Transcripts For BLOOMBERG Market Makers 20150226

Welcome to Market Makers. I seem to have misplaced Stephanie Ruhle. Im terrified all by myself. Im going to kick it off with the top business stories of the morning. Sears is getting smaller and so are its losses. The retailer cut its losses by more than half in the fourth quarter. It has now lost money 11 quarters in a row. Eddie lampert has been shrinking the store base and separating units to generate cash. They want to form a Real Estate Investment trust to leaseback the stores. Firsttime jobless claims rose by the most in more than a year last week. It was well above the estimate. Inflation at the consumer level took a dive last month. Prices fell zero point 7 , probably due to Falling Energy prices. The cpi actually rose. The fcc is headed toward a landmark vote on regulating the internet. Regulators expect to adopt rules on Net Neutrality that would bar broadband providers from charging websites to deliver content more quickly. Large mobile phone carriers say the regulations would discourage them from making billions of dollars in network improvements. They would carry the cost, not Companies Like google and netflix. Sprint and tmobile say they welcomed the measures that would rein in their bigger rivals. Barnes noble is breaking off. The bookseller will spin off its education unit. The result will be to publicly traded companies. Some analysts were expecting them to spin off the nook. Shares are soaring, up as much a 7 . In ukraine, the ceasefire may be taking hold. There were no attacks by prorussian rebels overnight. Ukraine has accused separatists from violating the ceasefire since it went into effect two years ago. The ukrainian currency has been in freefall, losing more than 50 of its value against the dollar this year. The central bank imposed a ban on foreign currency trading earlier this week, but that kind of thing never works. Marijuana is now effectively legal in the district of columbia. Congress is not happy. Anyone who is at least 21 can grow as many as 21 plants and possess two ounces. It is still against the law to sell the drug or smoke it in public. In december, congress attached a provision to block legalization in d. C. City Officials Say it is no fun if it is legal. That is not really what they said. The National Organization for reform of marijuana legalization. Normal. Everybody knows that. Julie hyman is here with me. She is our retailer reporter. Sears reported a narrower loss than expected. Shares are down. Perhaps theyre keeping and i on the cash levels and wondering whether asset sales are in effect of longterm strategy. Jules i know you have been doing a lot of research. Julie we all know that Eddie Lampert did not buy this company to make it a successful retailer. Since he combined sears and kmart a decade ago, the company has only had one quarter of samestore sales growth. This quarter we saw 4. 4 drop. Sears is down 7 . Who still shops that sears . Who is going to care if this thing does go away . Matt miller will care. We will get to this in a second. You are not the typical shopper at sears. I talked to folks who do shopper surveys and they said if you look at the average sears shopper, it is 50. 4 years old. You are a little young. With a Household Income around 58,000. 21 of these people have children and their household, as well. If sears did close you can look at the figures as well for clues. They also shop the jcpenney. 67 shopped at amazon. 82 shopped at walmart. Some of that demand would go to some of these other retailers. I also did a very informal and anecdotal survey on facebook. I am a city dweller. I dont shop at sears. I asked on facebook would you care if sears went away . I got an amazingly high number of responses. It seems like that people go there for craftsman tools. Matt they have a great brand of tools. It is easier to find than snapon. Julie i have one friend on facebook is said that used to have a lifetime war anti, but they no longer have that warranty, but they no longer have that. I have not verify that. Some folks go to sears or appliances. A lot of folks mentioned lands end. The interesting thing is that sears spun off lands end and it is now a separately traded entity. Matt do they still sell it in the stores . Julie they do. They are not collecting as much of the profit from lands end. There are these things in sears that potentially hold value and then there is the real estate which is what is behind Eddie Lamperts move to explore this sale leaseback arrangement to ring some more value out of the company before it perhaps dies as an actual retailer. Matt fascinating story. Thanks very much. Julie hyman, a retailer reporter. Our retail reporter. Ask from the brink. We will look at whether the greek debt crisis is over. The fcc is minutes away from starting a historic meeting. Regulators will vote on new Net Neutrality rules. Stephanie welcome back to Market Makers. I had to go to a kindergarten show. I missed that first show. I had to go to a snailabration. We were celebrating snails. There was no eating of them. It is time to talk about things other than snails. You can see the impact of plunging steel prices. Consumer prices fell 0. 7 slightly more than expected. Once you take out food and energy costs, cpi rose. Firsttime claims for Unemployment Benefits were higher than expected last week. United airlines has sent an unusually blank message to it blunt message to its pilots about mistakes in the cockpit. The memo was prompted by several serious incidents. In one united plan, they had to make a maneuver to avoid crashing. The message said, lets dont think that couldnt happen again at united. Americans are not drinking enough beer. Are you . Matt i drink as much as possible. Stephanie there you go. Fourthquarter earnings missed estimates. The company has been struggling to turn around a week sales of the flagship weak sales of the flagship budweiser brand. It could be that everyone is crazy to go no gluten, wheat free and they are not drinking beer, they are tricking vodka. Matt gluten, sugar free, dairy free. Stephanie people are crazy for that. Have you ever had bud light lime in the summer . On a summer day. Matt no. It is disgusting. Stephanie you know what, i like it. Snails, bud light lime greece. Matt it will ease the cash crunch it faces next week. The government is expected to push to loosen the conditions being pushed on by the rest of europe. Erik schatzker spoke with the finance minister yesterday. He asked what happen if greece fails. Then we need to be content. Matt lets bring in andrew balls. Thanks the much for joining us. Only four months. Stephanie will just be starting her bud light lime at that point. [laughter] are we going to be right back where we were before we know it . Andrew yes, we have a few things coming up. They will need to fill in the details of the provisional agreement they have this week. As you get to the summer as you get to the need for a new program then you could have a lot of noise from greece. Our best guess is that they will come to these agreements, but you get a lot of noise from both sides as they try to agree. Matt both sides have come closer to the middle because they started out at the polls and you have greece coming back in and agreeing to ask for this bailout on the same old terms. Arent greece and germany going to come together and finally make a deal in the end . Andrew that is what we think will happen. If you look at greece since the middle of last year, the shift in the town has been very marked tone has been very marked. They have moved to the center. This concentrates the minds of the government. A lot of the things they are negotiating on do not look that unreasonable. On the german side, you certainly have some rhetoric, but they came to an agreement this time quicker than we expected. I think it will be noisy. That is always inevitable. But there is a high probability neither side wants an uncontrolled greek exit. Stephanie andrew, for those who are shortterm investors, daras a day traders should dare i say day traders, should they be calm . Andrew one thing we have seen in recent months is the ability for greece to spill over into other parts of the european markets that are much diminished now. We have the ecb that will be announcing the details of the qe next week and then starting next month. I think for the broader Asset Classes greece has been pretty contained and will be contained. On greece itself, there are many things you want to be watching if you are involved there, including bank deposits. I think the focus could be away from greece for a bit of time. Matt if greece gets a new contract, if they get better terms, surely other countries are going to ask for the same, right . Stephanie i. E. Slippery slope . Andrew it is not germany versus greece. The spanish are pretty tough, as well. It is precedent. Ireland has made clear that anything greece wants, they want, too. If they can come up with an agreement over this summer and cover the big redemptions, over time, i think it is likely that we will see further debt writedowns for greece from the public sector. I dont think the finance minister is going to be on that watch. Stephanie lets turn our attention to janet yellen. What did you think of her testimony . Andrew i dont think we learned a lot new. She did not go a lot beyond what we have had in the past. There is a march meeting coming up which is going to be an important one. I thought she sounded relatively upbeat on the economy. The questions from the senate and the house were a little bit away from where markets are most focused in terms of the rate cycle. Not a lot new, but broadly positive. It seems pretty likely that the fed will take up the word patience in their march meeting and then they will have the flexibility to start hiking rates in line with the data could be june, could be september. Stephanie did you agree with her overall views on the economy . Andrew i thought it was pretty reasonable. Inflation is low and it is going to come in lower, owing to energy prices. The dynamics look a lot more healthy than those on the european side. One of the things which has been a concern is what i fed rate hike cycle lead to volatility . What janet yellen was essentially doing was laying the ground for the kind of rate hike cycles but no one should be surprised about. Sending the signal that they can be very slow. Hiking rates when they start. Stephanie we talk so much about the risk of hiking rates too soon and it could cause a tantrum in the markets are not ready. What about the unintended consequences of leaving rates too low for too long . Andrew yes, i think that is important. They are going to start hiking rates at a time when inflation is close to zero. There will be a forwardlooking element to what they do. They will start looking through the nearterm inflation rate readings and i think they want to gradually tighten policy so that they do not have to go faster they do not have to traditionally, the fed starts a bit late and goes faster. Matt are they doing that now . Shouldnt they have started a couple of years ago, really, in order to gradually tighten . Wouldnt it have been advantageous in the end of 2011 or 2012 . Andrew look at the growth profile. We dont have growth overheating. Roger will decline in terms of unemployment. Inflation is going to be very low. From pimcos point of view, the timing looks about right. It is going to be shallower compared to history. Given the challenges they have had, from our point of view, the timing looks pretty good judged by the macro data that we see. Matt obviously, the Oil Situation is very different. Andrew balls, thank you so much for joining us. Stephanie Market Makers will be back in just a moment. We have a lot more to cover. Matt Net Neutrality. Stephanie that is hot. That is hot. Stay with us. Stephanie welcome back to Market Makers. Im Stephanie Ruhle with my very special guest matt miller. We are sending you want to scarlet fu where she is taking a look at stocks in the news and on the move. Scarlet i want to look at barnes noble. The bookseller announced a longawaited break up. It is going to cordon off its moneylosing ereader business from its more profitable education business, the College Bookstore business. What will result is to separate publicly traded companies. This will be a taxfree spinoff that will be completed by august. It marks a change from an earlier plan. Barnes noble was planning to spin off the nook business on its own. A box that it bought back microsofts stake in the nook business. The business during the holiday sales season did not do that well and would have trouble being spun off on its own. This is a different twist. It is certainly something that investors like at the moment. If you look at how shares of performed over the past 12 months, they have rallied more than 30 . 31. 3 versus a 3 gain actually, if you include dividend, 8 advance in the smallcap index. A wide differential of 23 percentage points. Matt very good that you are reinvesting your dividend. Very conservative. Scarlet everyone has to. Stephanie keep it real. When was the last time you went in barnes noble . Scarlet i go look at the books and then i go in order them. Matt you were there worst dream. [laughter] Stephanie Barnes noble in tribeca is ground zero to hang out with toddlers and moms and nannies and the only thing people are buying his coffee. Matt i will go to the barnes noble in union square and drop a c note on magazines. Stephanie a c note did you just say a c note . A c note matt a benjamin. Stephanie raining money. Hes out there. Theres a guy out there whose making a name for himself in a sport where your name and maybe a number are what define you. Somewhere in that pack is a driver that can intimidate the intimidator. A guy that can take the king 7 and make it 8. Heck. Maybe even 9. Make no mistake about it. Theyre out there. I guarantee it. Welcome to the Nascar Xfinity series. Live from bloomberg headquarters in new york, this is Market Makers. Stephanie welcome back to Market Makers. Matt erik is on his way back from athens, so i am filling in for him. Stephanie happy birthday adrian toscano. Adrienne toscano. Matt happy birthday. The fcc is about to begin its meeting on Net Neutrality. They will approve on a partyline vote. Internet regulations would prevent broadband providers from charging websites to deliver their content more quickly so you will have to pay for it. Big internet providers are opposed. They say the regulations would stop them from making billions of dollars worth of network improvements. The winners include Video Services like netflix, that can use the whole highway without paying any more than anyone else. Shares of sears rising this morning. The retailer posted a fourthquarter loss that was less than half of last years. Lampert has been shrinking this years store base and has been separating units like lands end to get cash. It is the biggest management shakeup ever at the British Bank Standard chartered. The new ceo will be bill winters. He is the former coceo at jpmorgans investment bank. The banks chairman and head of asia also announced plans to step down. Shares of Standard Chartered fell last year. Something old and something new at royal bank of scotland. Rbs posted the seventh yearly loss in a row and it named a new chairman former regulator howard davies. He was once chairman of the British Financial Services authority. Rbs posted a 5. 4 billion loss in 2014. Rbs also forecasted higher restructuring costs as it shrinks its investment bank. Dunkin donuts is shifting gears on its losing coffee strategy. It will start selling cake up k cup coffee to franchises and in stores. K cup sales in Dunkin Donuts stores fell by almost 30 last quarter. Jeb bush would not hesitate to start a war in the middle east, like his father and brother before him. He said his familys history would not be an issue if the safety of the American People was at risk. He is expected to run for the republican nomination for president and made those comments on a radio show. Stephanie do you like doughnuts . Matt well, yes. Stephanie on a scale of junk you love to eat . Matt the krispy kremes, yes. Stephanie i feel that way about farm doughnuts. Matt i dont know what that is. Stephanie we can talk about that during break. Matt talked about the historic meeting of the federal Communications Committee voting on Net Neutrality in the next couple of hours. The proposals would bar broadband providers from charging websites for access to if it an internet fast lane. The ceo of ustream, is following this very closely. Peter cook is covering the story out of d. C. Peter, i want to start with you. Peter from alledge state of standpoint legislative standpoint, congress is watching this play out. Congress democrats are very optimistic about the vote about to take place. This is not happening in congress. This is happening at an independent agency where the president has pushed the chairman of the fcc to move forward with the rulemaking arguably the most important rulemaking at the fcc in years. They will vote later this morning. It is happening down the street from us here in washington. 32 is the likely outcome. They will back this proposal that will bar the idea of fast lanes of allowing any sort of paid prioritization on the internet. The two republicans adamantly oppose it. We will hear strong statements today at the fcc. Stephanie brad, why is this so important to you. Brad the internet is the bridges for our society. Think of the internet as a new country or a new democracy. To me, this is the first start in a bill of rights for the internet. We need to protect the openness of the internet. When he to make sure that all websites are created equal. We had no resources when we started our company. Had we not had the resources to rise up and start from nothing we would not have the innovation that we have had. Matt i love the idea of a bridge. I dont understand. If you are both paying the same toll across the bridge and netflix is taking up three quarters of the lanes, does that seem fair to you . Shouldnt they pay more . Brad that is technically not true. There are a lot of technicalities. Netflix pays a lot in internet bandwidth traffic. So do we. We pay paid prioritization. The reason that works today is because there is vast competition. If one person gets too aggressive, we can choose who we want to pay that too. What tends to happen is the last model. That is what scares netflix and a lot of the Media Companies are now control from the creation of the content into the household. That is a worrisome proposition. What we dont want to have happen is we go back to the days where we had verizon flip phones and every act was verizon app was verizon. We want openness and fairness and competition. I think this framework is a good start to that. Matt what about the Big Companies that used to back Net Neutrality so strongly . Facebook was behind it google. Stephanie i feel it we dont hear from them anymore on this. Peter they are still supporters, but they are not as vocal as they have been because google is now an Internet Service provider. There are some aspects to their businesses that might lump them more in the camp of the isps as opposed to the content companies. That is why it is a little bit more complicated. We have seen lastminute negotiating over specific language to make sure some of the companies are not caught up in all of this. There are competing interests. It is not as clear cut in terms of the dividing lines. Matt is there a better market based solution that is giving the fcc regulatory control here . A lot of people would be opposed to government regulation as a good, longterm, fair solution. Brad whatever can foster competition. There are all sorts of ideas out there. Maybe we open up new spectrum that gives access to major Media Companies so that there is more competition. The more competition you have the less need you have for regulation. That being said you need some sort of framework, just like with the highway system the telecom system, of a regulatory environment. From my standpoint, i think it is a good start. It will certainly evolve over time. We must protect internet freedom, openness on the internet, discrimination. That is not to say you cannot have prioritization in certain scenarios. I am a strong supporter of paid prioritization in emergencies. This needs to be flexible enough to not also disencourage types of information innovation we have not thought about. Stephanie clearly this is a hot topic that is happening as we speak. The ceo of usstream. Peter cook. We have a lot more coming up. Matt stay with us. Stephanie we are going to be joined by one of my favorite Bloomberg News colleagues. Matt time for the top business stories from around the world. The cpi fell 0. 7 , most of that depends on falling fuel prices. Once you take out energy and food, the cpi actually rose. A sign of uneven progress in the labor market. Firsttime claims for Unemployment Benefits rose for the first time in more than a year. That was well above the median forecast from economists. Another wall street bank is being held to account for the financial crisis. Morgan stanley has agreed to pay 2. 6 billion to settle an investigation into the sale of mortgage bonds. Jpmorgan, bank of america, and citigroup have also made similar settlements and those total 35 billion in cash and consumer relief. A recordbreaking deal for the kardashian clan. The family has signed a fouryear, 100 million deal to stay with the e channel. Bruce jenner will not be part of the deal. He has his own show based on everything that is going on with bruce jenner. We are more than an hour into a trading day. Lets go back to the news. Scarlet fu is taking a look at some of the movers. Scarlet the dow is slipping from its record yesterday. A lot of energy names are dragging down on the back of a stronger dollar. Janet yellen has made clear that the Federal Reserve is in no rush to raise interest rates. You told us about the cpi report. 1. 6 increase is what the fed monitors. That is moving up toward a 2 target. 1. 6 in core cpi is a long way toward that. Lets move to individual movers. A singaporebased chip device maker is trading at a high right now. Analysts at Summit Research say this is a fair bid and emulex is unlikely to attract competing bids. Qlogic could be an acquisition target. That is gaining more than 3. 5 . Finally, salesforce. Com trading at a record high. It rose raised its revenue forecast for last year. Matt thanks very much. Stephanie when we return, she lives the American Dream without having the papers to stay here legally. The undocumented immigrant who make it big on wall street. Stephanie welcome back to Market Makers. She climbed the ranks of Goldman Sachs, making over 300 grand 300,000 per year, but she did it all as an undocumented immigrant. She is here to tell us her story. She is now the director of development at defined america a nonprofit that helps women and men just like her, undocumented immigrants. And our own Bloomberg News superstar, max abelson, one of my faves. We have had the chance to read this extraordinary story. Get on the terminal and read it. Tell us. I came here when i was 11. I came here on a tourist visa and my visa expired. Because i used to the tourist visa to live here getting a work visa would be impossible. So i became undocumented when i was 14 texas passed a law that allowed me to go to college and i graduated from the university of texas at austin in 2005. Stephanie could you work . You go to college but you cant pay tuition. Matt did they give you some sort of temporary documentation to go to college . Julissa no. Stephanie did they give you a scholarship . Julissa no. I did get a private scholarship but i did not get financial aid. You can pay instate tuition, but you are not allowed to receive financial aid. Stephanie how do you go from college to goldman. Julissa i had an internship in 2004. I did well during the internship. I was asked to come back full time. When i got this job offer i was faced with a really difficult decision. My choices were to give up on my future and the sacrifices my parents made and i made or my other choice was to break the law and use fake papers. Matt it is such a great area isnt it . The state of texas knows. It allows you to go to college. It knows you are there. They are not doing anything about it. They sort of tacitly allow you to be in this country. Why doesnt washington make steps to change it to make it legal since states aarti know it is happening . Julissa that is a great question. That is when i ask myself all the time. Stephanie hold on a second. You in turn of goldman, now it is time to get a fulltime job. Eyes to work at a bank. They do background checks. I remember stressing over those. You had to be worried. Julissa i was terrified. It was really scary filling out the documents and knowing that i could get found out at any minute. Stephanie what happened . They did not check . Julissa they definitely checked. Im not an expert on this, but i believe that what a background check checks for is a criminal record, which i dont have. Stephanie stephanie, though matt stephanie, though. [laughter] julissa goldman now follows a different process than it did before. Stephanie this is an extraordinary story. This is what movies are made about. I love the fact that it is a goldman of all places. Max sometimes stories take a really long time. We talked more than a year ago for a story that i wrote that is out there about young people on wall street who have the run nonprofits. It was only a few weeks or maybe a couple of months ago now where she emailed me and said do you remember me . There is something i did not tell you. I found out about her story and we took it from there. Matt this is a great story and everyone should go to bloomberg. Com to check it out. Beyond the story im sure you have looked into the immigration question on a whole. The state of texas tacitly allows immigrants to be there and operate in our system. The state of new york does the same thing. The country was built on immigration. What is stopping us . Max dont get confused about texas. Although rick perry signed into law a state bill that allows undocumented immigrants to go to the university of texas with instate tuition, thus allowing julissa to go to college, rick perry stood up and said, if the u. S. Does not secure the border texas will. There are a lot of mixed things going on. Julissa by the way, there is big opposition to this bill that allowed me to go to college. Greg abbott, the new texas governor, has said that he will veto that law. That law is at risk and there are thousands of students who may not be able to finish their College Education if this law is repealed. Stephanie how did Goldman Sachs find out that you are undocumented . Julissa they did not. Matt she got married and got her green card. I read the full story. [laughter] stephanie at any point what you were working there, the pressure, the stress, the secrecy of it, the fact that you could not fly to go see your father in mexico, and you had a super highpressure job, it did not make you want to tell anybody . Julissa i absolutely want to tell someone, but i did not for two reasons. There is a stigma that what i did was wrong or shameful. I was embarrassed by it. I did not even tell my closest friends. I remember my friends to get her to mexico, a vacation, and they were like him he should come with us, it will be so much fun. I said, i cant. I have to work. They were like, you are such a workaholic. I could not go because i could not leave the country. Matt i want to quickly read a statement because Goldman Sachs did respond to the story. Lloyd blankfein said wouldnt it be great if we could give a home to more of the talented young people who come to this country for an education and want to apply their energy and skills to supporting our economy . It makes sense if we are educating people in this country, why would we make them leave after we give them the best education in the world. Stephanie did you ever meet him . Julissa i heard him speak a couple times. I never met him in person. I never had a conversation with him. I was so humbled by his statement. I was really shocked. Stephanie we are humbled by you. Thank you for joining us. We will be back with more. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and Stephanie Ruhle. Stephanie making history at the fcc. Regulators may be months away from a landmark decision excuse me. Moments away. What did i say . Moments away from a landmark decision. Reading is hard for me. Matt we will to you why ultraluxury cars are selling faster than those that drive the rest of us. Stephanie our man in havana. Middlemen are hoping to make a killing by hooking up American Companies with cuban consumers. Hopefully not literally. Matt im matt miller. Erik is on his way back from athens. Stephanie i know you are excited to talk about extraordinary cars. I loved speaking to julissa. The undocumented immigrant who got her way into Goldman Sachs a ball places. A Pretty Amazing story. Matt it is an amazing story. Stephanie lets give you some news. Shares of sears are down 7 this morning. Here that, Eddie Lampert . It posted the 11th quarterly loss in a row. Still that loss was less than half the size of the one a year ago. Is that supposed to be good news . Lampert has been strengthening shrinking the store base to generate cash. As many as 300 stores could form a Real Estate Investment trust and then the stores would be leased back. It is a real estate play. Bank deposits plunged in greece by the most since the country joined the euro region. Concern about the results of last months election have led some greeks to withdraw their money. The greek finance minister told our own Erik Schatzker that some money has returned to the system. We had a deposit flight back into the greek banks. Erik 700 Million Euros . As a result of the news of the bridge. Erik you are still down by tens of billions. It is a question of direction. Once you turn the tide, you hope. Stephanie earlier this week European Finance ministers cleared the way for the greek bailout to be extended until june. We are seeing an increase in durable goods orders. Looking for products meant to last at least three years rose 2. 8 last year. Commercial aircraft were the biggest sellers. Orders more than doubled last month, after falling by half back in december. As for as anheuserbusch is concerned, americans are not thinking enough beer anymore. They posted fourthquarter earnings that missed estimates. They invested more money and marketing to counter week consumption in the united states. The company has been struggling to turn around week sales of the flag ship budweiser brand. Shares are up 44 in the last year. A warning from United Airlines to pilots about dangerous mistakes in the cockpit. The wall street journal says mmo was prompted by several serious incidents. United pilots had to make an emergency maneuver to avoid crashing the plane. In another, the united plane landed with less than the minimum fuel reserves. They want, lets dont think this could happen in united. Here is Warren Buffetts secret to staying young. Eat like a sixyearold. Im not sure he sees what my sixyearold dates. He is 84 years old and tells Fortune Magazine as a fourth of the calories he consumes comes from cocacola. He owns 16 billion worth of cocacola stock. He also likes ice cream and salty potato sticks. I dont even know what potato sticks are, but i think i would like them, too. Stephanie he says he checked the actuarial tables and found the lowest death rate is among sixyearolds. Why is he eating like one . I just have to post for a second. If you would like to see what a sixyearold is like after consuming five cocacolas in one day, i would be happy to loan my son up and sent him to omaha. It aint pretty. Matt i did not think anything else when i was six. Stephanie you are talking about crazy town. Matt it is an issue that divided the tech and media communities. We are talking about whether broadband providers like comcast can charge websites like amazon a fee to travel on a faster lane. The fcc is poised to say no. That vote is expected any time now after years of debate. Our next guest says this decision will not be enough to keep the internet free and open. Thanks a much for joining us. Let me start by asking you about who pays for this . Broadband is not an unlimited commodity. Someone has to pay as we use more and more bandwidth. Is the idea that we are going to be the comcast the at t, the verizons of the money . This is a question about an issue that is related to Network Neutrality, but not central to it. This is kind of a distant cousin, if you will. It is what we in the tech world referred to as peering arrangements. These have been handled entirely with armslength negotiations in the past between the two parties, both of which tend to be backbone operators exchanging data. Historically, when the amounts of Traffic Exchange between one and the other was equal, there was no charge for the interconnection. If there was a significant disproportion in the Traffic Exchanged between one and the other than the one receiving the most amount of traffic would wind up receiving compensation from the other one. This is a classic arrangement. It has always worked well. There have been no problems with it. I think what the fcc would like to do is have oversight over that, so that if there are any issues that arise, any impasses with the formation of these arrangements, then the fcc can have oversight. Frankly, i dont think the fcc needs to do it. It has worked well in the past. With regard to the specific issue regarding netflix and its relationship with comcast verizon, at t, i think it is important to understand that there really are actual costs anytime traffic is delivered through the local Exchange Network the network between the point of presence of the locality in the premises of the consumer. At nighttime, netflix traffic can be 25 percent to 40 of the traffic across the Broadband Networks in these local areas. There are real costs to carrying that traffic. The question becomes, who pays for that . Netflix, through its broadband provider, its backbone provider , is placing a lot more traffic onto the local network then it is receiving back from the network. Matt let me ask, so now the fcc has decided that it is going to be the sheriff in town. Does the fcc now decide who pays from now on . Is that what this means . Rick i dont think thats what it means. The public announcement that was made prior to todays proceeding by the fcc is that they simply wanted to have oversight over these arrangements. There are real costs when that traffic is carried. The question is who pays for that between the backbone provider that delivers the netflix traffic onto the local network and the local network itself . Under historic arrangements, you would have the backbone provider delivering all that traffic onto the local network, paying for the delivery. It has worked reasonably well. Carriage has been negotiated. There have not been interruptions. It seems to me that the fccs role here is not really necessary, but if they want to maintain some oversight, that is what they intend to do. Maybe we should spend just a moment talking about what the fcc is doing today and that is applying title two with common carriage rules that is a regulatory structure designed for the monopoly or Telephone Service to todays broadband ecosystem. It does not fit very well and that environment. Broadband is competitive. It is multimedia. It is a very unlike the old Telephone Network that delivered one service, plain old voice Telephone Service and did so through one provider that had a monopoly everywhere it operated. Title two grew out of that old environment matt . 1934 matt 1934. I was going to point out that title two was written in 1934. Stephanie in your perspective, what fcc decision would be a win . Rick i think that the fcc is going to do precisely what it has said and that is reclassify broadband from a lightly regulated title i Information Service to a title to telecommunications service. That potentially makes available a broad array of common carriage rules. It is designed to promote Network Neutrality which is a worthwhile goal. Net neutrality is important. I know you have had others talking about the importance of it this morning. I agree that it is important. I think it is so important that it deserves permanence and the fcc reclassification rests on a bed of sand. It can literally be washed away in the next president ial election. As you probably noticed from your previous interviews on this subject, this is a very partisan issue. There is a deep divide between democrats and republicans today on the fcc because we have a democrat in the white house there is a threeto democratic majority on the fcc. Todays vote is going to be 32. Three democrats voting against two republicans. In a president ial administration with a republican in the white house and according to the polling we look at today, there is about a 50 chance that is going to happen in the election next year, you would have a flip in that majority. Three republicans, two democrats on the fcc. It is very predictable that one of the first items of business in a republican fcc would be to reverse todays order. You cannot say that is certain, but it is highly probable. You know, these guarantees of Network Neutrality are impermanent. They are a very tenuous and a statute should be passed by the congress that embeds these protections on a permanent basis. We had a hearing in the house energy and Commerce Committee yesterday. I was one of the witnesses of that hearing. We talked about the need to have statutory permanent protection that can be provided for Network Neutrality and at the same time. Stephanie we have to leave it there. Thank you so much for joining us. Rick boucher. Matt coming up, more trouble for herbalife. The embattled Nutritional Supplement maker. Bill ackman has nothing to do with the problem. Plus, who knows, your next landlord may turn out to be a highpowered investment firm, if it isnt already. Matt time for the top business stories from around the world. Is is the biggest shakeup at Standard Chartered. A new ceo will be introduced. The banks chairman and head of asia also plans to step down. Shares were down 29 last year. It appears the prorussian rebels and ukraine are giving peace a chance. The government says there were no rebel attacks on its troops overnight. Ukraine has accused separatists of constantly violating the ceasefire since it went into effect. The ukrainian currency has been an absolute freefall, losing more than 50 of its value against the dollar this year. The central bank proposed a ban on foreign currency trading earlier this week, but no one ever pays attention to such things. The terrorist known as jihadi johnna may have been unmasked. The man who beheaded several hostages held by Islamic State is a break from a will to do family. They say he graduated from college with a degree in computer programming. His family in west london is not commenting. Stephanie herbalifes thirdquarter Earnings Report was nothing short of disastrous. It will try again with a fourthquarter report. Bill ackmans wellpublicized campaign against the company may be its biggest problem but it also has problems with the strong dollar. Corey before we get into that it is sort of surprising that they are announcing earnings after the bell. That is not what we normally hear from them. Bill said to me that even that is suspect. They know there is bad news coming. Corey if it were a friday on a threeday weekend, i think they might have more credence. It is a change the way they present information. I think it is useful to look at what is going on in this company and separated from this he saidhe said battle. The wall street battle is not as interesting to me. The business is slowing down. When you saw the sales growth and the revenue continues to grow, but at a much slower pace. While the sales slowed down quite a bit, the profits slowed down significantly. The operating profit collapsed. Stephanie could it be that they are in the middle of a perfect storm . Lets say bill ackman is right and they have been up to no good. Maybe under their new management maybe they are finally flying straight and they are trying to do it at a time when the strong dollar is killing them, so they cannot get out of this vortex. Cory the company is paying attention to bill ackman. They are responding to his criticism. It changes the way they do business. They are not saying, we dont care what you are saying. They have changed their business in response to the criticism. What is important on the currency side is that the currency is another perfect storm hitting them. Just the change in that one currency slapped their earnings last quarter. Look at what has happened globally. We have had an absolute collapse in the euro. We have had the chinese currency improve a little bit. Across the board, you have seen global currencies collapse. The revenues are increasingly overseas. The growth is overseas. When those dollars coming in from overseas are at a lower value than the last time they gave guidance, that could be a big surprise. Matt i will be shocked. Stephanie what do you honestly think is going to happen . It is not actually a battle of the wall street wills anymore. So many guys on the other side of this trade are out. Cory the company is going to have to stand on its own. The business can only grow so much. They can only have so many locations. They can only have so many diet clubs on a single block. That is why the biggest growth has been in other markets. China is one of their biggest markets. We are starting to see change in Business Practices and we are starting to see results. Forget the ftc examination. Forget whether this is an illegal multilevel marketing scheme or not. The business itself seems to be suffering under its own weight. Stephanie i want to share a clip of a conversation i had with bill ackman. He named february 26 as dday. Bill interestingly, there holding a Conference Call. I think it is a little bit of a tell that the numbers are going to be bad. Stephanie many people have said, listen, you have told us in the past this is going to be the biggest presentation, but if you look quietly, this trade has started to go bills direction. A year and a half ago, he was under water with some of the Biggest Hedge Fund giant standing on his front yard with bazookas. That is not the case anymore. Cory his strategy is so concentrated in so few names. There are a lot of fund to Fund Managers that are pushing money into those funds and are concentrated in those positions and it is all in. Imagine what goes on on the other side. When youre a Hedge Fund Analyst you loved to have the night to go over the numbers and to read everything. You hate the Conference Call right when the numbers hit before the filing happens. That is the way the most companies do it. It does not give you the chance to do the analysis, to be ready to ask the smartest questions when the Conference Call comes around. Stephanie bill, like him or hate him, he has certainly done his work. Cory johnson. Market makers he is a pretty good snowboarder. It is shocking. Matt he is a kite surfer. Stephanie hot. Market makers is back in a moment. Stephanie coming up, there is a boom in bentleys, rollsroyce is, and all other luxury car brands. Matt ferraris are selling faster than ford. Welcome back to Market Makers. If you are wondering why we are so enthusiastic today, check out our new chairs. They feel amazing. Thank you, bloomberg. Markets in europe or closing for the day. Lets check in for a look on all the action. We are going to go inside the bloomberg terminal. This is the msci world index. It made a new high about 5 00 a. M. New york time. We are down, little change right now but you have monetary stimulus from europe to japan, not the feds intention to keep monetary conditions fairly loose. All of that lifting share prices. But we will show you the longerterm you know what that is not coming up. Over the longerterm for the msci world index, you can see we have three distinct peaks. Maybe we are ripe for a pullback. We had higher highs but also a lower low the last time around in early 2009. Lets get to some individual european indexes. The stoxx 600 closing at an almost sevenyear. The dax in germany also up. And they cac reaching a sevenyear high as well. A very cohesive european union. Stick a big role piece of duct tape on it. Lets talk about blackstone. They made a fortune scooping up rental homes at rock bottom prices after the housing collapse. It is buying a rental cerberus is buying a rental business. Heather covers real estate for us. She joins us now from d. C. What is cerberus up to . They are planning on making this big acquisition coming in as a landlord finally and, yeah, they are doing it big to start so they dont have to buy one at a time. Coming late to a party, i feel like it is just rocking when i get there, but for private equity, it has to be a different story. It is in some ways. Home prices are up 24 from the low. At the same time, it is a time in the industry when a lot of smaller players are ready to get out so they can swoop them out and grow a lot faster. So the business, the landlord is this is a great one for these Big Companies because they have such advantages of scale or is it the idea that they can there can still be real appreciation in home values . I think a little bit of both. Blackstone is still buying 25 million to 35 million of property a week. With scale, they have more opportunities. With the credit markets opening they can still have leverage and get nice return. So it doesnt seem that cerberus is in is late for the game . Blackstone has been doing it for years. You are not going to see the huge price game. They will not get the low hanging fruit. But there is still room. They can come in and buy these homes in bulk. There are a lot of smaller guys who do not have the access to the same kind of financing. They need to cash out and cerberus is right there and willing to buy the home. What does it mean for people who would normally buy or sell these homes. When private equity gets involved there is a schlock factor there is a shmuck factor. So who is the shmuck here . Those who are selling to cerberus are already land lords. I think they have been doing this for many years and it is getting to be institutionalized, getting to be a real industry. Thank you. Good story. Check it out on bloomberg. Com. Heather probert. Im not sure you can say shmuck on yes, you can. When capitalism meets communism, opening the door to cuba means some people are going to get rich. And they might be playing baseball as well. Welcome back to Market Makers. U. S. Businesses are starting to focus on the untapped market of 90 million consumers. Mil vila marx traveled to havana. Journalists from around the world gathered to hear the latest on the diplomatic talks with cuba. Among them was a cubanamerican businessman with a vested interest in the outcome. For cubans living abroad, we have a legitimate desire to come back and help them participate in the rebuilding of our country. It is our right. He is a handful of american cubans who have come back and set up businesses here. At his offices in havana, he has a local staff of writers and editors who put out two magazines. The focus is on cuban art and tourism. But he rarely stays quiet on politics. In promoting those goals the numbers are there appeared he has always promoted himself. It affects the people, my family, my friends. He first left cuba in 1980 as a 16yearold. That left him in south florida where he joined a Massive Community of cuban exiles. But his family ties to america go back several generations. His great great grandfather worked with the u. S. Military when it briefly governed cuba at the turnofthecentury. And his father was also a figure on the island as a member of a popular group. He followed his father in the industry. We have promoted cuban culture in this community, brought cuban artists, produced concerts that started changing the hearts and minds of the people of my community. Many cubanamericans believe the communist revolution would ruin cuba. But he told us, although miami will remain his home, he has changed his own mind about cubas potential. I lived here for 35 years, more than i lived in cuba. But i also love my country in a country of origin. As the two governments work out their political differences he says he is focused on brokering business deals that will prove profitable and patriotic. Is it possible to both make money and help the people in cuba . Can you do one without the other . I think one complements the other. I think this is the difference between me and the ceo of another company where an unamerican or a cubanamerican where unamerican where an american or a cubanamerican can bring a lot of passion. Well kind of industries does this guy actually work with . He is mostly focused on telecom. He has been running sort of a Media Business here promoting concerts but he is looking to bring telecom businesses and prepaid cards down to cuba . What does the Wireless Network system look like there . That is the mother of all businesses . If. You can run the cell phone business if you can sell those phones and cars to locals, it is a game changer . i agree with that. Bringing broadband for businesses and homes will be huge. That is something that the at ts and verizons of this world will be looking for. Why would it be such a Good Business idea considering that the enduser is only making a few dollars a day in most cases . I think you will have a Government Purchasing that technology. You will have the Cuban Technology you will have the cuban government buying. The longterm game is that cubas economy will improve. These people in theory will have more money oneday. It sounds like hes making the argument that if somebody is going to make money on this it better be a cuban. He feels very strongly they are best suited to it. It will be a big challenge for noncubans to go down there because they dont have the relationships that some of these guys like this man have. He was very common on this. Who are you . We havent heard from you and 50 odd years and you want to make money. We have no more time for questions, but yesterday do you like cuba . I love them music, the food and the cigars. The trifecta. If you have to ask, you probably cant afford it. You probably cant afford this if you already know the price. We will tell you about the porsche and other cars that are selling well. It is time now for the bulletin, the top business stories of the morning. The Manufacturing Center may be starting to stabilizing. Durable goods orders rose for the first time in three minds three months. Inflation at the consumer level took a dive the most in six years. Democrats are turning up the heat on republicans over funding for the department of homeland security. They say they will not negotiate a spending agreement that also locks president obamas immigration policy. Harry reid made it clear that he thinks refusing to Fund Homeland Security is simply irresponsible. The American People are frightened and rightly so. Isis appears to have money. Terrorists appeared to have money. Why shouldnt our homeland have the ability to protect itself . This is like living in a world of crazy people. Homeland security runs out of money this week. House republicans have refused to consider a spending bill unless it also rolls back the president s executive order on immigration. And they are the faces that launched a thousand reality shows. Are you ready for this . The New York Post says the kardashian clan get your head around this have signed a fouryear 100 million to stay with the e network. Bruce jenner will not be a part of the deal. He has his own show at e based on his possible sex transition. You could look at it as another sign of income inequality. Altraultraultra luxury cars like lamborghini are selling faster than other cars. Premium car brands have surged 154 . Kyle covers cars for the magazine. It is fascinating. How much richer the rich are getting . More people are superrich. I think you said 211,000 people have more than 11 million. Supply and demand. They want these expense of cars. They are making a lot more cars. They are making them in more interesting variations. And they are expanding their geographic focus. They are opening dealerships in places like the anon, cambodia, brazil, places they never did business before. Lets say i am buying a lamborghini, and aston martin is anybody buying a base model or are they just going for it . Yeah, its like real estate. They are selling custom services. Nobody wants to buy the exact same lamborghini as the next guy if you have 400,000 to spend on a car. No one wants a discount ferrari . No one wants discounts. I dont know about that. Except matt. There is a market for a base gt. If you have 400 grand to spend on a car, the difference between that and 550 grand is not much to you, probably. So you are seeing a lot more of these milliondollar cars. In your story, you point out that porsche is now making cars with electric engines. Maclaren obviously doing the same, ferrari doing the same these huge horsepower vehicles. People who did not think they would buy from them they are realizing that a kid who sells to the company for 20 million might want a rollsroyce and might not want the one that they used to make. I saw two phantoms in the courtyard today over by the cirque. A lot of coops, a lot of two doors. Ferrari has basically a Station Wagon now. I love it. My favorite ferrari. And its not cheap. 440,000. Obviously, when you add the options, they get more expensive. I tweeted it so you can have i mentioned my twitter account . Check out his story. Its at least cool to read if you cant afford one of those rides. We are going to say adios. That is it for todays Market Makers. We are getting ready for Warren Buffetts annual letter this weekend. We will be speaking to the men who wrote the book on the subject. Have a great day. Waters you suggesting what are you suggesting . Bloomberg television is on the markets. After closing at a new high yesterday, the dow in search of some direction. Right now, little changed, off 6. 5 points. The nasdaq meantime inches ever closer to the 5000 milestone. Currently, its highest level since march of 2000. And the s p 500 losing one point. When you look at the dow in the s p trading at record highs, the nasdaq inching closer to the 5000 level and not too far away from its record high, what is the u. K. , the dax, the germany record high . Its not just in u. S. We are seeing the same thing across as well. With the markets possibly consolidating its gains, we see a rally in the market spreading now. More stocks are now participating in the rally. If you look at the vics right not at the vix right now, it is steady. Weve got a lot of things off the table. Janet yellen has already testified to congress. We do have the ecb announcement coming up next week. Is that the big the next big macro event that could trigger more action . I think there is a bit of market fatigue to reacting to these events. In the market has seen a lot of cycles of these things come up and go back. Good point. Lets get to your trade right now. Stratus us stratusis is a 3d printing company. What is their strategy . I remain bearish on the stock. The company laid out its plan for investment. It increased the ingestion of those investments for a very long time. I want to buy put spreads into the earnings next week. Bought my strategy is for next week the 60 55 put spread. You can buy it even cheaper now. I think management will really have to provide [indiscernible] the stock has bounced back from the lows and i think it comes back down again. You can see investors would profit from the trade if it falls, it the stock falls, and that profit would be substantially bigger than if the stock rises. Yeah. Thank you so much for joining us. Money clip is up next. Welcome to money clip where we tied together the best stories and video in business news. Barnes noble is cutting off its College Bookstore business to focus on its recalibration. Around the world, the u. S. And cuba get closer but we show you the business not all of it legit, are bringing cuban Baseball Players to the united states