily a bad thing. but we have seen some media companies clearly hesitant to make the wrong move. you think at aol and time warner, maybe that was always in the back of time warner's mind when they didn't want to be more aggressive with making deals. now we had to figure out what is the right strategy. make aight to go out and bold move, or sit on the assets you haven't from the rest. -- and trim it the rest? >> what is the game plan for universal and -- univision. operation was acquired for 12:00 a.m. dollars. we talked a lot about the success of espn. truck -- strong ratings to. we have investors that want to get the return on investment. here's we had to say about the future of univision. >> we haven't decided what we are going to do. we are a group of investors who control this company. we will sell it one day. some reporting by bloomberg news not too long ago that there had been some conversation with cvs and -- cbs and time warner. the price tag they are interested in for univision was beyond their own thinking there. more media assets may be on the market in the month to come. >> are you saying he's a rational when it comes to what the value of the actual company is -- irrational when it comes to the value with the actual company is? >> when you think about two dozen six, the price tag -- $12 billion, has taken some time to get a value appreciation there. when you look at potentially what foxconn end up paying for rational or is it irrational to pay $100 billion that they would up their bid? i think content is the king of the story that we have been talking so much about. --and fortunately unfortunately, net neutrality is one of the things you can't say on market makers. our own jon erlichman joining us from los angeles. past the hour, which means tom keene will take is on the markets. >> zillow and truly a, this is an interesting transaction. -- trulia. the doughman from zillow it will join us soon. gentleman from zillow will join us soon. >> we will ask him about it in just a few minutes. >> live from bloomberg headquarters in new york, this is "market makers" with stephanie ruhle and erik schatzker. combine the biggest players in online real estate advertising. the zillow ceo. starwood's real blue-chip let's fortunes in poker games. welcome to what will be a great hour here on "market makers." erik schatzker is on vacation. look at who is filling in. >> it is a merger monday. >> let's get to the newsfeed right now. top business stories from around the world. virgin america is going public. it is partly owned by richard branson and has filed for an ipo. it is of the smaller players in the industry. has 53 planes. it posted its first profit last year. a takeover in the online business is getting taken over. has agreed to buy trul ia. we will be talking with the ceo. a landmark ruling against russia. the court of arbitration found that russia must day the former owners of. it will appeal the ruling. st may take years for the yuko owners to see any of this money. there are two big deals this morning. >> joining us right now is julie hyman. we are going over these different transactions. you have looked at these. the point of the employees. where giving so much news to this? they are pip squeaks in terms of walmart. arehat is really what you talking about. they are pip squeaks internationally. they have been giving walmart a run for their money in the united states. part of the issue is the dollar stores a been taking some market share away from walmart. it is easy to go into a dollar store and buy a few things that you need and go into the overwhelming this it is a supercenter. we have seen the balance shift. the problem with the dollar store is that there are a lot of them competing among themselves. the plight ofe is the low income consumer. they have been pinched. you see a defensive move. >> is this like a victory lap? >> it is. it is a bit surprising that it is dollar tree making the acquisition. it is not one of the wealthier companies. that was the one that had been talked about. they talked about dollar general. dollar tree is significantly smaller. than dollarger tree. >> it is more of a pure dollar store. dollar,o into a family it is a general discounter. there are some differences with the stores. people had not talked about dollar tree as much on either and. >> let's move on to zillow. i want to move on. we are talking about real estate. , i don't knowlia the difference. is this an obvious deal? businesses sell advertising to realtors. the offices inin seattle. we are going to have spencer on the show later. he runs an interesting operation. there is a lot of tech knowledge he involved. there is an old school boiler room type operation. when you walk into a certain floor, there is a big open room that looks like a trading floor. there are guys dialing up realtors. they are keeping track of this in a call center like you would see any cold calling operation. that is a fundamental part of this operation. it has a similar operation. >> they are both going to exist as separate brands. an approachst like where you have different websites that are essentially doing the same thing. it sounds like for now zillow and trulia will both be operating. >> we will check back in a year. >> if there really is this harder is it going to be to sell ad space independently? am i not going to look at the two of them as one of the same? >> you know your customers are going to zillow and you don't know which one, -- >> would you compare them to common magazines. advertising inut elle as well as cosmo. >> do you want to be in both places where the consumer is going to be? the companies have said they don't want to pose a threat to the broker model. i would argue do you need the broker at all? >> there seems to be a need for the complexity. >> we are going to walk out of this building with 8000 real estate programmers hunting you down. >> i sold my apartment without a broker. becausew needs brokers that's where the money comes from. the dirty secret is being a realtor is often a very crummy job. you spend most of your revenue on a marketing go broke. now it is not putting your name on a park bench. you put ads on zillow. >> herbalife has been in the news. they are reporting earnings after the bell. this is just days after bill ackman's grand presentation. shares ended up surging that day. what are you watching for this afternoon? fromwill not be watching pershing square's office. i will be sitting over there somewhere. i've been digging into the numbers of the company. they been talking about bill ackman against wall street. i don't think there has been a lot of discussion about how the business works. what is interesting is herbalife has been changing the way they operate in response to bill ackman. the are spending relationship with the distributors and their customers. you can see the impact in the alan sheets. >> are you saying that bill ackman in some perverse way has helped this company? >> with the operating profit. it has had the opposite effect. the operating profit of this company is getting worse. it is a negative number. costs that are going to the roof that have nothing to do with it. pivotal quarter for herbalife. thecan see the change of business model changing in the numbers. >> aren't you more concerned --hout getting taken right down by the regulators. don't you just want to survive? >> bill ackman would say the one skill set is survival. they have been able to survive as a multilevel marketing company for 25 years. that has been an amazing thing. >> the company has been pushing into new markets. ackman has criticized that. why do people in sub-saharan africa need this? that is traditionally how they have grown. they go into new markets. >> they're going to be looking at what is going on with venezuela. arcing schemes are not allowed in china. >> there you go. i know what you will be watching. cory johnson and julie hyman. what we have coming up next? >> we have more on zillow. spencer will join us. we will figure out the strategy behind this transaction. we will hear from him about the future of real estate. stay with us. makers."market good morning ♪ >> 40 years ago larry flynt started a publication that has become one of the most recognizable names in media. hustler magazine. i spoke with larry about the birthday bash that happened over the weekend. it was sad that i missed it. we also talked about his legacy in the future of his brand. >> i don't think hustler will be around much longer. most people are getting their information from the internet. takes a lot away, it has to be prepared for it. >> is there a timeline? >> no. it is making money now. as long as it makes money i will continue to publish. we can see the writing on the wall. we have a huge internet presence. we are in a broadcasting television business as well. has diversified so , publishing is less than 10% of our revenue at this time. >> was most profitable part of your business? >> broadcast television. we are the largest content provider for cable and satellite television in the world. we go to 67 countries. >> where are you the most popular outside the united states? >> europe thomas south america. -- europe, south america. there is a lot of censorship in china. >> when you look on the last 40 years, what is your proudest moment? case i one.me court after that case, you could no for notue someone proving libel. john stewart's show would not exist if it not been for that case. i never felt we got the credit that we deserve. the mediahe way for on that one. >> how do you feel about that? you created an extraordinary freedoms beach platform. people just think of you as a guy with a naughty sex mag. i care about my country. of hiding behind the first amendment. i was just glad that it was there to hide behind. i always did feel that free speech is only important if it is offensive. if you're not going to offend anybody, you don't need the protection of the first amendment. that is why the magazines like hustler need protection from the first amendment. >> where does the responsibility lie? you can publish as lewd and naughty stuff as you want. there is an audience for it. do you hold any accountability or responsibility now that so much of it can be in the hands of young people who should not see that kind of stuff? >> i think that is a false argument. to say that you are exposed to anything and it will adversely affect you. ofple grow up in a variety environments. they turn out quite well. we have to concern ourselves because of every movie we make or every picture we take, the effect it will have on an individual, that has a chilling effect. it has a chilling effect on free speech. >> what is your most popular? >> the novelties. we have a hustler retail chain. a we have all kinds of goodies for girls there. are the raven bachelor parties. that is the biggest thing that we have going on now. >> the 40th anniversary party. tell me about this party. >> it is going to be a house of the boettcher he. we are going to have an room and a bondage arnie. there will be new earls poll dancing. >> who gets to come to this party? >> only invited guests. >> only invited guests. i was invited but i could not make it. hustler magazine has been around for 40 years. when you ask him what the most last week theess, trailer came out for 50 shades of grey. it was massive. who is that marketing to? women. he is marketing to women. they are his most promising demographic. >> he is 71 years old. since that 36 years shooting. i remember that. he was hugely controversial. >> think about what he just said. it you have to say something and do something offensive for anyone to care about the first amendment. nobody argues over what we are going to say to the ceo of zillow. they are arguing about what he puts out there. many people who work in media kind of need to tip our hats to what he has done in terms of freedom of speech. >> without a doubt. whether i like his magazine or not, he is a great american. we will have the zillow ceo. he just agreed to by his number one rival. ♪ >> live from bloomberg's a headquarters in new york, this is "market makers." off.ik schatzker is when the transactions of the day is presumed. revolutionizedia how we buy houses and they have merged. trulia.ehurt justtrul spencer is with this. he joins us from seattle. congratulations on this transaction. when you reach critical mass? you are at a couple of years. you have $800 million in revenue. when do you get to critical mass? >> thank you for having me. it is very early. i know we are not there yet. real estate professionals spend $12 billion on advertising. we have a long way to go to achieve what we consider to be our ambition. we want to sell more media and .oftware tools and > >> aren't you capturing all the online advertising dollars? i have no idea who is on third. >> there is a lot of fragmentation of the space. most real estate advertising occurs off-line. this would be newspapers and outside advertising. long of it goes to a very trail of real estate sites that are local. there are many in any given city. it aggregates a lot of consumer audience. we are the two best-known national brands. there is a very pride -- fragmented space. >> what is your ultimate goal? we heard to do want to keep zillow and trulia as separate entities. >> they will be separate brands. i think it is important to have multiple brands. media companies have done this very effectively. operates many sites. having multiple brands allows them to appeal to different consumers. it allows you to expand your reach. the overlap is quite small. less than half of our users visit zillow. there's not that much consumer overlap. it makes sense to invest in both brands. up toyou open yourself acquisition? with the convenience of this merger, will somebody go after you? >> who knows. that we like our chances as a combined company. they were having success as in a panic companies but we thought joining forces we could be more successful. we will own about two thirds of the company. i am excitedmber, about owning two thirds of the combined company. trulia felt the same way. own oneted to learn -- third of the total company. this merger is exciting. we have a long way ahead. this is going to play out over many years. >> why do you think you got a negative stock reaction today? >> what happens in these deals get announced is the stocks adjust to what the exchange ratio is. that is what is happening today. that is fine. we are focused on where the stock will be in five or 10 years. what the shareholders will get is two thirds of a combined company. that will be very valuable a few years out. our stock has been up over the last couple of weeks. for breakingomberg the news last week. there was a very positive rice reaction. you are seeing the stock prices adjust. >> if you were to have a cup of coffee with a realtor in kansas city, what would you tell them? >> if they are savvy their future is very bright. the real estate industry is a great place. real estate agent to take advantage of technology are going to do very well. i would tell that agent to make sure that you are where your consumers are. make sure that you have a residence on mobile. make sure you are using tech to grow your business. the real commission rate is in the mid to low 5%. i don't see that changing long-term. real estate will always be a professional transaction. professional in the middle. it is complex and requires sophistication. they are more than happy to have an intermediary help them with the particulars in the transaction. i don't think commissions will go down. >> how dependent are you in professionals to take the business elsewhere and start to use a new portal? how susceptible to are you -- are you? >> agents and brokers and franchisors are the client and home seller. sure that theyke are listing where homebuyers are. homebuyers are increasingly on the web and mobile. that is why you see so much of gravitating to partnerships with zillow and trulia. they need to know that there agents are well represented. the early reaction i have received from the industry has been very supportive. >> how to get potential homebuyers loyalty you? google houses for sale. you are the first and comes up. how do you get me to go to zillow first? >> that is the challenge that we on the product team go to work and try to solve. how do we build great products? my hope is that when you come to have a hopefully you'll great experience and sign up for our e-mail alerts. they will come to us directly next time. >> thank you so much. congratulations on this transaction. turnover in the c suite. we will find out why. ♪ >> live from bloomberg headquarters in new york, this is "arkin makers are co- >> welcome back. i am stephanie ruhle. out today.ker is let's get to our next guest. he is one of my favorites. when should aboard start searching for a new ceo? that is what clark murphy says. he is one of the top executive recruitment firms in the country. welcome back to market makers. jamie dimon has taken ill. he is the ceo of j.p. morgan. when you get news like that, what does that mean? havest of the boards succession plans in place already. you go to work as a ceo and you start succession planning. the board is holding you to it. the sec cares more than they used to. you don't have a lot of choice. >> that is ideal. does that actually happen? >> in the best companies it does. ford, theyok at were well prepared. i think the best run companies are ready. >> does this mean you are busy are working with ward's -- boards? >> it changed our business dramatically. onward, boards are asked us to come in three or four years in advance. they want to know if someone can be a ceo in the future. >> it is almost like a college president. is it tougher to find people who really want to but up to scrutiny? >> no. it is tougher to find those who have adapted to a world of changes faster than it used to. now aility needed, -- thes plan competencies to get there are much more important. >> is important for culprit -- or print culture to bring in a ceo before they take the seat? apple or ibm and somebody gets jetted in from the outside, it must be horrible for corporate culture. companies do want to promote from within. we do a lot of research as you would imagine. 250, most joined in the five years prior. they were brought in trained to be this. ceos arerporate promoted inside. most of them, have been there for over 15 years. gap, theyoards see a say we will go outside three or four years in advance. tesco had to go outside for dave lewis. they were not prepared. the world is changing fast in the process. >> what drives you nuts about ceo zeit diced -- zeitgeist? you are in the trenches of this. what drives you nuts about how people think about the ceos and how the system behaves? >> i take a more positive approach. not know howds did fast the world would change. whether it is digital or global sourcing. the preparation you need to succeed in the job has never been so complex before. >> how does one prepare? >> you have to work in multiple functions and parts of the world. you have probably moved once. >> is leadership and overused word? has it changed in the last five were -- years? >> you need to have a good strategic vision. you'd need far better communication skills to deal with a show like this successfully. you also have to have more agility. you have to say what i am wrong and we will change. >> respond to alan mulally. he had to deal with the train wreck of all the institutional baggage and one for to. -- ford. >> i believe in pattern recognition. that means you have seen a series of events or occurrences that have happened before and it will cause the same problems. pattern recognition to work across industries, i do believe in that. is the ceo has to have a message and keep repeating it. absolutely does. communication today in every format, they have to have a blog . they have to go on television. they have to have an earnings release. communication has risen to the top of the competencies required for success. >> how much time should we give a new ceo before giving him or her a grade? the minute he or she takes that seat we are criticizing. how long should we give them? >> at least a year. pour mary barra steps into general motors. if they can get a year they are lucky. how do they handle the first crisis? that is important as how long you give them. that theinsensitive media is asking about what j.p. morgan will do. do you have to get real and saying we need a safer plan? >> when you have an iconic there are shareholders who are putting wealth in his leadership. i don't think it is insensitive. it is unfortunate, but you have to know the predictability of the success of j.p. morgan. he has a great bench. knows how to develop people. j.p. morgan is going to be fine. >> thank you so much. clark murphy is the ceo. stars gamble playing poker. whoill speak to the woman sets it up. ♪ >> she was the mastermind behind all-star ocher games. she is talking about her life the came crashing down. she is the author of a new book. this game originally did not start off illegal. how did it go down? >> it was legal because i was taking tips. when i started taking a rate that was illegal. >> talk about these a listers. they are usually getting things for free. you are asking them to pay up when they lose. >> everyone was willing to pay. they wanted to come back next week and have an opportunity to win it back. >> it sound like tobey maguire was a tough customer. people have different personalities at a poker table. it rings out a different animal. intense hereeally at he wanted to win all the time. he was a bad loser. that was just his poker personality. winning theywere were fans of yours. when this came down, who was by her side? >> matt damon only played once. i did not have a close relationship with him. around when it all came crashing down. >> what was your grand takeaway? in girlsare bringing from vegas and leonardo dicaprio was playing, what did you think? >> i did not personalize it. this is a business i was running and it was predicated on creating opportunity. the risk that i took a running this within some day and it did. that was that. going to come was crashing down but you were still in it to win it? >> i didn't think it would crash in this way. i had legal counsel on both coasts. we had looked at federal laws. i got advice that it was legal for the most part. i was advised that it was a misdemeanor. fbi or anticipated the federal indictment. i knew there was a gray area. i felt like that was the risk i was taking. >> ben affleck was a regular for you. he was recently kicked out of a poker room for counting cards. >> i think there is more to that story. he is a great guy. he is not a card counter. i don't know what to make of that. >> thank you so much. the woman with the big hollywood poker games. we are going to remember alan greenberg on market makers. ♪ >> alan greenberg was a legend in new york city. he built bear stearns into a powerhouse. he watched it collapsed during the financial crisis in 2008. he died on friday at 86. i spoke with him three years ago about how his career started and what he learned about leadership at a very young age. he lived to see bear stearns' he still thinks this is the best industry in the world. >> the best thing that happened to me was i started at the bottom. i was a college graduate. i was lucky to get the job i had. that was in 1949. everybody said go back to oklahoma. they said you were wasting your time. go work for your father. starting at the bottom and being treated like i was by certain people made me say that if i was , i started with a guy who is still at j.p. morgan. he is one of my closest friends. we have been partners for 60 years. the carto ride down in and say what we would do if we were bosses. we became bosses. we implemented we thought was wrong in the way people were treated and it paid off. >> when many other big-time wall street icons who were firms like madestearns, they have not he continued to be a mentor to so many in the industry. dimon sent out a heartfelt message about his contributions to the industry. >> i am so glad you brought this up. i interviewed him in number of times. bear stearns research capabilities was amazing. there were all the things that bill cohen did. i think we forget what they built and the style and smarts that they had. most of the research division was superb. did a great job. >> ace greenberg was the bear stearns guy who instituted that the employees give back part of their bonuses to a specific charity. they organized that. he made money and then gave back his whole life. he is a legend and an extraordinary life. >> he was a bit of a lone wolf as a firm. i think it is clear to say that working as the firm struggled. >> he went on to advise j.p. morgan. many will miss him. he died at 86. we will be back in just a moment. stay here. ♪ >> that is going to be at. tom, thank you. think? you >> i think it is transaction monday. >> you're not going to be with me tomorrow. i hope you're watching. we will speak with one of the earliest investors in twitter. he will be our guest host for the hour. it is 56 past the hour. we are going on the markets. olivia sterns has more. >> stocks are in green. things are mixed. this follows an unexpected drop him home sales. me is the active -- equity of derivatives holder. we have some economic data. we have the gdp coming out. we have a big fed meeting and job stay is friday. what are you seeing in the jobs market? equityhave a resilient market. you have solid earnings. there is a lot of m&a activity. the option market is slow. volume is not robust. not a lot of activity in some of these m&a names. i wish i could give you the answer. on this lastte week. stocks moved higher. you could've seen options flow in. there was some activity last week. there was not the sort of size you expect if investors were actively speculating. >> equity trading has slowed significantly. historically speaking we are 20% off average volume. are people shying away from options? >> i think it is both. there are summer doldrums for sure. they are looking to capture the stock. you get that with options. orwe revert back to 2006 2008, i would expect to see activity pick up. >> one sector that has seen more action is banks. that? thatr theme has been things are incredibly low and investors should be looking. it is the price to pay to stay in the market. you had someone come in and put a significant position in january. they are 10% out of the money. we never know what it is against. it could be against large long. it could be a short. volatility is cheap to buy right now. a lot of people would say what is the point. given the new environment we are in of extraordinary forward guidance, the fed has pinned down the volatile ability -- volatility. >> this is not just in equities. this is across the class. this is a job -- across asset classes. when that changes, it will we are not week, seen it. >> twitter earnings are out tomorrow. >> a lot of other events this week from an earnings perspective. we cover the name and we like it long-term. we want to be cautious in the short-term. monthly active is what people look for. it might be a little bit like. that will be the catalyst for the stock. we want to hedge long positions. we will use weekly options. we will be able to do that and create a band around it. 43can come in and sell strike calls. >> be cautious. thank you so much for joining us. we will be on the markets again in 30 minutes. ♪ . >> welcome to "money clip" where we tie together the best stories, interviews, videos, and business news. i am adam johnson. take a look at the menu today. it is not a monday if there are not mergers to talk about, from real estate to bargain shops, we got it all. in media, power rangers to the big business of film distribution. we will get a bloomberg exclusive. around the world, a victory. former shareholders of what was once the largest oil company in russia. wall street remembers the man who built their stearns before the collapse. and jeff koons makes a multimilliondo