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tv   Market Makers  Bloomberg  January 10, 2014 10:00am-12:01pm EST

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ceo has moved over to the new batch group, and your media business, you're dating, your surgeon application but are all now reporting directly to diller. >> thank you. really appreciate that look. "market makers from bloomberg headquarters in new york, this is "market makers." ... -- we crunch the numbers in the sky top the list of the best-performing hedge managers of 2013 and he is here to tell us how he did it and what's in store for this year. as of today, mortgage lenders must make sure you can afford your loan and be more transparent about what you are really paying for. will it backfire and make it harder for middle-class americans to buy a home?
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we will ask a top housing regulator. >> a stunning revelation in the big insider trading trial. the insider trader was kicked out of law school for faking his grace. happy friday, you are watching "market makers." is the us this morning best-performing hedge fund 2013, larry robbins. his returns are nothing short of extraordinary. welcome and thank you for joining us. 2013, you were the man but guess who is the man today? my partner erik schatzker because january 10 is his birthday. i think it is far more important than the jobs number. it's myact that birthday makes something out of a day that otherwise would be a massive disappointment. the jobs report was horrible.
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the u.s. economy added 74,000 jobs in december, lower than the most pessimistic economists view. >> can i get ready for knowing it's your birthday? >> i get to kiss you. michael mckee is here to talk about jobs. the topline number is kind of noisy. it gets revised month after month. 74,000, is there anything in there that makes it look that are? >> i'm figuring out how to top that. >> don't kiss me. >> you have to realize that these numbers do get have a late resolve. march of this year, only 88 house and jobs. we had zero jobs reported and now it is 146,000 after revisions. this could change. the job creation numbers, there were zero jobs created in health care. that has been a strength of the
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economy. you have to wonder if that was maybe obamacare implements -- influence. maybe employers held off and we will get a rebounded january. there was a big rise in temporary help. maybe people were waiting to see what happens. it's not something to be overly concerned about yet. i rarely get this opportunity to give both of you a hard time but the good news in the number in terms of numbers was the jobless number, 6.7% there was a country north of us where the jobless report number went up to 7.2%. passed canada officially in terms of having a better labor market. >> that is a noisy number because the labor participation rate explains why the jobless .8%.dropped 62 we saw a small improvement in december and that is gone now. what does that say about the strength of the u.s. labor market? >> you have to ask why those
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people left the labor market. normally, when the market starts to get better and we had several months of good jobs numbers, more people come in to the labor market. you wonder where those people went. why did they leave the labor force? are they going to come back and that is a question for the fed. the other fed problem is what do they do about their threshold? they said by 2016, we should be at 6.5% and then they talk about raising rates. at whatever reason, we are 6.7%, two years ahead of schedule. they have to revise this in some way or people will start ignoring it. >> let's ask reverie -- let's ask larry robbins. maybe the macro a connie does not mean as much to you. -- made the macro economy does not mean as much to you. what does this say to you? >> i saw a report last night about sean peyton how to drown
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out the crowd noises and that's what people in the market need to do is drown out the crowd noise. there will be economic data that is noisy. the employment picture and the economy are getting a little better and the u.s. economy will be a little stronger next year. and we sequestration have the headwinds of the payroll taxes so the economy will be a little stronger. liquidity is ample and interest rates are low so that bodes well for the market. you are right in saying i am a stock guy rather than an economist but we think the economics and liquidity backdrop is sufficient that the stock figures could go up. he said to drown out the noise. to defend canada, we had the biggest weather impact in the u.s. since 19 77. it was worse in the northern
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climes. >> except that there, it is cold all the time. >> i have to give stephanie a hard time because she lost $20 to me on a bet on what the jobs number would be. larry, you performed well next year so maybe stephanie needs a loan. >> if i lose $20 being an optimist, so be it. >> we will manage that $20 for you. record, that could turn into a lot of money. >> michael mckee, thank you so much. larry, we need to introduce you properly. in case our viewers don't know why, he is a great stock ticker but that is an understatement. it is a skill you need to have when the market is up arty percent. -- up 30%. at the rankings from bloomberg markets magazine, glenview opportunity fund returned 84% in october and if
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that was not good enough, by the end of the year, he was up more than 100%. we have to talk about your business. how did you do it? the attention on me but i want to thank bloomberg for putting a picture of our team in the main article. there are 73 people at glenview. it is how did we do it. we have done it with a long-term approach. while everybody views hedge funds and short-term trading, our top three winners last year, we have owned for five years or longer. the average duration of our top 20 holdings we have owned for four years or longer. laster was extraordinary year not in terms of where we ended in valuation and where stocks ended but it was an extraordinary year from where things started. things were extraordinary cheap
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and companies had too much cash and laster was a year where ever they came together. largest holdings rocket last year. when you put those positions on five years ago, what did it look like the previous four years? let's get at the patient's your investors have. at glenview, we focus on defensive oriented companies looking for secular growth. health care happens to be our largest holding because we are more comfortable betting on the demographics of the united states then the winds of the economy. we went through a 4.5 year period where correlations in the stock market were very high. all stocks traded on macro economic fears and systemic fears. even though the underlying companies were doing quite well, the stock price reacted to events in europe and the mortgage market and anything but what happened in those real economies praise stocks got cheap but we got positive performance in those for .5 years. there were definitely some
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coiled spring summit led to low bell uh in and companies hoarded capital. they took the excess capital and deployed it and that's what led to some phenomenal growth last year. >> if you are prepared to wait that long, you are clearly somebody who has the courage of his convictions. -- ended thered year with a lot of confidence. the fund was 100% net long and your glenview fund was not late longer. -- was slightly longer. how confident are you this time? >> as we enter the new year, our portfolios are long, about 14 times this year's earnings, trading under 12 times. we don't have a crystal ball as to whether the economy in the second half of this year will be phenomenal or week. we know the companies that were sitting with cash, earning zero or companies with excess debt capacity, even though we have seen a rise in interest rates,
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the average investment-grade company can access debt at 2.5%. even your average high-yield company can access that after taxes at 4.5%. there is a significant amount of wonderful cash deployment opportunities. if we look at our largest holdings, one of our largest winners, bought another one of our large holdings and they bought that company for 14 times this year's earnings which sounds like an entry point. it is not like an m&a valuation. these companies making significant capital deployment, it is like taking lebron james sitting on the bench and bringing him to the game. of course you will do better when you take your most valuable asset of cash and put it in. >> in 2013, the media loves to talk about activist and vectors. -- investors. we know bill acton had a hard time with, that some of his
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positions but dan loeb did not turn -- return what you did. you call yourself a suggestiveist. >> we have a tremendous amount of respect for the rest of the hedge fund community. a lot of us are free riders on their work. the concept of active investing used to be thought of as somebody with actively trading around their positions. active investing has to involve active ownership. as shareholders, even though we are part of a relatively in each of us owns a minority position, we have to actively engage the boards and management in the critical issues of the day. how are they position, have -- how are they deploying capital and their long-term capital allocations. we have always done that in a way which we call suggestiveism. >> you do your work on the back of it? the passive, investment community states behind the good work of those
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active investors. one can be active in front of the cameras. carl icahn and dan loeb are at taking thatd frontline approach. we have chosen to partner with their management teams and boards and find situations where we can help that the margin with suggestions which we call suggestiveism./ it was unique in 2013 where the hma board refused to engage in any sort of productive dialogue. we had to take error suggestions directly to fellow shareholders. >> we want to know more when we come back. we will take a quick break but we are speaking to larry robbins. >> we will also talk about new mortgage rules that take effect today. we will explain what they mean to you and what they mean to mortgage lending in the mortgage market. of the top officials from the financial protection bureau will be here.
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this is "market makers," on bloomberg television, streaming on your phone, your tablet, and ♪
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>> you are watching "market makers." there is word that the president will nominate stan fisher, former governor of the bank of israel as well as former treasury undersecretary leo brainard to the federal reserve and will re-nominate jerome powell to serve on the governors of the federal reserve. peter cook is in d.c. with more. hadhese are the names that been most closely associated with these vacant positions at the federal reserve. jay powell will continue on as a fed governor. the name that really has generated the most interest is stanley fischer. he was governor of the bank of israel and is an interesting choice. , given his history and his
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close ties to janet yellen and his prominence within the world of international central banking taking on the number two job. has been one of the lead players in the administration on international issues and it is quite likely she would take on the same role if confirmed by the u.s. senate and this role at the federal reserve. it is a different role for her. had a lot of experience in terms of budget issues and has worked in the private equity world. streeted with wall expressed on these are three familiar faces to people in washington. they are the folks that the president is sending up to complement the vacancies at the federal reserve board. this will be the team sitting around the table with janet yellen as she carries out her duties as chairman going forward. icks one of these tax p --
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as interest. there is something missing -- there is no one with community banking experience and that might be one criticism. >> thank you very much. let's return to our conversation with larry robbins. he had the top performing hedge funds of 2013. it's a teamclear effort at glenview and i'm sure your colleagues appreciate that. the team is the super bowl of hedge funds. policy, you are a stock picker and value guide -- do you believe you can operate in a way where your relative performance is fairly effective on monetary policy? >> everything is affected by modes -- by men -- by monetary policy. it is a difficult environment
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for a fundamental long-short hedge fund operator. there is a substantial risk of systemic crash. that is a remote possibility always. it moved into the four front of people thinking. there is talk about what will be the effect of tapering in 2014 and 2015 in the markets. we saw that the equity markets rallied strongly even though since may 1, interest rates doubled. the fed has made its decision clear. they already have a $4 trillion balance sheet. tapering will peak at 4.5 trillion and people think $5 trillion is a psychological level so the fed has a couple of tools. they have the quantitative easing and the 75 billion dollars of purchases per month as well as the ability to keep short rates lower longer. you will get language about short rates lower longer to
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counterbalance the fact that they need to taper. has $4000 withho a $5,000 credit limit, they are nearing the end. >> let's talk about affordable health care. how is that affecting you in 2014? >> last year, health care was our largest sector and largest winner and our largest sector entering this year. we are hanging on. hospitals have gotten the most attention. life science companies were a large contributor last year, not hospital companies, but we are excited about hospitals in the coming years as we are of anything. on december 31, there was as many as 60 million americans without insurance and while it has then a painful and slow rollout of the affordable care act, on january 1, couple of million people signed up and
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another 7 million people will be eligible under medicaid expansion for additional insurance coverage. those people who walk into a hospital that previously had no insurance and paid for cents on the dollar of cost to deliver, they will be able to reimburse those hospitals. if you have insurance, you are more than likely to use the system. the roll out has been plagued with difficulties. we think the concept of universal coverage is inevitable. once that train has left the station, we think progress will continue. in 2006 when they rolled up the rollout was horrible and drug stores in january of 2006 did not know what they were supposed to accept people because the paperwork was not done. the parallels are similar. >> we just have to get the kinks out? >> we have to accept the fact that society made the decision that everyone should get
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universal health care and how we pay for it and the terms of that will be subject to tinkering and debate. i think the fundamental premise that there should be access to health care is there. that benefits hospitals in particular. they are best able to serve those customers. >> you mentioned you are entering this year with your portfolio 14 times this year. your strategy, your value approach rocls when there is multiple expansion in the market. how do you think things will play out similarly this year? >> our multiple to not expand that high. it is not like we were fortunate enough to have twitter and netflix. i think there is a bifurcation of valuations. 50, i don'tw nifty want to call it a bubble, but we are seeing a reflated valuation
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among small class that small caps. we don't need multiple expansion in order to achieve attractive returns. we think our companies are likely to grow earnings in 2014 and 2015 on the strength of this d plumb and we talked about. employment wel talked about. individual stocks can climb the ladder of valuation as the market becomes less concerned. we think hospitals are way down because people are concerned about the poor start to the affordable care act. in other instances, one of our largest holdings, monsanto, people are worried about the low price of corn and the delayed planting season. those type of things that way the multiples are generally transitory. even if we don't get multiple expansion in the market, the specific stories on the long side should enjoy what we think is multiple restoration.
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it should go back to a fair representation. benefitid not have the of being involved with twitter and netflix but tech stocks have been on a tear. do you get tempted to dip in? >> one of our largest winners last year was a xerox. had 85% return last year so we will take it. if it requires somebody to have isision as to way the market going to evolve, there are people who are very good at that. are certaine there companies that fit our profile and the technology bucket that have access in our largest theng there is cfc computer science corporation where they came in and effectuate it one of the most powerful turnarounds. coming into a situation where
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people thought the balance sheet was stretched. there is excess n they are buying back 10% of their stock and we think that margin growth and d plumb and will accelerate in the coming years. >> we are talking a lot about the stocks that you like. you are a long-short guy. yourdegree do you expect portfolio to be a factor in 2014? >> we generated between five and 10% a between the two portfolios. these are on the shorts so it does we were pleased it was a classic pic and i think that opportunity set will continue to provide elf on the short side. is easiest time to short when there is contracting economy and contracting liquidity. we don't have either one right now. you can no question invest on the long side. we are tried to construct a portfolio where there is
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relative losers and winners. we don't publicly talk about our shorts from the his reasons. our style is not to try to short companies going to zero but too short companies that are kind of quality companies but have industry headwinds. would put that stock into a penalty box for maybe six months. >> are you as net long as you were? last year, we averaged that long it -- at glenview. we are slightly higher today as we enter the year. those things move around as we move through earnings season depending on the number of arbitrage positions. there is slightly more complicated risk management dialogue in that exposure. we are constructive on markets on 2014 and constructive on the opportunity to be good stock pickers. >> we are constructive having you with us. >> it's a pleasure.
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>> thank you both. inbloomberg markets named the top-performing headmounted or of 2013. glenview capital -- thank you for coming here on "market makers." ♪
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>> live from bloomberg headquarters in new york, this is "market makers." >> welcome back. there has been a bombshell in the matthew martoma insider- trading case. he was kicked out of harvard law school in the late 1990s for faking his grades while applying for clark. he changed his name after that and eventually he went up at stanford business school. the judge in the case denied the defense request to keep the story out of the trial. we have a former federal prosecutor. doug, we want to understand more
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, not about the particulars about what he'd did but we need to understand how the court should interpret this. was the judge right and ruling this admissible? >> i'm not so sure he ruled admissible. you have to break this down into the legal academic roles and then the real word -- the real word practicality. everybody is talking about it in the media but jurors are not sold post a look at the internet. -- are not supposed to look at the internet. i don't know what jurors do. the judge says do not go on internet, do not watch television. guess but in a your professional experience, do jurors look at this stuff? >> i think jurors do follow the
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rules and do not violate the rules. however, when you talk about you might go home and talk about it with your spouse. let's take the high road that they will not find out about this. does notfendant testify, that's one set of rules. if he testifies, that's another set of rules. in the direct case, you cannot put into evidence he had falsified his transcript. >> it affects the credibility of his testimony. >> if he takes the stand, you cross-examine him and asked him if it is true. actsan have other bad which is punching somebody in the face or a dispute at a poor but that does not go to my truthfulness. falsifying your academic transcript goes directly to truthfulness. saying imagine j leno
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this. >> it's not a joke. it stuck out to me -- is this a firm that said that people who do bad things, come on in? >> when the dust settles and joking aside, do they have a culture were something like that not only was not look down on but was interesting to them. ? >> that could make you a sleazy firm but does it mean you should be in jail? those are two different things. >> if there is a culture of sleaziness, that does not equate to a crime. if he takes the stand, he will get cross-examined. i don't think the judge will allow it in a direct case. >> that's interesting. let's say that matthew martoma wants to say something about steve: that reflects poorly on
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and this is at ruled admissible and he testifies in his own defense and the jury finds out he faked his grades, what do you believe about what he says about steve cohen. could it work in the favor of mr. cohen? >> it affects his credibility as a witness. the other point which i thought you would go into is you have to be careful not to open the door. you are trying the case for martoma and then you are has always that he been 100% honest and truthful. that could open the door in the direct case to allow this in. door is -- ladies and detriment, you will learn that my client is a wonderful person for truthfulness.
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then the judge might lead it in. you cannot give him an unfair advantage. it is unfair to say that he has always been truthful his whole life. thehave to be careful is point. the defense has to be careful. it is called kicking the door open. >> this is exactly why we asked you to come on, thank you very much. doug burns has been guiding us through the fac insider trading trials. when we come back, the surprise- free mortgage coming from the financial protection bureau we will talk with the agency's associate rector. ♪
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>> it's been called the most sweeping regulation of mortgage finance in decades. the consumer financial protection bureau is putting in new rules to protect americans
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from the second home loans. -- from deceptive home loans. these new restrictions may result in less mortgage credit. we have the associate rector for the consumer education at the cspb. thank you for spending time with us. can we talk about the rules themselves? they do and how are they intended to work? >> the new mortgage rules from the consumer financial protection bureau make sure we keep common sense in the making of home loans. it means there will be no more debt transfer for consumers, no surprises in the processing of loans, and no more runaround for people having trouble with mortgages. the big new feature is every lender will have to do a basic common sense thing to determine your ability to repay before they make you alone. percentageave what of the precrisis laws would not
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have met the standards being set by these rules today? >> there is one way in which every loan is different and that is there'll be no more no documentation lows. they will have to collect the information about income and assets and your credit file. in almost every other way, most will be best most loans can be made if the lender believes you can pay it back. >> in practice, have any mortgage lenders been making no doc loans in the last five years? >> before the crisis, no one would have predicted any lender would ever do that. it happened in these rules make sure it will not happen again. >> so you are looking ahead to the future and the world in which mortgage credit is much more permissive if ever we get there and making sure we do not return to the bad practices of the past. >> that's correct, we all got hurt the bubble and this is to make sure it does not develop again. >> these rules go into effect today.
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to what degree will they make it harder for people to get a mortgage? the rules you are prescribing affect the lenders. >> the ability to do this is well-balanced. lenders have to make a good faith determination that you can repay. if the loan falls into a category of safer loans which most loans to, there's a special way to make it easier for lenders to make that determination. that is the so-called qualified mortgage. >> you raise an important points -- we are talking about qualifying loans, the loans that are eligible for purchase or is that by thegse's, correct? >> that's one of the categories. there are a couple of others. that's worth going into detail about. which loans are affected? >> the basic rule is the ability to repay. the qualified mortgage category
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makes it easier for lenders to show they met that ability requirement. 92% of loansbout currently being made will fall in the qualified mortgage category. the fannie mae and freddie mac loans for up to seven years, loans that have a 43% debt to income ratio, and some loans being held by smaller lenders in portfolio. >> let's say you live in manhattan or you live in beverly let's say you live in los angeles or san francisco, real estatexpensive area but these rules are unlikely to help you because the loans that are made in this town are qualifying loans for the most part. >> that is a bit of an urban myth. ratio, ifo income and there is no negative amortization, it can still be a qualified mortgage. >> there are still more non--
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qualifying loans made on a percentage basis here in new york city then say, the center of the country in a small town in iowa or minnesota. that still stands, does it not? there are more people here who will not be protected than in other parts of the country where real estate values are lower? >> people who are getting a non- -qualified mortgage will still be protected because their lender will have to make a reasonable and good faith determination of the ability to repay. for everyone who is buyers to be a homeowner, they will be able to preserve the dream of hardship and started -- instead of turning it into the nightmare of foreclosure. >> let's go back to talking about a time when maybe banks were opening their wallets a little more in terms of mortgage credit. the mortgage will not be as easy to get. rulescap what banks are able to do. thehese role do notcap
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types of lending or how much they can charge for loans. they say the lender has an obligation to make a reasonable and good faith determination to pay before making that love. any lender who can make that determination can still make any loan. >> thank you very much. great guidance and explanation. more analysis on what these new mortgage rules mean, david stevens is the ceo of the mortgage bankers association, the top lobby for the home lending industry. you just heard gail hillebrand, give us your take -- how much of an impact will these new rules have on mortgage lenders and ultimately the availability of mortgage credit critical to the rebound that everybody wants to see in the housing industry? >> i appreciate the question. has done a bureau
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good job making a balance rule for housing finance that will protect consumers and ensure sustainable housing finance. is willern that i have there be a contraction credit. we expect there will be some. a 43% debt to income ratio, for example, may be too liberal for some low income borrowers but may be too conservative for borrowers with a lot of disposable income. it does not discern a 50% loan- to-value vs a 95% loan to value. to lookcipation is closely at what loans are being originated over the next many months, look at who is getting declined and what the ultimate impact is. on one hand, you want to protect consumers and make sure we have sustainable housing finance and never repeat the mistakes of the past but at the same time, we want to make sure we are not constraining credit access in
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markets across the country to qualify families simply because they do not fit in this framework of disk qualified mortgage rules. those are the things we will look at very closely as we move forward. >> was that a mistake for the cfpb to take a one-size-fits- all approach? >> i don't think it's a mistake. i have great complements for the cfpb. they have done a good job listening to the stakeholders in the marketplace. the things they did well is requiring that all loans be fully underwritten and you must prove ability to repay and we get rid of that negative amortizing loans, the extended term loans, the balloon loans -- the products that really caused the bubble in the first place. at the same time, underwriting is far more nuanced. you have to have more flexibility for compensating factors.
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a 43% income to debt ratio does not fit everybody. it may actually constrain credit on the margin. we are moving into to a different society moving forward. income have multiple earners in the household, multiple jobs, more self- employed borrowers. that makes it more difficult to it is a narrow and underwriting standard. i think that's the area where we can provide advice, technical advice, that can be looked at and look at the date it to see what this is doing to the housing market. let's remind ourselves that there was a terrible bubble created by excess over the last decade and we have to make sure that does not repeat itself. the bureau has done a good job there. >> what percentage of loans written in the pre-crisis period 2005- bubble years of 2007-would not qualify under the new rules? i will give you approximate
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percentages. we think it's 20-25% of the market. originated today versus the bubble. it allowed for 100% finance with no documents back then. thatlayering of risk caused the problems, those loans will not be done going forward. that is a limitation. i will add that we expect maybe another five percent contraction over the current environment. you talked about new york in beverly hills for example, they will not get the exemption of a fannie mae or freddie mac underwriting exception. lenders will have to be more careful about how they lend under that standard for loans that are not sold off to the mortgage. it will have impact on the margin and that's what we need to look forward to. >> thank you for the perspective.
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>> coming up, the need for speed -- an olympic track star helps nike make super bowl stars faster. we will hear from him, and all- pro running back. ♪
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>> the countdown to the super bowl has officially begun. nike unveiled its new line of super bowl apparel called the silver speed collection here in new york city. the event was filled with elites nike athletes including philadelphia eagles superstar whong back lashawn mccoy is recovering from his loss last week and that he is thinking about next year's championship. he says it is a given and the eagles will be there. >> the time is coming. in the next five years, we will make a run.
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on the coach and the attitude, we all have that same dream. >> what team do you love playing against? >> the giants. >>why? >> i am a giant killer. they are so close. it's new york. of those players get to live in a cooler city. >> any player helps their brand. guys who are mediocre who play here get so much more attention. it works out. >> we learn lessons in social media. what would your lesson be to teach other athletes? you are so accessible. sometimes, with athletes, you forget who you really are. we tweet may be off of emotions
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and anger. like it goes to the whole world. it's better not to send a tweet out to the whole world. issuese your personal and you have other things. >> are you the best running back in the game right now? >>um - i would say i'm the best overall complete running back in the game. has been the best because he has been doing it for so many years. he is doing it back to back to back. i would say i am the most complete. >> is it fair that people are critical of what football tires get paid? that wantsteammate more money.
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is that fair that people are attacking him? shouldink every player get the most money he can. i think he works hard. he is an excellent player. >> should he get paid more? >> that's not my call, that's the front office. hopefully, everything works out. >> are you surprised we are seeing new agents in the business? >> i'm not surprised. jay-z is one of the masterminds of the world. he finds things to put things together. he came from the project and now look at him. anything can happen. >> do you need to have an ultimate brand partner to take it to the next level? >> maybe, i like that. could end upz being his agent. we talked about the philadelphia eagles and their fan base. these arenas that are not
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selling out, they better get a better team and filly sells out. here is the super bowl in new york city and that means nike can unveil new cold-weather gear, socks, jackets, fleece is. what would happen to nike if this was in sangha -- in san diego? maybe a jacket. great business opportunity. >> i want to hear about the photo. >> if i did not have a good enough prom photo, how about this? this is a love shot with the two of us. >> that is cute. i think it's more than cute. what direction are you going there? >> i'm just saying, he's a superstar. we will be back in just a moment. that wantorts teams to hold onto all the cards, we
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are talking to the ceo of the 76ers and the new jersey devils. ♪
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>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. thought, thatwe is what target said about the hack attack on its shoppers credit and debit cards during a holidays. as many as 70 million people may have had personal data stolen. >> a showdown in the supreme court. trying to block area oh from from taking- aereo a broadcaster signal and putting in online. >> and for the first time ever, more than half the lawmakers on capitol hill are millionaires.
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welcome to "market makers pose quote and i'm stephanie ruhle, joined by the birthday boy himself, erik schatzker. >> it is time for the newsfeed, stephanie. the jobs report came in light last month. employers added just 74,000 jobs, less than the most pessimistic rejection in our bloomberg survey of economists. -- projection in our bloomberg survey of economists. that and whether may have -- the bad weather may have affected that. formore people quit looking work, so the labor participation rate went down. nominate obama will stan fischer to be vice president of the fed. the president also is nominating former treasury undersecretary lael brainard two and empty seat
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on the board. and jerome powell will be fed governor. consumers are moving to mobile devices, tablets, for example and smartphones. in total, manufacturers shipped about 316 million pcs. lenovo is number one worldwide within 18% share, hp second, dell third. boast about when sales are crummy. >> that is true. ignorance is chris, pathetic? i don't know if that is what wall street is saying. as this traffic scandal continued -- continues, some are run inng if he will 2016. they promise to raise money for him. there are many questions about
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whether the traffic scandal would jeopardize that support. we have breaking news exclusively from one of those big-money men, stan druckenmiller. a fantastic moneyman and philanthropist making an official statement. eric, we need to dig into this. a pretty strong statement just one day after you see -- a pretty strong statement, just one day after seeing sandra camilla coming out and saying that. let's bring in phil mattingly. namess just one of the that is still all in for governor christie's camp. isn't that true yet complex that is true. any are saying that what he did in his press conference only helped the opinion of him.
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governor christie was basically doing what can langone and supporters wanted him to do when they were trying to get him to run in 2012. first and foremost, governor christie needs to come out and talk about how much they like him, why they want to continue to support him going forward. this is helpful on that front. it is helpful from a fundraising perspective as well. really willing to come out openly and talk about who they are giving money to, particularly when those lawmakers or governors are not up for a race yet. what they are doing coming out so publicly is helping with other donors that are a bit wary of what is going on. people are looking for how the top guys react. you are seeing it. with that exclusive statement from dan druckenmiller and -- stan druckenmiller and ken langone. feelare saying, ok, we good about what he did
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yesterday. we are still behind him. >> why does a guy like chris christie need surrogates like stan druckenmiller and ken langone? was,erformance yesterday in the estimation of republicans and democrats, textbook will stop -- textbook, pure pulled perfect political theater. why does he need those guys? >> first and foremost, he is governorshe association as well. everyone was so excited that he will be taking over the rga, because he is a fundraising powerhouse. what these guys are doing right now is not only saying they believe in governor christie, but that we are still here, our money is still here. governors who need chris christie, we've got his back. that is a very important thing. and this is not over. he gave a great press conference yesterday according to republicans and democrats. everybody was impressed by the performance. but there is an early federal
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investigation going on. democrats in new jersey are not going to stop looking into it. and the democratic party in general finally feel like they have an issue to attack him on. this is not going away anytime soon. >> you bring up a good point. yesterday, chris christie spoke, but the other shoe has still not dropped. how risky is it for stan druckenmiller and ken langone to come out and support him when we have not seen the conclusion of the investigation? >> what is interesting is their faith in what he said yesterday. for chris christie to come out and say so declaratively i knew nothing about this, this did not get to my desk, i never saw the politics in this, this did not attach to me, he has to know for sure there is nothing tying into this. -- him to this. with federal prosecutors looking for any connection whatsoever, it will be discovered. what you are seeing with the big-money guys coming out is, hey, we trust what governor christie said.
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he would not have said this it was not true and we are willing to go behind him. a big risk for the governor and his supporters. if it turns out not to be true -- what they are saying right now is, he has not lied to us before and we are confident in what he is saying right now. >> stan druckenmiller who takes christie calling chris a leader, i'm not sure you should take those lightly. >> actually, you can take them lightly. news into our top big retail about -- in retail, sears reported its seventh loss in eight quarters. one analyst called those numbers atrocious. at the flagship sears stores fell by almost 10%. this might even be a scarier number from target. 70 million americans may have had their personal information compromised by hackers. -- joined at the
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head of consumer research, our guest. thank you for coming in. people have lost a lot of confidence in sears. but target is one of the most loved company. what is and say that target had such a huge breach and could not get a handle on it? >> we don't know yet. what target is doing is the right thing, which is being as transparent as they can. the key is, being upfront and talking about it as soon as you know about it gets you a lot of credit. public relations 101. and did not fester about it they even talked about at the week before christmas. if you are trying to get away with something and get better sales the week ahead of christmas, they could have let it slip before -- until january. they were clearly not trying to do that. >> you think they have handled this correctly and it could
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happen to anyone. >> they absolutely are handling it as best they can and it is the world we live in now. had a similar issue about seven years ago. it was 40 million or more accounts and they took a $170 million charge, and it worked out over a few years. >> a few years -- that is a lasting target wants to hear. are you saying that target will not get a pass from customers on this one? anyone who find out that there information was compromised will say, target, i'm sorry, i'm going to walmart. wereen though the results disappointing today, the reason the sox are not down that much is because it has improved in january -- the stock is not down that much is because it has improved in january because of the way they've handled this. >> how focused are they on this? woman were talking about jcpenney, we talked about their
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ceo issues. but do jcpenney customers pay attention in the same way that target customers pay attention and say, i will be going to walmart instead? >> i don't know, but my guess is that target will win back the trust relatively quickly. was an amazon christmas. e-commerce is now up to 10% of u.s. retail sales. using are now used to credit information online. they trust it. i think people are getting used to what is public and private and this is just one more sample of that. >> before we run out of time, let's talk about sears. what more could go wrong there? current burn rate, it's about a billion dollars a year operationally. we think they have about two years left at the current burn rate. we have a cell on -- a cell rate on the stock. rate on the stock.
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>> any chance of a turnaround based on the strategic moves they are taking? >> they have been under investing for over a decade, even before eddie lampert got there. and once you lose traffic, it can take retail a long time to fade away or die, but we have reached that point. when you get down nine percent sales, or down five percent at kmart, and you are burning a billion dollars in cash, how do you fund your self? spend a ton of money to reinvent themselves to get those consumers back in there. i'm not sure what somebody desires to go into sears to buy. >> they have had traffic declines for many, many years now. if you lose your customers and you have fewer than a year ago, it's very hard to get them back. >> are they passed the point of no return? stick a fork in it, it's done? long time totake a die. they were part -- there will be parts of sears that will exist many years beyond now, but my guess is that it will not look
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like it it does today. even darker beast about out. sears auto centers. could be spun out. sears auto centers. >> going back to target, what is most important to consumers? if target needed to raise their prices to make sure that they invest in protecting them from hackers, would that be ok? >> you cannot make the customer pay for that security. security is a basic. it is part of a fixed cost for retailers. >> the answer is, sorry margins. just for target, but for retail in general. it is the reality of the world we live in. >> thank you. when we come back, the battle of the broadcasters.
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the tv networks are trying to block aereo, that disruptive upstarts. we are talking about it next. is friday. you know what that means. it is time for the yearbook king. the detroitat county day school class of 1973. you're watching bloomberg television. ♪
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>> welcome back to market makers , everyone. i'm erik schatzker. aereo is a tiny startup threatening television's business model. soon we might find out if the highest court in the nation will be ready to consider copyright violations. so important?eo
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, in and ofaereo itself, is not that important. i think the technology would allow for a really disruptive impact on the television providersnd the cable come a satellite providers -- the cable providers and satellite providers would no longer have to pay transmission fees in order to carry broadcasters. that is a big deal for the local stations. it has been a key driver for the stocks and the companies that retrench. legal,o is found to be the cable providers would be able to capture the signal for free and sell it again to consumers. it changes the demand. >> we don't know if the high court is going to take it up. it could be months before we get a decision should they take it up. if theuld that mean
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supreme court of the united istes decides that aereo legal? what would we see as a conference -- a consequence? to be honest with you, first of all, it would probably take some uncertainty from this overhang out of the system. in a way, i would argue it is a positive if they take it up. but if it is found to be legal, the obvious path for the media conglomerates, the broadcast networks like cbs, or disney, simply convertl into cable channels. when inew york market, turn on channel two, do i think about it as a broadcast station or a cable station? i just think of it as television. over time, they will migrate into cable networks. --aren't there some legal perhaps some legal distinctions intomatter in drawing this between a broadcast channel and a cable channel? orders that no longer matter any longer?
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no longer that lon matter any longer? but the complexity is why the nfl contract -- >> the complexity is that the nfl contract with cbs is with a broadcast network. converting to a cable network would allow any of the networks to renegotiate their existing contracts. and the affiliates in big markets like new york, cbs and fox own their own affiliates. the smaller ones don't. that becomes very complicated. the networks would really have to -- would rather not have to renegotiate the process on all those contracts. >> would that explain why these broadcast networks have not already converted to cable channels? it sounds like there is this technological threat, and whether it is posed by aereo or a company with deeper pockets in the future, they will have to confront it at some point.
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>> i think that's true. you could argue that the broadcast networks have been contemplating converting to cable channels for years, really. they look at the affiliate fees that something like espn or the regional sports networks get and they argue they have even better content and they are getting 20% the affiliate fee, arguably because they are available over the air. just because cable networks charge a lot more, the reality is, you've got these complex agreements in place. you would lose a small amount of the audience, and it would take time. if you could flip a switch on a cable network overnight, i'm sure they would do it. but it would take time and that would be disruptive. and wall street perspective, that is our biggest concern. it is not that they could not overcome their business models. it may even strengthen them. but in the near term it is very disruptive. this is a very
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binary outcome. i think the probability that aereo prevails is limited. but it is a very dramatic outcome if they do. it is binary with limited odds, but very binary. >> ok, let's say, the odds are limited as you say. does it really matter in as much driveereo is helping to the discussion of unbundling, all at card, cable viewing, and getting rid of cable all getting a little box, whether it be an apple tv or a chrome plug-in i'm a whatever the case may be? >> what you said is the most interesting part. you could ultimately convert to a cable network, but until you now the ability to bundle channels together, particularly in the case of a fox broadcast network with the rsn, something like that, you
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probably on some level need to to get broadcast network reasonably economic terms on the other networks. the bundling together gives a lot to this ecosystem. if you could suddenly unbundled the broadcast networks, that could be disruptive to everyone. investors have said, aren't the cable networks far less vulnerable because of aereo and this is really about the broadcast networks? i would argue that it is really an ecosystem and want to start unbundling and driving a la c availableaking these like that, it becomes disruptive. >> nothing like an existential threat on a friday morning. little eight dimensional media. >> happy to see you. when we come back, it is probably hard for some of these guys to criticize the one percent with a straight face. the record number of millionaires on capitol hill. it is bloomberg television
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streaming on your television,, and now on apple tv. check us out. ♪
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>> gambling and pro sports? for years, there has been an arm and arm relationship. no longer. ofwill be talking to the ceo the 76ers and new jersey devils. ceo andat this future graduate of detroit country day school class of 1973. if you know the answer, tweet us. i already know it. it just came to me. i know exactly who it is. ♪
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>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> guess how much were local congressman is worth? it turns out quite a bit. for the first time ever, more than half of the members of congress are millionaires. megan hughes is with us from washington, d.c. should we be surprised? we know it takes money to get elected these days. >> we know that they have always been rich, but maybe not this rich. the majority of members of congress are now millionaires. with 530n the room four members of congress. they means you are in the room with 268 millionaires.
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i know you are wondering who is at the top of this list, who is the richest. congressman darrell issa from california is at the top of this list. $464 million net worth. he made his money in the viper car alarm business. second, senator mark warner, 200 57 million dollar network. he was in telecom ventures in the 1980s. early investor in nextel will stop congressman jared polis, big entrepreneur. john delaney from maryland also founded some lending companies. and congressman michael mccaul from texas will stop he's interesting because he actually said -- actually used to be at the top of that list, but they changed some of the reporting when it comes to spouses. thedaughter -- his wife is daughter of the chairman of clear channel communications.
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but that list is hundreds of millions of dollars. >> who is on the bottom of the list? >> if you think about it, the average sally -- salary as a member of congress is 170 $4000. it is not chump change, but many of them have had financial problems. poorest members and a lot of them have declared bankruptcy. congressman david valid deyo from california. who lost a lot of money. he is in the whole $12 million. congressman hastings from florida had legal troubles and is out $4 million. representative ruben hinojosa from texas is down $2 million. he said he lost a lot of money on a loan from his companies -- his family's meat company. you will notice that these are republicans and democrats, and that is the case across the board. it was not that republicans are richer than democrats or vice versa. if you look at the house,
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democrats are a little bit richer. if you look at the senate, republicans are a bit richer. lex let's look at how they got so rich. what are they invested in? be surprised. members of congress have actually been cooling off over the past couple of years. but there was an uptick in 2012. some of the big companies they are invested in, ge, procter & gamble, microsoft, wells fargo, and apple. if you look at the industries they are invested in, very heavy in real estate, securities, commercial banks, oil and gas, and finance and credit companies. a popular strategy is investing in mutual funds, managed portfolios. yourselfis to protect from any accusations of conflict of interest. >> conflict of interest in washington? never. >> never. >> thank you, megan hughes with us on this friday. >> how do you track the investment of really rich people
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in washington? when we come back, to pro sports teams -- to pro sports teams are wagering on online gambling. we will be speaking to the ceo of the philadelphia 76ers and the devils from new jersey. if you missed any of our interviews, you can now watch them on apple tv, a brand-new experience featuring live videos and on-demand tv. ♪
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>> welcome back. i'm stephanie ruhle. transforming the business of ports. that is what the ceo of the 76ers and the new jersey devils is doing. his teams have become the first to align themselves with online gambling. will this payoff? scott o'neill joins us now.
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before we start, you are not just into basketball, hockey. how about into fashion? show us that jacket right now. >> sartorial splendor. is going to say, i want out of miami and into philadelphia if i can get a jacket like that. tell us about this gambling partnership. >> i don't know if you play poker or not -- >> i do. i don't play online. >> not yet, rather. million poker0 players in the u.s. and at this point, new jersey, delaware, and nevada are the three states you can go online and play poker. we own theause devils and the sixers, we have a caller in the state of new jersey. it is an interesting correlation between people who are active, going to sporting events -- they
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are much more likely to be playing. >> what is exchange? >> money. what? who is paying for >> they pay for access to our digital media, social media, television, radio, signage. we come up with some crazy promotions to make sure we are engaging our fans at the highest level. this a gamble that at some point there will be legalized betting on sports? >> this is not have to do with sports betting. >> i know that. >> not now, not in the future. this is purely about going online when you step foot in the state of new jersey and playing poker. we have the legends of the legends, and they will do some activation. they will have a room where you can go and play with them. there will be some fun stuff,
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for sure. >> when i hear this, it starts to make me think you could hurt your ability to get people into your arena. to sean mccoyday about it. he plays for the philadelphia eagles. i asked him, how do you get people in the stadiums when they want to be at home watching it online? >> we sell out a lot. this way.eed any help i'm not sure what it is. we have diehard fans that love the game. they feel what the players feel. i think other places and teams, you know, good luck. >> you've got a challenge. you need to sell out those arenas. will online gambling help you do that? i would think you would sit in your living room, gamble, and watch the game on your big screen. >> poker is a skill game, as you know. it is not really gambling.
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nevertheless, if you are at a devils game and you wanted to lay a few hands between. , you could do that -- between you could do that on your phone. it works out for you well. thing we will become very good at is getting people to come and engage. it is a lot more than the game. we have jay-z coming on the 22nd. we have the nfl media day on the 28th. we have the ufc coming a day before the super bowl. we have all these different events with all different people. our challenge, our test is whether we can entertain them from the time they step out of their cars or off the train and step into this building. how do we make it a wonderful experience? >> you are embracing online gambling. it seems like something people do in their underwear on the couch at home about which is how they are watching sports now. >> that might be the stereo typical way.
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that the new age of folks, a 16-year-old, an 18- year-old, the way they are taking in media is very different. i think we are just scratching the surface to your twentysomethings and thirtysomethings in terms of gaming. they will think nothing of it of being on a bus and playing a few hands of poker. >> is there any leverage for you as far as attendance is concern? are 12 and 23, having a great season. as basketball, it will have to -- it will be hard to fill the arena. anthere will certainly be opportunity for us to talk to their players and gamers, and for us on our end to talk to our fans and how we cross market them. there have been a lot of discussions, absolutely. >> do you think they're a lot --
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are a lot of gamers that are not yet sports fans that you can convert? >> there may be on occasion, but that is around the edges. the challenge with us for sports is we have to ring the bell. >> what does that mean? >> there is so much going on in our lives. how do i get the casual fan to stop and pause and consider? i know once you come, you will come back. the experience is fantastic. the team plays hard. the crowd is engaging. the entertainment is correct -- is terrific. i just have to get you there. >> people say that the phillies fans are the biggest. and the eagles always do sell out. what do you need to do to get the fans to love the 76ers the way they love the eagles? >> i think that we have been really authentic. our marketing message is about "together, we build." .t is a very young team our veterans are 27.
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we have two first-round draft picks. one has been out with a knee injury, but if he had not been heard he would have been an overall pick. excited about our future. i think the fans will be, too. >> what makes your organization unique is the people you work for. >> they must below pressure. they must be so easy to work for. >> it is never low pressure. that when youu work with guys who are smart and strategic and believing collaboration -- believe in collaboration and get the plan and stick to the plan and have discipline and put financial resources behind it, i would take that any day of the week. >> but that brings me to what i want to know. party poker and a million-dollar deal. what comes next? what could make your organization more financially successful, the likes of which we have not seen before in
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professional sports? >> we have a lot of work to do. it is a pretty simple business. you have to sell tickets, suite, sponsorships him a book more shows. we are on our way. we have to figure out how to approach the market. we will use this off-season to it after it. >> good luck. thanks for joining us. and let me tell you one more time, that is a sweet jacket, seriously. it is on another level. >> may ufc and jay-z. >> may be more ufc than jay-z. thank you. back, he's got the hair, the accent. and today, our digital prophet has the latest forecast for 2014. ♪
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>> welcome back. you know what it is time for. big hair, big ideas. what is the latest reduction from the digital prophet -- prediction from the digital prophet? our man from aol, take a look. is thehe fifth addiction world is going to get smarter. we will have all these wearable devices, but what is going to be is not just quantifying self, which is me getting data about me, but collecting data to make me a better human. >> is this a fad, or just a next evolution of where things are going? >> i think what is interesting about wearables is where it is going. it does not quantify me. i don't care if i have walked 2000 steps. socialize that to my friend? probably not. but what i do care about is i can quantify that data and i can send it to my personal trainer or yoga instructor and it becomes valuable.
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it can't bereason in the fabric of our shirt, for example. tight, what does my t-shirt had me? you press it and a geo-locates where you are, and it tells you people your mood because it has a biometric unit. they, i mean, that is where things are going. i kid you not. here is the real challenge. what are brands going to do when there is no screen to face? at the moment, we are all trying to buy time on the screen. but if my phone is in my pocket 90% of the time because my wearable does it all, then we are kind of screwed. >> a wearable t-shirt that rates my mood and gives me a hug when i need it? that was it from the digital prophet all week. what did you take away from that? >> i love that stuff. i think we are getting a little too myopic with this stuff. he just talked about how smart,
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wearable computers can make you a better human. i think you can be a better human by reading a few more books and doing some volunteer work. >> i think what he's trying to say there is a thoughtfulness to this. he is saying, give yourself less data, but embrace the fact that you are valuable. and the fact that we talk so much about big data -- what is big it do? it enables companies to get more valuable information. important, which is to understand what it means on a personal level. how it affects her life and how you control the big data. that is, perhaps, more important to people. i talked to you about this earlier in the week. what kind of relationship you have to your mobile device, it is more than a division of that with joaquin phoenix. >> i'm dying to see that. what it is time for.
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>> name that ceo. this yearbook picture, the county -- the detroit day school class of 1973. we want to know if you know. ♪
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>> the yearbook, everybody. who is this guy? a tech ceo -- i'm giving you a big hint.
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i have to say that listening to him stop -- him talk, stephanie, i did not hear that accent coming through. >> i actually would have guessed post-up i originally guess dennis kozlowski, a former executive at tyco. it is.w who >> it is steve ballmer. steve ballmer of microsoft. >> still be exact same face. >> just take a way a few follicles. i think we can tell you the folks who guessed it correct. there was a clue for one of our other viewers. the unibrow gave it away for him. >> for me, it was the smile -- the smile. way, terrific way to end
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the week. >> it is 56 past the hour. before you go back -- go and enjoy your weekend, it is time for on the market. here is alix steel. >> it is time for dave's auction insight -- options insights. year, what arest the bowl -- the bulls going to do next year? you have a kind of bullish options trade for japan. tell me what it is. >> it is very bullish, but a long-term trade. over two2016, 740 days years. i'm looking to play the japan index fund ewj by buying the .anuary call this recent action between 10
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and 12 with projection up to 14. of got that large amount time and the expiration breakeven is only $.25 higher. you've got to years for the market to move $.20 in your favor. thato years, though, alan, is a pretty long target. why did you pick something so far out? why not take advantage of something closer? >> because you have the luxury of that time, staying power to write through it. s&p has not moved so much since the 1970s. the nikkei, some of the others japan stocks did not have the move that the nikkei did. you do not want to argue with the fed of any country. what they are doing in japan is stimulating the economy. who wants to step in front of that? thing with china stepping in front of the markets here in america. it doesn't make sense.
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>> but you're really only looking at 12% appreciation over two years. are you being too conservative? >> it is a market that doesn't move a whole lot. $12. are trading at about looking for a move of 12% up to 14%. you get the staying power, the limited risk, and the leverage of the options. is only in the low double digits, but the option moves up 50%. >> if you did see this big appreciation in the japanese stocks in the next two years, would you exit the trader earlier? >> oh, sure, there are a million things you could do. you could make higher calls to lock in your profits and make lower risk. -- take a lower risk. the first up is to execute good money management. and then you want to manage the position to maximize the trend. there are many things you can do once you are in a good situation, and taking a position is one of them to put the money
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in the bank. >> fair enough. and then to the broader question shinzo abehappens if loses his luster? the problem has been wages not rising with the rest of the inflationary sector. >> one option is that it is in the money, so if the market is stagnant and nothing happens like wages have been, then it is still in the money. >> thanks so much. we've got to go. "lunch money" is next. ♪
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money."me to "lunch we have a lot coming up, the best stories, interviews, and video in business news. looking at the menu, and politics, bridgegate. orthe scandal helping hurting chris christie? in media, the original, content creators at ces. in property, escape from new york. leading the big city in search of greener pastures. in sports, ambassador mark messier, a distinctly non- pro game,


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