Transcripts For BLOOMBERG Street Smart 20150325

Here are the top stories we are watching. French air accident investigators looking into yesterdays german plane crash saying voice recordings survive the impact. They say this will lead to clues in seeking to explain the tragedy a full analysis may be months away. Graces Central Bank Governor speaking in london. He said greek banks must actively manage stressed loads. We will have more later in the hour. Facebook opening its messenger chat application. The app will be opened to businesses to communicate with customers and to make reservations. We have got less than an hour until the close of trading. We are looking at some of the action. We are seeing a selloff that seems to be accelerating. It seems hard to find out why. The tone hasnt changed much. Moving ever farther away from matching the record high. Chip related stocks are getting hit. Ibm, intel, microsoft. We know intel tells us the cycle has come to an end when it cuts its sales guidance. He analysts are talking about weak demand for pc processors. If you look at the vicks it is edging higher. Its above 15. The 10 year yield at 1. 92. There is a weakness in treasuries after an auction did not attract as much demand as anticipated. Oil is higher at almost three and three quarters percent. It is a kneejerk reaction to the weaker dollar. Trish also production not rising as much as previous weeks. Its time for our big story. Its the biggest deal of the year so far. Heinz and kraft coming together in the megamerger bringing them together under the same roof. The new company will be known as kraftheinz. Joining us to discuss is ed hammond, julie hyman, and joining us over the phone is the ceo of capital management. Before we get to the nittygritty bill, did you like this deal . Bill we like customers and we like the transaction. It appears there is going to be a lot of cheeseburgers eaten around the world in the next four or five years, so we have the cheese the catch up, we have everything going. Trish you have been looking at how unusual this is. Julie usually when you have a private equity firm, they do it through bringing the company public. In a way, they are doing that but they are doing that through another vehicle, by merging with craft. If you look at it, 3g capital and Berkshire Hathaway are investing a lot less than they would if they were doing traditional acquisition, essentially putting in 10 billion in cash, which is split more or less evenly between berkshire and 3g capital. Then during the sharing of the shares getting with kraft getting 49 . Its not what you typically see. Not taking on any debt, which is unusual. Trish they dont need bankers. How much did buffett make in this deal . How much is the combined Company Actually worth . Ed its difficult to figure out the actual value. We think the value is around the 50 billion mark. That is what we put on it now. From what we understand it did not come together phenomenally quickly. One Thing Holding it up was how much is this actually worth to kraft shareholders . They are taking a stake in a private company and becoming a bigger public company. Nobody knows what the shares of the combined company will trade at. Trish you said you liked the deal. The cheeseburger, you said you own the whole Food Industry with that. This is a large number. Have you feel about the potential price tag like that . Warren buffett needs to get large chunks of money invested in things that dont violate his approach so this is very much in the context of a business. He is smart in spots and likes to stay close to those spots. He is staying close to his spots. Remember, these companies together can go to walmart, and they can go to costco and all the people that received the products and sell the products on the retail level, and they are going to be in a powerhouse bargaining position. They are going to get a good spot for their cheese and other things. You are talking about creating a powerhouse. Warren buffett is applying capital to the addicted Customer Base businesses. He can look out in 20 30, 40 years and know people are going to be eating macaroni and cheese which is the most popular thing in the world for two to fiveyearold americans. Trish the interesting thing about this deal is it was a powerhouse already. They essentially had a huge brand, was a global company, and then spun off the brand to focus on the u. S. And north american this notice where it gets 98 of its sales. Part of the growth proposition is the management is saying we are going to sell our brands internationally. Quite how does that make sense . The recently arrived ceo said you can do scale if you do it well. In other words, the implication is 3g can do it better than prior management. Trish there are still issues with craft. They are exposed to commodity prices, yet they are forecasting 1. 5 billion dollars in annual cost savings. Does that mean we are looking at massive firings . I think the involvement inherently determines there will be massive firings. These guys are phenomenally smart at drivein cost savings out. They did loads of stuff. They barred people from doing color photocopying. They do these small adjustments, but they all contribute. There is no doubt about it. They will be doing the same thing. They have looked for a long time. Thats at the end of the day cutting cost is not the same as growing a business. Bill remember, things like currency fluctuations, those things over 20 years are going to come and go. The kind of thing as investors have been excited about internationally over the last 10 years, yes, they have reason to not be as excited now, but over the next 20 or 30 years, there will be lots of opportunity. Its probably a good bet these businesses will grow during that time. Trish thank you so much. I appreciate your coming on. You are sticking with me. We have lots more to talk about. This deal isnt the first time 3g and berkshire are teaming up. Many say it wont be the last. Plus it may be the biggest deal of the year so far. Could there be more in the pipeline . Or are valuations just to rich . Too rich . Trish teaming up in the biggest deal so far. This isnt the first time they joined forces. How did these powerhouses get together in the first place . Joining me is pimm fox. 3g capital is run by george lehman. Who is he . Pimm hes a former davis cup star. He has two partners he works with on deals. I would imagine you could go back to the beer deal they did in brazil that put them on the map in terms of what they are able to put together and taking that deal and turning it into the anheuserbusch deal. They had been active. Thats thats why i love you. Trish you know all this stuff. P this is from pimm this is from bloomberg sources. Trish how did they get together . They are very different in the way they run the companies. Ed they have this wonderful symbiotic relationship. Berkshire hathaway is this old company that cherishes brands and keeps them going. 3g is the most aggressive private equity shop you can get. They are known for shedding costs from the getgo, being fairly brutal and how they manage the businesses. What seems to work is buffett gives them over near of acceptability. He gives them money. What he got when they originally did the deal, thats going to go away. He is still going to have about 46 million warrants exercised at a penny a share. If he does so at the end of the deal he winds up with 26 of the stock of this new combination. Trish the best question everyone is asking is what are they going to do next. They have partnered with burger king. They bought heinz. What do you think . Bill i think part of the convenience is largecap stocks are very inexpensive in relation to smallcap stocks. The typical private equity world is to search around for a small midcap company, i them, do the things you are buy them, do the things you are going to do and run them. That has been so combed over because private equity people have drowned in 1. 1 trillion of cash they cannot find a home for right now, and smallcap stocks are about 30 more expensive than largecap. The place to go is a large cap, so you got kind of a marriage of convenience. You have got relatively ruthless private equity buyers combined with warrens all shocks. Aw shucks. Warren seems to want to make a lot more money. Trish what do you want to see them by together . There are a lot of analysts saying, perhaps calix, general mills. Not the me analyst to say that. They are saying the same thing that it could be very strategic. What you want to see them do . We happen to be in the camp of people that believes we are in the early stages of five to 10 year positive run of the u. S. Dollar, so we are much more interested in what goes on inside the United States. This transaction, when you think of 86 million millenials just that he and having kids the mac cheese and cheeseburgers are right in the hunt the next 10 years. Most of the companies being thrown out, if you are depending on the next couple years for what is going on outside the United States, we think you are struggling, so the irony, for example, in our portfolio we are very light in Consumer Staples. Why . Because they trade at premium prices to the rest of the market, and we think there is more leverage inside the United States from what goes on here. There are not any kids that went without toothpaste or qtips over the last four or five years, even in the worst of the meltdown. Pimm i was just going to say trying to connect Warren Buffett with lehman he was on the board of gillette. I wonder whether there is somebody out there saying, you know all those brands they are trying to get rid of. Maybe these people can figure out a way to make more money. You were nodding. There is one thing they agree on. That is these megadeals. Buffett has been scathing of these deals. He was very critical, saying they show up one minute and the next minute say, sell the company. To do a deal of this size with one Investment Bank each is pretty much unique. We think it might be the largest transaction ever done. There will be general m a for the u. S. Big companies. You are sticking with me. Thank you so much for joining us. Always a pleasure to have you on set. Coming up next, will there be a bigger deal to top craftheinz kraftheinz . And i will talk to the big at your general about what needs to be done to secure the region of yemen. Trish heres a look at the top stories. German Business Confidence increasing for a fit straight month in march. Growth accelerated to the fastest in eight months. More evidence europes largest economy is over it slumped. It fell into the middle of last year. Elaine wynn said she was unaware of a stock sale made during a time when the company said directors are prohibited from selling. She is in a fight to keep her seat on the board. She said the decision to the vest funds to found her foundation were made for charity advisers. The Supreme Court saying alabama may have improperly redistricted black voters. And a 54 ruling the court sending it back to a lower court that upheld the district lines. The justices telling a panel to assess whether race played too big of a role in setting the boundaries of a particular district. The kraftheinz deal may be the biggest so far. Still with me is ed hammond and bills made. He joins us from the phone from phoenix. What is going to be the biggest . Bill thats a good question. Maybe i would be skipping every deal if i could predict. This is a huge deal whether you look at it from value terms or how exciting it is. Early in the year, you would say this would be the biggest. We saw enormous deals. Obviously, they were being eclipsed. We had the pfizer astra zeneca attempt, which would have been 16 billion or maybe more. Is this going to be the biggest . I would say probably not, but in terms of how exciting it is and the impact it has on the Food Industry, its one of the most important deals of the year. Trish what do you think . The theme was about biotech firms trying to team up. Had you think the m a will play out how the you think the m a will play out . Bill valuation matters deeply. We are an owner of ebay, and the way the circumstances of laid out over the course of the last year with activists involved in the stock announcing they are going to split into two Companies Paypal and marketplace and the current ceo is stepping down and wont be the leader of either one. I set down and made a list of who would want to buy paypal paying cash to buy a in excess of 40 billion. Its a pretty goodsized list. You have everybody from google and microsoft and apple and so on and then the strategic buyers that have incredibly highpriced earnings ratios stock with which to go after paypal or marketplace, and those would be facebook and amazon. From an experienced standpoint, you look and say this company is open to those kinds of passes over the next 12 months. Trish interesting. Thats what you are watching. Thats what you own. Thanks for joining me on this deal. Yemen has become the greatest battle. We are going to focus on that next. Trish here are the top stories we are watching ahead of the closing bell. A yearlong review of the fbis findings. The agency urgently needs to confront evolving terrorist threats. The fbi is being urged to prepare for foreign fighters and extremists working alone and a new breed of criminals working. The Berkshire Hathaway vicechairman says the competitive advantage may be eroding. The ceo says the Company Faces challenges over the next two years. The Company Overcomes the loss of costco. Pimco is increasing its stake in u. S. Singlefamily rental homes. The firm buying interest in haven broke homes. That company manages 4000 rental homes in florida minnesota, and alabama. Pimco began investing about two years ago. Just under 30 minutes until the close of trading. Our chief market correspondent is looking at the big movers. In this mysterious day, what were some of the big movers . A couple of interesting ones that do not involve billion or from omaha, lets start with tesla. It involves an american billionaire. It was sued. You have an analyst downgrade to underperform. The analysts are saying initial lower margins could pose risks to nearterm earnings at tesla. Lexmark is the other notable one. It is a 47 premium to koufaxs last close. The Quarterly Dividend is not at risk. Lumber liquidators making a bit of a comeback up 12 . Federal regulators are investigating the company after a 60 minutes story this month. The reason the stock is rallying is because a Consumer Agency says it will not use the same test. They have repeatedly pushed back , saying the methodology was not great. They put out a note saying this was a win for the company. Last we will check back with you later. We return to the french alps the crash site of flight 9525. The two americans are among the People Killed when the plane went down yesterday. French investigators uncovered voice recordings from the cockpit and are looking into what caused the crash. Hans nichols is near the crash site today. What kind of progress are they making . I see it is dark now. The big progress we have had is they now believe they are going to be able to scrub the flight box recorder. They are going to be able to extract the information to figure out what happened. This could be the voice recorder could have every vital sign. A third Important Development is the crash site it does look like the plane exploded upon impact which it means it did not explode midair. We have had numerous helicopters take off all day. You can see behind me there is a giant field. This is where Angela Merkel and Francois Hollande landed, and they saw how difficult the terrain is. Helicopter and rescue workers had to repel down from the helicopters. It is too dangerous to land on the slopes. Thank you so much for joining us from the crash site. Yemen emerging as the latest apple ground between saudi arabia and iran. The saudi government is urging to send fighter jets. A president ial aide saying they have left after rebels seized a key airbase north of the city. Joining me to discuss is the Brigadier General david phillips. He was serving as the director of security for the pentagons army staff on 9 11. Its really great to speak with you today. Would you call yemen a civil war zone right now . I would call the entire area of the world a significant concern for us. My area of expertise really deals with how to counter that involving the iranian resistance. There is a resistance to what iran is trying to do. Trish what is your expertise question mark what do you think the Obama Administration should be doing when it comes to dealing with the rebels as well as iran . David in iran specifically we have a resistance made up of iranian expats and iranians from within iran. They are the resistance. We ought to be using them to counter what iran is doing. Trish i have a question about yemen. It seems like the Mainstream Media has latched onto this. That means it will build up speed quickly or does the west catch on to how dangerous that might be . David there has been a great deal of danger there. There is a resistance. You dont have to put u. S. Boots on the ground. You can utilize those resisting the current regime in iran. Use iranians to do it. Currently men and women are being detained in baghdad. They are the ones that want to bring democracy and freedom to their country. Lets recognize them. Trish you are saying use iranians to help the west. Why arent they doing that . David that is one of the issues that has been bothering me for 12 years. I started dealing with the resistance to the current iranian regime. They have a platform that nears what our nation was founded on. Number 10 is a nonnuclear iran. Lets recognize it. That would send a message to the meal as mullahs in iran if we recognize it. Trish does the blame lie at the white house, not just the Obama Administration but the Bush Administration as well . David they were placed on the terrorist list in the 90s. They were removed several years ago. Were they put on the list as appeasement to iran to get iran to come to the table . They have been removed because there is nothing to keep them on that list. Are they terrorists . Are they not . They are not. They are a Resistance Organization led by a woman who wants to bring about regime change in iran. I think you will see a Ripple Effect that affects yemen, syria, iraq, the entire region including afghanistan. Does that mean the government is asleep at the wheel in dealing with these issues . I wish that was the answer but they are well aware of the 2500 men and women being held by the iraqis outside of baghdad airport. They have been held for years now. They were supposed to move down to camp liberty in baghdad for about or months and then be sent out as refugees to other countries around the world. Since then, more have been killed then send out. They believe in what we believe in. Democracy, gender rights, human rights, and a nonnuclear iran. Trish i want to get your reaction to some news. The army is charging berghdal with misbehavior before the enemy. Would you classify him a terrorist . No, i would classify him as a soldier who is going to face most likely a courtmartial and he will have his day to address that. Trish do you think we will see more of these accusations trickle out . David no, i think this is a small case involving this individual. The vast majority who have served in afghanistan and iraq, including my own son have done a wonderful job out there. He is really a single person. Trish a single outlier, not referring to him as a terrorist. Thank you for joining us. It was so great to get your perspective. Coming up i will speak to philip baker about how his company is faring in a week russias metals market. The answer is kind of surprising, so stick with us. Investors pushing up prices of gold. It is down 2 . One Mining Company that produces both is not feeling the heat. Tesla is up 20 . Joining me is the ceo philip baker. Good to talk to you. How did you get that kind of leverage . Youre up 20 . How did you achieve that . Phillip we had a great year. It is a company that has been around for 125 years, and we are hitting on all cylinders. I saw production was up. The cash cost were lower. That is like the holy grail for minors. It actually underperformed the s p. Meanwhile, your valuation is quite high. Do you think you are justified . We are one of the Key Companies in the u. S. And canada. We have we are clearly worth every penny. Lets take a look at some of the issues. There is some disinflation. Metals tend to not do as well. India has been lackluster with their buying. The key thing is to have lowcost operation. We are the lowcost leader for silver. We have seen the benefit of a weaker canadian dollar. We are in good shape, regardless of what happens to the top line. Alex why has your stock been underperforming . Because we are Precious Metals, and Precious Metals have underperformed in the s p. In our performance relative to peers it has been among the best. Alex thank you for joining us. An interesting take. Phillips baker. Greece facing pressure. Is this a final make it or break it moment for greece . More after the break. Here are the top stories. Kevin burns to be president according to the wall street journal. Burns holds both positions on an interim basis. Storage bag winning support from german politicians for a plan to transform into a company more like Goldman Sachs. This is according to a person with knowledge of the matter. This would have a group focusing more on global management. This would lead to job cuts. Greeces Central Bank Governor speaking in london. He says a greek exit of the euro would deliver no benefits and a lot of pain. He says athens is proceeding fast to a reform program. 1. 2 billion euros is at stake and the clock is ticking. Greek Prime Minister tsipras cannot get fast access to the bailout cash. For more on greases cash crunch that never ends, the managing editor. We have heard a lot of 11th hours in the last three years. Is this worse . It seems pretty real. We have had a lot of 11th hours. It does seem like greece has a big payment to make at the beginning of april, and unless they get a deal soon, they are going to be in trouble. They have a lot of pension payments due on friday. They need to deliver specifics based on the agreement they reached in february. Any word on what the specifics might be. Joe i think the most important thing they will want to see is some level of seriousness, that they really want to undertake reforms, that they are willing to have outside oversight. The reforms have not been very oppressive. There was this thing about having tourists and students collect taxes. It didnt seem like this was a government that was very serious about they are taking a lot of money from citizens elsewhere in europe. The leaders of those countries want to see the greek government is going to be serious. Alex it struck me the ecb approved another increase that is helping keep greek banks alive. It is a total analysis of over 71 billion euros. At one point does this become at what point does the ecb finance government . They are keeping a very short leash on it. They are only increasing liquidity to greek banks in small amounts. There have been reports the amount they have increased have been less than the greek banks wanted. They are putting limits on how much the banks can buy shortterm debt from the government. Obviously, ecb support is crucial. Increasing but a little bit of restraint. Thank you so much. Coming up next, we want to find out what is happening in todays market. The slump in technology shares. We will talk about it. Alex you are watching bloomberg television. Equities continuing to tumble. The momentum behind the drop. Chipmakers are falling. Technology shares are selling off. The nasdaq dropping the most in two weeks. The dollar is weakening. Oil is gaining. U. S. Treasury fluctuating to the lowest since early february. Lets get to scarlet. If you take a look at indices, the dow has erased gains for the year now trading in the red. Trading in the red at half of 1 . This is a broad selloff we are seeing after session lows. You mentioned chip related names. There is a selloff led by momentum gains. That is why tech shares are falling more than any other sector in the s p 500 and why the biotech is down 4 , the most this year. It is very uncertain because durable goods unexpectedly declined, showing the damage done by a stronger dollar and slower energy production. A report may have shown home sales jumped, but the trend has been for Economic Data to come in weaker than anticipated. We have specific him in, but there is so much anticipation before the start of earnings season. Alex joining me is lisa and the Oppenheimer Fund chief investment officer. Raise your hand if you know why we are selling off triple digits. We should not be selling off. Alex right so why are we doing it . Thats we entered the youre thinking growth is going to be spectacular. It did not turn out that way. Stocks had run up in anticipation of the growth outlook. Once growth comes back, we will climb back again like last year. Thats what does it say that we have three of the smartest people i know onset, and knowing can pinpoint this. Thats what we see happening is a loss of momentum in the economy. Economists were originally looking for 2. 5 to 3 growth. Stocks are a great forward indicator. The economy is getting some headwinds we werent expecting. Is the bad news actually bad news . There is a tactical factor at play. We are getting to the end of the quarter and people want to lock in their gains. People are basically say why not . Cash in ill the going is good. The momentum had done quite good over the past few months and i think thats part of that. At the end of the day, lets not make it too complicated. Liquidity is very ample both here and on a global basis of stop the economies in developed markets are doing well and at the end of the day, stocks are a good investment. By the end of the year, we will get a better level than where we are today. Alix there we have the closing bell. All indices closing around the lows of the session the nasdaq off by about 118 points. The dow jones is now negative for the year, down almost 300 points on the day. All of the indices hitting right around the lows of the session. We had that week verbal good number coming in continuing to grind lower throughout the trading session. For the biggest equity movers of the day, lets get to scarlet fu at the breaking news desk. You are looking at this almost 300 point decline on the dow. Scarlet we have to lead with the momentum names. Looking at the etf that tracks the sector, falling the most in 2015. The semiconduct your index dropping by as much as 4. 7 . The volume is also notable because it is higher than the 10 day average. Nasdaq stocks up almost 30 from the 10 day average. In telestrating and a ninemonth low. Earlier this month, intel had warned us that fouryear sales would be less than anticipated. The pc refresh cycle it come to an end and the strong dollar in europe was hurting it will stop ipm declining 2 . Microsoft followed the most since january. Pacific crest is talking about weak demand for pcs processors and currency headwinds. You do have some rotation into energy names. Even with this broad selloff they rose as a group. One outlier is schlumberger. The Oil Services Company is expected to plead guilty for violating iran and sudan cause sanctions and will reportedly pay 233 million will stop the Justice Department is supposed to announce a plea agreement sometime today. We will bring that to you when it happens. Alix im here with our bloomberg bonds reporter, Lisa Abramowicz and my two guests. Scarlet highlighted some of the big movers but look at tech shares really tumbling throughout the day. Intel and microsoft falling the most in the dow and the Philadelphia Stock Exchange Semiconductor Index dropping the most since october. Consumer discretionary than Health Care Companies losing 1 but the standout is Consumer Staples. You were mentioning earlier in the day earlier in the day that Consumer Staples are less hit by todays selloff sort of the buicks of the market. What do you mean by that . Their slow movers with less appeal for a quick return. They are the types of stocks that will perform better if the fed is hinting they are going to move slower. Alix so today we are going to sell off the momentum names and by the utilities because the fed wont raise . What we see happening in todays data is definitely about the fed and the strong dollar. I think it is about the data more than the fed. The fed has indicated they will be slow in raising rates. I think the data in durable goods, its definitely slower than most of us anticipated. Bonds are not cooperating with this narrative or this belief the fed will leave rates lower for longer. Today, there was an auction of fiveyear treasuries that had the lowest demand since 2009 which actually sent yields up, which means the price went down. Usually treasuries are safe havens and pile and if they are concerned. They pile with a think the fed is going to prolong how long they will wait to hike rates. Alix lets talk about the stronger dollar. Orders for americanmade durable goods unexpectedly dropping. The damage inflicting by a rising dollar and slumping energy production. This is a chart with the trade weighted dollar and what that means is as the dollar rises, durable goods continue to fall, meaning winter is not the reason. It has been happening since august. The mistake industry is feeling the pinch to shift demand to foreign produced goods. Weve seen it in february. Weve seen it for the last six months running but the trend has been exacerbated in the last six months. In our view, the growth was never going to be 3. 5 . There is probably a component of weather in all of this, but at the end of the day, theres no global decoupling. The currencies end up being the equalizer in all of this. If there are different growth rates in different parts of the world the currency is going to take that growth rate down and thats what we see in the u. S. It doesnt change the outlook. It does change the narrative little bit stop the u. S. Is not going to be a spectacular performer. It also means the power of low rate is gone. I think the power of low rate is there, but the overall valuation levels were not as cheap as they were before where the power of rates alone could power you up. What we need is growth cooperating and rates remaining where they are. I think by the summer or by the third quarter, we will see that hand out. Alix investors got more clues about fed policy today. Charles evans spoke in london, saying inflation remains to load to justify a Interest Rate increase this year. It would be very surprising if inflation did not begin to pick up to 2 . I share the ultimate optimism of so many of our colleagues that inflation is going to pick up but i just dont have the same confidence and time profile of all of this and other things could come along which would put us in a difficult situation. Alix do you agree . I think the likelihood against to 2 sometime this year is pretty good. It does not mean it will preclude the fed from doing anything. I think that is perhaps being too bold will stop i think the fed wants to give its toll in wants to get its toe in the door. What we are increasingly seeing in the fed speak is this struggle to understand fully what the implications of the stronger dollar will be. For the export sector, its very easy to understand. But what we see from the comments today is this struggle of how much the stronger dollar is impacting broader economic growth. That debate will be settled later this year and dictate the timing. Has any week had a more Federal Reserve directors speak . How much the limits mounts of information amounts of information . Alix i think this is intentional. They are flooding the zone saying we are debating these issues, but the net effect is everyone seems to agree they should keep rates lower for a longer time. They are in agreement the overall outlook has diminished. Alix after todays herbal goods, we started to see some economists come out downgrading their view of growth. Jpmorgan downgrading First Quarter of gdp its down from 2 its not insignificant. Can we do that . Can we go from 1. 5 in the First Quarter to a full year of 2. 5 . The eta has been much softer and the numbers have been slow in coming down. We are kind of coming to an Inflection Point because we are almost at the end of the quarter will stop from an investor standpoint, the key messages while we can take solace in the fact the u. S. Is going to do better than other places the global diversification from an investment standpoint is as critical today as it has in at any point. Weve made the assumption the dollar will continue to climb. I think this go round bruise the point that diversification is very critical for investors. Alix is there any area you wont go . We like equities on a global basis. Its a question of what level of comfort you have. I think you like european equities primarily because the evaluations are low. You like emerging markets where the growth is slowing down at the valuation levels are probably as attractive as they have been and how long time. Spread your bet inequities on a global basis. Alix unfortunately, we have two ended there. Thank you so much. After the break, i will be speaking to the chairman and president of the cme group about whether the feds reaches going to far when it comes to banking and commodities. Stay with us. Alix welcome back. Wall street is facing increased regulation on pretty much everything from the capital ratios to trading and now the governor is questioning whether big banks should be allowed to own physical commodities because of the risks that comes with. Joining me from capitol hill is terry duffy, the chairman and president of the cme group. Nice to chat with you again. What do you think the feds role should be in overseeing the commodities business . Im more of the mindset that businesses should be allowed to own what they think is in their interest. As long as theres an oversight industry like the fed agency like the fed watching it, i dont see a problem with banks owning commodity assets. They got back into it around 2002 or 2003 and i think they are good for the overall market. They held them accelerate and move smoothly but i see no reason for them to be out of the business. Alix what happens when Goldman Sachs sells its metal warehouse to a te firm . Metro and Goldman Sachs are part of the london mercantile exchange. When you see that business peeled away from banks, what does that wind up doing for a business like yours . We just listed and aluminum contract and thats exciting but the problem is the loadout time and how much time it took to get the aluminum out of the yard. That was a big issue and once you get that smoothed over, who owns the men who controls them want be an issue for the endusers of those products. Alix speaking of the controversy surrounding the banks and trading, it has in about a year since michael lewisbook came out. I want to get your response to this. Take a listen. If every market took the responsibility to make itself fair by eliminating the speed advantages the problems would go away. The problem is this bead to the traders. It would be a collapse of their Business Model to do this. Alix what is your take on that . The market has never been more level in my 35 years of being in the business. What he is suggesting is people are selling speed to only certain individuals and not to others for that is not how we operate. The access to the batch engine is the same speed no matter what side of the room you are in and everyone has access to that will stop his statement is a bit of a misdirect. Alix does that mean you have no highfrequency traders operating on the cme . Absolutely not. We have a few highfrequency traders, but in our world, its not a fragmented world like the equities world. We have vertical silos. The only one that knows if you put an order into my proprietary system it does not bounce around from exchange to exchange , like it may in the equities world. Alix fair enough. I want to get your take on oil prices. When do you think oil prices are going to bottom . Its funny you say that because i come to washington quite a bit and ive heard the opposite question when our Oil Prices Going to come down and now everyone to know when they are going to come back up. Its interesting when it trading at 130 a barrel and when its trading at 35 a barrel, Everyone Wants to know when its going up. It just goes to show its a supplydemand situation. The exploration of oil in this country is reaching new heights and we look to be close to Energy Independent. That would make us an Energy Independent nation as it relates to oil. We a lot of oil sitting around right now but a lot of these are underwater because of the costs going down dramatically. The big guys can survive in the small guys cannot. Sound familiar . Alix you guys are launching a new contract on monday. For a teaser, i will be talking about this on friday. This is a different idea a contract on oil that is in storage. Its going from point a to point b this is just how much oil is in certain storage tanks. Its an interesting concept and we will see how its going to work, doing it in partnership. We will see how these things work. Alix literally you can trade Storage Units and potentially put oil in it. Thank you for joining us. Coming up, policing the internet in the cloud. We will hear from a ceo who says his company will be the next big thing in the cloud market. We will discuss it. Alix here are the top stories we are watching after the closing bell. Oil is advancing to a twoweek high over concerns that rising supplies were outweighed by a rising dollar and the smallest increase of output since january. The data showed output at its highest level in more than three decades. Charlie munger says its going to be tougher for consumers to maintain their standard of living in the coming years. He was speaking at an event in los angeles and says her subject says purchasing power will decrease over the next 50 years. Heinz and kraft foods make a deal that doesnt need a make a bank to write the deal. The merger is the largest in a decade to exclude the big banks for m a advice will stop its trying to be salesforce of Cloud Security. Theyre using the cloud to police your Office Internet making sure nothing bad is in nothing good goes out. The ceo joins me to discuss it. For someone who might not know everything about Technology Tell us about your business. Our mission is to make sure the internet is a safe place to do business. The internet is like the wild west. Its wonderful but it has had guys too. We have a Cloud Security that form the make sure nothing bad goes in and nothing good weeks out. Alix how do you do that . Inc. Of it as think of it as how do you protect america . We make sure every International Airport has good checkpoints for security so we know whats good moving in and out. Any traffic that comes from the internet gets inspected to make sure bad guys are not trying to bring stuff in and your intellectual property is not leaking out. Alix you have some big clients like exxon and ge. What is their biggest concern . Lots of ip. There used to be a time when we all worried about getting but not anymore. Now these guys are stealing ips and source codes and whatnot. They infect your pcs with trojans and botnets and they talk back to command and control centers. Its like spying in the cold war days. Each pc becomes a spy and a gets instructions from commandandcontrol centers saying what should i do today . You will receive instructions to do the next thing. Alix you are worth 1 billion right now. When are you going to ipo . Were focused on growing the business. We dont really have an external pressure on anybody that we must do it right away. We are building a great team scaling the business, and at the right time we will go forward. Alix hedging the question. Thank you for joining us today. Coming up, we will head to San Francisco and talk about facebook. Stay with us. Alix welcome back. Here are the top stories we are watching after the closing bell. Bowe bergdahl is charged with desertion. He disappeared from his army outpost in 2009 and was held by the taliban for five years. He was freed last may in exchange for five taliban officials being held in guantanamo bay. The department of justice is saying schlumberger is agreeing to pay a penalty for sanction violations in iran and sudan. It may be the largest ever for u. S. Sanctioned violations. Animal houses under investigation the inspiration for the movie is being accused of branding studentsflash as part of initiation ritual. It could result in suspension and permanent loss of recognition for the return of the. The nhl is losing a bid in a suit rot on by retired layers. The league says it did not protect them from the consequences of repeated head injuries and concussions. Stocks finishing starkly in the red a third consecutive day of losses. Matt miller is taking a look at the damage we see across the street. The dow jones erasing its gains for the year. Matt the worst day for the dow or at least down to a two week low. The worst day for the s p in two weeks. A lot of superlatives today in the market. The worst day for the nasdaq in 11 months. The Semi Conductor makers really weigh on that index. Intel, apple, microsoft all big decliners. They way down the day though they way down the dow but also the tech heavy nasdaq. Take a look at the vix the biggest move up in two weeks. Someone say the best day for the vix in two weeks. But i would ask you, do you want more fear . Its probably a better day when the vix falls down. The 10 year yield coming down, the price of bonds in verse to the yield. The reason they are going up as a durable goods report was such a disappointment that in esters think the fed they not raise rates as early as june. Maybe they will push it back. Finally, alex steele, look at oil. We are 12 in six trading stay six trading sessions. It looks like oil really did bottom out and we did even get down to 40. Alix did we bottom . We havent seen production cuts im still a little skeptical. Matt very true. Its very interesting to watch. It has been up like a rocket, so we will see if it comes down. Alix yemen is in turmoil as were wages between saudi arabia and forces. The exact place of the president is unclear. Im joined by glenn carrie in riyadh and our Washington Bureau chief, john allen. What is the latest . What we know now is that the president the president of yemen has left his residence and is in the southern port city of aden. We dont know where he is we dont know if it has fled the city. We dont know if it is unclear at this point. What can you tell us about the forces from saudi arabia that it may or may not be moving toward yemen . There are two things going on. They are fighting forces loyal to the residency. Today was a pivotal day for them. They have taken the airport which was considered the stronghold. It is unclear to which extent theyve gone into the city itself. Next what is the response of saudi arabia . The saudis havent made any official statements on what they plan to do. The minister said saudi arabia and its gulf allies would take necessary measures to bring peace to the country or stop the violence. At the moment, the options are limited. It could influence the conflict on the ground. Alix this is a good place to bring u. N. Whats the response of the u. S. . The immediate responses the United States pulling out of yemen. This is a real danger zone at the moment. You can tell with ongoing conflicts that that is the case. There are silly conflict areas in the world. It creates more instability. Regardless of outcome theres a real desire to see stability and an outcome in a place that has been a hotbed of terrorism in the past. Alix you have yemen pleading for someone to help them and the u. S. Pulls out. I suppose we have no intel on the ground. I dont know what our intel resources are right now. We have human intelligence and potentially drones in the region. There are ways to get that intelligence and ways to assess the intelligence on the ground. I think the United States has been reluctant to become more aggressive in more places the middle east. Theres not a lot more that can be done to watch. You are on the ground in the middle east. We hear this in the last few weeks has it been on the rise and the west is just making up to that . They have been positioned in the north of yemen and were taking positions in the south last year. One of the problems is very few people have direct contact with them or even try to negotiate with them is difficult. Alix thank you so much. It is definitely something we will be following. We have lots more coming up on street smart so stay with us. Alix facebook positive Development Conference is underway in San Francisco where 2500 attendees are attending the conference. Mark zuckerberg came gave the keynote speech. Cory johnson is there and joins us now. Cory i am here with the head of the director of platforms for facebook. What is the difference between an app and a plat form . Apps are the experiences people see. It is what on your phone and what people see in the app and experience on the phone. A platform is what enables it to happen. So there is google play but the facebook platform is all about helping developers build and grow. Cory angry birds is an app and now this is a platform today . Now other apps can engage with that at. Cory how does that work . If you want to share animatedgifs messenger is the platform so you can now download it and engage with it bring the content in and share it with friends. Cory will you use messenger to download it . You will be able will those companies be able to monetize with the help of facebook westmark yes. Maybe they can sell enough purchases. Cory what about sharing in the facebook ad revenue . There has been a lot of talk about newsfeed, buzz feed or National Geographic publishing directly on facebook. Is that an ad sharing model or an example of a platform . Those are types of that forms. When you look at it, you can create content for the messenger platform and then sell upgraded content. You can get cheaper content and digital goods. Cory the notion is everyone is doing a lot of things on facebook, not just looking at pictures of your grandmother. s book is not just a place to share photos, its a place to engage in content and have direct conversations or engage in groups with smaller groups of people. Cory back in new york our anchors send us ridiculous things by its injure. Alix dont appeal it dont tell people that, cory. Coming up, who is buying the worlds most luxurious cars . I will talk to rollsroyce north america past resident about the future of the automaker. Alix here are the top stories we are watching after the closing bell. The United Auto Workers union wants to eliminate the difference between a between his most senior workers and new hires according to people familiar with the matter. The group also proposes a lower paid group. Googles driverless car could feature airbags on the outside to protect pedestrians in the event of an accident. This is according to business insider. Google was awarded a patent for external airbags and numbers for impact with a vehicle. Tesla was sued in london over the company interfering with a competitors plan to rule out electric car charges at u. K. Highway rest stops. A judge ordered tesla to search for documents about setting up its own network of chargers for its electric cars. The new York Auto Show is round the corner and rollsroyce wants a presence of cinematic proportion. The automaker will present the race following a full year of record sales stop major touches of the vehicles were inspired by its roles in films. Joining me to discuss the cinematic significance of rollsroyce in the future of the brand is Eric Shepherd president of rollsroyce in north america and matt because we cannot talk about cars of matt is not here. Who is this car for . Weve seen our buyer decrease in age with every model. Phantom came out first and then the those traduced the age. We are seeing the 40 age 40 year olds they are creating this wealth that is not typically handed down to them. Alix how do you come up with these names . Everything kind of has an at the real blend to it. We pao myers our heritage that way. Matt it has been that way for a long time. The silver ghost is probably the most is rollsroyce name ever. I wonder if you are going to continue in this direction because i spent a week in the ghost last weekend i was amazed by the lack of body role in direct connection i had to the road even though it maintains that magic carpet ride. Are you going to go with a more performance oriented direction . We are not a Sports Car Company and we are not a it he company. Were on that annoying to be those things we are not. Its about an effortless ride and effortless present effortless presence to the car. You will always see is pushing the envelope to deliver what our customers are asking for. Matt how do you maintain differentiation . Bmw completely revived the brand, but you maintain differentiation in your products and brand. How do you do it . We do it by listening to our customers. You have heard us mentioned a project which people are referring to as an suv but just another high bodied vehicle that will be able to go anywhere with that effortless drive we are known for. Matt bmw is also making a giant anywhere vehicle. The thing about the rollsroyce is its another level. How do you keep that level im sure bmw would rather make it the ghost, but they dont. It will still be a bmw. Ours will truly be a rollsroyce. You know from driving our vehicles that theres nothing like being in a rollsroyce. Alix what is the craziest thing you have in the race . When you look at the auto show next week, this is a twotone paint scheme that has never been done. Its a brilliant silver with an aluminum trim piece and a sharp edge route the wood. Its going to be those things that no one else has. One of the things you always see are these bespoke umbrellas. We always have the umbrella at the ready for matt the satellite Communication System talks to the gearbox, so it knows when a curve is coming up and you can downshift. I also heard from a little birdie that someone had the rear end of first customized into a dog bed. What we wont do is be the taste police. We will do everything we can to accommodate. Alix tell us about what you did with partnering with the royals getting rollsroyce to sell and uber ride. But weve done it from San Francisco from time to time in his is one of those while factors. We are not an ostentatious pretentious brand. We want to have fun and this is a way to show off that we are all, modern luxury that people havent recognized. Matt last year was a record year. Was it going to be tough this year . Were cautiously optimistic. We dont go out with huge volume planning. We do anticipate some moderate growth not to the extreme like we saw last year with a 30 growth rate. Alix thank you for coming by. Matt, its always good to see you. Alix this 24 ounce can of year is a complete Home Security system. They raised two Million Dollars rake Crowdfunding Campaign and raise 10 million in series a and announced major Retail Partners about the u. S. Joining me now is the canary cofounder and ceo. What is this thing right here . This is a smart Home Security product. A bunch of sensors and its all in one device. Alix what is the range . Most apartments might need one, and a homecoming might want to or three for you can see most of your home from just a few spots. We are trying to simple five e security experience will stop alix you can see through walls . It doesnt need to see through walls that we capture when people are coming and going. We send alert to your cell phone and you can see live videos and take action by calling the police or alerting your spouse or neighbor. Alix im the worst at responding to my cell phone. Does it automatically connect to 911 . You can add backup contacts. We are rolling out to other options that you can have Monitoring Centers that will respond like traditional security. You can get discounts on your homeowners insurance, so we are announced a partnership with state farm. Alix can you connect to a thermostat likeness . We give more information and other systems provide. So how they relate to each other, patterns of detection with community value, you can act on that and control your home anyway you want to. Alix how much does it cost . 249. Alix you can buy that a spy or home depot. How many have you sold . We get a Crowdfunding Campaign and after that, we only started selling it on our website. If the first time its for sale since then will stop alix how is it going . Its going really well for were shipping as many as we can out to retailers. Alix when do you think you will be profitable . We will be profitable in the coming years. Weve sold products and 78 countries in the first month we relied. The response has been extraordinary. The goal is to get as many of these out as possible. Most people have not had access to Home Security before. Alix are you worried about someone being able to hack in to the device . At the great question. We spent the last two years perfecting security on this device. Users are completely empowered to control it themselves. Literally the video and audio, everything is off and its in your power to control that will stop everything is encrypted on the device itself. We spent a lot of time and effort internally and getting people coming to audit the security to make sure we do Everything Possible to keep your data secure. Alix thank you so much for coming. That is it for street smart. We will see you tomorrow. With all due respect is next. Mark i am mark halperin. John with all who those with all due respect to those who are tried to stop the Affordable Care act happy birthday obamacare. On the show tonight, the governors elbow grease, john kasich Conversation Police and the karma police. First, joe bidens golden fleece. Diamond joe putting out five Hillary Clinton may be vulnerable to a nomination challenge