tv Money Moves With Deirdre Bolton Bloomberg January 9, 2014 2:00pm-3:01pm EST
come up but less than what you get on the gray lacked market here in new york. charging about $45 for an eight. medical mayor water was going for about $25. >> thank you very much. matt miller. back again on the market than 30 minutes. ♪ >> welcome to "money moves" where we focus on alternative assets. i'm deirdre bolton. we show you what investors and entrepreneurs are doing as well as what is going on hedge funds, private equity, real estate and more. today, private equity fund kkr rating $2 billion for its distressed equity fund. more than even the firm in-house expected. we are back with details in just
a few moments. the view that some writers have that some hedge funds are maybe too big to fail will be part of the conversation. we will give you the criteria, and also both sides of the argument on whether systemic risk exist or not. plus, the ceo from cybersecurity powerhouse fire i will be with me. made a $1y recently billion purchase and we will tell you about the latest technology to thwart hackers. first up, president obama naming five u.s. promised zones targeted for special federal aid. the motivation is despite income inequality. julianna goldman joins me now. what is at the center of the president's plan? >> this is all part of the focus on income inequality that the focus -- the white house has the tapping leading up to state of these union on -- state of the union on february 28.
the areas are san antonio, philadelphia, los angeles, southeast kentucky, and the choctaw nation of oklahoma. theseesident announced so-called promised zones in his state of the union last year. today, he is revealing the areas that have been chosen for this initial phase. the white house wants to use federal funds in the targeted areas, and elsewhere, as this to bolsterws education, access to housing, also crime reduction programs. he also wants to offer tax credits for capital investments and also tax incentives for people -- for companies to hire people who are looking for jobs, to hire the unemployed. this is all part of the administration's run-up to the state of the union, to promote some of the initiatives from last year. look for more of these two be dribbled out over the next few weeks, especially in the area of
manufacturing. >> thank you, julianna goldman. we are going to keep you in d.c., because senator elizabeth warren is turning up the heat on government agencies that cut settlement deals with corporate wrongdoers. she is cosponsoring legislation that would require more details on the settlements. peter cook caught up with the senator earlier today on capitol hill and has more. the issue here is transparency, right? >> that is the goal of this legislation put forward by senator elizabeth warner -- warren. her cosponsor is republican tom coburn. this legislation is going to put pressure on -- legislators to think twice before they enter into settlements with corporate wrongdoers. i spoke with senator warren about this legislation a short time ago. >> i asked the question last year from some of these banking regulators, when was the last time you took one of the big financial institutions to trial, and they hemmed and hot and had
trouble coming up with an answer . but they said, hey, the settlements are great. they are a great deal for the american public. my view, along with senator coburn, is if they are a great deal, hang them out there for everyone to see. make them public, so we can see them and evaluate them. in other words, a little transparency in these settlements, and a little accountability for the agencies that are doing them. >> was there one case in particular, one settlement in particular that inspired you to drop -- draw up this agitation? >> there are many, but i will give you an example. the home mortgage foreclosure scandal, where these companies lately broke the law. settlement was for 8.5 billion dollars. that is a big headline. and it turned out, well, $5.2 billion was for credit that the companies were going to get. how do you earn a credit? it turns out the bank could forgive $10,000, let's say, on a
$500,000 mortgage. guess how much credit they got? $500,000. click this legislation would make that abundantly clear. >> this would make that abundantly clear, and i hope, make anyone engaged in this negotiation think twice before they do that. >> let me ask you, is your goal here to make the government enter into fewer settlements with corporate lawyers? you want to send them into the courtroom because there is a risk that they could lose. >> i want to make it clear that the government lawyers work for us, for the public. they do not work for the companies they are supposed to be regulating. this is really and truly about transparency. it is about good governance. judgment -- if your best judgment on behalf of the american people is that there should be a settlement in this case, then by golly, make the terms public so we can all
evaluated and see if it is such a great deal. >> and senator warren and senator coburn are and -- rn in usual combination here on capitol hill. -- are an unusual combination here on capitol hill. we will see how the law enforcement unity response to this bill. if they fight it, chances of passage could be more difficult. >> peter cook, washington correspondent. senator warren will be a guest with al hunt on political capital at 9:00 tomorrow evening. systemic risk such as insider trading, we ring in blackrock -- we bring in an analyst that follows blackrock. kerry, what did they find in blackrock's program? basically, what the
settlement entails is that blackrock had access to nonpublic analyst sediments -- settlements, which theoretically could be used for trading purposes. that being said, blackrock has ended its survey program to avoid even the appearance of impropriety. and the attorney general said the survey program violated the martin act, which is a 100-year- old law that allows the ag's probe white-collar crime and financial crimes, a very wide scope. >> what does blackrock have to do? >> this is a very interesting to one of the many settlements we've seen in the past 12 months regarding the ag and financial institutions. $400,000 tos to pay cover the fees associated with the ag's investigation. admitlso will not have to
, nor deny, any of the allegations made in the settlement. >> as you point out, a little bit unusual. blackrock is more or less singled out because it is the largest money manager in the world. thank you very much. kerry geithner joining us on the -- keri geiger joining us there. raising $2 billion to invest in distressed debt. our expert jason kelly is here. he is editing manager of bloomberg link. jason with me, as well as a special cohost this hour. first, this is even more money than kkr thought it would raise, right? >> that is right. i'm told it was double what they went down to raise. they went out for a billion dollars and they got $2 billion. it speaks to the importance of this type of fun. the more classic private equity funds are having a little harder
time raising money. >> who will be running this new funding? any superstar names that we know? >> it is an interesting peek inside kkr. two thirtysomething guys running this group. we hate them for being so cobblers, but they are up and comers at kkr. one in london, one in -- we hate them for being so accomplished, but they are up and comers at kkr. one is in london and the other in san francisco. they are taking this firm in a different direction. >> double the money than they expected, so where will they be investing? what kind of assets? >> it is a hedge fund largely focused on europe. area that weessed have talked about for a number of years ago -- years now. keep in mind, there has been a lot of talk about distress in europe from the perspective of
buying off of balance sheet. what this group does a lot is what is known as rescue lending. they will go in where the banks won't. part of the distress around the bank is not just the balance sheet, but it leads to inhabit -- an inability on their part to loan, so kkr and other people step in and make for the profitable loans. >> which have not been that -- and there have not been to date that many distressed assets available. managers are paying people to be on the ground in europe. climate like maybe the is changing. >> the climate is changing alluded in europe, and also this is a group of two dozen people all around the world -- the climate is changing a little bit in europe, and also it is a group of two dozen people all around the world that is poised for action. they have been able to use these novel ways of financing that go far beyond the traditional private equity model. >> we are talking about a wide
barn strategy. >> absolutely, and it speaks to the larger effort around private equity firms, or what we have known as private equity firms and probably should not call them anymore -- alternative asset firms like kkr, blackstone. this recent acquisition will go to $29 billion. $30 billion is nothing to sneeze at. >> it is a significant chunk of change. jason kelly with me this whole hour as my special cohost. when we come back, jason and i will be focusing on privacy and security. will bef fire eye with us. in the next hour, the next- generation mobile payment option. matt harris will be our guest. he will tell us about the start up that he sees nipping at the heels of a just -- of jack dorsey's square. ♪
>> as soon as next week, president obama will be calling for tighter limits on u.s. spying on foreign leaders. this is according to an official familiar with proposal. the restrictions are part of an effort to curb nsa surveillance. snap chat, the data breach on new year's eve, more than 4.5 million users data exposed. today, snap chat officially apologizing. cyber attacks are becoming more prevalent. adobe, facing issues where sensitive user information was stolen. hacking and buying is big men -- is big business, and fireeye is of security. david, thanks for joining us. you are knee deep insecurity. you have been for years. before you were at fireeye you
were at mcafee. funded in part by the u.s. intelligence community. what do you see at the center of this issue that are either intelligence or government related? >> think you for having me. probably first and foremost is the loss of intellectual property. the second most would probably be the loss of monetary cap assets. and third, reputational risk and loss. we have seen that with some of the reagan things you have alluded to, snap chat, target, others. brand a really big and that is the biggest owner billy these companies have. >> david, when you work with a company, how strictly you have to be with that company e there will -- with that company? there were many programmers saying to snap chat, your data
is vulnerable and a lot of companies are blaming him for not addressing these issues. >> one of the biggest budget -- biggest issues is education and awareness. the attackers are very complex, well-funded, and they come from all over the world. and in many cases, they are politically or monetarily motivated. assets that they have to prevent these things from occurring are very low, so many of them are very vulnerable and they don't know it until there is attack. -- an attack. >> david, certainly, the snowdon affair, as it were, has played big from a political perspective. but take us through as a business perspective. how are companies talking about it and how are you addressing it when you talk to clients? >> jason, you bring up a good point, at least from a cyber security point of view. there were two big event this last year. atp onecalled the report that talked a lot about the chinese espionage issues. and the second was the snowdon
imprisonment and revelations. raised awareness around the world. that is what companies like as needed, so they would take a look at their internal measures, risks, and maybe understand that the security policy that they have currently is not enough. boost to our business around the world and an incredible opportunity. us.avid, stay with we will stay with this conversation right after this break. david devault, -- david dewalt, the ceo of fireeye. ♪
we have been talking about the cybersecurity issues for companies and government as well. you recently made a billion dollar purchase. i assume that will be your next biggest challenge, aside from helping all your client, basically integrating what you do with what they do. >> it look like a big challenge on the surface. these two companies have been partnering together for almost two years now. the products are really integrated in the management teams are very well-known for each other -- to each other. the businesses are very symbiotic. we feel we hit the ground running very quickly. the future.ed about >> david, any acquisitions on the horizon? clearly, this is a hot area, as you spoke of earlier. are we expecting to see more on the m&a front from you guys? >> not in the short term, but certainly over time, this is a huge opportunity for a new
company. i think the world needs a very strong next-generation cybersecurity company. we are growing very fast and see a lot of opportunity around the world. we will roll out opportunities as we continue to grow. the next piece we will be looking for, at most, will be a small talk in type of deal. >> how ahead of the bag are you? this is how many people describe this generation's arms race. >> it is amazing, just watching the disconnect between offense of activities and the adversaries and the current defensive model. we have had about a 20-year-old model right now with an antivirus that has very low detection rates and very low advocacy -- low efficacy in terms of effectiveness. we have an opportunity to close that gap and have done that with fireeye machines and next generation technologies.
we are uncovering a lot of the criminal organizations, a lot of the nationstate organizations. for now, we have really caught up. stay aheadly, we can of the competition with all of the intelligence that we bring with our recent acquisition. talking about president obama as soon as this next week he will speak about spying on overseas political leaders, how important is it both politically and for people in your business, that move, that statement? >> for the most part, cybersecurity and the risks for cybersecurity in the last few years were never really well- known by the leaders of the world. to watch president obama's elevation of knowledge and interest in these topics is really important. we are watching cyberspace he a very dangerous space right now. dangerous space right now. not just the monitoring, but the
dealings and sabotage going on. it is important to focus on how to make cyber peace and create treaties around the world that allow us to operate our businesses without the risk of intrusions or damage that could occur. >> we saw some photos of angela merkel, the german chancellor, looking particularly annoyed when she learned that her phone was more or less bugged by the u.s. government. dollar wise, this is a huge growth area. benefit.ell poised to how much of the billions of dollars of available business do you need at fireeye to call it a win? have a very small percentage of market share right now. we have been growing quickly, but we have big aspirations. i think we have a big opportunity in front of us. this is a $30 billion a year market. and nearly every company is getting breached. so the current model is not working too well. we have a great opportunity to
disrupt that model and to serve a good purpose in the world as well. a good combination of opportunities. >> david, thank you so much for the time. david dewalt, and ceo of fireeye . right now, at the white house, president obama is preparing to announce the first of his crosses own initiatives. goldmanear julianna speaking about this earlier, the idea to pick communities that are struggling with income inequality. and to focus on those. we do want to get you out to our newsroom. it is 26 minutes past the hour. olivia sterns has everything you need to know. >> stocks are moving lower right now, but a modest move lower. the s&p is down by about three points. the nasdaq is down by about .4%. fallen tofor wti has a seven-month low. the u.s. is reducing its fuel consumption and production has
>> this is "money moves," where we focus on alternative investments. i'm deirdre bolton. here are your top headlines. and -- mario draghi is strengthening the central bank to keep interest rates low as long as necessary. he also said it is too soon to say that the region is out of danger, and he added that banks should continue to deal with bad assets on their balance sheet, even if it causes a temporary worsening of credit in the euro area. claims for jobless benefits in the u.s. dropped to the lowest level in a month.
fewer temporary workers were dismissed following the holidays. we added more jobs in 2013 than at any point in the last eight years. u.s. governor -- new jersey governor chris christie apologized for a traffic jam that was allegedly triggered by one of his aides as political revenge. an prosecutor has begun investigation. chris christie spoke earlier. >> i am embarrassed and humiliated by the conduct of some of the people on my team. there is no doubt in my mind that the conduct that they exhibited is completely unacceptable and showed a lack of respect for the appropriate role of government. >> governor christie said he fired his fud chief of staff over the incident. deputytroversy -- his chief of staff over the
incident. the controversy advertises his possible 2016 presidential run. possible partnerships with communitiesnd struggling with income inequality is the topic of president obama's speech currently. >> i'm talking about suburban neighborhoods that have been hammered by the housing crisis. i'm talking about manufacturing towns that still have not recovered after the local plant shutdown and drugs dried up -- jobs dried up. in rural areas, jobs were scarce even before the recession hit. young people feel like if they want to succeed, they have to leave their town, leave their communities. and i've seen this personally even before i got into politics. this is what drove me into politics. >> you can continue to watch president obama on bloomberg.com /td. turning back to the business of wall street, global regulators
are raising the question of whether or not multibillion- dollar investment funds are, to use a phrase from 2008, too big to fail. su keenan with me with the story. there is concern that hedge funds could trigger a major meltdown and be part of systemic risk. >> that is what they are looking at, the funds that manage more than $100 billion in assets. the financial stability board, fsb, is based in switzerland and is raking -- ranking investment funds. right now, they are focused on ofds with trading activity $400 billion to $600 billion. our extra rules needed? they will have an expert opinion. >> how many are that side? >> there's only one fund that is even close to that in the u.s. and it lists over 150 alien dollars in total assets.
-- $150 billion in total assets. jpmorgan has 1.5 trillion total investment. and man group in london is at $50 billion, though their assets have been shrinking. insurance companies do not take on balance sheet risks, so it's not clear if they are needed. but it does raise the question. >> staying with hedge funds, the industry is pushing the cftc to update rules that could prevent five or -- private funds from advertising to new investors. we are bringing in brought -- bob rice attention capital thisers and also i cohost hour, jason. >> you know how persnickety those lawyers can be, when they started looking into the because it is up to the sec to get rid of the general solicitation limitation
on private placements. because they did that, and that is the big deal here. , yeah, we can advertise hedge funds now. giant asterisk on that legislation and it was called the cftc. both sides of how transparent this is has been hammering on this for a long time. sister agency a to the sec, but you know, they are sisters and do not always agree on things. the cftc has this rule that says, look, if you trade in derivatives that we have control over, then you have to be registered with us. the real not of this problem is that historically, hedge funds withnerally have swaps exposures. they have not had to adjuster
with the cftc under what is called a de minimis rule. ancillary ae or little bit, then you do not have to register. but a key part of that de minimis rule is that you cannot be generally offering your fund to the public. >> that is what it is all about, it is allowing people to do that. it is an interesting breakdown between hedge funds and private equity, which is also covered by venture funds,nd which seem to have caught on a little bit more, right? of those guysmore have richard because they do not tend to have derivatives. >> i think one of the key -- have registered because they do not tend to have derivatives will stop >> i think one of the key reasons is this. extensivets are very and you have to bring in new compliance people. it is not something smaller funds are willing to risk. they cannot take any exposure on this issue at all. they are saying, look, please, take care of this. congress does have some harmonization in the jobs act.
to the say directed cftc, please, fix this, but they have not done it yet. >> what about what su keenan said about the too big to fail hedge funds? what do you make of this idea that there may not be anyone close? there may be some day. >> regulators do not understand these industries at all. it is almost comical to think of a hedge fund by dennis -- by definition being systematically important. because as su keenan said, they do not have balance sheet, number one, and number two, they do not have mere exposures. a $100cause you have million fund does not mean you have $100 million exposure out there. >> anyone trading with long-term capital might [indiscernible] forill have to save this another day. bob rice and jason kelly, thank you very much. back, making more investment in these sectors, find out which models are
>> using data to understand customer behavior is a big investment theme. an israeli based company is pack,g the back -- the using a patented technology that records mouse movement and keystrokes. elliott spoker with the ceo. a we are planning on opening u.s. office in the next few months and growing internationally. there is always opportunity to invest more and to continue to accelerate the growth of the business. >> how fast are you growing e >> 50% year-over-year for the last few years. wise? revenue >> in the tens of millions of dollars. >> and profitable already? >> yes. >> shifting gears, but staying on the tech beat anyway, bain capital is a private equity firm that is also home to a $2
billion venture camp division. matt harris runs that division and he is with jason and i now. great to see you. you arene of the areas making an investment in his payment. we usually think of jack dorsey 's square. what are you seeing as far as mobile payments? what is the next generation? >> square will certainly -- square certainly continued to make news in 2013. we are talking about an ipo. we will see their revenues, transactions of about 400 million in revenue. that is a good size company. are many companies nipping at their heels. which ones are catching your eye? >> square has probably made the biggest impact on merchants. but the battle for the consumer is still raging. no clear winners.
the number of people who use square at starbucks is pretty small. and the biggest up and comer is a company called coin, which did a fundraiser campaign to launch a new product that is a device that looks like a credit card, but has electronics inside that lets you exhort -- load your existing debit and credit cards onto your their card. -- onto their card. >> basically, it makes your life simpler. >> it thins out your wallet. a couple of years ago companies like google's were saying, you can ditch your wallet. a more realistic view is a company like going or another called dynamics that may not be ditching the wallet, but saying it down through smaller cards. >> what else is out there that you think, ok, even if we are not investing in it at aisne, this -- at bain, this is something people should know about? observation the that the interbank protocols are
much cheaper than mastercard. if you can make ach real-time in has, thenat dwell a there is an historic model. where everyone is freaked out about security, how big a hill is set to climb for companies really trying to get to the consumer? >> it is a massive hill. and it is not made any easier by the target breach. in the fourth quarter, 44 million consumers information was compromised. that is some -- that is 40 million that had to replace their cards. for young startups that had to make the case that they are safe and secure, it should be a high hill to climb and it is. >> since we are talking about these payment land, of course we have to talk about bitcoin. we will be right back with matt harris after this break.
>> the national taxpayer advocate say the irs should give the taxpayers clear rules on how it will handle transactions involving bitcoin and other digital currencies as well. publicocate says the needs to know how to report gains and losses. the independent office within the irs says the lack of clear answers may encourage tax avoidance. we are joined by matt harris, managing director at bain capital ventures. and jason kelly with me will for this hour. -- with me for this hour. what do you make of bitcoin? >> the most important thing about bitcoin is if you asked a computer scientist or engineer what they are passionate about right now, half of them would save it going. and for those who build things in this economy, the fact that they're obsessed with anything is germane. >> bloomberg businessweek cover this week is a bitcoin cover.
and it has a unicorn. bitcoins flying everywhere. there are some very smart people, to your point, who are making a lot of money here. is that a short-term thing e is this -- a short-term thing? is this tech arbitrage? how does this play out in your opinion? >> currencies are a popularity contest. is what -- what they are worth is relative to another thing. bitcoin is growing in popularity. >> what about regulation? is someone at some point going to get upset? >> they are. against it.me out germany has said it is not a responsible investment. this point is a protocol. protocol. is a it is a protocol for confirming transactions.
it suffers potentially from regulation, etc. it is not a slam dunk and will be important to monitor. but it will be useful for a lot of things. >> as an investor, do you feel like you should be exposed in some small way to this? >> philosophically, we don't think we have to be exposed to anything. we are looking for the right we are behind a business model where we are going to find that. are not going to dabble and just by options. small businesses are may be getting turned away from banks and now have an opportunity with this whole peer to peer group and there is this alternative lending space. what did you like about on deck? >> we were the first institutional investor in on deck. the founder was just one employee. his belief was that small
business was evaluated by an individual's credit score. he thought that was ridiculous. there was better data to look at than the personal credit score of the business owner. and that is still the fundamental notion behind it. >> give us some other factors. >> you want to look at their credit and debit card transactions. 70% of a small businesses revenue comes through traditional channels like credit card revenue. why wouldn't you look at that? real data on revenue. you can see this card number, every three weeks, loyal customers. that is interesting. in an online bank accounts. you can get permission by the business owner to look at all of their cash flow. >> and how does that broader business rollup, and how soon until one of the big hanks get back into the business or starts to -- big banks get back into the business or starts to dabble in this themselves? fundamentally think the banks have a role to play, but it is more or less a wholesale
lender. ondeck borrows money from banks, goldman sachs and other huge banks. they are capable of moving money in big chunks. they can move chunks of $20,000, $30,000 each to small businesses. >> but how are you paying the employer's -- the employees if you are focused on the smaller amounts. in just two minutes. final thoughts from jason and we will also give you a trading update. moves" continues in just a minute. ♪
ho>> >> time to get final cost -- thoughts from my special guest host, jason kelly. we talked about a lot of things today. what stood out? notion ofthis technology pushing and pushing and kind of looking over their shoulder at what the government is going to do. whether it was technology within -- ofntext of technology
hedge funds, or bitcoin and how that will push into edward snowden land and how obama will respond to that overseas. everyone is trying to figure out what happens next. the nice thing is that as -- thaton moves along innovation moves along even as the government may doddle. the big picture with government versus the small and nimble tech community able to make some money through the passage, let's say. jason kelly, always a pleasure. minutes past the hour and that means it is time to get you out to the newsroom. all you need has to know on trades. what are you seeing? cracks -- >> stocks have been fluctuating throughout the day. right now, the s&p and dow are pretty much flat. the nasdaq is the laggard, down
about .25%. were jobless claims this morning that were in line with estimates. they are also looking forward to tomorrow's jobs data. highlight twoo stocks for you, american airlines group stock. that is soaring today. the company was created last month after getting out of bankruptcy. passenger traffic rose for the month of december. we are also watching ubs. one analyst cut shares to hold from a buy. and technology stocks are the focus of today's sector report. sectord of technology head of research joins me with his topics of 2014. scott, let's just start with what you have seen out of ces. i know investors do not usually bet on stocks they somewhat comes out of the consumer
electronics show, but has anything caught your eye? >> we actually had a couple of analysts at ces this past week and have been communicating with them. what i thought i would do for this segment is really, pull the analysts -- pull the analysts and get their interest. course, the names they were recommending is a strong buy or a buy. i want to start with intel. intel is aows that bellwether when it comes to semiconductors or pcs. in quarter three of the last reporter quarter, only 62% of revenues were from that category , compared to about three quarters of revenue five years ago. intel made announcements related to the connected car, wearables, and even this interesting 3-d camera capability that allows the camera to take a picture that can result in a 3-d printed
item. that actually leads us to our next stock, and i guess, company that we saw make some interesting announcements at ces. that is 3-d systems. they announced six different new printers and a 3-d scanner. and a couple of the printers we thought were interesting work, number one, a printer that .ctually prints in ceramic you could print a teapot if you have interest in doing that. and another printer that actually prints foods. a cake topper, like on the top of a wedding cake or something like that, with sugar or chocolate or whatever -- what have you. >> some promising technologies. yourquickly, give me recommendation for corning. >> the last one is corning, and amy had -- and they made a couple of announcements that