place before you go to work. we will take you to a 7:00 a.m. rave. good morning, everybody, this is "market makers. rave?0 a.m. i'm excited. we should do that one day. for the moment, we are looking at sun economic news, isn nonmanufacturing index is just out, a gauge of the economy's marissa are. michael mckee has the headline. >> quite a good start to the trading day. pmi comes ining 1058.7, the best since 2005. this is a broad measure and includes most of the service industry. it tells us that the service industry is doing well in this country. take a look at the new orders index, 64.9 from 61.2. business at 70, 60 2.4. we have not seen numbers like this in about eight years. 62 -- activity, 62.4. capital goods, nondefense x 3.8% after falling 1.4% in the prior month. we are making some real progress here, looks like some good economic news to trade him today. thank you. now it is time for the top is the stories from around the world. get that is publishing in two. ae company will become separate entity and will have a publishing unit including 81 newspapers that will be shut -- spun up to shareholders. they had been losing ad revenue and reader since 2005. there is a new leader in the world's largest smartphone market. the company is based in beijing and was founded four years ago. the company has won market share by selling cheaper devices directly to consumers. a 72 hour truce is underway in gaza. israel says it has all that all of its troops and has accomplished one of its missions of destroying tunnels used to launch attacks on israel. hamas says it has also agreed to the cease-fire. who recently returned from west africa is in a isolation unit at mount sinai hospital today undergoing blood tests to see if he has ebola. doctors say it is unlikely and they should have the results tomorrow. if nothing else, this raises the awareness of the ebola epidemic that has killed almost 900 people in africa. testing is critical to containing the disease. but to prevent anyone from getting sick, we would need a vaccine. joining us is a doctor from the columbia university epidemiology whoram, as well as someone covers the pharmaceutical industry for bloomberg. dr. morris, i know it sounds morbid, but we do live for moments like this, when the disease that you are studying is thrown into the spotlight. is said that such tragic events are needed for us to pay attention to the diseases out there in the world. i'm afraid i do not quite live for these events, but of course, i find them interesting. we are trying to prevent and predict a much better. >> can we get the obvious out of the way for a moment? how much of a risk does the epidemic in west africa present to the developed world at large, whether it's new york city, united states, western europe, even in southern africa, areas outside of the immediate hot zone. >> i want to point out the story in "the new york post." restrained "new york post." out that he turns is negative, will it be on the front? we can expect people coming from west africa and other places will land in europe or north america, and so it depends on identifying -- >> and other countries for that matter. >> if these people are identified in time and put in isolation, and the caregivers are properly protected against be veryn, there should little risk, virtually no risk. >> does that mean we will see new containment policies, people embarking from the planes? >> immigration officials have been watching pretty carefully to see who is coming from where, look for any signs, identify these people. i am sure you could tell us more about this, but my understanding is we are being exceptionally cautious right now. that is why we have less risk than these other places. >> we are being exceptionally cautious. if someone gets sick on the plane, for example, the crew is supposed to let the airport know and there are quarantines tatian's in places like -- stations in places like jfk. >> clearly, the greatest risk remains in west africa. almost 900 people have died. like another obvious question, but why isn't there a vaccine for ebola? >> there are a number of reasons. for quite a while, there were many technical hurdles. we did not know how to make a good vaccine or protect people, but now we do. of course, the economics are a bit of a problem for the vaccine manufacturers. also, identifying which population should get it. if we traveled there, even though we have little chance of getting ebola, we might take -- >> does the economics mean that since only 900 people have been affected, the actual effect is relatively small? >> the fact that these are sporadic events, relatively small, but unpredictable, and also, these are developing countries where it is obviously hard to charge high prices for the vaccine. we are talking about the vaccine being at the very experimental treatment, let me emphasize, highly experimental treatment that we have used on the patient in atlanta. that is a promising thing, but think about how early-stage this is. a biotech company with nine employees, at the very beginning of possibility. and we are talking about bringing these products to developing nations that do not have money to spend on health products. we are still working on extremely basic health problems in these countries. using this vaccine is another thing entirely. is the problem of a vaccine for a disease like ebola the same as a problem for treating rare diseases, that there is not a payoff for the amount of money intracompany would have to invest? you would rather be a gilead to develop a hepatitis c drug. >> even more so with the vaccine because everyone is a little different, has to be tested. we should be introducing newer technologies. we are using mid-20th century technologies and there are newer technologies -- >> the technologies we are using to make vaccine dates back to the 1950's? >> some, and some to the later part of the 20th century. some vaccines are made by more modern technologies. >> like influenza? there is only one new influenza vaccine that is made by modern technology that was just approved. the others use older technology. issue, is a funding lobbying not as intense for this? >> part of what we have seen is the economics are not there. this rare treating disease in western africa -- >> does lyme disease have a vaccine? you could argue that it is a pretty populous disease. >> that's a good question. there was a vaccine developed and it was available for a little while, as well as for dogs, but it is not available now. if there is not one for line disease, which is not rare here, you can imagine how much harder it is to get onto the market an ebola vaccine or something else. >> the death rate we are seeing is a little under 60% compared to 90% in other ricks. can you explain why? what is going on in western africa right now? >> this particular strain of strain,us, the zaire which we have known about for a long time, has a 90% fatality rate untreated. treatment,gressive especially with doctors without borders, they have had some delicate facilities doing some -- dedicated facility doing some treatment. if the patient has other infections, they will also treat those. they hydrate the patient. they try to correct that morales in blood clotting. that has led to an improvement. vaccines economics for are that challenging, does it mean that we are not going to see them? >> it depends on how much interest or is, if there is enough political or popular pressure or it. >> what would it take for there to be enough pressure? >> it is hard to say. >> an outbreak in a developed nation? hashe defense department partnered with some of these biotech companies. there are often raise national security concerns and you also have the gates foundation. billions of dollars. we may not see traditional of pharmaceutical economics come into play here, but it is possible to see some national and charitable interests coming in. >> those victims that were brought in are being treated in atlanta. >> i believe this is the first two times this has been used in a human. we do not know if these people got great supportive care or if this treatment will work. it is exciting but it is really early and a huge caveat that goes along with that. >> there are a few other treatments along the horizon of the missing as well, some using very new technologies. >> thank you very much, dr. morse. >> coming up, we will go to washington for the u.s.-africa business for him. with us will be the ceo of the blackstone group, steve schwarzman. it is not your grandfather's las vegas. why gambling is playing a smaller role in the city's economy. ♪ the u.s.-africa business to $14have already led billion in pledges between companies going into finance, technology, and energy. one company investing in africa is the blackstone group. and ceo steve schwarzman is with hans nichols at the u.s.-africa business summit in washington. >> good morning. .et's get straight to the deal you announced a $5 billion investment in africa. that is a big number, even for blackstone. >> it is a good size number. it is a number that starts to make a dent in the problem that we will be addressing, which is basically power and electricity for africa. it is probably hard to imagine that 70% of the people living in sub-saharan africa do not have electricity. from the perspective of growing up in the developed world myself and probably for most of the viewers, 70% not having electricity is so difficult to contemplate because it impacts development. >> that gets me to the next question, 5 billion is a lot of money, but why now, is u.s. investment somewhat late to the game? have beenly, there two other ways of investment in africa. one was from europe, which has historically been a place as a spear of influence because of geographic location. second came the chinese with development in almost packages in different countries, for theirent purposes, with own engineers, construction companies, and so forth. the u.s. is now looking at africa, significantly behind in terms of aggregate embers, -- numbers, but many companies have had long histories there. >> when are we going to see blackstone opening up offices in africa? >> i think this is already happening as part of forming our joint venture. we will be opening different offices, and it is a very .xciting type of activity but the total need for power in africa is $300 billion. so the power initiatives of the current in the -- administration along with the joint venture is really just scratching the surface of what the full needs are. >> talk about the pipeline. in uganda,be hydro wind farms in western africa. what has you excited? >> we cannot give away our inside information. >> no one is watching. just a couple of gentlemen talking. >> mike bloomberg would disagree. we have about 10 projects currently in different stages of development. year, there will be several announcements of what we will be doing. >> what is your plan for exiting these projects, if it is a hydro dan, let's say, do you run it for 15 years and then pull back and have a local partner? >> we set them up with strong takes in terms of demand for the power, so it can be capitalized at whatever rate the markets will give us. we typically do not own things forever, because of the nature of the money that is given to us by pension funds and sovereign wealth funds, and others. actually they would like some of their money back at some point, if not all. we build them, finance them, conceptualize them, and eventually we find something. talking about your investors, take a macro look at the globe. where are you spending time -- i don't mean vacation. where are you investing? lots of distressed real estate in southern europe. >> it depends on which business of ours -- and we are in four different businesses. private equity, real estate, credit, and hedge fund. one of the most interesting opportunities happens to be in the real estate area right now in europe. they are starting to sell their underlying thet properties. we are doing a large investment program there. in private equity, lots of interest in energy and other types of companies that we are building. >> energy in europe? >> energy globally. energy happens to be one of the areas where there is simply huge demand for money and not enough money with capability to know how to make those, as intelligent investments. it is not the same as buying, for example, something that you could relate to, a lipstick company. you know it's manufacturing and marketing. energy is highly complicated. if you are finding something below the surface of the earth, bringing it out, construct thing, refining. that is an interesting business with a lot of opportunity. >> clearly a lot of opportunities in africa. opportunities but also danger on the governance side. you look at those countries where they are extracting resources. gdp per capita does not assess early reflected that. what assurances do you need from heads of state that the government issue will be addressed? >> governance is important to matter what you are doing anywhere in the world. you need a stable regime, you need to know what adulation's are -- regulations are. you need the protection of rule of law. in places where you are not comfortable with rule of law, you cannot invest. some countries don't even have laws but traditions that you can honored thet get best amount of times. >> so you do not need a letter of the law with international arbitration. you need a culture that you can respect. >> you would like to have both. that ishe evolution going to have to occur in africa is to provide that level of stability for investors globally. if they can do that, money will come in, and in reasonably large size. >> we are talking about $14 billion today, $5 billion from you guys. a few years down the line, what are we talking about, will it be a linear progression? >> i don't know if it will be linear. most investments are not linear. people start coming in if there is a good experience, more people will come. this will be determined by future events. you could have a significant increase if the next wave of projects works well. follow-up that needs to happen from the white house, administration, or frankly, the business community? >> the business community is waking up. africa itself is growing about five percent. if you added the amount of electricity you needed, you could take it up another two percent, three percent. ,hese are high growth rates admittedly, off of a lower pace than in the developed world, but with those types of growth rates, money will find its way there if it is an accommodating environment. theresident obama over weekend gave an interview talking about the business community. i know there has been back-and-forth between the president and wall street. i wanted to read his comments and get your take on them. "i would take the complaints of the business community with a grain of salt. if you look at what our policies have been, they have generally been friendly towards business." our complaints from the business community grains of salt? >> there has been a lot of rhetoric for local purposes. .rom the white house over years. actually, the environment has been relatively good. i would say, in terms of the number, some of of regulations, some of the responses to different types of things may not suit everyone's taste. nevertheless, business is high.ring and profits are the stock market basically touched a record. so i think there is balance in this equation. the president is essentially accusing the business community of complaining unwanted the. is that fair? to get involved is probably not the best idea. >> i thought we were just two gentlemen playing along. we will play ping-pong next time. back to you in new york. >> thank you. thanks to steve schwarzman as well. much more from the u.s.-africa business summit coming up today. sorenson will talk about commitments his company is making in africa. kim.then jim ♪ coachinga battle of versus michael kors. coat shares falling 70% last quarter while michael kors continues to grow at a record pace. julie hyman is with a now. 17% does not sound very good but the stock is up. are waiting for coach to turn things around. they hired a new designer last september. investors have been waiting for that to bear fruit. he has just introduced his new complete collection. fashion bloggers have been receptive, it's a russian of whether they will buy it. that still remains to be seen. at the same time, the men's business is growing. >> isn't all about my luxury handbag, or erik's? there is such a thing as a murse. >> that made my day. >> the company said its chinese revenue was up 20%. at the same time, closing 70 stores. cutting down costs and still having growth in those markets. glimmers of hope on the horizon, but not a full turnaround. >> do they have to discount the murse? the first time they did a more significant summer sale on regularly priced merchandise. that seems to have drove some of the traffic but also compressed gross margins to some degree. >> what about michael kors, what is their strategy? >> they came out with results yesterday and revenue was up 43%, same-store sales growing at a clip that far outpaces that of coach. revenue growth is slowing to some degree and that is a concern among investors. grossmpany also said its margins are going to shrink by 50 basis points in the coming fiscal year. there seems to be a couple of thing contributing. one of them is investing in expanding internationally. another is a normalization of growth, some of it's faster selling stores. there is also the question of discounting. , wecompany said yesterday are not doing the deep discounts . >> but i see all of their stuff at tj maxx. >> that is what analysts were saying, that they see discounted items. kors said that that is not really happening but it introduced ball items early in consumer did not really want it, so they were put on sale. so it is kind of confusing what is going on with the discounting pick her. been somere has equilibrium restored in terms of valuations. kors trade at a multiple that is not far off coach, a premium at 19 times compared to 18 at coach. >> just to put history interesting it, when you talk about what is called the aspirational handbag market, you are talking about a bag from $250 to $500. not a high-end luxury like lvmh. coach really created that niche and then dominated it, but maybe they got a little lazy, did not design enough, opened up outlets , and then you have this attitude of why should i buy full price? kors, after michael cores have been on project runway, gained some prominence, decided that he would expand more aggressively into accessories, was able to capitalize on some of the mistakes from coat. -- coach. >> the bottom line is there is always demand for the bags. and what kind of market can they be in. >> kate spade is another company but it's not clear how big their market is. they are not opening stores as fast. >> and let's not forget, michael cores is no longer on "project runway." i love the show. lifetime onave apple tv, it is the best moment for me. thank you. >> they come for the gambling and stay for the shows and maybe the food as well. it is the new face of vegas. ♪ >> you are watching "market on bloomberg television. is the future of casino gambling in trouble? the big resorts in vegas generate 30% of their revenue from gaming. sin city offers much other things as well as some good clean fun as well as good food. skip bronson knows there is more to vegas. he is a developer and advisor to the bronson companies. also here is an analyst who provides research and context on companies and research. what is the future of the casino industry? >> we have had such an enormous expansion in gaming. nevada in the in 1930's and then spread to atlantic city, and then today we have more than 40 states with some form of casino gambling. the competition is so intense, i was comparing it to reality television the other day which started with "survivor" and now dynasty."duck >> so when does the rest -- rationalization,? >> there has been a lot of expansion around the country. some do well, some do not. example, has had to continually reinvent itself. it has had more costume changes than a katy perry concert. >> what is the current look working for vegas? >> non-gaming activities have been extraordinary. one thing you have to take your hat off to was that vegas reinvented itself in positive ways in terms of infrastructure, airport improvements. they are rebuilding the convention center, you have people like steve wynn and sheldon adelson who just to get it and they work with each other even though they compete with another. better,k to make things as opposed to atlantic city, where there have been big challenges. it helps that las vegas is a destination that people want to go to. posted recession, the rise of the non-gaming visitor, whose reason to visit is to go clubbing or dining, entertainment, anything like that. story.numbers tell the last year only 71% of the people gambled, actually versus more than 80% back in 2009. again, wynn, reported record results. las vegas has come back, but in a different way than we originally thought. vipsw important when the be then compared to the masses? that is an-- >> important trend. you have a lot of vip players coming and that is driving the growth. city, you have a few casino looking to close because they do not have that boost that vegas has. that is a problem everywhere else. >> and there is no vip business on a mississippi riverboat casino. if we were to look at the success of vegas and it's renewal, on the one hand, the failure of atlantic city on the other hand, is that a parable for the casino industry going forward? if you cannot create a destination, you are doomed? theyu have to wonder what were thinking in atlantic city when they saw this massive expansion taking place. california where we have earthquakes, and you have no warning. on the east coast, they can track hurricanes well in advance. they had plenty of warning that things were happening and did not adjust. it would make sense to see atlantic city have a guggenheim museum on the ocean, create something that will get people there. they are talking about opening up a branch of stockton university. they need to do things that will get people there. the cal,bout destinations. we have seen the revenue their falloff. , destinations. >> that is a slightly different story. what is happening in macau, growth has slowed. that does not mean that it is forever, and there is a lot of investment going in there. a lot of parallel that you can draw is a lot of the capex going into macau and las vegas. it is hard to justify that anywhere else. really, you want a geographic monopoly. that is a big problem for atlantic city. ad you want to be close to large population center, those are the keys. >> that raises the question, why aren't there other true casino centers outside of vegas? i guess atlantic city and macau. maybe we can throw in monaco as well. opportunities coming back to the united states. these are really become the border wars where you have expansion that is running rampant. of course, as brian points out, expansion throughout the world. this is not unique to the united states. everyone understands that enormous revenues can be generated from gaming, huge gaming is jobs, and economic engine that allows you to build all of the other stuff. >> what the return on investment, when you see new projects coming in for $130 million, how long does it take to make it back? >> it depends on the market you are in, and that's a stage for how much you can spend. outside of new york city, they are cap around a billion dollars. if you look in las vegas, they are in the $4 billion range. you have larger returns and larger expectations there. it is geographic-based. vegas the things that las cells is it is not just gambling, it is the whole experience. you do not see anyone else on this whole sin city experience. >> if you were to pick a spot anywhere on the world map to a gaming industry, something more than just gambling on everything we have been talking about. skip, where would the? -- be? >> everyone has talked about china. certainly, japan will be the next center where there will be casino gaming. in the u.s., there are some small niche markets like boston where there will not be a proliferation. there will be one new casino in the area and it will do well. certainly, still places in the united states where there are opportunities, but you look at places like atlantic city, where there was a glut of casino space. they need fewer casinos, not more. >> i like one of the places that skip pointed out, orlando. you have a lot of hotel rooms, a lot of people already going there, and a ton of attractions. >> mostly for kids. i'm sure the parents want something as well. >> that is a place where the steps are in place to make this thing work. >> why haven't we seen any development toward that end? >> in florida, there has been a long-standing debate intel has see about casino gaming. the seminole tribe that owns hard rock has a lot to say. disney is a factor. they have never come out publicly and said it, but they are opposed to the idea of a proliferation of casinos in orlando. would agree on this. it all comes down to the politics. >> as we have learned in new jersey. i'm curious, with your periods in las vegas, hearing about the new entertainment things. what is the craziest thing you have seen someone pay for? storese are some crazy in las vegas, for sure, but the stories are changing. you are hearing stories of people going into nightclubs and spending $50,000 for table service. people start asking, where do these young people, with the money? vip's, orse really people blowing a lot of money? >> i think it is more of the latter than the former, actually. >> time will tell. that money will be drying up if they do not have that much money to begin with. it is so much money, the expectations are unreal. >> how does that happen? does somebody like you come up with the idea of a service like that, or does it evolved organically? >> i think it involves. clearly, there is a copycat factor. --ebody sees a nightclub there are disc jockeys that make us to have a million dollars a night. they take a lap top and press a button and they make up to $500,000 a night. the entire world has changed, it totally crazy. >> and there is still profit in four these companies. that money soem that they can make more money themselves. >> what is the most exciting bleeding edge trend in the casino world right now? >> one of the things that i don't think is working out the way it was planned is online gaming. you have to really go back to the rise of non-gaming amenities , which have always been there, but are becoming more centric in a lot of places. >> gentleman, thank you very much. >> $50,000 table service? we know where we are going on our next vacation. these guys hit the club before hitting the office. kind of sounds like fun. ♪ >> what are you doing at 7:00 a.m. on a work day? . am just getting out of makeup but hundreds of new yorkers are waking up and going clubbing. it is an event called day breaker and it is catching on around the world. we went to see what it was all about. it is 7:00 in the morning and there is a party raging downstairs. breaker, a morning movement where people are coming to dance their faces off, get sweaty, all completely sober, and it is tuesday, and then they go to their desk in about two hours. >> you walk down into a dark basement. you get to sweat. >> a lot of crazy people. notou walk out and it is :00 a.m. and you have the entire day ahead of you. >> day breaker is a pop-up party. event is when the next is e-mailed to subscribers shortly beforehand. when they announced the party, you can buy a ticket, but there are usually only about 300 perso event. >> i am a dermatologist by day and a morning dancer. i am a er doctor. i just got done overnight. starting my morning this way. for gilt.buyer >> are you going to work? >> yes, i have to be there at 9:00. >> day breaker started in 2013, and around the same time another group started something similar in london. more parties are being planned around the globe. >> the economics work. it is a labor of love. once, and thent they come back, and then they come back again and again. >> i know you are thinking, screw that, 7:00 a.m. try it here and you will become addicted -- try it. you will become an addict did. >> i would have totally done that working overnight. restaurants,k in you were out drinking for a couple of hours anyways. >> but it is not supposed to be sober. >> it is healthier. you get a workout. >> do you believe that everyone is sober? >> the people on camera seemed to be. >> the dermatologist. >> the guy from the hospital as well. perhaps there will be people there who are not. >> i think it's a great idea. prisoner to the preshow routine. at worknot have to be until 6:00. i would go at 4:00. the hour andast it's time for on the markets. >> target reported a second-quarter profit that trailed or cast. u.s. sales remain weak, canadian operations continue to struggle. day, a seniorthe retail analyst points out, it's all driven by promotions. they cannot last forever. how do you replace those emotions? >> and this is a warning effectively. >> full assault on august 20. below the forecast from what they already decided. continues makers" after the short break. boys" the hero in "flash he wants to clear up his name and company. 0nd then watch with us at 11:3 this morning. much more on the way, stick around. ♪ live from bloomberg headquarters in new york, this is "market makers." -- usa todayresses publisher get matt plans to spin off its newspaper business and they will focus on broadcasting and digital media. >> how to make a fortune in africa and we will talk to the richest man on the continent who made his fortune in cement and sugar. >> the company that brought you fruit bouquets is getting into the smoothie business. >> good morning, once again. we are going to begin this hour with the newsfeed and top business stories. economy is building momentum and service industries expanded at the fastest pace since 2005. the services sector includes everything from accounting to retail to tourism and some agriculture. it makes up almost 90% of the u.s. economy. president obama is hosting several dozen average and leaders of the summit on business and investment. it plans to announce that u.s. companies will invest $14 billion in africa and among those making the pledge is ge and ibm. last hour you heard from steve swartz and in. -- steve schwarzman. is the number one party school based on a survey of students and syracuse says it is disappointed and does not want to be known that way. the top school on the stone cold sober list is brigham young university in utah. -africa on the u.s. business forum. hans nichols is there with africa's richest man who made his $25 billion fortune in cement and commodities. he is standing by. morning, thank you very much for joining us. new 5 billion dollar investment teaming up with steve schwarzman and blackstone, what will you do with it? how quickly are you going to exit? be in theing to sub-saharan average in countries , nigeria, tobu, tanzania ,ghana and the likes of them. we are going to invest this money in terms of a generation of power and transmission of power and distribution of power, infrastructure in terms of gas pipelines to make sure we unleash the opportunities. at the gapok especially in power generation, africa is enormous. we agreed to team up. in order toorations put money 50/50 -- we are going to go into that kind of put 50%ship where they of the money up and we will roll out. >> how do the chinese do it? dude they do 50/50? >> they don't, they go on their own. the chinese are not involved in what we are doing. cement and they are not in power. they are in railroads but mainly chinese companies are looking for contracts to do things. or mineral resources. what they are trying to do is we don't want people to come and take our minerals. we can train our own people so it can be a win-win situation. >> that would be like building refineries? >> that's right. a refinery can turn out 5 billion barrels. >> when we look at where you have made your fortune paving roads, in cement and making roads. it made you a lot of money and you have had very good margins. there will be more competition in africa. are you concerned about execution? >> it's not about execution. ? is the demand growing the answer is yes. >> if the execution is sloppy, your margins will be down. >> as a company, what we have always been doing is to look at what we can do to bring our costs down. down, we wills go be able to maintain. obviously, if usb in the next 10 years if we are going to be able to make the same money we are making, no. >> because of competition? >> yes but secondly when you look at the capacity to meet it increases. the amount of building we will do what will replace the higher profits. >> your margins come down and your volume goes up and you are still happy? >> we are still a happy company, yes. >> when you look at your investments in zambia, is there need for more concrete and more roads? when you look at zambia for example, it has nine borders with nine countries in africa. some of these areas are what you cand do do is take it to the next country. it's not normally for only the domestic market. that iss landlocked but a road that can be done. in nigeria, if i grow the business very large in nigeria, i don't just rely on the nigerian market. i rely on the community of west african states. are you worried about ebola spreading to nigeria? >> it is a worrisome issue but the government is doing a lot about it. the guy who came from liberia, likely, he was taken straight to the hospital. it has been contained. rune was somebody who had in the city for a while, it would have been a bigger issue. they were able to quarantine there and the 59 people he was in contact with, they have been contacted and some of them have been quarantined. >> what will be the effect for your company across the community? it will be a great impact because we only have a few partners -- >> one percent tortured percent of gdp? >> it might be. various governments do things to tackle the issue. ebola has been around since the late 1970's. it's not a new thing. which ire panicking now think is good for people to realize something can be done about it. right now it has come to the attention of the western world and i'm sure we will find a cure for it soon. is causingl see what it so we can attack it from the front. >> i wish you the best of luck on that challenge and the remaining confidence that your margins may come down but there will be enough profit to go around. only in cement -- if you look at africa, the opportunities are enormous. a lot within oil and gas. we believe the cement business will be second. >> it sounds like a virtuous cycle and i wish you the best of luck. i will send it back to new york and we will continue to talk to ceos and heads of state here at the u.s. business forum in washington. >> thanks so much. back, he turned fruit bouquets into a gift that was perfect for chocoholics and the founder of edible arrangements is renting out. you are watching "market makers," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire. ♪ new age of newspapers -- usa today publisher gannett announced it is ready to spin off its print properties and split. intotwo publicly traded companies it had been one of the last holdouts in the industry that is forsaking the media marriage. good to see you. perhaps long overdue for ga nnett because it seems like every other company in the business is gone this route. we are in the process ofde-cootification - getting rid of the cooties. in some cases, in this case and others, they became tv companies and news corp. and time warner became entertainment companies. they say they don't have the guts or the patience to try to turn around legacy information-based media. they have become entertainment companies. information is not such a good as most if you look at it as a mass media business. if we look at where the growth is in advertising, we see it in google and facebook and programmatic buying. i think we are seeing the end of the mass media model. >> to these publishers just go out of business? >>. i hope not >> we all hope not. >> i have worked with digital first and advanced at the guardian and we see them becoming digital first. it means they have to become fully sustainable digital enterprises. >> can a newspaper do that? >> i think it's possible. >> they are all competing for the same place. >> who is doing at the best of the traditional newspaper companies? " the guardian" does great is the work but they are not profitable. they have transformed all their companies so they have consolidated digital and print into a digital first enterprise and print becomes a byproduct. the next kick in the candies to print is freestanding interns. coupons are still 50% of the retail advertising. that will go away. switch to this for couponing. that goes away, the last justification for printing and distributed newspapers goes away. >> what is the benefit to spinning off versus an out right sale? >> who is going to buy these? >jeff bezos is a savior. koch brothers interested? >> it becomes bully pulpits for a rich person. i hope jeff bezos will bring his experience and -- in the relationship business at hope wrote the washington post." >> why haven't we seen media conglomerates do this with tv or now thebc or nbc talk is that cnn might leave time warner. >> i think there is a nonmarket force at worst and broadcast. it is retransmission fees and the bundling of cable companies. change if we move into an over-the-top world? >> it could. if netflix and youtube figure out how to get major revenue, yes. >> what's valuable in cbs? it surely the non--news content. the notion of broadcast is its outmoded. you are proof. it is all about cable and digital. that's where it's going to end up. >> doesn't local news do really well? don't local newspapers to root really well? newspapers were one-size-fits-all and local tv news is the same thing. there is some slippage and tv news for the first time and that is missed does not look right. scripts and other companies -- in the people wake up morning in iowa and want to know about the weather and the latest urban legendary developments -- are they going to go to a tablet to get that? >> yes, i think they will. i have a smart tv now. an event at the school of journalism where i teach on september 19. tv news fills the clock but you make assets that people come to all day, you hope, on digital. that changes the nature of tv news and how you make local tv news will have to change. >> what is the new model? that we've got to ship to a relationship -- we've got to shift to a relationship-based model. got to give your advertisers more value as a result but you have to have a new skill set to know these individuals and build user profiles and act on them and not treat everybody as if we are the same because we are not. >> you are definitely not the same. we will give you that much. [laughter] great to have you here. giants,ing of media disney is reporting earnings today at the closing bell. disney has done a bunch of deals that have transformed the company. jon erlichman is in l.a. with that story. does that mean disney is no longer on a buying spree? a placenk disney is and where it can say that it does that have to go out and do a deal just because fox is pursuing time warner. you also have comcast acquiring time warner cable and at&t acquiring directv. the deals that have been done of the leadership of the ceo bob iger that stand out are the ones of the biggest price tags, the purchase of pixar for more than $7 billion, the purchase of marble, the purchase of lucasfilm was gives them the upcoming star wars films. the difference with these deals is they brought a lot of brands into disney. those brands can extend beyond the movie theater or even the small screen. there is a lot of difference is in the way disney is run as a media company because they also have a massive consumer-products business and i have a massive themepark business. maybe in the case of fox going after time warner, they are acquiring content that they are also acquiring a studio and cable networks. the disney strategy of grabbing these brands was more about having various kinds of content to fuel all the distribution arms the disney already has. >> out as a compared to the time warner strategy that is shedding assets instead of building up/ >> if you look at the media performance of media stocks, it has been pretty good. even though people say time warner ceo has left his business exposed to somebody like fox, the stock performance has been pretty good if you are a shareholder. disney took a different strategy which is to say that if we want to control where things are going, we have to have a lot of brands that people will want. reasone to give people a to go to the movies and now they have had success with the marvel films and some success with the star wars films eventually. they are different strategies but if you argue that comcast went after disney way back when, would they have been able to do so this time around? they could not because of what disney did in the meantime. >> does it make disney less flexible to change with the times? >> that's an exiting question. companies have more content than they can get out there. if you are disney, you've got so many brands and each summer, there's only so many films they end up winning in the theaters. it's almost like they want to best it all and use the content the best way they can. put fox and time warner together, think of the content that falls under one roof. if you have disney on one side and fox/time warner on the others, those three combined companies control so much of the content that we interact with on a daily basis. they cannot distribute it all in a big way all the time. the bigger question for the industry is what happens when that on tenant is in the hands of a few. >> and who's got the better strategy? i was surprised to find out that over the past five years and let's discount that every series comparison is irrelevant but over the last five years, time warner shares thanks to the premium they receive from the fox offer have outperformed disney. both stocks have done incredibly well. disney is up 250% if you include dividends and time warner is up 275%. offer is full value for time warner then time warner strategy is better for shareholders. beyacht, companies have to wanthen their shareholders what they want. in the case of a lot of these companies, you're thinking about the long-term. when disney went and bought pixar and bought marvel and bought lucasfilms, it was not necessarily if shareholders would like the story today or tomorrow or in the next two or three years. >> i hope they like marble because that is a great franchise. >> i like marvel. thanks so much. we have to leave it there but tune in this afternoon for the interview with the disney ceo with jon erlichman. theoming up, he was one of good guys in michael lewis's best-selling book about high-frequency trading and now bruce katsuyama is here to set the record straight. ♪ >> coming up, you read about him and michael lewis's book and brad katsuyama has some things to say and he will be here after this next break and it was a the founder of, edible arrangements thinks he can get it right again we will ask him about his new project. ♪ >> live from bloomberg headquarters in new york, this is "market makers." >> good morning once again. i am alix steel. was ad katsuyama mild-mannered canadian traitor until michael lewis made him the hero of his controversial book about high-frequency trading and now brad has had to mount a defense of his business. most recently, he panned an op-ed for bloomberg view taking him at his critics including the former cftc commissioner. great to see you this morning. >> thanks for having me>>. >> let's begin the conversation with a quotation from bart chilton the former commissioner had issues who has with high-frequency trading but was quoted as saying that -- at the very least, you take issue with that so-called fact of 50% high trait just hyper busy trading volume. has he got it wrong? >> yes, he's got it wrong. >> how? what's wrong about what he says? said -- what he said is untrue. we never had a chance to clarify that statement prior to writing that. we were never contacted. part of the reason for saying four-- and we heard that months -- for months covertly in meetings and anonymous twitter trolls. into a platform that was supposed to give people an alternative to trading venues that were dominated by high-frequency trading? >> we wanted to build a market that first and foremost was fair. it does not mean eliminating all computerized trading but it meant taking away certain advantages we knew high-frequency traders have in the market and taking those away and seeing who shows up and who does not need the advantage to trade profitably. as a result, certain high-frequency firms showed up in a large number of them andined to connect to iex it differentiates us from the rest the market. >> what is the real number? july and a study for the number of proprietary trading firms which is a broad aggregated category that includes high for twisty trading firms was 17.7% in july of our volume. >> is that on a single or double counted basis? >> we get that question a lot. -- itill put it simply broke her a buys 100 shares from roker b than 100 shares sales -- sales. broker be an broker a can both claim they are 100% of the the volume. they are both 50% of the volume. >> even on a single counted basis, it is still less than 50%? >> it is less but this is another example of the industry making of jargon to confuse the broader issue. the aggregated volume should add up to 100%. that's what most people would hope to believe if they see 17% trading is proprietary trading and you would hope that is 100%. bart reached out to chilton to get a reaction to your article. he said i stand by my "new york times" opening in and he said the numbers are based on actual traders. he said iex does good things. he is saying 50%, 20% -- whatever that is, this is an important part of the market, how do we fix it? abouthink part of it is doing the research of what is happening in the market. the next part is educating people on what exactly is happening in the third part is letting them make decisions on how to best execute given the information we have always talked about. we talked about standardization of data. and includes disclosures the fact that people can make up definitions does not advance the discussion. many of the things that bart chilton says, we agree with. >> in terms of regulations? >> that there is a better way forward and the discussion needs to advance. the exception we took is that some of these informal attacks on us started to become very formal and started to come from people of credibility and it got repeated so often that people began to believe it. the fact that it became more formalized and the fact that a repetition of an incorrect point was perceived as fact, we thought it was time to set the record straight. >> why is it that your firm and the business you have built at iex has become such a lightning rod for criticism? >> it's not all criticism. we have a lot of supporters. michael put you in his book and people have issues with the argument he made. >> most of the criticism against us comes from people entrenched in the business we are trying to disrupt. it is human nature that they will have an opposing viewpoint two hours. they created the environment for this problem to exist. >> but competition is a good thing, right? i think people that are viewing this purely on competitive merit have become supporters. maybe they are unhappy with the things that they have read but they have become supporters. the people fighting against us have dug in their heels. their interests fueled her criticisms. >> where do you feel you still fall short? >> if this is a marathon, we are in the second or third mile. there are many players out there and there are many people who don't fully understand how traits are being handled and how the markets work and it's our job to educate and meet with as many people who are willing. peoplere about getting the right information and letting them make choices for themselves. that will take a while. >> your market share is steadily increasing but it is still small. you have ambitions to become a exchange. where does that stand? you will have to enter into discussions with the sec. people accuse you of some things they don't leave should exist in the exchange world like broker preference or queue jumping. where did those discussions stand? >> we are in the process of meeting with the regulators and talking to our subscribers. the conversations are positive. people realize that market based solutions are better than ones imposed by regulation. from our standpoint, it's about collecting the right viewpoint and moving forward. the issue around broker ing is one we have taken from the canadian marketplace. if a broker has a buy order and they get a seller that stock, they will remove the order from iex and traded in their own dark full. if there is another part of that order, it sits in their dark pool. we are asking them to send it to us. we want them to let it trade. the piece of the order that is not internalized can stay in the open market and interact with other.internalized orders broker preference thing -i preferenceng improves a lot of things. hear consistently that the market is too fragmented and too complicated and there are too many markets. this is one of the best ways to reduce the number of markets out there by giving brokers who have both size of the trade the ability to internalize and it's free so we don't charge for it. there is no alter your motive other than trying to say let's provide the market with a solution that fixes some of the problems. >> thank you so much for coming by. he is trying to fix what he perceives to be the problem in the american stock market. coming up, he came up with the idea of turning fruit into bouquets and now he is the founder as taking on a more established business. he is up next. ♪ >> edible arrangements is looking to freshen up its business after spending more than a decade creating and delivering fruit bouquets. it is expanding its offering to smoothies and juices. are the original arrangements no longer enough? here is the founder and ceo tari q farid. these are double-dip bananas so i am excited. >> dark and white chocolate. >> usually we hear about companies that go from brick-and-mortar to online. you are doing the opposite. why is that? >> we call it click through the brick because we have 1200 stores and we want people to experience our products. when we started the company, i had no marketing budget so it was about people coming in and seeing the product. itn they told people about so experiencing the project -- the product is very important. as we move into the drinks, the story becomes the definition. >> 1200 stores. >> 15 years. >> quite honestly, i am a little surprised, more than little surprised, that you have been able to build that size business on what once upon a time was a novelty. >> that's what people thought. when we made the arrangement, people were looking for a unique roddick and looking for something fresh and something healthy. the product just took off and we did amazing. i am more surprised than anyone else but we work very hard especially getting the reaction from the double dipped chocolate. >> at the end of the day, this fruit won't last more than a couple of days. >> it will last maybe less than our. i will take this home, not eat all this in one day. at some point it will go bad. >> i'm going right for the pineapple star. >> does that wind up prohibiting? >> not at all, that requires us to have more stores and be closer to the customers and we deliver fresh. we are going to make the arrangement and deliver it freshen our own vehicle. we do not employ drones, we employ people. concierges deliver the product so from the time of placing the order to the time of delivery is very important. >> what are your margins like? >> we have 1200 stores so we have done well. >> clearly, but it is a business. it is no >> our franchisees owned the 1200 stores and they are the ones who employ. we trained them and 50% of our business happens through the web. go -- are you going beyond bouquets? >> it seems like this movie business is quite competitive. >> the difficulty in the smoothie businesses trying to get smoothies from a national chain where it is real fruit being put into the drink. we have fruit. everybody knows about our fruit. we just move it to the front of the store and we are now mixing it up and making these amazing drinks. >> how do you get people who historically would come to your store to choose a fruit bouquet to all of a sudden think of edible arrangement is a place you go to get a healthy food drink? that's not a natural. >> it's not but at the same time, when we started edible arrangements, there was nothing out there. into our stores, they come in for the arrangements and we want that. this is our core business and will always be. it is celebrating what is good in life. at the same time, there is the opportunity for these customers with a new campaign where you can walk into our stores and in seven minutes get an arrangement. >> that brings me back to margins because you have the fresh fruit and a lot of people and you are expanding. how do you wind up holding her profit margins when there are a lot of variables? >> by moving a lot of product and doing more deliveries in getting your people busier and doing more through the stores. we have these brick-and-mortar stores and we want to do more in our stores we want people to walk into the stores. we don't want our business to stay where it is. >> i will do the thanking. thank you so much. it's an amazing story. the fruit bouquet becomes a 1200 chain franchise. we will be back in two minutes. ♪ >> that was a very exciting show. >> we had the fruit bouquet to top it all off. tomorrow we will have an awesome show. revived cit that does lending to medium-size businesses. the manhattan da will be here as well. you cannot miss "market makers" tomorrow at 10:00 a.m. ♪ it is 54 minutes past the hour and bloomberg tv is "on the markets." let's check in on how equities are doing in terms of the performance. we got a bit of a bounceback yesterday and it looks like stocks are resuming their decline. dows&p 500 and the industrials are giving back a little of yesterday's advance. in the studio with us with the options inside. the question is whether this pullback or bout of weakness is over or whether we are taking a pause. vxx has shot higher material in the last few days. prior to this latest bout of nottility, the vxx had broken 15 in three or four months. it was a long. of low volatility and now we are seeing that come to an end. there is nervousness in the market and a lot of it revolves around the question of interest rates. it is a moving target. >> you have been looking at interest rate sensitive exchange traded funds with more action and volatility? pursuing the high-yield perspective of the credit rate market, we are seeing some volatility. high-yield spreads are blowing out to some extent. the facteflection of that investors were too complacent and spreads were too low and we are finally seeing that come to an end and it has to do with strong data points we have gotten as of late with gdp and jobs numbers or the iso numbers -- ism numbers. the idea of interest rates going higher is becoming more of a real concept and the timing is probably moving up in investors mind. >> you are seeing a pivot toward that positioning -- given all that, how would you position yourself in a comes to gold? >> when interest rates move higher, investors get nervous. there is generally inflation alongside of that but we are not seeing that now but interest rate expectations are moving up. gold is usually a safe haven what comes to higher interest rates. d is quite low. as opposed toon buying directly. the call spread which is a six dollar widespread for under one dollar so it gives you a nice leverage in terms of your maximum payout if you're correct. >> what if you go further out be on september? the 2015 will capture more data points. are for axpectations fed hike in the second half of 2015. possibility in the flux in that expectation. i want to have breaking news -- dollar general is set to explore a bid for family dollar. more consolidation in dollar retailers. it is jumping to session highs. had dollar tree looking to make a bid for family dollar. is said to beeral exploring a bid for family dollar according to bloomberg news. those stocks are all moving now. you have been looking at retail. you have a trade for us on target. it has its own challenges with the data breach but it kind of sets the tone for the retailers when it comes to earnings? >> the earnings cycle generally lates the retailers into september. we got the pre-announcement this might buy target that they have lowered second-quarter guidance. we'ves not look good so got a slew of other department stores coming up. i would look ahead to names like jcpenney and sears and macy's and maybe position with put spreads ahead of those earnings releases late in august. >> target shares are moving lower in trading this morning, down 3.1%. thank you for being with us. we will be back "on the markets" in 30 minutes but "money clips" is next. ♪ welcome to "money clip." we'll full coverage of the africa leaders summit in washington dc. companies are pumping $14 billion into africa and we will hear the numbers from the summit. pulling out troops from gaza as a three-day truce takes effect. so far it is holding.