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tv   Market Makers  Bloomberg  August 28, 2014 10:00am-12:01pm EDT

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in 30 minutes. work at bang" is up next with erik schatzker and alix steel. makers" is up next with erik schatzker and alix steel. ♪ >> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> hackers attack jpmorgan. stealing gigabytes of customer data. fingerprints may point to russia. >> who says it is not easy being green? investors tapping into the market for clean energy bonds. >> pro football fever. we will see if anybody has fumbled? makers"watching "market on bloomberg television. i'm erik schatzker. >> i'm alix steel in for stephanie ruhle. >> i want to begin the show by
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introducing one of our favorite guests. he is the ceo of algebras and attachments -- algebras investments. is always worth reminding everybody how good of an investor you have been. year, equity up over 50% in credit. up 10% this year. love getting your perspective on banks. we are going to have it in a couple of moments. >> it is time for the newsfeed. the top business stories. a surprised upper revision in gdp figures. the economy grew at a 4.2% annual rate. the biggest gain since 2012. to announce and what it calls a de facto russian invasion. two columns of russian tanks have entered a strategic town and pro-russian doubles have gained -- rebels have gained
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ground in key cities. malaysia airlines says passenger booking center up 33%. six straight quarterly loss. >> it is not just ukraine under attack or the russians. there was a recent cyberattacks on five banks, including jpmorgan. an enormous amount of customer data was stolen and there appears to be russian fingerprints all over this hack. bloomberg's mike riley broke this story. do we know? what do we suspect? what more may we be likely to find out? >> we know this was a tremendous hack. banks spend a lot of money on security tools. they spend a lot of money on people. to hit one big bank is a hard thing to do. to hit several, five at one time, is a huge thing. part of that is feeding into
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this idea that this was a very sophisticated group of hackers. we know that one bank has decided that this is not just russian hackers, but seems to have some government connection. attribution is one of the tough things in these cases. that is one of the questions the fbi will look really hard at. is this russian? is there possible government motive. >> if there is a government motive, what are the chances the other banks were actually european? >> we have been told that the other banks may in fact be european. i think there is one of the big u.s. bank involved. we still don't have the names, although we are trying very hard to get them. it is interesting how the other banks have not come forward yet to read i think that of customer data was stolen, they will have to do that soon. >> can you help us understand how it is that law enforcement investigators are able to identify or at least able to
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speculate with some certainty or good reason at the origin of the attack? ways to doe lots of this. they will look at the way the digital fingerprints were left by the hackers. we have information that the servers that were used to take and were in latin america other countries, but they are servers that are typically used by russian criminals. there is a long track record of russians using that infrastructure. the trail has been traced back to russia at least that far. the banks have detailed and -- information. lookare trying to carefully at who the bad guys are. they are bringing in experts, experts and russian cyber crime or russian hacking of different sorts. there are ways of sifting through the data. alreadyhe banks has
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decided it is a russian attack. >> what might be the next level of attack here? >> it is an interesting question. west keptin the ratcheting up. to one source who said the russians often do the same thing. they leave opportunities to ratchet up pressure. step?s just one if so, what would trigger the next level. that is the question on the table. >> thank you so much. we really appreciated. great reporting there on the banks being hacked. >> as i mentioned a couple of moments ago, one of the world's foremost financials investors is with us. financialn since the crisis has been about bank balance sheets? now there is a new whole durability being exposed.
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nerability being exposed. what does it say to you as an investor that we learned that jpmorgan and potentially another u.s. bank and european bank were infiltrated by the russians? 60% ofs account for global spending. >> really? >> yes. we're talking about a number that is in the range of $200 billion plus. is normal operating budget about $4 billion per operating pop. indication is that the way you breach such an amount of , it has to be a government related entity. you summonrces could
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against each other? if you have institutions like governments, which have unlimited power, then they could do that. from an operational point of view, they are not worried about an individual criminal organization. there are only two governments that have this power. with an r and one starts with a c. no one else has the firepower. >> what might they do? >> exactly. the maximum damage they can your clothess get off. they will not be able to get anything off of you. [laughter] it might not be particularly appealing to have your data out there, there is no risk of having damage of the ultimate
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data. no one can steal money out of your bank accounts or make transfers you are unaware of. >> what about the money they will have to spend to protect against the china or russia attacks? >> the government has to get involved. it is up to the bank to defend itself and to the bank to get the police or the fbi. but if you have a much bigger threat, which has to do with government related, then at that point, banks have to work with the government. i think it will be interesting. the government has been so anti-bank over the last several years. maybe this is something that brings them together. >> coming to be very reluctant about the fbi working with them in general. i think there is no choice at
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some point. governments and banks will have to work together. i think field cyber security, the ownership of the internet, the data which can be manipulated, it is a key event. the u.s. is one of the safest places. the majority of servers and data are here on u.s. soil. the banks most at risk are the ones that do not have full control of the server. if you have full control of have a lookey can at it, but they cannot take anything up to read >> it almost seems the way the you describe it that paradoxically, we could end up in a situation where the , whether the u.s. government, the british government, the french government, needs to work more
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closely with its banking industry. could that change the dynamic we have seen unfold between banks? the doj settlement with bank of america. for example. >> it totally should. the government is supposed to regulate industry. people pay taxes to a policeman on the street. it is too easy to say it is also one else's fault. the reality is in between. firms like bank of america and j.p. morgan stood up to the plate. it is different. lynch, wee of merrill
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are aware. >> it was the lehman brothers weakness. >> causing a third of american private assets. the fact that retroactively you go back and you sanction them for criminal offense, basically putting them in a corner, i think that in my view is mobbing. that is something that you would expect to have in russia and not america. new york state is in circles. onyou can feet -- keep finding people for $10 million -- $10 billion, of course you will be in circles.
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taxpayers are more comfortable the government find institutions are having the institutions protect themselves? >> i think we're talking about frenemies, . what is your favorite bank out there? >> we are not i.t. experts. we are investors. i think the u.s. banking system is a good place to be. assets with bad regard to your equity in the reserve itself. , it wenter of peaks
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down, it is less than 16%. basically, we are close to an all-time low. the quality of the assets has never been as good. there is a significant change in the way financial institutions need to be regulated. from supervision to i am in your room and i look at your data. that is what has happened. hasf that is the case, why bank of america, citigroup, etc. continue to trade at discounts on value? >> two reasons. investors are extremely skeptical about this government mobbing. every time they come up, they go of jpmorgan,e case when they told washington mutual in the first time, they said, anything you did before the acquisition date, that is passé. the government says, that was
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civil and here is criminal. here is a check. it is litigation risk. the government is above the law. they can write their own laws. what happens is that investors are saying for politically motivated reasons governments want to get money out of the banking system. we are not investing in banking if the government wants to take our money. if you keep taking money out of the banks, the banks are not going to be able to lend to the guy down the street and he is not going to have a job and the government is not going to get the taxes. in this situation come you take then you have and a russian hacker getting your bank account. quickneed to take a break. i'm delighted you brought up the texas ratio. we need to talk about the texas ratio as it concerns european banking industry. green bonds
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we will look at some unconventional places for environmentally friendly investing. ♪
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>> you are watching "market makers." i'm erik schatzker with alix steel. davidespeaking with serra. i'm thinking about european banks. resultswill publish its of its asset quality review. that is finally aing to give us a theory -- sense of how solvent the european banking industry is. then i was wondering what mario draghi said a jackson hole negates the value of that october 17 date. >> i actually think he made that statement is a preview.
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we already have a preview of the numbers. >> 6000 people. >> you are looking at a massive exercise. in europe, we love to do things slower. [laughter] the reaction is, the americans don't get it and then five years later, we say, yes, that was a good idea. [laughter] in my view, what happens is there is an important point of the jackson hole speech. the ecb is ready to do more. mario draghi knows his banking in clean the amount of capital will be
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manageable and it will not be a number that shocks the world. that means you have a sound banking system. bank you can push more liquidity at that point. he said, this is not enough. government has to agree to do two things. the first one is do your best for structural reforms. . then i will help you to run a higher deficit. >> soaking it up with quantitative easing. >> in europe, it will result in more infrastructure spending. bank,rica, as a central it is easy, you buy treasuries. it is not easy, it is global. buy 45pe, you have to trillion euro government bonds to do the same thing. are you helping the economy by
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financing government? or would it be better to do a smaller quantitative easing and doing a much bigger what larry summers advocates, the real economy. we are falling behind america. still have a much better telecom system than america. today the telecom sector in america is up and you need to invest. of the speechpart is a combination, structural reform, more infrastructure spending. it government to invest. the banking system is about to be cleaned up. >> why do you say that the capital requirement is going to be manageable when by the same texas ratio you applied to the u.s. banking system, number of s are at or exceed the
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deficit ratio and they are not small institutions? >> because of the tax incentives in europe, you are not decentralized to write down. basically, you have the nonperforming, you keep on providing. by providing come you get the tax advantage. if you write it off, you lose the tax advantage. people want to hold on as much as they can. in america, you take the last move. the loss you take is tax-deductible. >> if the european banks were to do the same thing, the texas ratio would not be so high. >> exactly. they would be lower. >> at the end of the day, isn't it still in ecb credibility issue? don't they need to fail some of the banks to say they were tough on them. can analyze the top 50 or
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60 well of the 135. remember, the overall amount of capital in europe is about 2.5 trillion euros. >> that is manageable. >> a couple of dollars. european economy is 5% or 10% bigger than the u.s. economy. ecb -- why the >> so good to have you. the ceo of algebris. we will be right back. ♪
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>> coming up, a big exclusive and something of a shocker. betty liu has a big interview. ♪
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live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> it is "market makers." i'm erik schatzker. >> i'm alix steel and for stephanie ruhle. $300 billion. that is what the green bond market could be worth in a few years. we're talking but tax-exempt bonds that are used to fund environmentally friendly projects. calvert investments is looking to grow its green bonds and very unconventional places. the portfolio manager comes to us from washington to explain. it is great to talk to you about
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this topic. it is an under spoken, underreported environment. really pickedve up steam in the last 12-18 months. absolutely. thanks for having me on, first of all. athave been looking environment investments for the last years. industry hasat the picked up steam in the last eight months, more so. there are different definitions. tax-exempt. bonds. the basic concept of the green bond is that a corporation issues a green bond, uses those proceeds and does environmental good or projects that have direct environmental impact. on one second.
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we're looking at a graph that shows the companies you are investing in. they are very unlikely. google, verizon. why would they be green? >> absolutely. where we at calvert have taken a next step on this because we think the market is still in the first inning of the development of the green bond market in the u.s. the way we define, we would buy a company's general purpose corporate bond and the meadows green-- daemon that as a -- deem that as green. this a come from product service through looking
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at companies that manage environmental impact. we have a separate team of environmental analysts him -- separate from our credit .nalysts through company filings and talking about environmental commitment and .rograms you mentioned google. >> i was just going to say, one of the questions i have is how do you define environmental good? one of the companies you invest in is bank of america and a number of others bank bonds. banks lend money to industries that we might consider anything but environmentally good. coal, mountaintop mining
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operations in appalachia. >> what we're looking for is whether the issuer, whatever company in this case, bank of america, is making an effort to go towards managing environmental impact. i know they have been lending and that is what the discussion constantly is at our offices. oil company comes and issues a green bond. what if a utility company issues a green bond. are they going to buy it? or the other commitments they are doing on the other side to actually make up for the environmental impact that they are having. is a greatrica example. google is as well. bank of america made in environmental commitment of $20 billion of refinancing or financing green projects or energy projects across the world. this was before they issued a
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labor green bond where they were your marking those funds for renewable energy. that is what we are looking for. are they having commitments on the other side, where they're good for good -- do the environment. that is what are environmental analysts are looking for. >> do you believe these investments will outperform other fixed income investments over time? i'm reminded of a conversation i had with the man who cofounded ebay. peter told me that in silicon valley, green is a four letter word because green investments never pay off. isthe way we are thinking that that is a philosophical difference that we have with a lot of competitors, a few competitors. to the want to deliver end investors. we are looking for an investor who is looking for wristed just risk adjusted -- risk-adjusted
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fixed income returns. if we can provide them that and not take away the returns and at the same time we are not giving , the biggest risk in the fixed income market would be duration right now. as well as liquidity. we give ourselves the ability to hedge out the duration. where the differences, by telling the investor, you do not have to give up or you do not have to slap on more risk just because you are trying to make an environmental impact. nuance the >> expanding what the definition is gives you a wider range of what you can invest in. thank you so much. we really appreciated. joining us from calvert investments. >> coming up on "market makers,"
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a fortune for nfl games. we will see if they get their money for it. ♪
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>> who is ready for some football? cbs is betting big on thursday night games. head of cbs talked about the plans. is a one-yearit contract, which is highly unusual. what are the longer term plans? going this year, they are all-out. it is an all-out sprint. they are giving it 110%. they made it clear that this is an important contract to have.
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their goal is to win it again next year. they are rolling out all the stops. they have the top talent broadcasting the games. they are debuting it on thursday nights, which is usually when "the big bang theory" airs. they are going above and beyond for thursday night football. we saw the new graphics packages, the new promo video. i got pretty pumped up to watch my broncos play. it was pretty exciting. when i talked to him, he said the network has not promoted something like this in a very long time. take a look. >> it is fair to say we have not promoted a franchise like this in a long, long time. it has been the biggest promotional push we have had at cbs in years. to thursdayights night football in early february. we started our campaign in early march. by the time our opening game kicks off on september 11, everybody in america will know there is thursday night football on cbs. >> if you watch cbs, you may
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have seen some promotions. there are cool videos with their actors with eye black and it seems like everybody is getting pumped up. >> pulling out all the stops why? >> for one year. it is less than that. the contract is a quirky contract. there are 16 games. cbs will air the first eight games, the first seven games him and then nfl network airs the next part of the season, but cbs is still producing them. it is still the cbs team. cbs is essentially propping up nfl network. they want a long-term contract. they want to go above and beyond this year. they are treating it like, this is my girlfriend, and we are getting married. there is no rain yet, but this is the direction we are going. >> ring yet, but this is the direction we are going. >> they all bid for this thursday night football contract
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last year. it is reported that cbs won because they're pulling out all the stops and other networks were not willing to promoted to this extent or go above and beyond. >> i will say. just a way we can have it. >> it is thursday night on tv. night live audiences are much more important to advertisers than thursday night tivo audiences. "the big bang theory" does extremely well, but people do not watch it live. >> thank you so much. of thoseou include all other football broadcasters, you get to this number. $6 billion. that is how much the nfl will rake in for its tv rights this season. for the bige to pay broadcasters. is it a good deal? eric tammy did the number crunching as he does and he came up with a sense of which of
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these broadcasters gets the best deal out of nfl broadcasting. >> the three broadcasters all get a similar deal. they all pay about $1 billion. in total, they have about the same audience. when you count total audience per game and average number of games. fox and cbs have 27 games each airing the season. fox pays a little bit more than cbs. they're nfc teams come from cities with bigger populations. if you think about dallas, philly, d c, atlanta, these are markets with nfc teams come a but not afc teams. -- teams, but not afc teams. the one channel that really sticks out is espn. they pay twice as much as the other guys for half the audience. >> why, why, why, why? >> they only have 17 games.
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they have eight dollars per viewer over the course of the year. the other guys are about two dollars. espn would make the case that part of their agreement is to have 300 65 days per content, they have more studio shows, very full sports network. -- they are a full sports network. just the value of the games. if you only focus on the value of the games, they are paying so much more. the revenue stream is going to hit us. they have an eight year deal and in that eight year period, they are going to get to renew all of their deals with all of their cable affiliates. they will have football as a leverage point to force higher rates throughout the entire time. that is what you want to have such a long-term deal to push through higher subscription fees. >> interesting. >> is it a worse deal for espn? >> it is a longer-term play. they clearly did the deal.
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they're comfortable doing it. we will be the ones who end up paying for it. it is interesting to see how out of whack it is. it is interesting to see how much value the revenue stream gets you. they are by far the highest paid cable network. >> it is a longer-term outlook. they will get paid down the road kind of thing. it is not like they are getting made -- paid now. is interesting to see how evenly matched the broadcasters are. they have all gotten similar deals. >> is there a distinction between tv espn and online? >> it is all part of the same deal. >> interesting. latest on who gets the best deal broadcasting nfl games. us.he takeaway is not >> yes, we knew that before hand. >> fighting on two fronts.
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talking with betty liu. ♪
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>> you are watching "market makers." d quite thehe ha thele when he took over as head of aig. the government was in his bonusescriticizing the
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he was giving to keep talent at aig. then there was the other battle he was fighting. he was battling cancer. we just did not know how bad it was until now. he is leaving aig next week. betty liu went to croatia for an exclusive interview and learned a lot more about the timing of his departure. >> that is right. he will be stepping down on september 1. we went to croatia over the weekend. that is where he will be spending part of his retirement. during that time, we talked about everything from the war over the aig bonuses. 160 $5 million paid to the traders in the financial products unit. bob's ill phrased remarks. >> calling people in washington crazy.
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we also talked about his battles with other companies, say warren buffett for instance. they have hit head-to-head. the moment that struck me the most was really his discussion about cancer. how he battled this illness for much of his time at aig. infirst disclosed this back 2010. it was at that time that he was told he would have 9-12 months to live. he took an experimental drug in that extended his time for three more years, until now. , while we were in croatia, that back in may, doctors told him that they had to reset the clock again. the drug was no longer working. he would now have another 9-12 months to live. but possibly no more than that. bobhat disclosure, ben mosh benmosche told me how he feels
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about his treatment and his legacy in his own words. >> there is no cure. extremes.f the of getting the benefit of the pill. is it because i am working? is it because i run an? is it my attitude? i think it is all of that. >> you have beaten the odds already. >> i have already beaten the odds, but it stopped working. .ow i am in another study group hopefully it will work. i had some very bad side effects for a while. i have at least completed all of the things i set out to complete. had a really he difficult prognosis before and he still continued with the job and pushed through. what was different this time? it seemed like he faced just as harsh of a prognosis.
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there isn't actually anything different. >> did he feel like aig was in a better place for him to go? >> as a temper him to exit? i get that. -- time for him to exit? i get that. nothing has changed in terms of them dealing with his cancer. he felt like finally he got aig back on track. he gets out of tie the bow on aig and that would be the appropriate time to exit the company. he wanted to exit when he was still healthy. when he was still healthy and able to walk around and enjoy life. >> did you get the sense that he feels as though the battles that to keep, to turn around aig weekend him ed himally -- weaken fight cancer? the man had to be frustrated to
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of bonusesriticism to the lynchings in the civil war south. >> some people say he did rescue aig. i asked him that. knowing bob, he has been fighting his whole life. this is certainly one of his toughest assignments. having this mission, having these people depend on him him and knowing that their livelihoods were dependent on him really drove him. >> a source of energy. >> for him to say, i have this mission, i'm going to complete it. in some ways, it gave them this purpose that could have helped him in coping with this pretty dire prognosis from the very beginning. muchtty liu, thank you so for bringing that to us from croatia. >> this is all in it is the patient of the "titans at the
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table" session which will premiere on september 24. >> we appreciated. >> "market makers" will be back in a couple of minutes. you have seen dozens of those ice challenges to fight als. we did one here and bloomberg yesterday. mike bloomberg himself. about $100 million thus far has been raised. there we go. >> there we go. got it right back. ♪
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>> live from bloomberg headquarters in new york, this is market makers with erik schatzker and stephanie ruhle. >> rebels make gains in a new offensive. >> hollywood shows youtube the love, and why not? they have the secret to attracting the most fickle audience of all. >> and $100 million in cold cash. all of that money raised for als comes with its own pitfalls. we will look at the pitfalls charities face.
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i am erik schatzker. >> i am alix steel, in for stephanie ruhle. we are very excited about our guest. her day job is covering the bond markets for bloomberg news and she is energetic about it and asleep writing about it. >> how could you fall asleep? it's awesome. >> three big nerds on the bloomberg desk. purchase contracts rose the northeast, falling slightly in the midwest. it hasn says that increased defenses against hackers after it was attacked this month. cyber criminals targeted jpmorgan. there is speculation the hackers were based in and possibly even
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sponsored by the russian government. to angelinaons jolie and brad pitt. they were married this weekend in france. the children art in the ceremony. the two met almost a decade ago on the set of mr. and mrs. smith. >> russian forces have invaded ukraine and the president is looking to the international community for more help. it is a major escalation and it is disrupting the financial markets and posing a challenge for the obama administration. peter cook joins us. what proof do we have the russian troops have crossed the border question? poroshenko is accusing russia of sending troops across the border and nato forces are backing that up. satellite photos to show
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movement across the border. president poroshenko call this a sharp escalation. he canceled a trip to turkey a short time ago. ukraine accuses russia specifically of opening a new front in russia. to russia -- two russian armored came in and satellite photos show russian troops on the ukrainian side of the border. another 20,000 are along the border. the prime minister is appealing for help in light of the latest moves. >> we can confirm that russian military boots are on ukrainian ground. ukrainian forces are available to tackle and cope with russian led guerrillas, but this is
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to fightficult for us with russia and its army. >> he also called for an emergency meeting of the u.n. security council. that is going to happen at two :00 p.m. eastern. president obama is also holding a meeting of his national security team at 4 p.m., although officials tell us the focus of that meeting is syria, iraq and the threat of the islamic state and not so much on the ukraine. i guess i could change between now and then. it. guess i just don't get how is this not a redline? we are still dancing around the real issue here. what gives? >> the united states at this point has called with the russians are doing an incursion. a state department spokesperson was careful to use that word and not the word invasion, but this may be a redline. that may be opening topdoor to a gray area is a
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separatist official yesterday acknowledged there are russian ukraine. he said some are retired troops and others are active-duty troops who are on leave and onng that leave to fight behalf of separatists. we have not heard directly from the kremlin but a top russian official denied any suggestion that russian troops had a in fact crossed the border. the ukrainian president says it is clear russians have crossed that line. it's very sensitive right now. he ignored should his security council meeting -- he acknowledged at his security council meeting that talks with russian officials are taking place. >> what do you think would be the game changing move from russia right now? what are they looking for? to get anywere
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official word from vladimir putin or any top russian , that would be a game changer here. i think the effort on the part of the united states is to try to ratchet down tensions. we heard from the french president, once again raising the sanctions threat today. is not clear what will take the u.s. over the line, but the accusation by the russians, if accurate, would be a step in that direction. >> on the whole, we keep seeing all of these geopolitical risks, but we don't necessarily see a ton of action in the market. is this different? >> there was a different feeling in the market today. positive economic data in the u.s. would indicate a need for
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higher interest rates, but bond yields are lower than where they were last year. ten-year yields on u.s. treasuries are the lowest since 2013. >> been bernanke reiterated the quantitative easing might end as early as 2013 but it didn't happen. >> although 30 year yields are down even more so which really indicates that bond buyers are saying you know what, we don't see the economy taking off. >> but this is not just an american phenomenon. sovereign yields around the world on the whole are at a record low. >> there is a lot of speculation about european central banks right now. there is the potential for a recession mayor. that's just injecting liquidity into the overall markets. how much of that is going to go
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into the u.s. markets, frankly? yield for there u.s. 10 year treasury. when we see yields fall worldwide, as eric pointed out, you have to wonder -- investors are going to want to turn somewhere else. there is a trickle-down. >> we're going to go where yields are higher. we are also going to go into less liquid bonds, things they cannot trade, so that means they are going to be locked into their investment for a while. reach four-year-old has driven any number of investors --o asset classes that sandboxes, if you will, that they wouldn't normally be playing in. >> the question is when does leverage start picking up? when do we start seeing the potential for systemic
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instruction? if yields remain low long enough, investors are going to take outside risks that could have significant consequences. >> there has to be some sort of trigger though, right? >> you would think, but the question is, if there is a lot of risk building up in the system -- you know, there has been an increase in the volume .f derivatives there has been some concern, generally, about risky behavior in the corporate credit sphere. the question is, if you have such a buildup of risk, it doesn't take much, just a little up inp inc. -- hick communications and federal s to really disrupt the complacency of the market. >> the question is who holds the
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risk, right? and does that in and of itself represent a systemic threat? banks have a much harder time participating in these products, allocation of these products in the sale of these products than they used to. they can warehouse loans the way they used to. holdcan hold -- cannot balances like they used to. so in theory, the risk reside somewhere else. >> where? >> where and in what concentration? >> there's a lot of debate over couldr any big fund become systemically important. it sort of a hot trigger controversial issue that even the biggest fund managers have been saying look, you need to andly be careful with bonds specific investment firms. but there is a question, when you have so much risk moving
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through the shadow banking system, moving away from banks to private equity, to hedge funds, could there be risk that is developing that is out of view of regulators? their credit there is some kind of disruption -- it could, if there is some kind of disruption, become systemically important. >> are their names coming up among your sources among what they watch? >> some, but they are not sure. the funds are very big. that may used her evidence. that people don't know that much about. derivatives.y use that people don't know that much about. the names are, obvious. it's the blackrock sub the world. blackrockour money -- s of the world. and it's your money at risk, not
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the banks money. >> if the fund is only $30 billion, systemically, how important could it be versus 300 billion dollars? >> a lot more debt taught to come -- debt talk to come. >> coming up, how hollywood learned to stop worrying and love you too. >> plus, what happened to all that money raised to help fight als?
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>> time to check headlines here on market makers. cofounder of alibaba is the richest person in china, worth 22 billion dollars.
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alibaba is preparing for what is likely to be the largest ipo in europe's history. governor jerry brown in california and the legislature agreed to triple the tax credit for hollywood studios. now only new york offers more tax breaks to the entertainment industry. facebook is making it easier to find content that could have been buried. >> hollywood embraces youtube. i personally like anything that has caps on it. but how do you organize an environment that makes sense for viewers as well as creators? one person thinks he has the answer. he is on the cover of businessweek and he joins us now. what is this? >> it is programming for the
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teenage and between market. it runs the gamut from many reality shows about cheerleaders to talk shows about fashion tips. it was started by a guy named brian roberts who was himself a child star. he was on the abc sitcom head of the class back in the 1980's. he saw how his own teenage kids were consuming content and he thought, you know, the future is not really cable television. going to be more youtube centric. >> how are they going to make money? ends upe the bulk of it going to google, right? >> a lot of the work is still ahead. tvamworks bought awesomeness last year.
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the injection of hollywood expertise is going to take it to the next phase. right now, these networks are not profitable. these youtube multi channel networks. there is a big discrepancy in terms of the amount of time people are spending on this program and how much money it is generating. part of it is trying to figure out new revenue streams. >> does google have all the power here? rights they do, but they have taken a pretty hands-off approach in terms of how the programs develop. >> it seems like big media is really subsidizing as. is there a time when it is going hisubsidize big media or big media on its way out? rights that is what they say -- >> that is what they say, but it
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hasn't happened yet. >> will it come in terms of advertising or are we looking at things like product basement -- product placement and more creative ways to make money? rights that is the next big wave -- >> that is the next big wave of deals you will see. people like donald trump make all their money in licensing or wholesale product deals and to think that is coming to the youtube stars next. >> how much talent is left? >> there was a big scramble to lock up the talent. once these multi channel networks have the youtube talent, what they also do in terms of revenue streams is repackage short form video and sell it back to movies, is moreon, because that short form video.
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>> and you may have to redefine what talent may be. let's be clear. >> can you see yourself -- could you see yourself watching this stuff as a kid instead of three's company? >> not gilligan's island. >> i spend my time on it now. , ifut would you -- i mean you transported yourself back. >> yes. m part of it is -- and part of it is you get to interact with stars in ways we never got to as kids. tv stars were so removed. now fans interact back and forth on youtube, and that's part of why they are so incredibly passionate about these shows. entry isrrier to pretty small. >> it is, and that's part of the problem. and it's one of the advantages
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for you to fish for youtube. it's not great for these .ultichannel networks >> what is the most successful channel out there? >> they don't just measured in terms of videos. they measure it in terms of franchises. now that they are teaming up with dreamworks, they want to do what dreamworks has done with shrek, madagascar, kung fu get these really shows overseas to make money can sell merchandise and make money. it hasn't happened yet, but fans are going crazy about the first art. >> thank you for being here. eric, gingern for or mary ann? >> wow. marianne. >> get answer.
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good, good good answer. >> coming up, argentina is running out of options. workers are protesting economic policies and that could be good news for bondholders.
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>> we are approaching 26 past the hour so it is time for bloomberg's on the markets. abercrombie & fitch is not having a good day. revenue is down 5.8%. no shoppers. mall traffic is not great. they don't have the right product and teenagers are not spending their money on close. we are hearing that all the time.
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>> that is part of the broader retail slump, and so is this. williams-sonoma forecasting earnings to fall short of analyst estimates by at least three cents a share and possibly eight cents a share. outiams-sonoma has written ridden out the slump very well. the stock is up 300%. done twice as well as the underlying index, but not today, as you can see. concern is growing that williams-sonoma will be affected by the malays. malaise. weand williams-sonoma, cannot blame teenagers for that. as opposed to guess or abercrombie which are pretty
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specific. >> coming up, argentina remains nationalnk of another strike over government economic policy. did it too. that is bloomberg's majority owner dumping ice.
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>> live from bloomberg headquarters in new york, this is market makers with erik schatzker and stephanie ruhle. watching market makers. i am erik schatzker. alix steel, in for stephanie ruhle. >> thousands of argentines are on the street's protesting the economic policies and high inflation that has come along with them. holdout investors include billionaire paul singer who made
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it happen. josh is just back from when buenos-- from when aires. >> they hoped they could get a last-minute deal, which was in there mine a stay. but i am less confident than i was before going that they are going to find their way out of this mess. in private conversations with officials and economists, everyone sort of gets the joke, increasings frustration, increasing social unrest. the public feels the frustration. part of it is you are dealing deflation and evaluation,
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and it is getting worse. >> the public is getting fed up. >> more than fed up. we had strikes last year. going onnother strike now which is likely to be the worst. you have a country in south thatca they cannot get -- can't get off the ground and has become a net importer of energy. >> so what is it going to take? >> that is the multibillion-dollar question. it literally turns on the economy minister and christina to find a way to sit down and negotiate. i think everyone wants that to happen. everyone was pushing a plan for private negotiation with banks. a lot of officials wanted that. at this point, you have two
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people not really listening to anyone else. will >> it's a game of chicken. who moves first? it the people willing to accept the price the argentine government considers acceptable? is it the government being willing to negotiate? not induced by the holdup dispute. this was induced by avoiding reentering capital markets for a decade. they could have settled this years ago. .he economy was faltering they could have settled this before there was a ruling with negotiations. remember, they have on hold are saying they want to negotiate and the government saying they
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will not negotiate any more than a swap. you hear a term a lot from the administration, and former officials, arrogance. you have a country with the prospects, fourth-largest economy at the turn of the 1800s and 1900s, and they have foregone investment in a major way. they have left about $60 billion in the past six years. >> you say the government is willing to offer no more than it for restructured terms, but that's because it can't. >> remember, their argument changes almost daily at this point.
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the union leaders are being termed vaulters. -- vultures. >> but why take the risk that it violates this clause? >> the clause specifically says that they cannot engage in offering securities on better terms than those who participated on a voluntary basis. clearly, 10 years of legal battles suggest that the decision would not the based on swap.ntary >> it's all in the eye of the beholder, right? >> if that were the reality and they really believed that, wouldn't they be actively soliciting waivers from the existing swap holders allowing them to? and if they had done so, you could say alright, maybe they really do have that fear, but they have done nothing to solicit waivers from the exchange bondholders allowing them to enter into negotiations
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on better terms. >> is it too late for them at this point given how much animosity has been created among people in the government? >> it is never too late. default is never an economic necessity, it is a political choice. if they find reason -- and they think they will, not because of the court and not because of pressure from the u.s. or from bondholders -- i think it's some point the social unrest and the difficulties will make it almost impossible for the government to continue down this path. >> how hard is it for argentina right now? >> you have an economy where you have inflation between 40%-50% -- you feel it. it's terrible. there are two economies. there is the official economy and the black market economy. everyone transacts on the black
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market economy to the degree that they can. but these labor strikes at this are really because the government has balked at a 30% wage increase and labor is saying hold on, that wouldn't be enough. we need 40%-50% is to keep up with inflation. you really are feeling it on the street. it's a very sad situation, and unfortunately, somewhat unnecessary. >> thank you for being here and bringing us your first hand from when azeris. buenos aires.
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>> the ice bucket challenge may be growing tiresome for some of you, but the amount of money
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raised is extraordinary, almost $100 million. >> and you did it. how did it feel? >> jelly. and i made a donation to the als association. >> his face says something different. feels good.say this >> did you do it because you wanted to see if you could? >> it was the right thing to do. >> and you also donated. >> lots of people are doing it. opera wound up doing it. let's take a look at this. >> love the noise. >> and you hope everyone is donating at the same time as taking the challenge. coming up, it's a great problem to have -- there he is. michael bloomberg, our ceo. >> what to do with the charity windfall? that is what the als association we willonting and what
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talk about when we come back from this short break.
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million dollar question. what will the als foundation do with all the money they have raised? the ceo says she is fully aware of how much responsibility they have taken on. she said -- let's talk about some of the pitfalls they have to avoid while doing this. kim runs a charity watchdog group. it would seem that some donors would want immediate gratification. i want to see what my money is doing right now. is that a risk? >> absolutely, and we have seen
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that before. you have gotten the money now. the solution needs to occur now. leaves, act swiftly and transparently about what you are going to do -- please, act swiftly and transparently about what you're going to do. you have tension there that i think als is going to be struggling with. >> do you think they will invest it all at once? how much will they squirrel away? will they invest in the meantime? will they hold cash? >> that is what they have to tell us. they have two very quickly get in front of this and tell the public the answers to those questions. they are having a meeting in october where they are supposed to be figuring that out. right there, a few months are going to pass. the faster they do it, the better off they will be. study, analyze and rate
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charities like the als association. >> absolutely. the issue of transparency is very important. evaluate charities on how transparent they are with information, how they manage money and how they govern. >> the question is critical , but now for alsa answering to a big donor in this the case because these are small donations in most cases. >> that's true. 80-20 cases where small donors are big backers. this is very unusual. equipped to handle $100 million? i know if i had that money, i would not have the infrastructure to manage that. can they? are stories about how
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people win the lottery and theyt handle it because don't have the infrastructure. >> how the lottery ruin my life. >> they very well might not do it well. we have many cases where charities has gotten into trouble because they did not manage money the way their donors expected them to. >> have you heard from other charities about this campaign? >> i know one fellow was trying to advocate for the use of marijuana. he is pouring buckets of marijuana on himself. there is a rice bucket challenge a bowl ofto bring rice to someone who is hungry and bring the issue of starvation and hunger to consciousness. there is a wide variety of these attempts. from our observation, it's usually a one-hit wonder. it may go a little too help , but it isties
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really an als thing. are there other cases of charities finding themselves in the situation of having much more money to invest than they expected? >> this is so rare. if there were a formula, every charity in america would follow it. but the key is good planning. i think it would be good for donors to be involved in this deliberation. they should have the people that support them as part of the discussion. >> it's good to bring that up because they need to continue this for next year. they have half a million new donors. it doesn't seem like the flyers and envelopes you get at home are going to cut it for them. >> that's true, and the other thing we have learned for situations like this is that sadly, most will not be sustained donors.
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but evidently the size will be a major influx going forward. it will raise the base of how much they can raise each year. >> part of the problem is it is not easy for charities to scale their spending, the stuff they spend their money on. let's say you are giving her money to a researcher who is trying to crack the code of flu -- giving your money to a researcher who is trying to crack the code of lou gehrig's disease. he may not know what to do with the money. >> you can replicate the problem in many ways. finechariot all the sudden -- a charity that all of a sudden has a lot of money to spend may not know the right place to put it. >> only a few charities can scale above $10 million. very few can scale up. they rarely have the resources to do it. it is a unique situation. generate enthusiasm
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for charity in general? are the donations to als taking away from potential donations to other charities? >> it could, but charitable giving in the united states, as you probably know, we are the most generous by far in the world, two to three times more than any other country. that's the good news. the challenges it has been somewhat flat overall, the total, even though it is $300 billion with a b, so much money. the because this is a relatively small amount compared to how much most people give each year -- i'm saying individuals, not the overall amount -- i think it will be ok. kind oft's a different giving, right? it's one off, kind of a viral campaign. >> a thing most charities will be ok. >> have you done it?
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are you allowed to do it? >> because we rate the charities, we are not in a position to personally support the charity, but we give them our highest rating and we urge you all to participate. >> thank you so much. good to have you. >> back into two, stick around.
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>> that wraps it up for market makers. olivia sterns is coming up next. >> we are looking at the geopolitical tensions in ukraine. really interesting to try to understand what is owing on here. president putin says he cannot comment because he is not a party to it. interesting, because if you ask ap, they said russian tanks have crossed into ukraine. meanwhile, some ukrainian separatists who have been interviewed say you don't understand. yes, there are russian troops, but they are volunteering because it is august and they are on summer holiday. thosewas hope during minsk, butto ops in obviously talks have unraveled. >> we will look forward to that. lisa, it was so great to have
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you for the whole hour. read your columns. they're great and easy to understand and you're very enthusiastic. >> thank you, lisa. tomorrow, a new era for college football. playoff formatew mean for the sport? but first, bloomberg television is on the markets. scarlet fu has more. >> hi there, alex. the fighting in ukraine has intensified. in today's options insight, we speak with mark sebastian. this represents the first decline in u.s. stocks after a blistering rally the last four days. are the geo politics investing
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-- affecting investors trying to get into the game? >> i am little surprised by the way the bonser rallying. i would have thought the s&p would've been down half a percent, maybe 1%. any selloff is going to be a foroff event and an excuse traders and investors to step in and by the market. >> if it is a one-day event, let's look at a couple of individual stocks. have climbed. what kind of options are you seeing there? >> apple is an interesting one. regular pattern with apple. typically, we see them rally into a product launch and then disappoint, no matter how good the product is, and then selloff. apple sold off on the ipad, which 4, iphone 5, all of
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have been blockbusters. a trade i think is interesting is in october, after the iphone six launch, i can buy the for about a buck and a half. really good risk-reward. if and when apple does get the pullback after the product launch and everyone in the world is disappointed in fan boys say hey, it is only a nine out of 10 , it's a sell the stock good opportunity to make a profit on that. a strategy on ralph lauren, specifically. >> i was looking at macy's. it's really different from the rest of retail. it has really broken out. i was looking at stocks that are sold at macy's, coach and ralph lauren. really lown has implied volatility, which means
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the options are especially cheap . i think there is a chance they will follow suit with macy's. i like buying the october 1 70 two for about $2.50, dollars $.70. it's a momentum play and a cheap play on buying calls. >> thing so much, mark sebastian. joining us this morning from the cboe. we will be back on the markets in 30 minutes. money clip with olivia sterns is up next.
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>> welcome to "money clip" where we tie together the best stories, interviews, videos, and business news. i am olivia sterns in for adam johnson. our is the rundown -- exclusive interview with bob benmosche about stepping down as head of aig after staring the insurance giant through the financial crisis. what happens when the cost of a nation's central government services are shifted to the poor? the gop has the house and control, so what has speaker john boehner so worried? in motors, the 2015 mustang


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