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tv   In the Loop With Betty Liu  Bloomberg  February 18, 2015 8:00am-10:01am EST

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a big guest with big bets. wilbur ross joining us. looking for opportunity when others are fleeing. what is next on his radar in europe? $10 oil? that is what one economist says is a real possibility. gary shilling will join us and justify that call. first, here's a look at our top stories. snap chat may receive one of you -- may soon be one of the world's most valuable company spirit seeking a new round of funding that would value the company at $19 billion. only uber and xiaomi would be valued more than that. according to a greek government official, the greek government will ask for a six-month extension of its loan agreement tomorrow. the word yet if the terms of the loan will change.
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european leaders -- the greek government want some of the restrictions lifted. here's the prime minister. >> i'm certain that we will make it and we will escape this self-perpetuating debt trap where we have been for the past five years through the street talk to -- through the destructive policies of the bell appeared >> he wants to raise the minimum wage. you can't do that unless the terms of the bailout are rewritten. the world's largest oil exporter trying to raise $10 million to pay for acquisitions and other investments. in talks with banks, expanding its refining of petrochemicals. it sounds like the good old days again for sony. forecasting its highest earnings in two decades. the ceo is using video games
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movies and music to turn around the company. >> it was the year of change in 2014. it will be the year of profit increase and investments for growth in 2015. we are determined to deliver what we have planned in order to revise sony. >> shares up 28% so far this year. he beagle is top dog here in new york city. a 50 inch beagle won best in show honors at the westminster kennel club show at madison square garden, the only second time a beagle has won the prestigious award. next up his retirement. time to have some pups of her own. so cute. today, the federal reserve will release minutes from its january meeting. yesterday's gains but the index on track for the best monthly performance since october of
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2011. the recent gains helped offset january's rocky run. mike reagan joins us now with more. what are investors looking into? >> last year, two words. considerable time. they got rid of those words last time but the new two words are international develop its. -- international developments. the lifted it hanging in there is a big debate going on about what they mean. it could be talking about greece russia the swiss central bank. almost every analyst and economist i have read is hoping for some sort of clarification about what they mean by international about mustard >> development.
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>> is it an eye on geopolitics? >> exactly. geopolitics and the global economic scene and whether that will push back -- >> what is the consensus right now? >> you look at fed funds futures trading, a june rate increase is not considerably off the table. the odds are 25%. by july coming close to 37%. the probability is not until september, 60%. we will have to look at those again as the minutes to see of the needle moves at all. >> has the economic outlook improved that dramatically? >> some of the most important numbers have. the jobs data was better than
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expected and the wage growth better than expected. retail sales was below expectations. the fed looks at inflation and labor markets. >> thank you so much. our markets editor, mike reagan. overseas, european stocks rising to a seven-year high amid speculation that greece and its creditors may be moving towards a compromise. greece may seek a six-month extension of a loan agreement as soon as tomorrow. hans nichols has been following the greek debt talks. what is this all about? is this a significant development here? or does it boiled down to an issue of semantics? >> semantics and significant. the greek -- telling it by a one-day -- everyone here in
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brussels to take a look at what they are asking an extension four. if they are asking for extension of the loan agreement, that is a no go especially for germany because they want greece to stay inside the bella program. there is a distinction between a bella program and a loan agreement. they could get everyone tied up. -- bail out program and a loan agreement. yesterday, we had a speech by the prime minister to his parliament and he went out of his way to have some harsh words for the german finance minister. >> yesterday, the german finance minister lost his composure. not because he spoke against the greek government. that is his right. but because he spoke to sparingly of the greek people. i would like with a limited appreciation and in a friendly
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manner to say that he would do better to pity those people who walk with thoseeir heads bowed. >> negotiations could beginning personal. why not be the best sign. we need to see what is in this request, what they are asking for. is it the bailout or just the loan? that could be dead on arrival for the germans, the dutch another finance ministers if they indeed come out to brussels on friday. >> we will get some light shed about whether this loan extension means it completes the current bella program. -- bailout program. >> that would only be done by the eurogroup if they completed the bailout. the fact that this is being delayed until tomorrow, the request is also significant. european central bank is meeting and they may be deciding on what to do with certain liquidity windows for greece.
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the ecb has very much followed the line of the european union. if greece is not inside of the bailout program or not making any efforts to stay inside the bella program, they will start closing windows -- bailout program, they will start closing windows. that is already around 65 billion euros. if they closed that night, greek banks are going to have a liquidity problem. >> hans nichols on the latest in greece. a focus on rolls-royce. the luxury carmaker known for setting the standard -- the cars were never designed for utility, just for good appeared that is all about to change -- just for beauty. that is about to change. suv? >> the ceo seemed to want to do
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it. i guess he had not made a final decision until now. yesterday, they hand-delivered me a letter in a white rolls-royce phantom in the courtyard. they were delivering these letters to journalists around the world yesterday. they're not giving a heck of a lot of detail here. it will be an all-new aluminum architecture and it will be based on the -- they are making this gigantic suv. this will be completely separate, made i. maybe they released this as a teaser photo. they have no idea what it will look like. they have not even sketched or rendered the image of the car
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themselves. they are starting to -- >> why now? >> some would say they are a bit late to the party. everybody else every single major carmaker in the world outside of ferrari has already announced plans to build an suv. one out of every five vehicles sold in your will be an suv according to ihs. they have seen incredible growth since 2008. global suv sales up 88.5%. it is a huge market. they're in the business to make money. their customers have been asking for one. most rolls-royce customers -- the most usual suv for them to have is a range rover.
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they say they can do a lot better. >> what is the pricing going to be? >> they have not given a price. auto car seems to have taken a guess at 500,000 pounds. they will be more expensive than anything else they make. -- will not be more expensive than anything else they make. if you have to ask, you can't afford it. some people have a ton of money. this is the kind of thing you should not be buying unless you have double-digit millions. >> the average customer owns five cars. >> one for each house. if you have a rolls-royce, you almost have to have a chauffeur. i spent a week driving the ghost and they were great to drive myself.
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i wore my own white gloves and police athat. >> coming up, warren buffett has had enough of falling oil prices. he cashes out of exxon mobil. he made a fortune investing in distressed assets. we will be talking to wilbur ross. ♪
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>> it is 15 minutes past the hour. let's take a look at our world news headlines this morning. ukraine troops withdrawing from the eastern town fighting has been raging over the strategic town and pro-russia rebels are in control of most areas. this despite a cease-fire agreement last week. white house condemned the violence saying russia's violations will come with higher
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costs. vladimir putin suggested the u.s. is providing arms to forces loyal to ukraine's government. prosecutors raided the geneva offices of europe's biggest bank , part of a criminal inquiry into allegations of money laundering. hsbc says it is cooperating with authorities. u.s. federal authorities investigating construction of mining equipment caterpillar. receiving a grand jury subpoena for information about the movement of cash between its u.s. and overseas subsidiary. it is cooperating with the investigation. that is the latest world news. we will have another update at 45 minutes past the hour. greece in a showdown with its creditors. they will ask for a loan extension tomorrow. so much damage already done. greek banks unable to cap investors for cash. exhausting their stash of emergency funds while they're
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waiting for the ecb to throw them a lifeline. joining us is wilbur ross. making a number of investments in distressed european banks including bank of cyprus, bank of ireland and the greek euro bank. you have a lot of skin in this game. when you hear this news out maybe we might have come to -- not an agreement per se, but some sort of like line here -- lifeline here. what do you want to see get done? >> a compromise of some sort is to be made. this is being negotiated in the news media than the conference room -- rather than the conference room. if you've set 800 times i won't do this, it's hard to go through . >> all negotiations are played
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out in the media and privately. this news about the loan agreement does that make you more positive? >> it does. it's a recognition of the part that greece needs the money. the deadline for that is sometime this week. perhaps as late as friday. there is still a little bit of time for people to go back and forth. the amount of the loan is not going to be a big problem. the duration does not make that much difference. the key things will be what other conditions are tied to it. what do they do about the minimum wage? how much of a primary budget surplus will greece commit to? >> merkel and company, are they
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being too hard on greece? are some of these reforms -- they sound pretty reasonable to me. raising minimum wage. >> it is not so much a question of what is reasonable. you have ireland who lived up faithfully to all of the element of their ballot. you have portugal, possibly in italy who will be eager to see how far greece can go. you have those complications on the eu side and mrs. merkel's complication with her own vote. on the greek side the run against the bailout. how far can he get? >> the chance of an exit?
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>> i think everybody understands it is not a good idea. >> you have bet big on this crisis. >> not as big as we are prepared to do. >> what are you prepared to do? >> once we get down to the non-trading period -- we are not permitted to buy or sell. there is no action we can take right today. assuming i am right that there will be a deal is very attractive. >> you have already gone into ireland and greece and cyprus. what is the next country for wilbur ross? are you preparing something? putting together a group? >> within europe, we are looking at something a little different. another segment. europe has lots of banks.
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is more dependent on banks than the u.s. they do not have the specialty finance companies like we have here. we are looking very much at that sector as a supplement to the conventional bank system. >> what do you mean by specialty? >> they just lend to small and medium enterprises, for example. there are specialized mortgage lenders who just do -- they're starting to have these specific entities form. >> could we see something done in 12 months? >> you never know how long something will take. we are actively looking at things like that. >> it is reasonable. we will be back with much more with wilbur ross. we will focus on the u.s.
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and mark zuckerberg on connecting the world. he would not mind asking google for some help. ♪
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>> you are watching "in the loop workout good." good morning. facebook racing against google when it comes to connecting the world to the internet. mark zuckerberg says the two companies could work together even more. emily chang asked zuckerberg. >> i talked to a number of folks over there. we watched in zambia and google -- that is valuable. in addition to health services and education and jobs and different government services
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people need to be able to search and find information. whether we work with google on that or others that is an important thing and i would love to work with google. >> you can watch all of that interview tomorrow night at 8:30 p.m. eastern time on "studio 1.0." warned has gotten out of exxon mobil. exiting its $3.7 million investment in on as oil pr exxon. trying again at an ipo -- preparing to replace its ceo as the first step. in just a few moments, we will get some more data on the u.s. housing market from january.
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housing starts in decline last month -- the market has risen remarkably from recession lows. will we ever get back to pre-recession levels? my next guest says probably not. gary shilling president of a gary shilling and company and wilbur ross staying with me as well. you say there are several signs out there that the housing market is never going to recover to the way we were. >> that was a very -- you had a tremendous money available, the conviction that you can't lose by buying a house. they were virtually giving it away. those conditions are not going to return for a while. lenders are under a lot of pressure and regulators are boorish.
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house prices can and have fallen you have much tighter credit score requirements. a lot of people don't have the incomes or the job security. some of these factors are transitory. in the longer run, to have the conditions -- >> use a once-in-a-lifetime. -- use a once-in-a-lifetime. >> what we are seeing is a sociological change more than an economic change. the millennial's are more interested in the use than the ownership. they go into these micro apartments like student dormitories in public areas because they like to hang out together. it is a societal change in their behavior patterns. their having family formation
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later, having children later and fewer. will they revert back to the -- >> when they become moms and dads right? >> you do have later marriages and so on. you can't be entirely sure. i agree with wilbur. there has been something of a change. a lot of people are very comfortable -- they have moved back to the cities. a lot of people are living with mom and dad, comfortably with mom and dad. the pew research -- the kids take out the garbage help with some of the income. 100 years ago, that was the way it was. >> you think we will eventually get back to where we were? >> if you look at the recent
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period of 2000-2 thousand seven we have built a couple more million units than the long-term trend. cumulatively, we are a couple of million >> trends are only important until they change. i don't want to harp too much. a couple million units is a lot. betty: hang out for a moment. we are getting a few numbers that might speak to a certain trend. housing starts coming in. down 2% is the number. that is worst in what economists had estimated. i want to give to julie hyman who has more. >> a lot of numbers. month over month, those cars and best those housing starts fell
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an annual pace of 1.0 5 million. the month over month gain for december was devised -- revised higher to 7%. 2014 was the best year for housing starts numbers is 2007. in december, we saw strength in the single-family housing area. there was some sent this -- some sensitivity. some of that worse than estimated drop may be pinned on that. if you look at building permits, the numbers worse than estimated . 7/10 of 1% month over month. an annual pace of 1.75 3 million. inflation on the wholesale level. coming in very interesting numbers. a worse than estimated drop in the overall number. 8/10 of 1%. energy prices and other commodities figuring into that. even if you look at the core number excluding food, energy
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and trade, you get a decline of 3/10 of 1%. economists predicted a gain of 1/10 of a percent. that number unexpected. betty: thank you. julie hyman, breaking down those numbers. when you hear those numbers, how can the fed raise interest rates? guest: i think they would be reluctant to but i'm not the guys at the fed deciding. i think they are happier over employment numbers. i would not say they are robust. it is the incomes. is the incomes that matter, as opposed the number of people employed. the fed has a dual mandate. it is price stability and full employment. you look at deflation deflation is here. is it going to spread beyond energy? betty: you think deflation is here? >> you saw that wholesale place
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-- also prices actually declined. 1/10 of percent is no big deal but we are seeing over half of -- year-over-year declines in cpi. >> i think there is the danger of deflation. people have forgotten it has been so long since we have had deflation, it is much harder to manage in a deflationary environment. betty: you think deflation has arrived? >> i think its head is perking up but i think it is too early to say for sure we are in a deflationary period. there is good deflation and that deflation. the decline in the price of oil for different countries is good deflation. that translates into pressure and lots of other things. such as transportation cost and all that. until we get to a more steady.
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period on oil it is hard to measure how much is just noise and how much is true deflation. >> i'm glad you mentioned that. i think i can take credit for coining those words for a book i wrote in 1998. >> now you have deflated me. i never read the book. [laughter] >> i will send you a copy. deflation is supplied being greater than demand. that's what we have had when we have had got to -- productivity growth. bad deflation is the 1930's. betty: was that a shameless plug for your book? [laughter] >> as tom keene would say, a shameless plug. betty: gary and wilbur will stay with me.
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it may be the calm before the storm, gary predicting $10 oil. we will be back. ♪
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betty: welcome back. i'm in betty liu. less than an hour away from the opening bell. i want to head back to julie hyman who is taking a look at what george sure is is up to. >> a number of these hedge fund managers, cutting their holdings of u.s. stocks. george soros is one of them. about $2 billion out of the u.s. and moved it to companies in asia and europe. we saw other big hedge fund managers making similar moves. david peppers cutting his u.s. earnings by 40%. you -- lewis bacon, cutting his
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u.s. holdings by about 25%. that was an interesting trend that did emerge. you see soros on the herbalife trade added about one half million shares. he now owns 3.8% of herbalife. this is the one that bill athens says is a pyramid scheme. we saw george soros as well as dan loeb cutting or divesting their stakes in y ps. the argentina state run energy company. we know had -- we know what has been going on with energy prices. soros sold about 1.7 million. loeb got rid of all of his stake in that company. soros, exiting other stakes, intel, apple and microsoft. betty: thank you, julie. get ready for $10 oil.
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that is the big headline of a recent bloomberg column. brent is now trading at about $61 a barrel. still way down from its june peak of 115. here to explain why this rebound does not stand a chance is gary shilling back with me and my guest host wilbur ross. gary, justified $10 oil. gary: cartels exist to be prices above equilibrium. so but he than their share. the leader of the cartel's responsibility is to a comedy by cutting his own production. the saudi's the leader of the opec cartel. they cut production and somebody else steps in. the cheaters are countries like iran and russia. the american fractures. -- the american frackers.
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you look at the last 10 years. opec's production is basically flat and all the growth has gone elsewhere. a lot of it to american frack ers. so what they said, they said enough. we not going to cut production and i think what they are playing is a glorified game of chicken. they are saying, we can take lower prices longer than the cheaters. meeting budgets is not the question. they are over $100 of barrel in venezuela. even the new cost of the full cycle cost of drilling oil for american fractures -- betty: $10 oil will cause pain for everyone? gary: once the wells are drilled, what does it cost to
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get you out of the ground? it is about 10 dollars to $20 a barrel. wilbur: i disagree, with all respect. you'll have to tell me you wrote another book. here is what i think you are missing. oil has gone down $50 a barrel. the amount of excess supply is about two percentage points. all you would have to have would be a few of the big people cut back 5% or 6%, which would be cheaper than the $50 hit they are taking. this is a lousy trade. this is already a mistake and trade on the part of the cheaters. they would be better off with a slightly smaller volume at a higher price. eventually, they will come to that realization. the fact is, it is not the price of getting oil out. russia cannot afford $50 oil. they need about $110 oil to
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balance their budget. iran, much the same. betty: we have the chicken out point. gary, you're mentioned. when one -- when producers have to cut back on production. in the u.s., it is $60 a barrel. $100 plus for iran,. wilbur: i am just saying that that is where you know someone has to chicken out. even marginal cost is not the lower price. we have seen commodity producers who will reduce in exports, even if they are receiving prices below marginal cost. gary: the right thing for them to do is to cut the production and make more foreign exchange. the ruble is getting killed, not because russia is cutting back in production, is because the price of oil is down. in the case of russia, there is a double whammy.
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a lot of their natural gas contracts are tied to the price of oil. gary: i'm not saying that isn't logical. i do not think there is an absolute guarantee. i cannot get inside the russian brain. betty: wilbur you pointed out something interesting. there is going to be a moment of reckoning for some of these oil companies who are highly leveraged? they have been financed in those assets will get repriced come april. wilbur: most independent exploration companies have asset aced loans that require reevaluation of the assets in april and october. april may not be too bad at revaluation because a lot of them had hedges left from last year with higher prices. october is going to be more
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challenging. $10 oil. gary: one thing. all this money the fed pumped out it all to not go into stocks. my suspicion is a lot of it went to the energy area. we see that in the leverage. what i think is evidence of that is the speed with which so many companies cut their current and capital spending after the opec announcement. they cannot wait for the dust to rise. it says to me they were highly leveraged. wilbur: all the oil companies just about, including the exons and shells, if you take their capitalist -- capital expenditures they have been in excess of their cash flow for years. they all have been leveraging out. that is why you have seen dividend cuts. it is not that you've just seen production cuts. you've seen suspension of stock buyback programs. a whole dynamic.
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betty: this might be the reason why warren buffett has decided to sell out. gary: i started working for jersey standard. they had a 20 year time horizon. i agree with it. they have that dividend requirement. you look at bp for example, they basically are saying their dividend is in danger. they're going to have to borrow. they are responding. betty: thank you so much. wilbur ross, thank you for joining me again. also, thank you to gary as well. provocative thoughts. gary: i hope so. betty: speaking of warm buffet he is going bigger on a hollywood studio with rupert murdoch. . harvey weinstein wants to get invited. he politely declined saying since the academy continues to
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ignore me, i'm having my own awards dinner at a local dairy queen. so far i am the only one who has accepted. we will be back. ♪
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betty: world news headlines. the company which was founded in denmark in 1847 is to appoint its first non-dane to the top job. across asia, celebrations have begun for the lunar chinese new year. the year of the sheep will be welcomed on thursday. in china, hundreds of millions of people are traveling to be with their families. the state media saying 3 billion passenger trips will be made. imagine the traffic. in 2015 is not two months old yet china has 2 -- two dozen new
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billionaires. they include the head of a drugstore chain, a video game developer and the chairman of a low-cost airline. all their companies and others have gone public in the last six weeks, creating a friendly -- a frenzy of investment activity. can this last? joining me is colette melby. why so many billionaires this year? guest: there was a quiet period for ipos in china. all of a sudden, they are lining up to ipo and we're getting a bunch of new billionaires out of the gate. betty: describe some of the newly minted ones. guest: a lot tied to middle-class growth in china including spring airlines. a video game developer, all
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these companies riding the china growth. betty: why has the ipo market taken off again in china? guest: i am not sure. what we do know the ones that are going public are seeing 44% growth on the first day. in some cases 10% day after day , which is the max they can grow on each of those following days. betty: there is so much talk about china posts slowdown. how's that going to affect future billionaires being minted? guest: we are hearing competing narratives on that front. one group says there are so many companies vying for ipos that there is no way investor demand will meet supply and that that could be a concern. others are saying capital requirements will create more
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liquidity and continue to meet supply. betty: caleb, thank you so much. we will keep our eye on these billionaires. big apologies from one top college. it turns out hundreds of people who thought they would be going to this school will not be. more on that story, in a moment. ♪
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betty: much more ahead on "in the loop." we will hear what gerrit -- what derek jeter has to say about possibly owning a team someday. who ever thought that disappearing pitchers would be worth $19 billion? we will look at that new round of funding for snapchat. we were watching in the loop. -- you're watching in the loop. ♪
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betty: welcome back. here's a look at our top stories. futures indicate stocks will open lower. another sign that the rebound in housing remains uneven. housing starts were coming off an almost seven-year high. greece is trying to end a standout -- standoff over the bailout. the big issue will be the terms of any agreement. here is alexis tsipras. >> i am certain that we will make it and that we will escape this self-perpetuating debt trap where we have been for the past five years through the
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destructive policies of the bailout. betty: citrus wants lenders to lighten up on the terms. he wants to raise the minimum wage and rehire government workers who were fired. in ukraine a cease-fire appears to be growing more fragile. government troops are withdrawing from a town under siege by rebels. hundreds of ukrainian troops have surrenders. trying to raise $10 billion to pay for investments. saudi -- saudi aramco is expanding into refining. it wants to boost ties with asia. the world's biggest investment bank make it smaller. jpmorgan may shrink some of its trading business because new rules makes them less profitable.
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we are under 30 minutes away from the start of trade. i want to count you down with the top headlines hitting our radar. alex sherman and matt miller join me this morning. we always seem to start with food. starbucks rolling out a new breakfast item. double smoked bacon egg and cheddar sandwich served on a croissant one. it is 540 calories. 73% of your daily cholesterol intake. alex: you will eat that and then celery the rest of the day. matt: is it me or doesn't starbucks have seven of the same breakfast sandwiches? betty: i thought they had it bacon egg and cheese sandwich. matt: every kind of pig egg and cheese on bread, they have all
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of that now. alex: is it good? betty: have you tried their other sandwiches? matt: i think they're delicious. alex: they are decent. the idea is if you keep rolling out quality food, people will buy it. betty: why do they publicize this heavily -- why didn't they publicize the 70 -- this heavily? a big boost by carnegie mellon after mistakenly admitting 800 students. the office mistakenly sent out the e-mail on monday and seven hours later, sent another e-mail revoking their offers. terrible. alex: getting into college is one of the happiest days of my life. to rip that away from you, i question what are they doing that would lead to an error like this? betty: it's e-mail. alex: just to make the e-mail
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said you were one of the select few less than 9% of more than 1200 applicants we are inviting. matt: the new e-mail they sent said, you are part of a huge pool of losers. we screwed up. alex: when you set up your e-mail system where you have a warning? betty: let's go back to the good old days. number eight, amid plunging oil prices, warren buffett's sold off stake in exxon bowl -- exxon mobil. 20 century fox valued . matt: they had a rough time last
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year. since june, energy prices started plummeting. i'm assuming from the 13 k which is finished december 31. that means over the three months from september -- betty: one of the rockist moments in oil. alex: warren buffett does not like to invest in unpredictable things. maybe this is an instance of saying, i will take it back seat on energy and i will invest in things that i do understand more. one of the things we have seen berkshire hathaway invest -- he dressed that she invested in direct tv. he has people below him that are knowledgeable. they tend to make media picks. maybe fox is the next one. betty: and petro china, he had a big stake. he made like a $7 billion profit. number seven sony, forecasting
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a surge in profit of $4.2 billion within the next three years. the ceo says it is using games and entertainment to turn around its electronic maker. alex: this is something analysts have wanted to them to do in a long time. finally, you are starting to see commentary that sony is earning back the investment community's trust. saying more or less, if we get -- matt: they are willing to sell their tvs were big enough premium. alex: you wonder what is that premium at this point. they are saying, we're willing to sell if i enough bid comes in . you would imagine, they would be willing to sell for a reasonable bid. the margins on tv manufacturing have been going down. they are so much higher in other instances, like game consuls.
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betty: if there is a right price. matt: you remember when people thought, i don't know if the playstation or xbox will be profitable to these pc behemoths. they are making all the money. alex: sony has kept the price of the playstation high. betty: speaking of profitability snapchat could be one of the world's most valuable companies as it seeks a new route of funding the value the company of -- at $19 billion. alex: it makes snapchat look good for turning down that $3 billion acquisition bid by facebook. it also makes facebook look good for making a $3 billion acquisition bid. this company is much more valuable at this point. betty: how will they monetize young viewers? matt: i get if you're going to you snapchat for sending naked
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pictures, but otherwise, why is it so big with the kids? why do you care if you send a picture of a funny face that is going to erase itself after 10 seconds? of course, the most important bottom line is, all of that stuff is really savable. you think your snapchat will go away, people save those. alex: the naked picture business might be a big business. matt: i missed out on that. alex: matt, you could still get into it. matt: i think taste. betty: entertainment companies do want to use check -- snapchat. matt: the kids love it. betty: hilton and hyatt earnings. the hotel industry following changes. ♪
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betty: we continue to count down to the opening bell. it is time for our deep dive. the hotel industry. hilton, hyatt earnings. mariette reporting after the close today. i want start with starwood. the ceo resigned from the company. no reason was given for his departure, asides the fact that it was a mutual agreement with the board of directors. there is speculation on what surrounded his departure. i want to bring in a chat buying and -- chad. speculation has been around the fact that he has not made that many acquisitions of other hotel brands or partnerships. he has not unveiled a new brand in the last 12 months.
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that led to his ousting? guest: first of all, thank you for having me. fritz, he was in love with his brand. other companies were growing beyond their current portfolio. starwood had only nine brands within the portfolio. more focus on the upper upscale segment. hilton, they started to grow the number of brands. marriott in hilton have 20 number of brands -- 20 -- 20 different brands. marriott and hilton have 40 million loyalty users, or starwood has about half of that. a big part of it was the m&a profile. betty: why wouldn't shareholders reward the fact that he was willing to buck the trend and focus on growing the existing brands? they have some strong brands themselves. guest: they do have strong
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brands. more importantly, great relationships with owners who put the capital to invest these brands around the world. the biggest thing here is, companies like marriott in hilton have over 200,000 rooms in the pipeline and part of getting there came to the building of new brands. starwood has about half of that. you can only build so many sheraton's. phenomenal brand, but to expand in new areas and in lower end segments, you probably have to invest in a new brand. betty: the stock has been up over about 10% in the last 12 months. which is decent. the others have outperformed, of about 30% or so for the other brands like hilton and hyatt. given that, what does the
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interim ceo have to do? guest: he is stepping into a great situation. this is one of the best times in lodging. at the beginning of the fifth year of the cycle where all the companies are looking for five to seven -- 5% to 7% rate increases. that is in addition to the 5% to 10% unit increases. he will step in at a great time in the cycle, when group businesses up -- when group business is up, when leisure travel is up partly because of the decline in oil. what he needs to do is expand the performer leo and growth -- portfolio. they are looking to sell all of their assets and they would become an asset like company. part of it is selling assets mainly the saint regis in new york, which is speculated to go for over $1 billion. that also -- then also, work the
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new business model, which will be management contracts. betty: chad, thank you for joining us. some breaking news on the economic front. industrial production up 0.2%. julie hyman has more. >> that gain is lower than had been estimated. it was held back by a decline in motor vehicles. weaker demand for construction materials. we saw a forecast for an increase in 4/10 of 1%. if you break down the numbers and look at the various components, we saw manufacturing output, up about 2/10 of 1%. the other components include things like mining and mining production includes oil drilling , down 1%. drilling and servicing wells, down 10%. not surprising, given the trends
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we have seen. we will have more "in the loop." ♪
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betty: global markets. greek government bonds climbed. a six-month extension of its international agreement. european shares rose on that news. advancing almost 7/10 of 1%. german and athens exchanges also gaining some ground, but not a ton. let's get back to bringing you the most important stories before the bell. alex sherman and matt miller joining me this morning. jpmorgan, too big to fail? considering tricking some
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trading businesses because new roles could make them less profitable. the federal reserve proposed an eighth -- that eight of the largest u.s. banks will have to hold a capital cushion against their own businesses. matt: trading is rough. betty: we have seen that. matt: if you hang out with a lot of traders on wall street, the last five years have been tough. it is not just -- it started off with computers. this new dodd-frank and more regulation is making it more expensive. they need to cut costs and eventually -- alex: it hurts jpmorgan because they are the against bank on wall street. a have to hold more capital on reserve and that is why goldman analysts came out and said jpmorgan should break up its bank and would be more profitable that way, but jamie dimon has next that idea. -- has next that idea.
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betty: trading operations my beginning smaller but not the banks are getting smaller themselves. there was a report out that says the banks are getting bigger and smaller banks are shrinking. soros fund management. changing strategies, cutting its holdings in the u.s. stocks in the fourth quarter, shifting toward europe and asia. interesting that these guys kind of do the same thing at the same time. not only soros but david tupper. matt: even apparently, leon cooper. he says he expects big gains in europe and asia. this is good news for the global economy. even if the u.s. is no longer the biggest gainer as far as the indexes go it is in a good position so it will not be bad to have other regions help out a little bit. alex: i think that is what leon cooperman said. it is not that i'm bearish, it
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is that other reasons will -- other regions will out there the u.s.. betty: he has pointed out that the end of the bull cycle does not happen until after the fed raises interest rates and we have not gotten that yet. we will wait and see. greece could officially request a six-month extension. the loan agreement at the eu issued an ultimatum to ask for the extension by friday or leave the negotiating table. it is a step that could ease off . who thinks they will come to an agreement? matt: i think they will come to an agreement but they do not have to until the end of the week. they will do it as late as possible because they want to negotiate. we reported this morning or last night that it would happen this morning, now it'll happen tomorrow. betty: it will happen at the last minute. alex: the agreement will be kicking the can down the road and it will put it off for another six months.
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six months from now, we will have this discussion again. this is no different than what we've been talking about the last year or two. matt: as brendan said earlier these are pre-negotiations to the real negotiation. all germany wants them to do is agree to the extension of the current package so that they can lurk -- work on a new package they would do better with. betty: who feel sorry for angela merkel? alex: i do actually. she has in in a difficult position for a while. matt: she is the chancellor of germany. she is an incredible success story. alex: depending on how you define i feel sorry for somebody. betty: it is a high sorry. alex: it depends on how you define it. betty: let's get a check of where futures have settled.
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slightly lower. investors this morning, waiting on the federal reserve. we'll talk about that, in a moment. ♪
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betty: welcome back to "in the loop." outs sherman and matt miller joining me this morning. we get to number one it is the fed. they will release their minutes from the january meeting. fed watchers looking for signs of how policymakers view the current weakness in inflation. gary shilling was like, deflation is here. matt: gary shilling was predicting deflation? are you serious? i have grown up with gary shilling. since i was five years old, he's been saying that.
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betty: have you listened? matt: i should've been listening more. alex: he does make good money. betty: back on the fed minutes, i think the focus is when are they going to raise interest rates and what they think of what is going on internationally? alex: patient. if we see janet yellen -- if we see it removed it is a clue that the fed is going to start getting serious about raising rates. janet yellen has defined patients as we will not get a rate increase for these to another two meetings. betty: what they think about international monetary policy. matt: that is been a shift people are more focused on now, what is going on internationally . or what the fed thinks is going on internationally. it is been a focus for them. betty: clearly a focus for hedge fund managers. stocks get ready to start trading.
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i want to bring and john stumpf us. and often i'm her -- and often i'm he his of least concern to him. what is your biggest concern? guest: my biggest concern is that bonds are not acting like bonds. last year's story on bonds, the returns were from price, not yield. traditionally, we know bonds are supposed to be a source of income. right now, they are it that on the direction of monetary policy in the they are a bed on the direction that the market thinks interest rates will go. -- bet on the direction. they have to sell the bond to get the return when the yields are low single digits or negative. >> when does that turnaround?
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his call on the long front has been right, right right. >> a remarkable guy. i was weaned on gary shilling. >> clearly not enough. >> we are going to get normalization of interest rates. that normalization will not take us back to a wild to a 3% on the tenure -- to a while 283% on the 10 year. -- to a 3% on the 10 year. the income crowd and the players could the players are just playing it. they have been playing it for a while. they think the 10 year could yield a one and a quarter.
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if there bet goes wrong, when they pull out, it will be leveraged that. -- leveraged bet. i've been in the business for 32 years now. >> it is going to be ugly. >> it really good. what keeps rates low -- you are not getting tightening in terms of the labor force. on a global basis -- and china wages go up, chinese manufacturers move plants to vietnam. it is about outsourcing. their problem is, technology has made lower barriers. you have to be nimble. they have to move to protect margins. >> are you saying a run on the bond markets -- there are two money players out there? -- too
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many players out there? >> they would normally be in other asset classes. >> it looks like a decent spike. i say look at the dividend paying stocks in cyclical sectors. look at technology, whether you buy cisco or microsoft or intel, you buy that for decent yield. you buy ford industrials boeing honeywell, pick up with some yields with potential for total returns. when it comes to this with the exception of musical bond market , for most investors -- >> 126 for s&p earnings?
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we had peter yesterday on the total opposite end. he thinks talk will go down 5% this year. here is why he justifies it. >> we will see pressure on earnings through a stronger dollar. that is fairly consensus but that is the first step in lower equities. >> the dollar is a potential problem. we saw the fourth-quarter earnings -- not all company spirit honeywell hedge boeing seemed to escape right through it. there were companies that did get turned -- the pepsi-colas of this world. >> you mentioned ford. most of the car manufacturers try to produce as much as they can in the markets where they are selling their products. >> if you watch where you are sourcing your materials, you can
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hedge by production. we can't help but think that u.s. multinationals are certainly not unfamiliar with dealing with foreign currency. they have dealt with strong currencies before. not all will be good. that's why we are alpha over beta. >> pretty amazing to me that you go for were you go for yield these days. microsoft -- where can i go? intel cisco, the at&t's of today. facebook is another pic of yours. >> i look at apple as a dividend place. in the mainstream stuff you buy facebook and apple for innovation and pick up a total
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return story by buying guild with apple. use the old tech for your income and you are cyclically exposed and globally exposed in the management of those companies have shown they are very aware of the problem. >> thank you for joining us. also thanks to matt miller and alex sherman. we are staying on the markets this wednesday morning. the company's with earnings from angie's list to fossil. derek jeter voices interest in one day owning a sports team. who could he buy? ♪
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>> we are about 10 minutes into the session, trading just
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underway. julie hyman looking at movers come including angie's list on earnings. >> we continue to have a lot of earnings reports from some of these smaller companies. angie's list is one of them. it's total paid membership rose by 22%. net income more than quintupled and its forecast above estimates. we have a couple of down movers as well. fossil, a very disappointing forecast compared to what analysts had been anticipating. weakness in the north american wholesale business partly to blame. dispute on the west coast taking a toll on perry ellis. some analysts saying this forecast from perry ellis could prove conservative. we are looking at boston scientific settling a long-running dispute with
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johnson & johnson. they will pay $600 million to j&j to settle a lawsuit that is almost a decade old over boston scientific's 27 point $5 billion acquisition -- $27.5 billion acquisition. >> thank you so much. julie hyman with big movers early on in to trading session. 14 all-star appearances by derek jeter had plenty of milestones over his career. the former yankees captain tells me he would like to be a sports owner one day, just like his mentor michael jordan. just not anytime soon. >> my biggest fear in life is being unprepared. i have to make sure i am fully prepared. i'm trying for that. > for more on derek jeter's
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prospects, we are joined by bloomberg sports reporter. if he were to go to own a baseball team, how much money will it cost him? >> for him not too much. he needs money. if he kept every dollar, he still would not have enough money to buy the cheapest baseball team. his role in an ownership group will be similar to what we saw with magic johnson or jay z. a minority stake, but a public image to the ownership group. >> he's going to be able to get a pretty big group together. >> absolutely. you think about baseball, derek jeter was the face of the sport
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for a wild. he came through unscathed in a career where a lot of athletes don't. -- face of the sport for a while. >> absolutely. we put together the most expensive teams out there and the cheapest ones. the most expensive team you can imagine. the yankees number one of course. the dodgers and the boston red sox. out of the range for derek jeter. as great as he is. the least valuable teams, the tampa bay rays, the kansas city royals and the oakland athletics. who could he buy? >> alone, he will not own a baseball team. there are none for sale right now. derek jeter, there is any team
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that goes for sale will be in his wheelhouse because there will be owners who want to pair with him. if he is looking for a sports franchise right now, the atlanta hawks are for sale, the nets are poking around. in terms of baseball, he may need to wait for a while. the last baseball team that sold was the dodgers. that was 2.5 years ago. >> how do baseball teams rate in value in asset inflation against football teams? >> the yankees are worth more than the cheapest football team, being the jaguars or the charges. -- chargers. you have a very expensive basketball teams and baseball teams. at the bottom and of those leaks
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, the athletics and the royals in the rays are worth $500 million. >> before we go, spring training is just around the corner. what will be the biggest issue this season? >> good question. i would be interested in following the story of alex rodriguez. he comes back to baseball, back to the yankees. we saw this week's handwritten apology to the team. it is a step he has to take. he cannot come back without an apology. it will be interesting to see what kind of shape he is in, how much the yankees are willing to play him and how much they are willing to give him. >> certainly drama. thank you so much. we will be back in a few minutes on "in the loop." ♪
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>> mark zuckerberg has changed
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the way the world communicates and he is trying to do it again by providing internet access to people in the most remote corners of the world. bill gates -- emily chang sat down with mark zuckerberg and got his reaction. >> bill gates criticized project loom saying while you are dying of malaria when you will look up and see that balloon. how do you respond to that? >> bill and i have had a few conversations about this. i think the reality is that people need a lot of things in order to have good lives. health is certainly extremely important and we have done a number of things at facebook to help improve global health and work in that area and i'm excited to do more there. it's not an either/or.
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people need to be healthy and to have the internet to connect them to the full global economy. internet facilitates health. in the most recent evil outbreak, one of the things facebook tried to do was -- evil bola outbreak, the number one thing people have said is helpless us with conductivity. we have to wire up these different treatment units so we can cordon eight the response -- help us with con a nectivity. so we can coordinate the response. >> you can watch the full interview tomorrow right here on
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bloomberg television. the world's second-biggest pension fund does not agree that people pushing for -- the chief investment officer will be a guest on "market makers." joining me is stephanie ruhle. why does he believe that is not an effective way? >> the very outspoken and passionate -- the second-biggest pension fund in the world. he runs a $190 billion. it's important to evaluate credits -- he definitely asks the questions. as far as dirty coal, he is saying you are not going to make a change by seeing pension funds pull money out of. those changes need to happen in washington. it's not his problem.
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he is not in a position to change it. we will talk about global warming and energy and global macros. if you want that kind of money at a time when we are seeing a huge amount of volatility and uncertainty where does a guy like that make his money this year? >> where is he looking outside of the u.s.? who is pushing them to do this? >> many different critics have said investors who run teacher money, retirement money should be the ones sing the buck stops here. chris says send it to washington. >> thank you so much. much more ahead. world's largest retailer -- should walmart be broken up? ♪
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>> walmart set to report their earnings. the company's u.s. stores have been struggling. what can the company due to shake things up? one analyst is suggesting this -- rake up walmart. running me is julie hyman.
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-- joining me is julie hyman. >> you have a company with big international operations could he. he says the main reason to make this kind of move would be so that walmart can focus on those core u.s. operations and fix them as we have seen them struggle. he is talking about baby exiting the weaker or lower returning international businesses. and spending off sam's club. if you look at the international business, it accounts for 32% of the company's capital expenditures but only 28% of sales and 24% of operative profit. he looks at the core u.s. business and says by contrast that only uses 52% of capital but generates 60% of sales and 80% of operating profits.
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when you look at the bulk of walmart's business if you backup the international operations and you look at sales walmart is still the world's largest retailer. just by the u.s. sales. they would not lose that mantle. if you look at the way the store count is broken down, it has more stores internationally than it does here in the u.s.. sam's club is a smaller count. if you did this kind of exiting, you could use that cash and return some of it to shareholders, do some buybacks raise the dividends. >> it is a provocative idea. is he the only one saying this? is this realistic? >> there is some talk about it in the analyst community. there is one big reason why this is not terribly likely to happen. it has to do with the biggest
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shareholders of the company. they still control the voting rights of the company and still own half of the company. historically, this is not something the family would consider. they are focused on the longer-term, not looking for quick positive stock from doing something like returning cash to shareholders. they are doing pretty well collecting their own evidence -- dividends. for that reason, it might not be terribly likely. the ceo has been making some relatively dramatic changes. he has been trying to invest more in the e-commerce business in the small format strategy with the neighborhood markets. >> thank you so much.
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that does it for today on "in the loop." tomorrow, my guest, sir martin sorrell. plenty to say about the increasingly complex media environment. that is tomorrow at 8:00 right here on bloomberg television. ♪
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>> live from bloomberg headquarters in new york this is "market makers" with erik schatzker and stephanie ruhle. >> if you want a piece of snap chat, you will have to bite with the company valued at $19 billion. is it worth it? >> break up walmart? whether it's time for the world's biggest retailer to spin off some of its businesses. >> hairstylist to the stars. what it is like to be treated like a supermodel. >> good morning, everybody. you are watching "market makers ."

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