tv Market Makers Bloomberg January 15, 2015 10:00am-12:01pm EST
"nightcrawler" which did not get nomination for best picture and jake juvenile did not get nominated for best rector. some people were surprised jennifer aniston did not get nominated for best actress. i did not see it so i cannot comment. >> thank you so much for joining us. staying in switzerland. stay with bloomberg television. ♪ >> live, from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> and avalanche and the swiss alps. switzerland swiss -- switzerland central-bank stuns the markets. >> leon black changing the rules. he could be facing billions in losses for his bad investment in caesar's. >> mary barra wants to shift --
great is it on the rearview mirror? you watching "market makers." >> we have breaking economic news. the fed index, scarlet fu has the headlines. we are going to cover it here. >> the philly fed index coming out at six points, way under expectations. it is the worst since march 2013. >> 2013? >> pardon me, march 2014. >> everyone is talking about how
strong the u.s. economy is, how great we are doing across the board. this is a surprise. i did not expect this. >> horrific retail sales numbers yesterday for the month of december. two pieces of economic data about the pace of the u.s. economic recovery and ultimately , not just the demand of consumers. we are going to talk about the greatest buying opportunity in the month of january. >> top global finance and business stories of the morning. switzerland rock financial markets around the world. they lifted its policy of capping the swiss franc against the euro.
a huge move against the dollar. swiss stocks plunged. switzerland is an export reliant nation by making swiss goods more expensive to sell in other currencies. shares dropped as much as 60% in early trading after blackberry and samsung denied a report by reuters that samsung was in talks to buy the canadian smartphone company. it sent blackberry soaring up 30% yesterday. radioshack preparing to file for bankruptcy. they may file the first week of february. will mitt romney -- should he run for president again. it is a question that bloomberg
puts to senator rand paul. >> in deciding whether or not we try to reuse a nominee we had before, some of it has to be looked at on ability and how successful we were in the election. you have to ask yourself why. it is not about whether you are right or wrong with the arguments. >> rand paul cannot be called a neutral observer. he is expected to make a run of his own. >> he is the opposite of a neutral observer. >> he meets with president obama the next few days. >> day two of bank earnings week.
get use -- get your head around this. 86%. citi says it is a decline in business. eight is blaming fixed income trading for a profit drop of 11%. it did eat estimates by a penny. i want to bring in a bank analyst chris. what do you make of all of that? >> it has been weak. we have four reports under our belt. trading is weak. we saw a bit of an expense bump at the end of the year. that is not entirely unusual. you do not like to see it. not a major deal, but a slight negative.
the lending revenues and loan growth, it is slow and steady. seas, some were up and some were down. city and -- citi and bank of america a little weaker. i think there is a secular issue here on the trading front. we have had 14 down quarters in the last 20 quarters. based on the four companies reporting so far, we are looking down about 15% year-over-year. >> when you say there is a secular issue going on here, is that to say we are going to see more of the same in 2015 16 income trading and other trading is going to remain weekend anything but a sort of earnings growing engine.
>> we have been living in this secular pressure and living with it for more than a decade. we are used to it. the equity side of the house is it hit a bottom level. the 16 income houses, the banks are able to put up less capital than they did in the past and so it is more of a fee for service business. the buy side is increasingly sophisticated about how it spends its dollars with the sale side. you have a lot of banks and investment banks blaming the lack of volatility. a year ago they blamed commodities. a year before that they blame the euro crisis. you stand back and 14 out of the last 20 quarters are down. it seems to me like there is an
ongoing pressure here and that the banks will have to -- for the new world reality. >> by right size, do you think we will see the banks shut down some of the businesses? those are expensive businesses for banks to run. >> everyone is facing the same dynamic. the way it will work is that company by company sector by segment, someone will come up to a desk and they will, to a mortgage desk or a high yield desk and say, last year, you had 50 people and you used $1 billion in lines, why don't you see what you can do with 35 people and 500 million in lines this year. that is the way it is going to work. there will be ongoing pressure on all of these businesses until it gets right size. >> it is my understanding that
at the very least, goldman sachs has been talking to some of the largest by side firms about the equity as a nation -- equit ization. is it possible that goldman may be ahead of this curve and that they are going to crush it and do a good deal better than some of these other banks have done? >> i do not know. we will see in the next couple of days. i think this is something affecting the industry as a whole. we may find out in a year or two that we missed the big banks in this business. the amount of dealer inventory that we have to trade all of these markets is down from a couple of years ago. that is what has led to some of the volatility, like the volatility you saw in october.
basically, nobody in the world needs broker-dealers when bond markets are going up. we may find we missed them once the bond market turns around. >> thank you. breaking down the bank numbers. >> when we come back, unexpected is not a word you usually associate with a central bank of switzerland. its reputation changed in a matter of moments. >> he rolled the dice on casino operators. caesars has filed for bankruptcy, will leon black have to fold his cards? ♪
>> chaos in the currency market. suddenly, unexpectedly, the swiss central bank pulled the rug out from underneath the euro. for three years, they had tried to insulate their economy by keeping a minimum exchange rate. you can imagine the reaction was swift and breathtaking. the euro plunged file most 30% against the swiss franc. now it is down about 15%. the sudden strengthening of the frank is terrible news. the stock indexes down to 10%.
mark gilbert will tell us how this situation looks from the currency trading capital of the world, london. here, we have a less seo -- alessio. could they have wanted this to be the outcome? >> i think they miscalculated. their point is clear that there was no other way to do this. they have to surprise the market. this move is big and in the press conference they explained that they do expect the dust to settle. they expect -- from the current correction. they are admitting that this move is a little too fast too big. >> i think it is a miscalculation. i think they thought having a negative interest rate would deter people from making the move. why not just move the rate?
if you have a target in mind and you are saying the swiss economy is in a better shape to cope with a stronger frank, you could have moved the goalposts slightly. it shows how much demand there is for safe haven currencies ahead of what people are expecting. basically, trash the euro against everything. >> who is losing money here? >> next week, when you and i are in switzerland we -- when we cannot afford a course on coffee, or a cab ride, it will be the two of us. >> you read the caller from dealers. they were saying there is no market. here is all stops being triggered.
a sudden move, but no active market. >> the people buying are buying because they have to. >> yes. plenty of orders in the market. the immediate reaction is, do we know including the imm, that there were large positions as an alternative? because of the peg, they were considered alternative funding currencies to each other. the strategy where you buy high-yielding assets such as euro and swiss. who is losing money here are the swiss. what is the next step? this is pretty much euro negative and negative for other foreign currencies. volatility shoots up. the natural strategy is to roll short positions into more well-behaved and less volatile
currencies. maybe some asian currencies. that is what we are trying to figure out, what are the implications next? >> when you saw this news, you could not have been expecting what went through your head. >> i have two children. one of them woke up in the middle of the night and i think i'm going to stay up all night. >> you refresh your screen and say you have to be kidding me. >> i might as well refresh. i see 15%, my eyes were worried. i am going to stay up all night. >> did you think this had to be a mistake? >> i have been mark -- watching markets. once you have seen the headlines
and you watch you pull up the relevant chart, it is clear it was going to go in one direction. the magnitude of the move, i have never seen anything like it. >> beyond the miscalculation are there unintended consequences beyond what we have seen happen today? that we should be thinking of for the days, weeks, and months ahead? >> the consequences we know about the nominated mortgages in eastern europe. >> people in those countries were taking out loans in swiss franc's because of the answers rate. >> the thing that confuses me the most switzerland has been
in deflation for the last two years. with a euro zone that is growing steadily into a deflationary algorithm having a currency appreciate 15% is going to exacerbate the import for switzerland. are we abandoning the inflation target. his switzerland taking a first move towards abandoning the inflation targeting mandate of the central bank? maybe other central banks, is that what you're thinking? >> oil prices are plunging. japan faces the same problem. >> switzerland can weather deflation because they do not have a stock of debt they have to deal with. japan, the eurozone, they need
inflation. switzerland is in a comfortable position. if there is one country that could test having a lower inflation mandate, it is probably switzerland. this is brainstorming on my part. >> how complicated does this make life for mario draghi? >> i think he has already told the swiss central bank that he has persuaded the boom to spank that he is going to do quantitative easing -- the bundesbank that he is going to do quantitative easing. i do not think this will change that. there was a text message and they would rather surrender the currency policy than try to stop the swiss franc appreciating.
it is a preemptive move and evidence that the ecb is going to do whatever you expect them to do on january 22. >> do you think there will be fallouts on the wrong side of this move? >> near term, but i expected to maintain in the currency markets. i do not think the amount is as large as we had it in 2011. that was much more of a shock. >>alessio thank you. mark, thank you very much. >> "market makers" will be back in a moment. stay with us. ♪
>> welcome back to "market makers." let's begin with movers. homebuilders on the move after a note from morgan stanley. it begins coverage of the sector with an overweight rating. linares the best -- kb home began with an under rate and pulte rate with an equal rate. growth will come at the expense of growth margin. let's move on to losers. best buy and extending its declines. best buy give a disappointing first-half outlook. j&j cut to sell. bank of america sinking almost 2%.
>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> good morning once again. >> time for a story. >> it was one of the worst investments of leon black process illustrious career. -- leon black's illustrious career. caesars entertainment. caesars was hit hard by the downturn, missing the boat in macau and the recession.
laura keller is here to explain. >> i don't even understand this. >> it is very odd. >> what is supposed to happen is that the people at the bottom of the capital structure take the losses first. that is not happening here. cracks -- >> this is only because the way of they structured it. back in 2008, they kept some of the company separate and they had only tethered the parent company to this massive piece of debt. that is the parent guarantee. whatever happened with the troubled operating unit down the line, the parent would be able to pay it back. they started moving assets around. this tether they also cut. it meant that the creditors now don't have access to any of these other assets. >> what are they facing?
normally the firms do the right thing and handed over to the creditors, but you have creditors, bondholders who is not going to lay down and say, i'm going to go second. >> he has made that very clear. there are remedies. you can go into bankruptcy court and he will. he filed with oak tree and tenenbaum, this lawsuit for involuntary bankruptcy -- to try to take away the plan that apollo had going. it is going to be in up the battle to see if they can get at the current equity. >> isn't at all predicated on being able to get the debt investors on your side? there are some who think that leon black and the folks behind it are getting away with murder but there are others who signed off on it. >> i think they signed off, but
i don't know if they would agree if there were no remedies that they could get back in little bit of value. if there is a way that they can agree to this deal and that also go back and get some additional cash, some equity from the parent, they will. >> what was it that presumably apollo and tpg offered the bondholders to persuade them that cutting the tether was a good idea? >> it is not something that they mostly agreed to. it was a bad deal for most of the lenders. a few of them agreed. >> those who did come over those normal players in the market? did they realize what they were getting into? what are people behind the lines saying? this was leon black's most clever move? or this was a sleazy, backdoor move? >> and clever at the same time. >> they are praising him and they are slamming him.
what did you do at the time that was most beneficial for you? if you are not going to be hurt by this decision, that is ok. >> if you are dealing with an investor likely on black shouldn't that be what you are expecting? >> no. there is some level of here is how the game is played, here are what the rules are. but if they are taking the gloves off, i'm kind of excited to see david tepper and leon black in an open cage match. >> i don't know if it will get to court. it will be in court. >> we just won't see them on the witness stand. >> i don't think so. >> i would like to see that can of showdown. wouldn't you? >> absolutely. >> this could end up being hate
the player -- game, not the player. if leon black did everything legal and exploited a loophole, that is the nature of this game. >> when you deal with leon black, shouldn't you expect that every single time? it is not a gentleman's game anymore. >> if you want to dissipate that is happening, but maybe you cannot anticipate all the things he might do. >> thank you for coming in sharing the story with us. we look more -- forward to more reporting from laura keller. she covers distressed debt, like caesars. >> a report card on mary boris first official first year of general motors. -- mary barra's first official year as ceo of general motors. ♪
gm ended up recalling nearly 30 million cars last year. here is maryborough talking about the fallout. -- mary barra talking about the followed. >> we took action the minute we learned it happened. it was brutally tough, but we are going to take the lessons and use it to make a better company. our employees are committed to that. >> we cannot forget to mention that gm also sold a record number of cars in 2014. we got to look at the self-described cardell house first year -- car gal;'s first year with matt miller. laura, she may have shattered the glass ceiling but one she got it, though shards of glass came pouring down from the heavens all over her.
cracks it -- >> it was a year of incredible highs and lows. last year at this time, she was treated like a rock star and then the whole crisis happened. she was able to turn the crisis around and use it to her advantage. she is turned to galvanize the employees in order to take on the company's very famous. chrissy -- famous bureaucracy. if i gave her a grade? it is incomplete right now. she just started. >> that was the worst grade when i was in school. there was no relief from it. at least when i got a d, and knew what it was. -- i knew what it was. >> that is not making a negative judgment. it is too soon to tell how well
she will do. the jury is still out over her biggest challenge, which is to change the culture at g.m.. >> she generally gets most improved if you are going to give her a yearbook thing. >> not best chatterbox? there is class chatterbox. why most improved? >> she stumbled initially in the congressional hearings that she had but she was on capitol hill six times this year and she really recovered and she was very powerful and determined at the end of these hearings. i think that that helps to turn around the company culture. now you hear g.m. workers levels and levels below her parroting the stuff she has been saying. it also helped in public perception and washington
d.c.'s perception. this whole recall thing is largely behind them. it only cost them $3 billion and change. >> why does she need to change the culture at g.m. and can she? she came from there. >> she was basically somebody who was groomed to be ceo from the very first day. she grew up in a general motors family. her father was a die maker for 40 years. >> it is the only culture she knows. >> she understands the culture better than anybody. she used the crisis to speed up the bureaucracy at the company. she has changed almost all the top managers. there are only three people out of the top 18 managers who have been in their job for more than one year. >> of all of those top managers that she changed the she put any women into the top seats? >> yes.
>> all right. >> a question i would not have thought to ask. >> how would you like the approach -- like in the approach that mary barra is doing to what alan mullally did at ford? >> alan mullally sold off almost all the other brands to focus on ford. >> i think lesson substance than in terms of willingness to abandon convention and move the company. >> in one way what alan mulally mullally did it ford, mary barra -- this tragedy that struck gm has done for her i gm -- at g.m.. alan mullally made everyone own up. he made everyone be honest. mary is definitely doing that
and her team is the closest net, strongest group of managers gm has had in a long time. they huddle up like a football team. they are so close tight, and supportive of each other that they can let anything by there. >> do you want that? >> instead of hiding something and having their fiefdoms and working in separate units, these guys are working together and if they have a problem, they share it with the group and they go after it together and solve it. >> this sounds like reality tv. >> there are regular meetings with the top 300 managers in the company and they talk about things that need to be changed publicly and frankly. it is similar to what alan mullally did at ford. >> here is the key. has the effort to try to eliminate the bureaucracy a general motors and the work that it took to recover from the recall debacle become so much of
a distraction that mary barra might not succeed at the one thing that matters most which is making cars three or four years from now? >> i don't think that is going to be the case. she has spent her entire career at the company. she has been in charge of product development. she knows what needs to be done. this has been a distraction, but it seems that she has managed to turn this terrible circumstance to herd vantage as a manager, as a way of galvanizing the troops which nobody has been able to do before. the other thing that is important to know about her is that she is a product of this bureaucracy. one of the things i write about in my book is how gm had all of these bureaucratic systems in place to promote people who are talented. the bureaucracy that caused the terrible time for her in her
first year also helped create her because she was picked out at an early age, she was rotated through different jobs she was sent to stanford to earn an mba. she is a product of the system, but she understands it. >> i'm going to make you stop because still you want to sell the book? i will be sure to get it. you want to be sure to get this. i'm sure matt will be get -- the first to get it. matt is quite the car enthusiast. thank you to both of you. laura colby and matt miller. >> coming up free community college for everybody? some say it is one solution to unemployment. we will take a look at president obama's new plan. ♪
>> employers call it a crisis, but many cannot find employees educated enough to fill the jobs. president obama calls for free community college. gail, when i think about what to do after community college, so many, it takes them six years to get out of school, it is unclear what they do for a job after. if you were an 18-year-old and did not have the grades to get into a top university wouldn't it make more sense to try to become a carpenter, a mechanic, a plumber? we surely need those more than students who go to community college. >> you actually don't need them more. america needs entrepreneurs.
this proposal is like the g.i. bill. what would it take to do in moonshot? we are going to make a big statement about what america needs. you need entrepreneurs. >> what does that mean, we need entrepreneurs? i need people to fix my car, built my house, and fix my refrigerator. i know i need those things. i don't know if i need entrepreneurs to start companies i've have never heard of. >> that is just one thing. you need people who were going to run the cameras in this office, people who were going to code, people who are nurses. >> what percentage of people to graduate from community college become those things? >> probably about 50%. it is about putting the -- education in the hands of mom and pop small businesses.
people make their companies more profitable. they understand accounting sourcing a little bit about how to get people what they need. we need a big lift. america is in the knowledge economy. you probably did not get your fridge raider fixed, you bought a new one. >> it is hard to find a repair guy. the repair guys who come are 60 years old and i don't find 25-year-old palmer's. i'm going to have a broken toilet for the rest of my life. [laughter] maybe we should spend more money on vocational schools then community college. >> i'm interested in the economy. you need people who can think of a work, come into a place like bloomberg news and really understand that it takes initiative thinking, technical skills, and a big vision. >> what percentage of students graduate from community college? >> 27% at my college. >> that is a low number.
>> if what you think is that graduation is the only way out. the student who learns how to use quickbooks for one class is immediately connected to the economy. what really need to do is work much more closely with business. the work that i have been doing with accenture, goldman sachs, microsoft says, what are the skills that you need? some of them are at the certificate level. we are not only graduating philosophy majors. the we are. we are trying to link education in a very practical way. >> here is another question. in addition to encouraging -- if you are trying to shape public policy -- if you want people to attend and complete more community college, should we be trying to get fewer americans to attend university and get degrees that frankly are useless to them in many cases? >> the workforce education
program at georgetown says it is not just getting a degree, but the kind of degree you get. we really need to advise people about how to think about their careers. people start in the mailroom at bloomberg news and move up, you don't really do that anymore. we have to help people think. one thing that investing in community colleges will allow us to do is change the inequity. the government pays three times more than a few started a community college. they begin to leverage what we might be able to do and make it more profitable to think about what should people be studying and how can we do that effectively? >> does the need for a free community college education mean that we have failed our students in terms of high school education? if we have put more resources or better resources into their primary and secondary
educations, they would not need to go to a community college. >> almost half the people who go to community college have been out of school for seven years. the economy is changing fast. what we really have to do is not just educate one, but educate andriy educate. it is really a knowledge economy. -- educate and reeducate. it is really a knowledge economy. you have to have practical education and does not just happen when you are 19-21. we need all the all -- it all. but we have to be realistic. this is not a 19-year-old going to college and then being perfect. it is how do we open up these fiber to institutions that are linked in multiple ways to their communities? >> thank you for spending time with us. >> figure so much. thanks for joining us. the president of laguardia university college. >> "market makers" will return
>> blackberry says it never happened. the struggling smartphone maker denies a report that samsung made a takeover offer. the company may be available if the price is right. >> maybe just in time -- the opera newer -- the oxford newer -- the entrepreneur who hopes to make it big with a new company. >> oh no, canada. after racking up billions in losses.
welcome to the second hour of "market makers." i am stephanie ruhle. what do you think about this target headline? >> when i was growing up, there was no target. >> erik is canadian. >> we did not have a target and everybody wanted to go south of the border to shop at target. going to florida for the vacation. driving across the border to buffalo. i cannot understand why they could not figure out. >> they lost the desire factor. >> could be. >> sometimes i feel that way about walmart. they do not have any around here. >> you love going to walmart. >> we have to take you to the bulletin.
you know what i am going to talk about. if switzerland has rocked the financial markets this morning. the central bank has given up on its efforts to hold down the value of the swiss rank against the euro. it listed its cap onyx change rates. the result, the french -- the frank sort against the euro and the dollar. exports will cost more. shares of swiss companies fell i double digits. the fourth-quarter profit fell 11% at bank of america. they have been hurt by a slump of fixed income trading. it happened over at citigroup. profits plunged 86% because of lower trading revenue. a proposal is out there to rein in high-frequency trading. the top democrat on house budget committee says the u.s. should work with europe to impose a fee on financial architect action. chris van hollen says a lot of money is skimmed out of the system. he wants a 1/10 of 1% charge on
all transactions. we have to turn to hollywood. birdman and the grand budapest hotel have been nominated for nine academy awards. bird man is the story of a washed up star try to revive his career. it stars michael keaton who is the very famous mr. mom. grand budapest hotel is an oddball comedy by west and -- by wes anderson. the oscars will be handed out february twice i can. what do you think about that? >> i have not seen birdman. i love ran budapest hotel. i like rushmore. >> when bill murray has a cigarette hanging out of his mouth and goes off the diving board.
when he's watched the basketball. -- when he swats the basketball. i like wes anderson movies. do i think they have a specific style? i buy it. i like it. i am into it. christopher guest, who i think is probably an icon for wes anderson. >> you think so? >> you have never seen waiting for government -- waiting for government? >> moving on from spinal tap. a headline investors scrambled about yesterday. reuters reported just before the closing bell yesterday that samsung made an offer for blackberry. the price tag at least $13.35 a share. the shares surged and the last few minutes of trading.
they felt back to earth today. both companies are denying the story. a person close to the company tells us that blackberry gets offers all the time and it broke -- would require a bigger premium to entertain any of them . here to figure out whether blackberry desserts that kind of premium is the chief researcher at idc. this question as to whether blackberry is worth more than its market value comes up all the time. in many cases, companies are worth more than their market value. how big a premium do you think blackberry deserves? >> you are right that -- what you are seeing is a test. parsing a test of the water. -- you are seeing a test of the water. future options in the situation
because as the smartphone business matures, a lot of these fundamental wireless and security patents that blackberry has will be worth more and more in the future. again, it is a tough one. the forward options on the ip is worth a lot in the future. the actually core smartphone business that blackberry is worth less over time. you get the value of their network. valuing this company is difficult right now. what samsung did is put a number out there that puts them -- it puts the evaluation of black -- back when blackberry was the blackberry everyone knew. based on what we are seeing blackberry is saying that is not close. we think it is worth more. we have a first volley and that is blackberry coming back and saying no, we are thinking of a much larger number. >> to some degree the beauty of
blackberry or the eye of the beholder. there are certain comedies like samsung that could bring a lot more value out of blackberry because of those patents. for example, if samsung were to get some of the security patents that blackberry owns. the connected car things that blackberry is developing. samsung could make a lot more because they have so much market share in the smartphone business. it would have a greater value to a samsung that it would to another acquirer. it is worth noting that, if somebody look at the earnings over the last 12 months, i think the last quarter report for blackberry was so important. it reflected a strong turnaround of the company. you had free class float -- cash flow generation. roast margin improvement.
-- gross margin improvement. you can see some signs of real good progress at blackberry in terms of turnaround that means they can't survive a lot longer than an independent company and wait for a deal they want. >> the question then is, blackberry seems to think that it is worth a great deal more than what samsung put on the table. both companies denied the reports. we do not know if they put something on the table that was north of $13 a share. the history books are littered with companies that thought they were worth more than the market value, only to find themselves with a great deal less several years past. >> you want to talk about driving across the canadian border, see kodak who played
this game forever until they went bankrupt. you have a strong turnaround. that is what is so interesting about what john chen has done. >> everybody is for sale. it is just a matter of price. this is not a black and white situation. >> i think what is interesting about this is the suitor. that is samsung. they sit on a very interesting square on the board. they have had this kind of knock initiative. about security and about securing a smartphone environment. now they are competing with google. what blackberry would give them and i asked john chen about this. blackberry as a service. creating a secure messaging services outside of the hardware. he agreed publicly on stage that
that is what they would like to do. >> that is very much what blackberry would like to do. they want to be a platform in different company. they want to get out of the smartphone business. they want to be in your i.t. department. that will partly work because they are getting out of the consumer handset business. if you are samsung, does the customer trust you to be platform indifferent in the i.t. department at the same time as trying to sell you handsets? >> the samsung customer aligns samsung with android. blackberry has a growth problem. i cannot grow their base as fast as they need to. the magic here is taking android running it through the blackberry network, of which they have their own network to
secure e-mail messages. and provide a differentiated more secure experience on android. that is the partnership they announced. this would take it to the next stage and give samsung a footprint in the enterprise. it might look like edward, but it would be more secure than android. >> today is the day that samsung has finally shipped the phone with an operating system that is not android that they created in-house. it is a game they were playing with google. we do not need you as much as you need us. they are hedging their bets. they have other options. >> if you look at the margins that samsung is earning on its handsets, they have to find a way to recover more of the value chain. cory johnson on bloomberg west editor at large. thank you. >> when we returned, a man back
>> after a year off, the serial entrepreneur bradford shellhammer is back. he was the cofounder and creative force of fab.com that went from hero to zero fast. he is launching a new site. another shopping site he says will be different. tell us all about it -- he is here to tell us all about it. >> i would not have guessed born and bred in baltimore. take us from fab too bizarre. >> you would have to go back. fab and bizarre were me first.
my outlook on life is as colorful one that has been immersed in the design and maker community. >> you do not say? >> i practice what i preach. fab came from a special place in my heart. we made mistakes as a business. i left a year and a half ago. i needed to figure things out. i was put on this earth to do this thing -- to bring consumers who i think need better choices online for shopping, and makers who have no place to sell their goods. etsy is problematic. many industrial designers -- it started off as a handmade thing. they don't fit into that mold. they abandoned the handcrafted thing and they are mass-producing from china. lots of knock offs.
my designers do not want to be on a shelf where they are selling an authentic or soft items. another retailer that gisele copies and fakes. >> you think this idea will fail? >> no. many other designers i am wearing i found on etsy. i believe the best was in the world have different tastes. >> how do you take the good of what you did at fab.com and learn from the mistakes? >> you do not go too fast. when i pitched this business and raise the money, i said i am not telling you i am making a billion dollar company. my dream is to make a difference in the world and create a sustainable and meaningful business. if that becomes a billion dollar
company then hooray for all of us. i learned -- the big thing i learned was slow. >> the mistake was be -- trying to be the biggest, the most fabulous? >> there were many mistakes. because we were going at such a fast pace, we were not able to -- >> was going at a fast paced your choice or were you encouraged by your investors? >> it was everyone. it was accommodation of all factors. quite how do you find the designers? >> i worked with over 20,000 of them at fab. all my friends are designers and makers. it is talking to everyone i know. i use etsy.'
i use i look at design blogs -- i look at design blogs. what a business like ours does is we pulled them out and say, look at these people. not look at the millions -- >> you get overwhelmed. there is so much. >> we put a spotlight on the best. that, in a short amount of time, it works. we put a collection of for three days. by it or it's gone. it creates volume in a short amount of time. >> how much pressure are you under in terms of discounting? >> consumers are not addicted to deals. they want value. they want great stuff. they are addicted to deals from brand names because that is what -- that is what happens from sacks to barney's.
>> they can comparison shop? >> you cannot find this everywhere. >> it is $29 and i wear this crazy blue suit and people stop me on the street asking me what is this? >> you think that suit is crazy? >> you know what this is, a whole other level. >> bradford shellhammer. >> that was awesome. all the way up here. when we come back target, after billions of losses is coming out of canada. ♪
>> target is cutting his losses in canada less than two years after opening its first store there. the retailer is walking away after racking up more than $2 billion in losses. let's bring in our market correspondents, julie hyman. where does it go from here? i like to think the canadians are just like us. apparently, they are not. >> you guys were talking at the top of the hour about people who would like to cross over from canada into the u.s.. before there were targets to shop at the targets in the u.s. >> and they did. >> i talked to an analyst who said he did focus groups with women and it was a right of passage. it was something they got excited about. target thought, ok, this is easy. move across the border.
it was not that easy. they didn't have the proper supply chain in place. you are also talking about -- they are closing 133 stores that employ 17,600 people. that was a system that was put in place in two years. think about how quickly they did this without the proper infrastructure. just like with your last guest, it was a problem of speed and trying to grow too quickly into a market they were not familiar with. they did not have the resources and infrastructure. it went wrong. the new ceo of target said it would take until 2021 to make money on this. if you look at the operating losses, they did not open until 2013 in canada. they were showing losses before they opened. the losses were growing. not getting smaller over the
last several years. >> hold on. were you surprised? >> no. the company they replaced was not a great company. not a pleasant shopping experience. the discount marketplace has been tough to crack in canada. canadians are -- maybe it is the scottish heritage -- we are thrifty bunch. there are a bunch of established players that will benefit. >> they are a thrifty bunch? >> everybody in canada does not by rouge. they play hockey. >> it is not that shocking. the timing is shocking. >> this is good for the country's largest supermarket. good for canadian tire and
>> welcome back to "market makers." i am stephanie ruhle. i am erik schatzker. >> the european markets have closed for the day. a very busy session after that. the swiss national bank decision. i want to bring in scarlet fu. >> european stock market rallied into the close. the euro stoxx 600 index climbing 2.5% as the swiss surges in value. this is bad news for swiss companies that rely on overseas markets.
this is why the market index tumbled today. this drop in 25 years. a 20% plunge for the smi -- 28% plunge. swatch group making comments that this is very bad from the company -- for the company. we are continuing to monitor this. it is a 24 hour market. >> i have one in datapoint i wanted to add. if you want to gauge what a big deal this was to the swiss -- the trading volume on the swiss exchange was 600% the 100 day average. i have to look at the history books to see if they have ever traded this many shares on the swiss market. i would be surprised. let's is massive. -- >> it is massive. it is a popular trade. no one thought they would make a
move like this. they were known for being reliable. >> scarlet fu with the latest from the european market close and the chaos thanks to switzerland. republicans in the united states are enjoying their first days in control of both sides of congress. members from both house and senate are meeting in hershey, pennsylvania to talk about their priorities for putting 15 -- 42015. peter cook talk to one of the gop key dealmaker. the chairman of the foreign relations committee. what did you talk to senator corker about? >> get a feel for what is happening behind the scenes. republican senators and house members meet, talk, and compare notes. they don't always get to sit
down and make sure they are on the same page. bob corker told me that is the beginning of what this retreat is all about. >> it is helpful to secret eyes. -- to synchronize. it gives everybody a good idea of what the agenda of each side is. just being here with house members, people do not realize, when i go to tennessee, we don't have that much interaction with house members. >> you guys need to bridge differences with them. >> we have a lot of similarities we need to secret eyes -- synchronize. i am glad to be here. it has been helpful. for people to understand how each body plans to move things along. >> what is realistic to achieve in terms of priorities this year, legislative priorities? we have had five veto threats
from the president. >> i do not think the legislative branch ever follows the agenda of the ceo maybe laying out. we will follow our own course and deal with energy. we have to deal with a budget. we had meetings. we will deal with the iran issue fully. you all keep referring to sanctions. you will see a bill on a ron that ensures -- on chiron that will stand the test of time. congress has the ability to weigh in on it. congress got us to the table. the administration was involved but congress late a major role and we need to play a major role in ensuring whatever final agreement is negotiated is one that will stand the test of time . you will see energy, foreign relations issues.
the president has given the nod and plans to work with us on a authorization for the use of military force. we hope that is actuality and will occur. it will be banking issues we will begin with. it will be a robust. the first six to nine months will be the most robust. st period of time. >> republicans in the house passing a bill to the senate. there are questions about how this moves forward. is it a mistake to put department of homeland security funding on the line? >> one of the things americans have not been able to see because it has not happened in so long. the last conference was on dodd-frank in 2010. the house passes legislation the senate passes legislation and then there is a conference
where you work out the differences. you will see a lot of that happening. the house has had its say. i know that ron johnson, the head of homeland security, he doesn't outstanding job in my opinion. he will have his say and we will figure out a way to merge the two. >> you will have to pass a clean dhs funding bill? >> i think everyone is cognizant of the fact that americans -- american security is our most important function and homeland security is central to that. we all want to maintain that. at the same time my since the senate will speak strongly to the issues you are alluding to. >> you mentioned dodd-frank. we have talked you about regulatory issues and financial -- in the financial sector. what you think should be done in terms of tweaks to dodd-frank
and efforts to do sweeping changes. is that remotely possible? >> almost everyone would agree that community banks across the nation have been under a lot of stress over some of the changes. everything flows downhill. those are some of the issues we can look at. the biggest issue to me is, when dodd-frank was being passed every single republican senator i believe went to the floor and complained about the fact that it did not include changes to fannie and freddie. keeping them off as a taxpayer liability. it is the biggest issue that we need to deal with. from my standpoint, it would be total malpractice for us not to figure out a way to get this tremendous taxpayer liability dealt with and have the private sector playing the kind of role it should be playing right now
in housing and finance. i will speak about something that was left out of dodd-frank that we need to make sure he still with. >> should janet yellen expect changes? >> i think what you will see oversight wise there is not a lot of oversight and how the fed is turning out his regulations. you will see a lot of meetings in that regard trying to understand how they are going about their business. the effect that is having downstream. one of the most important roles we play is oversight. that is something that will be very robust over this next couple of years. >> senator bob corker will be a key player on reg odrick issues on the banking committee and as chairman of the foreign relations committee. at this republican retreat, you can hear in his voice that they have a lot on their plate. a lot of differences they need to work out with their fellow republicans in the house side.
>> welcome back to "market makers." i am stephanie ruhle . could a new wave of skyline defining icons across the united states had the same effect as paris. i'm pretty sure it that is the paris of the midwest. a city that has its own famous structure appeared right this down for us. what do these structures -- what are they trying to come push -- accomplish?
>> this is not the paris -- the statue of liberty of the midwest. what we are seeing are plans to build all kinds of massive structures. urban areas are enjoying the benefits of an economic recovery , an influx of residents and rising real estate prices. there is an architectural arms race. we are in st. louis because the gateway arch is a model for urban developers. it was envisioned as a structure that would not only revitalize the riverfront, but that would stimulate the economy in st. louis. it is credited with attracting 2.5 million visitors who spend $230 million annually. it supports 5000 jobs. that is the success urban developers are looking to replicate across the united states in cities like phoenix, las vegas, miami orlando. even in camden new jersey. more structures planned in new
york city. >> do studies suggest that other landmarks like the space needle in seattle. i was in seattle yesterday and admiring the space needle. or the paul bunyan statue in portland oregon. do they attract as much as tourism and create as many jobs as the gateway arch in st. louis? >> yes. there have been studies across the world. you mentioned paris and the london eye. these structures can create jobs and bring in tourism dollars. based server as a symbol -- they serve as a symbol for the cities. one is called sky rise miami. a thousand foot tall hairpin like structure. critics call it an inverted toenail clipper in miami. a huge building. the largest building in miami. the plan is to have three
observation decks, a 500 seat ballroom, and an amusement ride. a flying theater. >> why would miami need to go through such a huge expense like that? they have infrastructure and traffic issues. they have tons of tourists and real estate is booming. why spend public dollars for something like that? >> that is a very common complaint. it has been in the news for a very long time. this project is a $430 million building. only $9 million is coming from taxpayers. the rest is coming -- the developer says he is putting $30 million of his own. he is shopping for investors in dubai and china. it is not a publicly hundred project except for the $9 million. new york is building a huge ferris wheel.
there is a bizarre place to build more ferris wheels. new york's will be the biggest in the world. 60 stories high and will accommodate 1800 riders. this structure is supported by the government as a way to revitalize staten island. built on the riverfront. the state and local governments have pledged $50 million. a lot of the funding is coming from the piece of program and all different sources of grants. that is receiving public money. local officials and state officials say that is worth it. if that can bring tourist dollars to staten island and revitalize new york city, that is the end goal. wring money into town and get a structure -- that will define the skyline. >> thank you for joining us. stay warm in st. louis. i hope you get a lot of instagram shots. i don't know -- i like miami a
>> next week stephanie and i will go to dallas -- switzerland for the world economic former and -- form. interview setup with the biggest names in business, government and finance. that is why you go. there is some bad news for everybody who is going to switzerland. the decision by the swiss national bank. next the timing is crazy. >> they removed a cap on the price of the swiss bank versus the euro. it amounts to a cap of the swiss bank versus everything else.
that means spending any time in switzerland will be more costly. >> we will come home skinny because we cannot even drink. >> this is for the high-end crowd that will be in switzerland. a glass of johnny walker blue at the belvedere hotel. more or less the fancy his hotel on the strip in switzerland. it will cost you $41. johnny walker blue now $41. yesterday, $35. >> yesterday, $35 today, $41. one drink. you can throw it back in for five seconds. >> a bottle of dom. $342 yesterday today $400. >> we would not be drinking it anyway, but it will not be -- it was not cheap anyway. it is a big ticket.
we are joined by jefferies of those tomorrow. his strategy has gone from -- if you don't know what that means you will have to watch. we will see you then. >> the swiss national bank's decision. we are also just about it. there has not been a move since the breakdown of the written woods agreement -- britain was agreement. excited. bloomberg television is on the markets. here is scarlet fu. >> the swiss franc is hogging the spotlight after the swiss central bank defunded. european stocks rallied into their closed. mario draghi will begin quantitative easing. in the u.s., things are,, relatively speaking. the s&p 500 down one half of 1%.
joining me is out another command. i know you focus on the technicals and get to the vexed and a minute. i wanted to get your take on the fallout on the decision of u.s. equities. are we feeling it? >> we are getting action. a lot of volatility and capitulation. we saw the euro currency make new lows. crude oil get about $50. the dollar got up to 93 and change. a lot of action. this is when trends and. we want to see not how they act, how they react over the next couple of sessions and figure out if this is the worst behind us. >> the vix above 22. holding above the historical average of 20. where do we go from here? will we retest the highs of
mid-october at 25? >> we have not done that yet. we have seen lower highs. yesterday's highs, how they activate resistance on a weekly basis. we want to see the fix stay below yesterday's highs. try to get more stability from here. if we look at the action in the vix we have not seen a surge in volume. yesterday was the first time we saw a surge in volume. it has been half of normal volume, trading anemic numbers. we want to see what the total is today. we are at the average today. the heaviest call action we see is the january 22 call. trading about 30,000. >> one individual name i have my eye on is johnson and johnson. down because it has been downgraded. what kind of options activity are you seeing?
>> johnson and johnson is not much of a mover. we have seen a volatility increased from 10% to 16%. in percentage terms, we have seen a job. he will have use that to see it -- sell covered calls against their stock position. on tuesday, 66,000 of the april calls were sold. 111 is the target if you average the analysts estimates. there is more upside in that stock then the downgrade that goldman is saying. >> you have a trade for us on board -- ford. >> looking at the in the money call, the $13 call. below is $13.26. you can buy that for to an quarter. if we give them 16 we are going to 18. >> how closely are you looking at the drop in oil prices? >> it makes people feel better
>> welcome to "money clip" where we tie together the best stories and videos. here's the rundown -- the s&p dropped its cap against the euro and it sends shockwaves through the market. at one point today. a bumpy first lap as ceo at general motors. and the gop retreats to hershey, pennsylvania. we will hear from the republican senator leading the charge getting keystone approved. the owner of the golden