Transcripts For BLOOMBERG Market Makers 20141106

Welcome to Market Makers i am Stephanie Ruhle. I am matt miller come in for Erik Schatzker today, again today. I will just criminally take this seat. Just permanently take this seat. Erik, are you watching . The top business stories we are offering you this morning. The ecb is ready to jump in if the euroarea economy needs more stimulus. Saysresident mario draghi that the Bank Governing Council is unanimous on that score. Must pushat europe ahead on Structural Reforms to the economy. Earlier, the ecb raise expectations of higher incomes, and encourage firms to increase investment today and bring forward to the economic recovery. Earlier, the ecb kept Interest Rates at record lows. Here is one for matt shares of tesla are rising today. Therefore busting forecasting robust growth for the next three years. Here is elon musk. Yearoveryear, as far into the future as we can project, that is quite a big percentage growth for manufacturing. We would like to grow faster. Have one factory. K says the companys biggest problem is making enough cars to satisfy overwhelming demand. The Treasury Department is making money from the bailout of fannie mae. Sendortgage lender will the government 4 billion by the end of the year, under the terms of the bailout, all fannie mae profits belong to the u. S. Government. Fannie mae and taxpayers are catching in on the rebound in the housing market. Health officials in new york are monitoring 357 people for any signs of ebola. Most have come here from countries where the disease has broken out. Doctor diagnosed last month is described as improving and in stable condition. Good news there on ebola. More on the ecb decision. Jonathan ferro is watching the mario draghi News Conference and joins us live from london. What have you got from draghi so far . For literature of the euro versus the dollar and gives a good idea a further picture of the euro versus the dollar and against a good idea of Mario Draghis performance. He really performed today. A commitment in a statement to return the Central Banks Balance Sheet back to the size it was at the beginning of 2012. That is an extension of one trillion euros. He says that yes, we have unveiled measures to get it back we will do more is needed. You see the reaction in the market. The only thing it seems like he has sent from the getgo is we will do whatever it takes. Clearly the market likes it. What does the european economy really look like . He has cut the deposit rate , Asset Purchase Program in the works again, and what does the economy look like . We have structural problems in europe and they need aggressive. That is not down to mario draghi, that is down to the leaders of the eurozone government. You have got to look at angela merkel, the chancellor in germany, government that is still balancing the budget while the rest of the eurozone is riding along slowly. The debate is not on Monetary Policy but on fiscal policy as well. What is interesting, jonathan, there is this real debate there. D unanimously good in japan they do whatever they want to do. In europe you have these different governments chiming in and maybe even a split decision inside the ecb. Yeah, and i think it is really interesting. It sort of implies that the ecb is talking the talk. The bank of japan is really walking the walk. He holds 20 of the japanese Government Bond market. E is fighting etf he is buying etfs. Yes, by Exchange Traded funds. The japan a vacation the japanifcation of the bond market. Dont ever think about the japanification of the central bank. It remains to be seen just how he is going to do that. Mario draghi with the bond buying program, to your goat 2year covered bonds. Go fish could that is not going to do anything. I think you have a point, not just about the policy measures and how much he can do but how much there is in covered bonds and assetbacked securities in the euro zone. Not enough to get the Balance Sheet above one trillion euros. Whatever youve got, are you going to do sovereign qe . Right now that remains unanswered. Walking the walk is a . Question mark. What else has he got to make investors confident in a market with a poor economy underneath it . Theyre going along because mario draghi is not shown signs of improvement. He is just saying dont worry, i will keep the safety net there. The economy under it is still massively flawed. You tell me the last time a market was trading on Economic Fundamentals. The sovereign debt market in granted, would not trade on come Economic Fund the minerals, either. It is trading on declining yields and the triscuit going trades keep going lower. I guess what he is saying, investors are drug addicts. Yes, i think we can agree on that, and thursday afternoon, jonathan has to get over for a swift pint right now. You got it, matt. Lets get over to tesla. We were talking about the Global Economy for a moment. Matt needed to wrap that up so it is time for tesla. Luxury cars, Global Economy. And elon musk forecasts Global Growth every year for years to come. Lets look at the future with efraim leavy, who has a hold on the stock, and editoratlarge cory johnson. Let me just ask you, i thought we would see a drop. I thought this was a Short Covering after the gain. They cut the current order forecast and they pushed back the release date again. You read the intro about 50,000 cars next year, i thought, why would anyone believe that . They are emphasizing just a few months ago 35,000 cars for this year and they backed off 33,000. Why would you believe 50,000 for next year . Hope springs eternal when it comes to tesla. The shares are way big, all the way back to where they were on monday. I think the trading on the stock today is not indicative of the news we got about the company yesterday. Yes, 7700 80 cars, big surge, apparently, the end of the quarter. People who tracked the actual registration of the vehicles, not as many cars got the registration during that period. They are still saying they will but 11,00013,000, cars in the quarter we are in the middle of right now, which is an ambitious target indeed. Does it seem like it doesnt matter what information elon musk puts out there, they want to be long elon . You are talking about investors being addicts and theres something about investors loving the tesla stock. I was somewhat surprised when you guided down from the consensus of 75 to 3035 in the fourth quarter, even though you have this growth for the next few years, not so surprising, it is a confirmation where wes is a company have been positive on execution and this is one of the not clean quarters where we had those misses the lower guidance. You have to be cautious. I dont know why it is going up so much. A, i was listening to cory on bloomberg west last night about how the stock ask completely different from the company, and then i went to the Film Festival in an and and everyone was saying the same thing, that they are two different entities. Do you agree . I guess so. The company has generally been executing this was more of an exception this quarter. The stock is going up well beyond normal parameters. I dont even value it as an automotive company. Of hybridnk technology versus automobile company, they are at a higher valuation than General Motors f or ford. It should be you are paying a lot upfront for future development. I am positive on the growth of the company but i dont want to pay so much money. We are looking at the model x and they pushed it back a couple months, release date for next year. The interesting thing to me, cory, when they came out with the allwheeldrive system, 691 horsepower in a car, monstrous power. Is that going to be in the model x, too . Who knows . Right now they are trying to make the trunk open which they could not pull off when they unveiled the car. Cori can do you think they should be valued as a tech company or automaker . Every company is a tech company now. That is sort of the whole point of bloomberg west. Technologydriven changes in every single business, whether it is jpmorgan or the plumber down the street or tesla, the automaker. Technologies driving change with mobility. Cloud,ductors, the changing every business in the world. It is what it is. It is an auto company with some growth and massive losses that is having trouble meeting its espoused targets but has a lot of excitement. I want to ask a question to matt, our resident car dweeb. ,hen you talk about the model s is it going to be hot at the end of 2015 . Is it going to be as hot as it is now in receipt u. S. And european sales declining . It is a car three years long in the tooth. I realize everyone here is focused on companies and stock stores and the Global Economy, i get that, but if you think like a car guy for a moment, ok, it is just unbelievable how much power the platform will have for the model s. Will carry sales i cant imagine it would in for 50,000 units. All the Automotive Press as the dollar challenger and knowledg that all the automati Automotive Press talks about is the dollar challenger i do want to talk too much about cars, but people outside this building care about that kind of power. My toothbrush is also electric and more powerful than ever. Your toothbrush . Yes, it is electric. What do you think about the idea that the reason they cut reallyus now is people are not waiting for this model s to come out now and they dont want to go by the iphone 5, they want to go straight to the 6 . Youeople want to buy and have to know that it is not just a u. S. Story. It has excitement for china in particular, were people dont have cars in the really wealthy will pay for the tesla for the cachet of it. That demand is still there. With a minute, lets talk about china real quick. Before you get that wonderful torque that matt is talking about, you look at the giant ipadlike a monitor, very cool. Not in china because in china there is no google so there is no nav in china, no charging stations in china. China is a great big challenge to tesla. The chinese market, while it seems exciting because it is so big, has not been a Great Success for tesla yet. Of the potential is still there. In the cities, you dont have to go as far. The chinese are giving way license plates to electric car owners now. Cory johnson from bloomberg west and effort them leave the , thank you, and stephanie, thank you for putting up with my car nerdiness. I thought you were talking t werking, but it was torque. When youre after michael dell took his Company Private, it is looking like a good deal for him. About this closing the gender gap. Closing the gender gap. Welcome back to Market Makers show during the commercial break is pretty freakin funny. Corey come we have got to talk about dell. Looks like carl icahn may have been right. Are dealsweet when he took his Company Private and they have made a paper gain toat least 90 , according people familiar with the matter, and that is based on valuations of hp and other publicly traded rivals as well as a surge in its cash flow. What do you make of this . Who have sources looked at the financials for the debt that is out there, saying that they dont look that good. Is interesting, michael dell is very much at the home, surely to benefit, and one wonders why he would want to do it. Behavior withilar gateway computer 10 years ago, recognizing it is a business timeime with whose had come and was going. Changes behinde closed doors may not have when the market may not have been so patient. I thought the same thing when i first saw this story. How do you really know the value if there is not a marketer to put a price on it . The way i think we came to this valuation was to look at the cash flow, very conservative , 3. 5te of ebitda billion, and that compared to hewlettpackard makes sense. Also, debt, 15 billion, foreign cash, bringing it down to 11 billion. Obviously, youre not going to get an exact price, but it is roughly about two times what they paid for it last year. Yeah, fundamentally is can they fix this business . It had been about what had been a hardware slinger. They have the contracts in place and the position to do that in the marketplace. Is sitting on a ton of debt and having a great struggle to turn around the business. They hope that the optics will make things look better because the business is in Getting Better is not Getting Better. Check comedies across the border having trouble adapting to this Tech Companies across the board are having trouble adapting to this new world. We dont know what the numbers are with dell. Maybe they are better than what they were, but it is certainly talking a trend bucking a trend. Companies founded by some of the richest people in the world. I want to share for a moment my conversation with carl icahn just two weeks ago when he was talking about the actions of michael dell. These guys are looking old alchemists, they take this crap and they say they are making gold out of it. Im talking about guys like andreessen, since im no for this, shall we say, altercation. Like i said on tv before, they screwed more people than casanova. That is what they do only carl could say that. I thought it was tony. And we said he was one trick pony. There was one of my favorite moments on tv ever. Mork and mindy. I wasnt around for that. There is tremendous excitement and keep organized there is an enormous amount of change happening because of the changes in technology. But the belief that great wealth can be created because a smart guy with a smart idea comes around is not borne out by the facts. Mark andreessen, preaching is at so many other companys, he is also on the board great genius at some and he other countries come he is also on the board of hewlettpackard. Cory, we like you so much today we had you want twice. Market makers will be that just a moment. When corey does not make fun of my hair and clothes and skin he has to come on our show. I want more oh, i was singing. She was literally singing little mermaid. Changes on capitol hill, and the changes in Energy Policy. Know something about home repairs . This place is a worldclass renovation project. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and Stephanie Ruhle. Welcome back to Market Makers i am Stephanie Ruhle. I am matt miller i cant believe you had to ask the question, do i like nicki minaj . She does. There could be big changes in 2015. Yesterday we spoke with keep it and here is what he said. S and here isen what he said. You have to address the Keystone Pipeline, which the president has ignored. You have this Strategic Petroleum reserve, spr. That has got to be looked at. There are so many Energy Things just sitting there that have not been discussed. What changes next . Gerards president and ceo of the Mountain Petroleum institute, the industrys top lobbying group. I am assuming you agree with boone that the pipeline has to be done. Absolutely. It has been six years of study. Every Environmental Review shows it has little impact on the environment. Frankly, it is low hanging fruit, something that democrats and republicans could come thether on quickly and show American Public we are serious about Energy Security, serious about job creation and bring our economy back on track. Why havent we heard much about it recently . I was thinking we mustve figured out other ways to get seemswn there because it like we have forgotten about it over the last year. I think the resulted of fatigue in terms of Public Discourse surrounding keystone. There is 81 pipelines across the border today. This should never have been an issue. This could have been looked at. Nd decided in six short months unfortunately, the president has made it an issue and im hopeful he will step back and realize the error of his ways and say, you know what, this should happen quickly, we and make it happen, we need to not only move the oil coming up from canada, but keep in mind, this could pick up a couple 100,000 barrels a day and move it down to the gulf coast. It is big for the United States across the board. But lets be honest, how likely do you think it is for the president to changes to . Change his tune . I think it will be very likely that serious pressure will be put on the president. If you look at the senate today fore is well over 60 votes the Keystone Pipeline. Unless he is willing to spend Political Capital on Something Like this when he has much bigger fish to fry, this should be a big bipartisan action. If the president continues to obstruct and resist the Keystone Pipeline, it shows his agenda is inconsistent with the American Public, because over 72 of the american people, democrats and republicans, say approve the Keystone Pipeline, lets get on with this. It is often touted as 40,000 jobs added to the economy. How long those jobs stick around . Dont they just have to put it up and then they are done . Construction job is just like any other job. Let me tell you, we work closely with organized labor on this, who are very supportive of the pipeline, and friendly, they are offended by the president s comments that these are temporary jobs. They like to remind us, building the white house was a temporary job but it was still a good job. At is the disease they are in, construction. It is that is the business they are in, construction. It is like infrastructure could one could argue that there is a temporary jobs for are still. Ellpaying jobs we need the structure, we need the pipeline, and this is low hanging fruit, a chance to put 42,000 people to work. That is the state department estimate, the obama administrations own estimates, people back to put to work and the economy on track. What if president obama agrees to a compromise, yes to the Keystone Pipeline and in exchange, closes some of those tax levels oil and Gas Companies . I think they are 2 separate issues, stephanie, and it is important to consider them, because if you look at the tax code today, we have need of tax reform, but i hope everybody understands that the oil and Natural Gas Industry does not get subsidies. Unlike other forms of energy, we get the typical standard Code Provisions that everyone else gets. They can talk of any sort of compromise they would like but at the end of the day, if we are after job creation and good, sound Energy Policy, the worst thing for us to do is to discourage or penalize those of us like the oil and gas industry who are investing in the American Economy and have the potential to create jobs and put us back on track. What if you are concerned about the environment . Conservativeof wall street guys in new york that are against the Keystone Pipeline because they are conservationists. They want to be able to go out there and haunt ducks that are not covered in tar i appreciate that concern and that concern has been addressed repeatedly. There have been five comprehensive Environmental Reviews done by the obama administration, state department, and every one of them has concluded there is insignificant impact to the environment. We should not think of it as an either or proposition. We can have a lower cost energy, reliable energy, and we can also enjoy the standards of living we enjoy with conservation. Those who like to hunt, those who appreciate the waters of this country. We can do both. It is not an either or. It is an opportunity to do both and approve our quality of life and our standard of living. Do you believe we will see any movement in the Oil Export Ban since the 1970s . I certainly hope so, stephanie. It is one of those great opportunities. Who wouldve thought five or six years ago that we would be where we are today . The worlds number one natural gas producer, on the verge of becoming the worlds Number One Oil producer, surpassing saudi arabia. We can view the issues to family than we did back in the 1970s, when we were in an era of scarcity. We are now in an area of rich abundance. We need to get at all the markets available to us on the global setting. Exports is a great way for us to create more jobs in the United States. Exporting crude oil from the United States, which is what our around the world are asking us to do so they can wean themselves off of places like russia. This is how i feel when i get my christmas bonus. You get a christmas bonus . What . And i should spend it all. What . But come summertime i dont have money left. Great question, but let me tell you, we have moved from an air of scarcity in the 1970s when the crude export ban was put in place to an era of rich abundance. We have vast resources in the United States and the technology only gets better. We are more efficient in the way we produce it. We produce it at less cost. It shows that we can become the thegy superpower of world, making ourselves Energy Security here at home while creating jobs, exporting this vast resource, realigning the geopolitics of the world. This is unprecedented in the history of this nation, and the public better understand this through each election and just like the last election, overwhelmingly they supported candidates who support making us energysecure, and i believe that is only going to grow in strength. Our exit polls in the election on tuesday show 66 of the American Public, democrats and republicans, say they are more likely to support candidates in 2016 that support developing americas oil and natural gas. But we are still not energyindependent here. Why not keep the oil here so we can be . Well, we are becoming energy secure, stephanie, and what is important is that we are improving that position every day. We can improve that with the keystone xl pipeline. We can improve that position by exporting some of that accrued. Why . We produce more here at home because we have global markets. Our reliance on imports has gone down significantly over the last few years and the projection is that it will continue to decrease. We can become energysecure in a few short years but we have got to get the Energy Policy right. That is why we need the president to stand up to be a leader on simple things like keystone so we can get to the tougher issues like crude exports. Thank you for joining us. Always good to visit with you. Im feeling jack has an agenda. Do you get that . I think you do, to talk about cars. She wrote the book on how to bridge the gender gap in Silicon Valley and did it right here in nyc. Welcome back to Market Makers. I am Stephanie Ruhle come here with matt miller. Women make up only 25 of the computing industry and just 20 of congress. In the book women dont wait in line, a former congressional candidate outlines how women need to take more risks in these industries. It seems in the last 10 years whether we are talking government programs, corporate america, there is not a ceo out there that isnt waving the flag saying that we want women, we are training women, we love women. What gives . One of the things i talk about in my book is that we need to make a difference on sexism and dealing with issues we have in the industry. We need to start taking more risks. We live in a society where we are ashamed of failure. I lost two races. That was not fun. Two races . Two political races. Family is failing is hard and it is hard for women before we get the job. What we are doing with girls who code is to teach more girls to get into Computer Science. Itwhen i think about coding, seems boring good on you just typing in line after line of code . Stop, stop. I want to bring up a chart that is interesting to me. Why women are not going into Computer Science. In areas like medicine, law, the numbers are going up, a Computer Science the numbers are still very small. We have the iconic Sheryl Sandberg figures out there. Why isnt it registering with women . In the 1980s, 37 of Computer Science graduates were women. Today the numbers between 12 and 18 . It is the only industry where u. S. Seen a decline in women. The opposite happened with medicine and law. I am a lawyer. I decided to become a lawyer anduse i saw the accused l. A. Law and i saw these women who look like me. In the 1980s he started marketing the personal computer to voice, revenge of the nerds, weird science. You cannot think of a single female entrepreneur role model on television that looks like a girl and they think, not for me they dont want to seem like a slovenly, unshaven drinkr a red hoodie and red bull. It is not fun. We are changing the way we teach Computer Science and make it more projectbased. Apps to find your polling booth, to fight bullying, to find whether the cancer is benign or milling. Or malignant. Tampons shoots other companys you can point to that are making a difference . Twitter is making a huge difference. At t is one of our Companies Making a difference. I thought twitter was one of the problems. Isnt twitter one of the companies they didnt have women on its board . And they are making changes. They have programs in many of their office is now where girls are learning how to code. They are committed to building consulting the supplyside problem. When did you start girls who code . 2012 with 20 girls. In december we will teach 3000. What is the exit plan . Se 3000 girls, what a day what are they to do next . Of graduate program say they want to major or minor in Computer Science. We are going to graduate more and able work at facebook and twitter and will run those companies in the next 10 years. Are those Companies Making hard number two mins to say i am going to hire x amount of women, because there is some fatig a Womens Initiative but we are not seeing results yet. Ue are you seeing the ceos committing to hiring women . We get them to commit to say it is not just having girls in your conference room. We want to see them in your internship program. Our girls in the next year and a half will start working at facebook and it is going to happen. The only thing we can say is thank you. Thank you for doing it with business, thank you for doing it for girls, thank you for educating guys like matt. Yeah. Codingi will take ia class. 40yearolds who code. Except he cant be in that cause because he is 41. Thank you for joining us. Coming up, if you lived here, your home would actually be your castle. A Real Estate Agent would say it needs a little bit of tlc. It looks like a sweet deal, compared to some of the condos in new york city. Exceptional landscaping bill. Except he has written some of the most famous lines in film history. Thee and now behind newsroom, he is behind some of the most iconic tv shows. Emily chang sat down with him. I go to the office early in the morning. Early in the morning is good writing time. Toake anywhere between six eight showers a day. You are not exaggerating. Im not exaggerating. I am not a german fo a germaphobe. It is all about a fresh start. Again,ting badly, start take a shower and put on fresh clothes. Holy cow hobe, i justa germap like a fresh start . Who is doing that guys laundry . Does he have a special outfit . How much time does he have to fit that in . How many buttons i hope you will not miss the full edition of studio 1. 0 only on bloomberg television. Just one more time six to eight showers a day. I will literally turn off call of duty and watch this tonight. That is weird. For us to call Something Weird lets not take a break, lets go straight to the castle. For sale, and 18thcentury castle, with a moat and a lake on 14 acres of countryside. It is a lot cheaper than you might think that there is a catch. The international correspondent, the one and only hans nichols, went to take a look. Cross this bridge and step into your own fairytale. An 18thcentury german caso, cures for just 15,000 euros. Easier the wall is a lot when someone isnt pouring hot water on you, but when you take ownership, that is when the real obstacles begin. You may find more brothers grimm horror than disney fantasy. The problems are very modern. The challenge of selling this stronghold located two hours south of berlin falls to the local municipality. The mayor has traveled as far as dubai to pitch fires, but the bargain Sticker Price has a catch. Investment depends on the renovation costs, between 3 million and 6 million is a realistic expectation. In ther communist rule old east germany, castles and manor houses were left to rot. Their shells. The countryside. As a resident for one family, it is in the debate, and for a five Star Luxury Hotel it is a little too small. But something in between is, i believe, exactly the right thing for this castle. This is the dining room, quite a place for a harvest banquet or a hunters feast. If an angry mob crosses the moat, you can address them from this balcony and figure out some way to appease them. If you get castle fever, you can cross over the moat on a bridge and head into town for a beer. Joins us fromhans berlin. What is the upkeep on a place like this . Heating costs are just 10,000 a year but if you put a little more effort maybe put solar panels on the roof i dont think solar panels work with outlook. Work with that look. , it is, you never know the modern world. Was there a little girl in that castle . That was the brothers grimm horror aspect of this because if you do invest in this, you could end up paying 6 million eruos euros for just the renovation. It is a big project for you. There is a home depot across the border in poland you have got to catch that piece on bloomberg. Com. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and Stephanie Ruhle. He is a real market maker. We will spend the whole hour with the executive chairman of the cme, harry duffy. We will be asking what republican senator means for the nation cost exchanges. Highfrequency traders get unfairly punished . You will talk to the former cmt commissioner. New Jersey Governor Chris Christie has lunch with billionaires. After a whirlwind crosscountry campaign to her, when will we know whether hes running . Welcome to Market Makers. I am Stephanie Ruhle. I am matt miller in for Erik Schatzker. Top Global Business stories from around the world, start off with the ecb. The European Central bank is ready to come to the continents rescue with a united voice, at least according to mario draghi. At a News Conference he denied reports he has been asking acting without his colleagues support. Draghi says the ecb is prepared. Should it become necessary to further address risks of to of low day period inflation, the government is unanimous in its commitment to use additional unconventional instruments within its mandate. Earlier the ecb kept Interest Rates at record lows. Mortgage rates rose slightly this week here in america. The 30 year fixed Mortgage Rate is now a half over 4 a hair over 4 . The 15year fixed is now at 3. 2 . Mortgage applications have oflen for the last couple weeks. Fewer homeowners are refinancing their properties. The Treasury Department is still making money from the bailout of fannie mae and freddie mac. Government 4the billion by the end of the year. Its cousin will send 2. 8 billion back to treasury. All of their profits belong to the government. President ces Francois Hollande said president obamas popularity looks pretty good, mr. Obamas Approval Rating is 43 and his Party Just Got hammered in Midterm Elections. Hollande has reached the midpoint of his fiveyear term with a 13 popularity rating. He speaks to france tonight in a nationally televised speech. 13 . Can you imagine . If you thinkine what Francois Hollandes policies are. Now its time to bring in our guest for the hour, kerry duffy. He has been there since 2002. It owns not just the chicago mercantile exchange. Handles one quadrillion dollars worth of trade every year. That is quadrillion with a q. After trillion is quadrillion . Before gazillion. We are so glad you are here. Youre not just executive chairman of the cme group grade you truly have an understanding of what the u. S. Looks like. We are two days after an election where the Democratic Party got wiped out trade what do you think of it . There are two things. The country was looking for a little more balance. There was not only a republican victory, but a vote against the administration. I think its a twofold scenario we are seeing here with the elections. I think what we will have to look at now is the republicans have the upper and lower chambers of the congress, and they will have to work with the president. The question is do they throw everything at the president but the kitchen sink and make him veto everything and try to set up for 2016 for the candidate, or do they actually work with the president to get things done. I dont think the country will be so happy if all they do is throw unreasonable bills at him. They have talked nothing but about obamacare. They wont lead with it. I think they will lead with sensible things. They will look at Corporate Taxes. They wont try to tackle the larger tax reform, but they will try to tackle Corporate Tax rates and what they can do to stimulate more business in the u. S. That would be very interesting for the u. S. Economy and the republicans agenda going forward. In terms of the financial industry, it seems like they voted against overregulation. Going forward, what will things look like . To realize that dodd frank, the rules are not even finalized throughout this process. I think there are some things in the regulation that they will try to give either no action to from the regular side, versus the congress to get things done on the nature. You cant repeal this either. Two and a half weeks ago when the market was truly in that volatile moment, was the first time we had a look at doddfrank and volcker rule when we are faced with a stressed market. We have not really had one since the crisis. Once we saw a situation where the street could not absorb risk, is that a reason for us to look at onfrank and say maybe we do want banks to be the backstop. We traded 39. 8 million contracts on the day you are talking about. We traded 25 million interestrate contracts flawlessly. We are talking 17 trillion of risk we managed that day. We did it flawlessly. The system can take it. We saw some of the breakdowns, and that was into the dark pools and equity markets. That is really where the stress came from. Certain segments of the Financial Markets need to be looked at her and all of them, no. Do, narrow ityou down to four or five exchanges in america, go back to a nickel . I would not say that. Many exchanges is fine. The question is how are we going to deal with [indiscernible] how are we going to deal with dark pools. I dont have a problem with competition in the exchange world. At the same time, you have to be careful not to fracture liquidity to a point that it cant be executed during if there are 17 or 20 of us in the same product, who are we benefiting . Do the regulators actually understand all these nuances . I think they do to an extent. Place ms was put into before computerized trading really took off. Was it not disastrous . Wouldnt you deal with reagan ms by completely wiping it out . The world is changed radically since 2006. What would you do differently . When you look at the way the quotes are going and the decimals and things of that nature [indiscernible] as long as we are talking politics, pat quinn lost the election. He was the person who really helped the cme stay in chicago with tax breaks. Hes the governor of illinois. Pat quinn did not do any tax breaks. Cme did not get any tax breaks. What cma got was an apportionment, which is still seven and a half percent of our income is apportioned to the state of illinois. We are still the largest taxpayer in illinois today. Are you committed to stay in illinois . It has nothing to do with governor quinn or governor elect around her. We are very happily headquartered in the city of chicago, but our business is global. A big art of our client base is in new york. 150 countries around the world. We have 150 people on the ground in europe, same in asia. Have you spoken with the governor elect . I havent. Obviously your business is a huge part of what chicagos identity, for example . Its a huge part of it. You mean deep dish pizza. I have not spoken to the governor elect. Hes a very market oriented type individual. He knows what the cme angst of the state of illinois and city of chicago. Rings to the state of illinois and city of chicago. You say you have a global footprint. Do you have any acquisitions in mind . We did a lot of acquisitions in 2007 and 2008. We just opened a new exchange in london. We are listing more and more new products over there everyday. We feel very comfortable that we can service the Asian Community through north american or european entities. Right now we put the pieces of the puzzle in place long before others can even think about it. I want to ask about floor traders. We have got to take a quick commercial break. Cme executive chairman teri duffie. Up, riding volatility. How callan group did it right. 00 did it. Welcome back to Market Makers. Callan has a lot to celebrate today. The firm reported their fifth straight quarter of profitability. Jeff solomon is the president of town group. , you are here as our guest. Earnings out today. What we have been focusing on for the last five years, since we just celebrated our 50 Year Anniversary of merging with my each of those businesses to a spot where they can make a real difference in terms of alpha generation. It is really how are we helping our investors to outperform. If it is at cowan, it is servicing the hedge fund immunity. I feel like every guy we talked to right now is moaning and groaning, business is so slow, they are not getting paid, things look dark. Where is the disconnect . Sounds like a party in your house . The disconnect is finding your area of focus and doing it really well. It is honing in on the places where you can make a real difference. We have had Significant Growth in our equities business. Our equities business over the last few years is up 4 . We have increased the number of stocks we have under coverage. We have Excellent Research analysts who are actually adding value. Do you think traditional Research Analysts do not add value . If you are a big firm, you have got to map the s p 500. Size andto be huge huge volume. When you are doing that kind of stuff, that is a more commodity oriented business. There is less room for focusing on alpha generation. Particularly think about the fact that most investors today access the markets three tfs through etfs. We no longer look at the world as one that is a buy side firm. If you care about active management, which we do with cowen, we are partners. Were people who think about how to help people outperform. We do that at remy us. Volatility, we have not seen much of it. Then we see a sudden burst of volatility like we saw two weeks ago on wednesday. How are you dealing with your clients . I get asked this question a lot about sudden spikes in volatility . Is not a problem for us in terms of the process. It helps in the equities business to have a little bit of volatility. It is about consistently service. Highquality we now have the ability through some of our acquisitions to do high touch as well as electronic. Is a real different approach to the markets that a lot of other firms had. We dont care how you pay us as long as you are paying us for the services we are providing. Because you specialize in small and mid caps, there are other brokerdealers who dont cover the same names you do. Isnt that a problem that clients who are in those companies in those stocks just cant get the liquidity they need . 70 of our Research Universities i defined as large cap, which is companies that have a market cap north of 2 billion. Our trading and repositioning is largely in some of the larger cap names. In smallcap names, we have been talking an awful lot about how some of the challenges are in liquidity in smallcap names. As part of the reason why we have been working so hard to fix some of the Equity Capital formation issues in the country. We do need to foster more liquidity in smallcap names. Marketizze fits all doesnt always work for small caps. We have not had that issue when our clients have wanted to get in and out of names, particularly like sciences and technology. We were talking a little bit about reagan ms. Most of the guys i know who work around exchanges and brokerdealers think of it as nightmarish because it went too far with decimalization. You have dark pools that cheapen the business. You have been doing very well over the past five quarters. What do you change as far as regulations to make the market more solid, more quality . It is one word, simple. Make the market more simple. The more complexity you take out of the market makes it more efficient. We have said this over and over again to regulators. The Pilot Program that the sec just put up for comment yesterday is an attempt to try to change the market structure. I think there are some issues with it. At least were trying to address some significant issues around liquidity. We talk about the fracturing of markets. There are so many different ways investors can access liquidity. For largecap names, its not terribly challenging. For smallcap names, if you are on 52 different venues, where are investors going to find liquidity . Bringing fundamental buyers and sellers is way better in my opinion longterm. Are investors willing to pay for that . Atn i was a kid working tucker anthony, i put through in order for a couple thousand shares and was 200. Now you can do it for a penny. Is a difference between individual investors and Institutional Investors. What we have heard from our institutional clientele is it would be a lot better if we can offers and limit trading in between the bid and offer. About this. Clear most individual investors today access the market through institutions. The market shift has changed. Im not saying people arent entitled to discount brokers. Theres a cost associated with that and we should be balancing the need for cheap execution with quality execution. Sometimes reagan ms gets let out of wack. Its hard to put the genie back in the bottle. Anytime regulation comes out, to take it back a step or take it back several years is hard to do. What you have to do is not try to change the whole process, but almost what amendments into the process to make it more efficient. Add more pages . Add more pages to eliminate pages. One thing you can do without regulatory framework, limit [indiscernible] there are so many order types. There are harmful order types. In the equities world there could be upwards of 70 to 80 different order types. At the cme groups, we have seven order types. Fromve seven order types 1985. We still have seven order types. With this seven order types, it could give supposedly the highfrequency traders an advantage with different kinds of order types. Those are some of the allegations going around in the market lease. Marketplace. What is a harmful order type . Orders that give you a peek into the market and you can pull out of it . Flash trading. There are some order types that enable trading. Enable flash trading. There are clearly market leaders who thought about simplicity as a business model. You are pointing to terry. As it relates to our business model, nonconflicting business models. Tradingalgorithmic capability that accesses all 52 models and gives a lot of transparency to Institutional Investors without reading their order types and slowing them through a dark pool. Havedea here is you can nonregulation answers by providing honesty, integrity, balance to the market. That is a little bit what you have done at cme and a little but what we have done at cowen. You are saying we need more simplicity. It seems like that is what flash boys Michael Lewis was demanding, saying this is a completely open market place and we need simplicity. On some level, arent you in agreement with him . Hes some levels, when making the allegations that people are front running orders im in agreement with him. I dont support that. We are a highly regulated industry. If we dont have a credible marketplace, we dont have a marketplace. If he is suggesting there is front running going on, those abuses need to be stopped. We have shown clearly to our regulators how are marketplace works for us is how the equities market works. We have a vertical silo. They have a fragmented marketplace. When you are computerized trading like that, the way those orders are entered versus the equity world are two different things. Correct. The equity world is way more fragmented than your world. If we can approach solutions that would be a little bit more like your world, that would be a lot better for all of us. Congratulations, five straight profitable quarters. Youre not going anywhere. Im staying with you. Thank you, jeff solomon. Welcome back to Market Makers. I dont even know what im saying. We are going to talk about Chris Christie. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and Stephanie Ruhle. Welcome back to Market Makers. Im Stephanie Ruhle. I am matt miller in for Erik Schatzker. We have a special guest with us for the hour, the chairman and president of cme group, terry duffy. We are glad to have him in from chicago. Good to have some more midwestern blood on the set. Jersey girl. Few politicians are having is good a week as Chris Christie. He ran the Republican Governors Association this year, the group charged with electing more gop governors. On tuesday they won races in deep blue states like illinois, maryland, and maine. Added they celebrate yesterday . How did they celebrate yesterday . Where was governor christie yesterday . Not in atlantic city, not even at the paramus park mall. Is louise ruhle your mother . Obviously. [indiscernible] my editors, Christine Harper and robert friedman, who are usually very mean, real taskmasters, yesterday they said you should go to the four seasons and to a tople other restaurants just see what the wall street and midtown new york crowd thinks about the election. It was a pretty big deal. I intricately went out to the four seasons the most expensive bunch in new york, by the way. Weirdly enough it wasnt that expensive. Are you crazy . Have you been to the 40 to the four seasons for lunch . I like to swim in the pool room, but thats expensive. Did you read maxs story today . 28. I like to spend less than seven dollars for lunch. I thought 28 was reasonable. When i got there it was pretty empty. Back inre dsaid come 15 minutes, so i went to another place, came back. A secret Service Person was there. I thought maybe i was getting lucky. Chris christie indeed was sitting down. He was with two billionaires, but i only recognized one, steve wynn. I stayed and talked to bankers around the four seasons. How do you know the other guy was a billionaire if you did not recognize him . I asked around [indiscernible] it was richard [, a real estate mogul. Part to me is the Midterm Election we just went through is going to be the most expensive Midterm Election ever. Wall street has never been until this year the biggest supplier of political money. They have always been up there. The unusually number two, number three, number four. I was curious to ask these guys how they want to see a return on their investment. Very cool. What did they say . Actually, this did not make it into the story. I would like your advice on this. Two people talked about taxes and how profits tracked overseas may really want to come back. I very much feel that way and i know a lot of politicians feel that way. I spend a lot of my time in washington as well. Put it into the infrastructure of the country alone and it would do a lot of good, create a lot of jobs. I think it would be a great benefit. Yeah, jive around new york. We desperately need that. [indiscernible] is done a lot of good things. He helped win elections throughout the country. Fors setting himself up 2016. I dont think this anoints him for 2016 by any sense arent you concerned that keeping people stuck on a bridge for four hours we have got to move on from i dont think i will ever move on from that. It seems unforgivable to create that kind of traffic. People in america dont like traffic. I drive, and i dont like it. I dont like it either. Hopefully the governor would not cause any gridlock in policy legislative issues. He wont cause gridlock in washington. Have you heard the Chris Christie joke i love . Im going to have to tell it off air. Off air. We will say hes in good shape. David shepard was here a few weeks ago, the biggest philanthropist in new jersey. Said when you think Chris Christie, what do you think. Do you know what he said . Lap band. [indiscernible] i got lunch in a paper bag afterwards. True beat reporter. I can see why the bill was only 28. Bloombergs max able to hear. When we come back, the regulator who came in from the cold. Now works with some of the people he used to regulate. We will hear from him about highfrequency trading. Markets are doing better than ever. That is what one former financial regulator thinks. He has gone from calling traders to cheetahs to advising them. Tcts bring in former cf regulator. Is guest host terry duffy still here to our left. You wereare the guys coming after a now you are in their office advising them . How does this work . There is significant synchronicity, which is the great thing about the positions i espouse when i was a regulator and what this modern markets initiative espouse, and they want markets that are transparent, that are simple, and there is accountability. They want regulation, actually. Im totally down with that. It has been a delight to work with them. They are making markets better in general. They want transparency and simplicity. How does that go handinhand with high freak would see trading . High frequency trading . People lump highfrequency trading into one category. There are many different strategies. Some of them are in dark pools. Some of them are just inequities. Approachesyriads of and that is one of the things i look forward to sort of helping explain. Its not just a onesizefitsall. They are in every market, every place, all the time. In terms of regulation and inefficiency, do you believe the markets today are better than they have ever been . I think the markets today i dont know if they are better than they have ever been. The way you can always judge that is by the overall volume. We have had fairly anemic falla over the past several years and a huge equity runup. The average person does not have the confidence in the overall system. I personally good believe the systems are as safe as they have ever been. You are talking about people who own cats. Who are the people who own cats more than stocks . Do you think we are more regulated today . I think we are. Heck, its weird for me to complement terry here and be even more positive. You guys had the highest volume ever. You guys are doing fantastic. I think the whole circumstance where you have these 45 different places to trade, the dark pools plus the proliferation of regulated exchanges, that is something we need to look at. By and large, transaction fees are a heck of a lot less. If you are an individual investor, it used to cost you 75. Bid spreads are less. Full ability is way down overall. Volatility is way down overall. Lets say you go back to being the king regulator. What is one thing you would change . Crossborder. Crossborder guidance. Knows is probably better than anybody. We put in place all of these rules in the United States as a result of doddfrank. The eu is a stagger step behind us. Theres market migration going on between the two nations. Theres some regulatory arbitration where people say the rules may be too tight in the u. S. , so we will go to the eu. That can happen around the world, other places. Example, we are in 85 countries around the world. Making sure there are fair, sensible, harmonized rules. That is what i would do if i could come back for one day. It doesnt have to be uniform, but there has to be deferential compliance. The eu has to say, we like the usa rules. Wouldnt you agree, terry . Right now london is trying to become the Financial Center of the world, not just of europe. Is that because they basically pushed everybody out five years ago . Theres no question about it. Now theyre trying to bring everybody back. Even when the transaction taxes were proposed throughout the european union, the British Government him out and said we will not accept that. What we need to make sure is regulators are not competing in global industries. Thatf the things commissioner shelton did, and to his credit, he is the same today [indiscernible] yes always believed in what he has said. I have a lot of faith and confidence in bart and what he has done at the commission. Guinness book of world records. Do you have any confidence that the cftc and continue to do proactive work can continue to do proactive work Productive Work . Rulemakingdotfrank c, office of the oc comptroller of the currency, fdic and fed there is still a least a quarter of the rules that have not been done. I think the agency can do well with limited budget, but it takes more. Congress i hope will step up to the plate. Cme in the past has supported increased budget for the agency. Do you think because so many republicans won, congress is going to help support . No. I dont have a lot of faith. Expect the unexpected. With all due respect, over the last several years when the democrats held the senate and administration, they did not get any more appropriations into the cftc either. Im saying i dont anticipate any new funding streams because the republicans i havent heard anybody that suggest that. We agree on another thing that you called for earlier this year, the fines that the finds that the cftc collects fines that the cftc collects. Last year when the Government Shutdown we had no reserves, we had to shut down. The fdic, sec, the others, are for the most part self funded. Let us take that 1. 7 billion. The cftcs budget was 218 million. The 1. 7 billion could have funded the agency for five years without a dime of taxpayer money. Congress. Fied in what is important is you should at least get a percent of that to find your own agency, whether it is 10 to 20 . We need to take a quick right. We will be back with final words. A little Word Association. Partial thannd still here. We are going to play Word Association on Market Makers today. We are going to say a word. You say the first thing that comes to your mind. Elizabeth warren. Strong. Elizabeth warren. Not a chance. Nyse floor trade. Nice history. Good friends. Frank doddfrank. Fantastic and needed. A touch overdone. Like Word Association. I want to talk about this stuff. Like Word Association. I want to talk about this stuff. There was only a time certain we could do doddfrank. There are still lots of problems with it. If we did not have it, we could still be in the circumstance we were where we had unlit, dark markets. Lehman brothers before they went down were overleveraged 30 to 1. To increasedads capital, better margins, rater transparency forget lehman. Goldman sachs. Great firm. Great firm. Nobody would publicly say anything bad about goldman sachs. Thats not true. I have disagreed with him on many things over the years. Disagreed on speculative position limits. The thing about goldman is they are very forthright and they want to engage with regulators. Quite frankly, not all the banks do that. Lets talk about energy for a second. We have not put any position limits in the place. The rule at the cftc was challenged in the courts and failed. Since that time, the price of oil has gone down 30 a barrel. I dont think speculators are causing it now. It doesnt mean they cant in the future and you dont need protection. Chicago cubs . Not as good as the sox. Chicago bears. Fantastic and on the move. All i can think about is deep dish pizza. Thank you so much. What an awesome morning. Thank you so much for joining Market Makers. This guy who is making profits on the cheap. We will have an interview im extraordinarily excited about, speaking to the ceo of h ms u. S. Division. We will be talking about the latest jobs report and the new rival here in new york city, top shop. The Alexander Wang collection explosion. Lines are wrapped around the block today. Im going to take you to lunch and talk about who Alexander Wang is. Collaboration with the one and only missy elliott. You know who she is. Let me work it. You dont know who she is . No. We need to wrap it up because i have to talk to matt about missy and Alexander Wang. It is 56 minutes past the hour. We are always on the markets at 26 and 56. Mia saini has more. The boardsook at how are reacting today. Call it a session where you saw muted gains after we saw some expectation from the ecb. Mario draghi chiming in, saying Interest Rates are unchanged as well as hinting at perhaps quantitative easing in one in some way, shape or form over the next couple of months. Give investorsly much to hold onto. Nasdaq unchanged at the moment. Join me for that joining me today is scott bauer. Lets talk about these markets. In europe we did see nice gains after mario draghi at a press conference. In the u. S. , not much reaction. It really seems in the gains here were ahead of the announcement. Its great to see we are not having a selloff. Buy they you will see a rumors, sell the news situation. I think here people were buying into the markets, thinking we might see some qe come out of europe. We have not seen it. The market is holding pretty strong. Tesla shares are jumping 5 today. This is after those earnings yesterday that pretty much tesla reported a profit of two cents a share, beating forecasts of sales on 923 million. Tesla cut its delivery forecast due to production constraints. What type of action are you seeing in the Options Market . That was the anomaly where the options plays were going into earnings as well. When i say the street, options players were really thinking not meet thisld demand. Quite unbelievably, you look at any sort of company, especially a car company and the chairman comes out and says we cannot keep up with the demand. We cannot meet the demand, so we are going to cut and the stock goes up. Theres almost some shenanigans going on around there. The earnings, the pressure was actually to the downside. This is quite a surprise that stock is up. Shenanigans is a good word, considering that elon musk said 50 next year, quoting right here, probably for the next several years. You have a trade for skyworks solutions. We have earnings coming out after the close. With their presence in the mobile market right now, they are the dominant player. They just came out recently and actually upped their guidance. Going into earnings here, theres not going to be a downward surprise. They are the premier player. What i want to do is take advantage of that, put on a bull call spread. I am buying next weeks weekly options. Five dollars spread, i can buy that for 1. 30 or so. Right now the Options Market is pricing in a five dollars or six dollars move, which would put it at a 66 or 67 level. They just came out and raised their guidance. For a company to do that ahead of earnings, they have got to know what is in the bag here. That. Tt, thank you for we are on the markets again in 30 minutes. Money clip is next. Welcome to money clip where it had a get her the best where we tie together the best video clips and money news. Tesla surges as elon musk sees several years and 50 growth for the model s. Tim armstrong sees better days philipand