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tv   Market Makers  Bloomberg  January 13, 2014 10:00am-12:01pm EST

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>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> the japanese whiskey company buys a name synonymous with american urban, -- urban-- bur ourbon. >> mid-america is says it was a victim of a holiday breach. neiman marcus says it was a victim of a holiday breach. a full season's suspension for using performance enhancing drugs, it could cost
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him endorsement dollars. thethis is great news for new york yankees. good morning, welcome to "market makers." monday in new york city, i am erik schatzker. ruhle, itephanie suspect you were up late watching the golden globes. not. >> yes, my wife and daughters were watching it. some funny moments. poehler,ey and amy there were less women nominees than men, the women rocked the show. >> they put on a great show. >> let's bring in another woman on "market makers." a big takeover and the liquor industry. offering $16ngs billion for an iconic american brand, beam. our own deals reporter loves drinking --
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>> you said "market makers" whiskey. -- our own brand of burden bourbon. >> erik got my favorite brand of bourgbon for christmas. >> off easily, suntory is very big in japan. drinks, iliquor, soft was telling erik this, you cannot go a day in japan without running into centauri -- into suntory. this is their attempts to go against giants like the agio, they are trying to hedge bets. even if they are not going to get growth after the american market, they will take the american brands to the asian market, southeast asia and
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china. $16 billion is a huge number, they don't have to justify, suntory is not public. >> they don't have shareholders who are going to get down there next for paying a 25% premium. they have to borrow a lot of money, too, taking advantage of the low interest rate environment in japan. riskyborder deals are because there are all sorts of immigration issues, currency fluctuations to take into account. more risk appetite in the m&a, potentially this is a sign. there is an entire office doing shots on west 57th street, win for bill ackman, he has a 13% share of the company. >> he made a lot of money. a little bitalife easier to take. from a suntory perspective, this
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is genius. on the nymex is going to enomics is-- ab going to continue, the yen continues to weaken. let's say the yen goes to 1.30 or 1.50, if you are borrowing but making dollars, every one of those dollars translates into more yen. >> if that is the way the currency markets are heading, absolutely. there are other investors that are going to make out, bill ackman has been calling for this company to divest assets and to streamline its business. his call was right, we had tw itter saying "thanks, bill." >> cristina alesci, thank you for the latest and -- in deals. the newsfeed.
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activist hedge fund elliott management is targeting juniper networks, elliott is run by pulsing her and once juniper to cut costs and buyback stocks. this is according to people familiar with the matter. jennifer is the second-largest maker of computer networking -- juniper is a second largest maker of peter networking. 15%es of lululemon dropped in early trading, they cut the forecast for the quarter ending february 2. and storeys sales traffic have fallen meaningfully. in west virginia, the fifth day without drinking water. a freaking industries -- a fre edom industries leaked chemicals into the elk river. ton it may be safe enough drink. the chemicals are used to wash coal. >> the world's biggest
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automaker, in detroit unveiling some of the hottest cars of the year at the detroit auto show. who better to send out there then our car guru matt miller? already cruised the showroom, what is the coolest car? >> one of the coolest cars i have seen is the one i am driving, this is a concept car i am smashing into the wall. ft1, people have been waiting for a toyota to come out with a sports car. erik are members, back in the 1980's. this is a videogame called grantor is now -- grand turismo 6. technology has played a huge part in the show. massive. some of the things we have heard, you can order a domino's pizza from your ford.
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i talked to the chairman of the ford motor company about technology. listen to what he told me. >> when you talk about the future, it is about technology. we all have talked about automated driving. all the pieces that will make that in terms of vehicle to vehicle communication, vehicle to infrastructure communication, we are working on all of that. excitedford is the most about the new mustang. today, a new truck, a new f1 50 with an all aluminum body that will save 700 pounds, that is one of the other big futures. -- features. new materials being used to make the cars and trucks more lightweight. i talked to mark from general motors about that. >> we are about 200 pounds f-150, betteran
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fuel economy with our the eighth and their ego boos -- with our ecoboost.eir we don't want to offer a tear to midsized-- a tier 2 truck. >> it is all about technology to do stuff in your car. the third big trend that we are more affordable luxury. mercedes kicked it off with the cla. bmw, audi. it is really exciting. >> i am really impressed, i know you are a hard-core gamer. how can you have that conversation with us while driving the simulator? the thing would have been a flaming wreck. >> astronaut sitting next to you. look at the person behind you. --he is a
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do you ever watch "top gear"? about the use of aluminum, some people say america's truckheads are not going to go for aluminum and -- in an f-150, is it going to take time for people to get used to that? reportertalking to a about this. it is not so much that aluminum is a terribly new material for automotive's. theirrover uses it in trucks, they only still 12,000 a year. ford makes that in its sleep. much ofnew material, so that for such a big, mass production truck. only about five percent to 10% of ford mechanics around the country know how to work with this stuff.
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you love having less weight and more power, being able to tow more. if you get in a wreck, it will be expensive to get it fixed. that is the risk people are concerned about. >> we will leave you there to enjoy driving. gearheads, truck heads. take a break and go back to the golden globes when we come back. you are watching "market makers." >> talking about credit card fraud, it is not just target, add neiman marcus to the list. stay with us. ♪ big-time, a out yankees start loses 25 million dollars in his salary because of the suspension. this is "market makers" on bloomberg television, streaming on your phone, your tablet, and
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bloomberg.com. you can watch all of our interviews on apple tv. ♪
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>> you are watching "market makers," i am erik schatzker. the second-biggest panic on ha -- the second-biggest payment card hack. and debit credit cards were compromised during the holiday shopping season. the same thing happened at neiman marcus, the numbers appear to be much smaller, maybe one million cars. ,eo of ronan analytics previously worked for the nsa and the pentagon. i am struggling to understand how this happened. a operates the world's largest payment card network last yeartomers twice of the kind of fraud that
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appears to have been perpetrated at target and neiman marcus. so, i think what some of the retail companies need to do at the leadership level is have a better understanding of their risk. come board needs to together and say what is the probability of an attack like this occurring and what is the severity of if it does occur? how much money are we willing to spend to mitigate this risk. >> you have made an important point. i went to understand. only one, ofthe course, visa is a very big company. that,fter a warning like two warnings in six months, you believe that the target board and possibly the board at neiman marcus ignored it? is that what is going on, they are ignoring the risks? >> i am not implying that. i am saying maybe they did not understand the risk is, maybe
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their assessment of the risk was not correct. maybe they need additional measures in place. i don't have access to either of those boards. cybersecurity, we find companies tend to be reactionary. for example, i heard the target ceo talking to the media. he said we do not know the full extent of this problem. that is very telling. if there were measures in place to actually monitor and understand the dynamic of the situation of the network, they perhaps could be able to tell and pinpoint the problem very quickly. as opposed to spending weeks or months and investigating, having a costly investigation to figure out what occurred. >> is there anyway of knowing how deep the hackers can go? we have not experienced this until the last 1.5 years. it is not like you can look back
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to history and say this is what we did before. the cybersecurity issue is so important now. how can they get their head around how complex it is? >> it has always been around since the internet has been around. since computers have been around, it is just more visible now. this problem had existed previously. what i would say, having awareness of your network. what i advocate for is an intelligence based approach. we use a mixture of technology and people who understand the threat. we are able to detect a threat within minutes as opposed to days, hours, or weeks. this is a different approach, you have to understand that no matter what static measures you put in place, an adversary can get in. if man can make it, man can break it. america, we use magnetic stripe cards as opposed to smart cards with chips and
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pin numbers that they use in europe. until america moves to the chip and pin card, bob, what is your best advice to cardholders? should you be concerned about using your card at a retailer? out --uld like to point those are called emv cards. they are not exactly foolproof, they are better. they have their vulnerabilities as well. for the average consumer, and a lot of it is you are kind of hiding in the noise. if you were one of the hundred million people that perhaps had their credit card information stolen, you may not actually be the one to get the credit card sent to a malicious actor. the best thing you can do is increase your security, two factor authentication with your credit card company, don't use public wi-fi to do banking transactions. vpn service that can
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pierce my communications. t- that incorrect -- tha encrypts my communications. who is selling this stuff, how much can a credit card get on the black market? >> it eventually funneled into organized crime networks in russia or china, perhaps the u.s. credit card information is usually sold in bulk. statements. they can go for anywhere from two dollars and $100 per account. ronin stasio, ceo of analytics. >> pay cash? >> out of the bag you keep under your bed.
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>> matt miller, bitcoin. sachse come back, goldman ' difference. the only major investment bank that does not declare a public profit target. investors say it is time for a change. we will have that next on "market makers." ♪
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>> it is good enough for lloyd blankfein, why is naked enough for investors? to hit ahas profitability target of 10% return on equity for the ceo to michael moore is here. gotten thehas
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benefit of the doubt for a number of years. every other bank lays out a number profitability target, not just for the firm but for individual businesses. goldman does not really have target of any kind. >> do they slip through the cracks because it was a partnership for so long? >> they had one before the crisis. they said it went, is too soon to know whether we said -- we should change it. >> sneaky. too soon for lloyd blankfein and other executives to have a profitability target for bonuses. >> long-term bonuses for lloyd blankfein and his deputies, over three years, you need 10% roe to hit your mark. why y is negative for -- isn't it good -- >> if 10% as investors had their
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long-term target, the stock would fall. goldman does not admit that is a short-term target. he phrased it,ow investors want to see something in the teens in the long-term. shareholders are were demanding this information, why not keep it to yourself and maintain rationality -- and maintain optionality? is somethingility they prize. they are all about adaptability. forward,ion is, going they have been saying regulatory uncertainty is the reason we are not setting one. now that you have the rules in place -- >> certainly. >> you are getting into a time period where people are like you have the rules. >> uncertainty or arrogance? >> smarts.
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keep the optionality to yourself. >> lots of other firms have set profitability targets. how many have met them? >> that is what people around goldman will say. other look at the investment banks, they have set targets but they are not anywhere close. a couple have had to delay, ubs had to delay there's, people push them out. it becomes a question of what you rather have a target you don't know is reasonable or no target. >> what do you say? you like optionality. outf my husband said i am tonight, great. he has all the optionality. if he says i am going to this restaurant, he no longer has optionality. less information is better. >> goldman's marriage with investors. >> goldman reports thursday, is
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there a chance we will get an roe target this quarter? it would be a surprise, but there is some talk at nikon this year. >> michael moore, back in two minutes on "market makers." ♪
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>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> well-connected "market makers peer for i am stephanie ruhle. taking you back to matt miller in the detroit auto show. scarlet fu has some breaking news. >> the chief operating officer northd making comments, american production will job next year -- drop next year. there were concerns about inventory. torying that they would have
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cut prices to move inventory. gm sees growth in the u.s. auto passed over asnn ceo in favor of mary barra. inmillion vehicles sold 2013. he said yesterday that the carmaker is closer than ever to restoring it dividend. >> heading back out to matt miller at the detroit auto show, interviewing top executives at car companies. he is standing by with toyota's senior vice president for automotive operations, bob carter. >> toyota dropped a big bomb on the auto show today. sportse got this new ft1 car, no one expected it, everybody has been blown away. it is a concept, tell me about the direction it points toyota. >> we have a lot of heritage
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going back to the 1960's. sports cars, fun to drive, that is our roots. consumeris to gauge interest of how we should get back into this market. this is a concept, judging from the reaction we had this morning and the number of people he said one, we need to take a look at bringing something like this to the market. in yourave got the frs psion division, you are in charge of that. a new lexus has been a big hit. you have a lot of sporty offerings. our global president is really passionate about cars, a lot of us within the company love fun to drive. we brought out the scion frs.
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had the lexus exotic supercar. amaro, we will reduce the lexus rcf, performance vehicle to go along with this. performance is the theme of our show. theerformance has been theme of your profit operations recently. every quarter last year, it was like wall street investment bank size property -- profits globally. will that continue? year, oura very good sales have recovered fantastically since the recession. in the last two years, we are almost 600,000. what is driving at is twofold. real improvement in the u.s. economy. interest rates are low, consumer confidence is right. the unemployment is heading in the right direction. we are in the midst of the greatest number of new product
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launches we have ever had. the combination of good u.s. economy, great product, that is driving profits. >> is that going to slow down this year? ford says profit is going to slow down, they had some incredible forecasting power going out to 2015. are we going to see a low-end growth we have seen in the u.s. -- a lull in growth we have seen in the u.s.? >> the auto industry just cannot afford consecutive years of one million cars growth per year, we cannot sustain that growth. at 15.6 million, we are forecasting 16 million vehicles next year. a couple other manufacturers are saying 16 million or 16.2 million, not the growth we have experienced, but a very healthy industry overall. >> i have got to ask you about a
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neverthat top gear has been able to destroy. owns thea totacoma market and midsize trucks. others are coming in with competition, gm releasing a couple trucks. --that they get shot market the pickup truck market was fantastic. good and 2014,be we are seeing the construction markets recover, that drives the pickup truck market. we had a very large foothold in the midsize pickup trucks, as well as full size with tundra and tacoma. with some rumors around the show, we look forward to the competition. what we saw in the car business consumers segment --
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migrated from full-size to midsize down to contact. -- to compact. we saw that in suv's. we have yet to see that in the pickup industry. entries with these new and the recovering economy, there is an opportunity for compact pickup trucks. >> alan mulally just told me they are ready to bring back the ranger if this segment continues. well with hisry fusion, you have been fighting him off to keep the number one spot with camry, you have had to give a little more. will you be able to keep pricing power? >> we have a lot of activities centered around camry, it has been the number one selling car in the u.s. for 12 consecutive years. >> will it stay that way? >> that is our plan. we're the only car that sold in excess of 400,000 cars, we plan
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to do that again. why that is important, we know at aconsumers buy cars one time. it is important for us to have more consumers select the camry than any other vehicle in this segment because that is the largest and most important segment in the u.s. spending timeor with us. bob carter, senior vice president at toyota. >> you are having the time of your life out there. we will check in with you later. >> ken lay u.n. succeed in getting a climate change deal? we talked to the point person on the issue, coming up next. any of our missed interviews, watch them on apple tv. live streaming and on-demand video, bloomberg on apple tv. ♪
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>> it seems like a never ending debate in the u.s.. as the climate really changing? people cite the increasing naysayerseather, point to things like the recent snap of record cold, wondering how the world could be warming? what christina is up against, she heads the human cuthe un effort to greenhouse gas emissions. progress has been slow. are you at all optimistic we are going to get the kind of deal nations around the world can sign on to? >> i am confident we are going to get a global agreement. i have seen progress forward. years.e past 3
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at the last conference, which recently happened in warsaw, governors decided to stay on track for the 20 15 agreement, actually to accelerate the pace with which they would reach the milestone. >> here in the u.s., do you feel like we are moving at the right pace? democrats want to keep obama's china change plan on the table, there are other issues that people think are more foreign -- obama's climate change plan on the table. on track, the science says we should be moving faster. in the u.s., it has become a partisan issue. partisanld not be a issue. climate change affects everyone, no matter what your political affiliation. >> how do you get people to understand that? people seem to care about how
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much money is in their pocket, do they have a job, they are not thinking about planet earth. they need to. all those other things are secondary. >> so many years later. >> it is also true that everybody, every day in their own experiences having more evidence of climate change. here in the u.s. and in many other countries, there is public demand for climate action. people are seeing the effects. they are not seeing it two generations down the line or way over in another continent, they are seeing it in their own front yard. >> even last week, people were not acknowledging the extreme cold weather, this is part of the radical climate change. they were saying global warming is not happening. they don't understand the nuances. >> it is a complex issue. if you only call it global warming, that is already the
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problem in calling it that, it is about global climate change. you tell me when in the past have we talked about a polar vortex. we are having changes that we have not seen before. unprecedented changes, that is what climate change is about. with you have a dialogue of those people who disagree and say climate change is not happening? if so, is it working? >> i do have a dialogue. those who deny the science are increasingly in the minority. >> they are often wealthy. of theirspending lots own money publicizing their position and making it difficult for the president get congressional approval for any kind of deal. >> there is a difference between those who deny it and those who use money to stop policy, that is two different universes. the climateny
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change are in the minority. they are disappearing. tose who use their funds stop climate policy are really having, honestly, shooting themselves in the foot. the advance of climate policy is inevitable. it is advancing slowly but it will advance. it will shift the value of investment. if they continue to invest in the policy -- the technologies of old, they are not going to be the companies of tomorrow. they are shooting themselves in the foot. thef that continues to be position of many members of the republican party,, gaining any plicating any com governmental efforts to have a climate change deal, is there a way the federal government could work around congress? >> the important thing here is
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to reach out to the u.s. citizen who does not like at this as a complex issue and says what is my interest? my favorite issue, those out there who are republicans and say i don't really want any government interference. i don't want the government delivering energy to me. i will put a solar panel on my roof. fantastic, that is what it is all about. it is about getting energy independence, it does not have to involve the government. exploiting your own resources and moving forward. that has nothing to do with politics. >> is there a country our government that is doing it right? >> i have very bad news, yes, ch ina. >> china? hold on, would you have ever guessed? you could have given me 50 countries. >> germany comes to mind. advantage with
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respect to legislation, they decide any policy and push it forward. china is already the lead country in wind energy. they are going to invest so much this year that they are going to bring wind power costs down. solarcond in the world in energy, they are going to duplicate solar energy over the next two years. they have an aggressive energy efficiency standard for buildings and vehicles. you know why? not because they want to save the planet, because it is in their national interest. >> are they one of the biggest polluters? >> because they are burning so much coal, they have enormous unacceptable to the citizens. citizens are saying you have got to do something. for nationalg it health reasons. they're doing it because of competitive reasons. to continue to be
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competitive in tomorrow's low carbon economy. if they shift investments, they will be competitive. the question for the u.s., does the u.s. want to be competitive or export all the renewable energy capacity to china? it is a question the u.s. has to answer. >> thank you for joining us. we wish you luck in your efforts. yuantive secretary of the -- the u.n. convention on climate change. >> a-rod out of there for the whole season. gamesar suspended for 162 . what that is going to cost him and the new york yankees. right here on "market makers." ♪
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>> i am excited to go to davos. makers," talking about the new york yankees. third baseman alex rodriguez struck out. he has been suspended for the entire 20 14 season for using performance-enhancing drugs. he will forfeit his $25 million salary this year. it could cost hundreds of millions of dollars more in lost business and endorsement deals. i went to bring in bloomberg news sports reporter scott.
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we know what this means for immediate,rms of the could there be a silver lining for the new york yankees? lining. a goldplated they are having a great time. has underperformed in the last several years, he is the player inid baseball, if they could get rid of that salary for the next four years, they would. it lets them get under the luxury tax, they can add another pitcher, perhaps. without having to pay the luxury tax. this is the best thing that could have happened to the new york yankees. >> is there a chance they will get relief beyond the 162 games? >> this is it. >> let's say at the end of next season, he is not healthy. his hip is bothering him, he
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cannot play. >> insurance picks up the rest should hetract, retire because of injury, the yankees don't have to worry about what do we do if the problem child comes back. >> what happens to endorsement deals? >> he is not exactly loaded with endorsement contracts. >> why? >> you get the star quarterback, think about the mega endorsers, lebron. got derek jeter, he has ford, he does not have a portfolio like lebron. alex had a lot of incentives in homerunract for the title chase, he will not achieve any of those. he could have done marketing deals. yankee fans would have bought
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merchandise, autographed baseballs, anything they wanted to sell. race.-good home run od hased on the way a-ri most powerfule agent in the business, what do you expect will happen? >> he is done playing for the yankees. >> he is done. >> he will not step on the field again for the yankees, whether there is a retirement, a full buyout. he could now go play. >> because of ill will? >> in large part. >> you have heard of people burning bridges, this bridge cannot be rebuilt. this relationship between the yankees and alex rodriguez been severed beyond repair. >> how important a president is the set?
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precedent does this set? >> it is important for but d selig. you have a new players' union leader. the players are tired of talking about it and tired of people taking jobs because of it. there may be some sort of groundswell to make a push on eradicating -- >> what is the message? to alexwhat happened rodriguez, or is this just the tip of the iceberg? thelex was the pelt on wall. they wanted to make an example out of this guy who went to such lengths to hide his activities. with alex, let's see if it permeates to the rest of the league. he struck out.
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thank you so much, bloomberg news sports reporter. "market makers" will be back in a moment. ♪
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>> live, from bloomberg world headquarters in new york, this is "market makers", with erik schatzker and stephanie ruhle. drink up. the company behind makers mark. the deal may rock the liquor industry. the headphone moguls that gave us beats music. >> the best-selling car luxury maker -- electric carmaker rolls
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out -- luxury carmaker rolls out. ruhle. stephanie >> im erik schatzker. >> jim beam is going japanese. the iconic whiskey and bourbon distiller it's agreeing to be $65ht by centauri for billion. bill, an bring in analyst. >> a 25% premium, is this a good deal? >> i think it was the price they had to get this thing done. it looks like a very good deal forerms of beam, dissipating in the resurgence of round spirits, worldwide. for somebody to play that, wo ways toly what -- t
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do the u.s. bourbon market. jack daniels, or beam, makers mark and others. this was the only independent, per se, that you could really acquire to participate in that worldwide growth. >> were there other bidders sides centauri? -- besides centauri? since they grew out of this purchase price, they stared off scared offities -- any other suitors. a indicationis as that others might try to make a bid for beam? >> it is not 100% done.
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of 200 the breakup fee $50 million, that is not an obstacle in and of itself. -- it goes back to the yasiel in particular, if they have a hole in the portal -- and a weekre poorlheir portfolio of presence, at his way beam have such a premium. it is going to make attentional suitors before they -- potential suitors think twice. they willwe assume not be long before they go and buy brown-forman? >> it is a majority whole by the brown family. it would be a tougher one. this is a cleaner type of acquisition about versus brown- -- acquisition, versus brown-forman. roses, why doour
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we care so much about it? >> you think about the business. there's not much growing in spirits worldwide in terms of your or widen. even vodka is starting to slow down. wine.r or even vodka is starting to slow down. beam, and others are 20 times the size of the next largest player, that is not something you can buy or create overnight, that brenda recognition. rand you for your input on the latest deal by suntory. >> the future is here, but it is
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running into a big roadblock, called washington. realtors are just turning to get their heads around the internet of things. it might be a silly term, but is the only one we have to describe the cars, iphones, and trashcan, believe it or not. the companies making these products cannot keep pace with technology. what is the technology -- what is the holdup? flood off this technology, and it is all being developed, and coming out at a very rapid pace. government does not work that way. we're hearing from matt miller at the detroit auto show, looking at some of the cars that drive themselves. we saw a number of items at the consumer electronics show in las vegas last week. we're talking about everything from home appliances that run themselves to the self driving bmw. .udi has its own technology
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as these products come out, the government has to find a way to balance innovation and risk. inc. about and possibility for hackers here. if they could get into some of these home appliances, and start fires, or get into the technology in these cars, and create accidents. or that technology stops working and creates an accident, then you have personal data issues tied to all of these devices. so the devices could be hacked, they could be stolen, and the question that the government needs to answer here is what are the companies allowed to do that personal data? the security? that is the framework we do not have at this point. companies are lobbying to get the federal government moving event that policy around the so-called internet of things? >> it is difficult, when you're talking about all of these different types of productivity grew to be a patchwork of agencies, is going to be a patchwork of companies attacking
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these things. one that we have on the books is happening over at the ftc. they are honing in on some companies under the bellows -- under the umbrella of deceptive actresses. our companies misleading customers? are they doing what they can is for security? reach a settlement with the one committee, friends and net, that was -- trend was hacked. they are promising that they are going to look at more enforcement action in 2014. it is not that nothing is being done, but that there is a new framework for these devices to use what is already on the books. >> thank you. herculanean task.
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think about how they are looking at actual technology. it is a big job. >> i feel sorry for the regulators, for once. >> we are going to be looking at sound business strategy, we are talking about beats. we will have that next on "market makers," live on bbg television and streaming on your phone, tablet, and at bloomberg.com. ♪
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>> what a year for television. -- a lotshows aren't of shows are actually on netflix. house of cards, or just the new black. [applause] it, because it will not be
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too long until snap chat is up zero -- here accepting an award for best drama. [laughter] the whole divide between live television and streaming services like netflix. there's not much point in watching the golden globes on netflix, is there? golden globes were airing, girls was premiering on netflix. they don't have to watch it in real time, they can watch it on their own time. the game has changed. >> i have a question for everybody. can dr. dre do for streaming music what he did for headphones? man behind beats and pandora
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is taking on spotify. pandora and spotify, there's rhapsody, there's itunes radio, there is slacker radio. i was eads music owing to be different than all of those services? >> there is no doubt. they have their own particular spin. i love your description of the beats, because we all know them now. they have the strong read more or strong white red -- red, strong white headphones. technology has changed music for most music listeners. it is easier to get music, the streaming services are pretty off some -- awesome. gang says that the problem is we do not have that same usable experience we used to have. now,e are buying singles going from song to song. we have a lot of industry experience, we were to try to
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deliver you more of a album experience. tell us what you like from the beginning, and we will deliver you better stuff. it works pretty well with the headphones, because that was at a time when the iphoto,, smartphones work starting to gain traction and people were listening to music on their phones. doing so on these itty-bitty ear buds, and they were saying this was ruining the music experience. let's make a product for that, and they've done pretty well in that category. people are going to a attention to this drink service to begin with -- a attention to this streaming service to begin with. >> is it because streaming is disrupting the digital download? >> if you're somebody that has a lot of experience and the music industry, you have a couple of options. you have the option of just sitting there, navigating the technology twist and turns as they come, or you can take it on to and say hold on a second, if albums in theing
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traditional way, beyoncé going directly to itunes, people are not going to go out to buy albums. maybe we can create our own service that will do a better job of delivering music of an opening your ears to other music options, the way that spotify does. it is too early to say, as there's a lot of competition out there. >> thank you. >> we want to keep the beat going on this entertainment front, with andy gershon. founded smashing pumpkins and the white beats. this is so attractive to music takes, but what about regular people? cary mom just gets in her and puts on the radio, she does
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not go for beats. >> she will probably go for pandora when it becomes effortless in the car. what gives it the credibility is dr. dre. what they did with headphones, can they do that with streaming? for one, you have a streaming company that is actually being led by music people, as opposed to streaming companies that have traditionally been led by nationally -- technology people. they are relying on that human touch in order to personalize the experience a better one. raze have not mentioned reznor. his skillsow that
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are going to bring a better experience? >> you don't, but he has a great track experience. foras tried to give it out free, he has tried pay as you like. i do think that the interesting thing is to go after pandora, demo thatng after a is older. trent reservoir is not the reznor is nott -- the person you want going after that demographic. i think that is where the future lies, is how music streaming handled by the telecom companies. >> if i am on verizon wireless, but my wife and kids aren't at&t
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-- are on at&t, they could sign up for, or get as part of their monthly bill, access to music? >> exactly. a streaming service in france hasn't with spotify that hasn't with spotify -- has it with spotify. part of that key is going to be the marketing that needs is putting behind it, so it is not just an add-on proposition. something you just add onto your phone bill, but that it be seen as a really important a really -- a really important aspect of marketing. >> this new product, i am dying for, when beyoncé went theysively for i tunes, bought the whole album. a beyoncé's experience was
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complete win for her. there are other artists beyond her. >> i am willing to buy herbal album, i'm not sure about other artists. >> consumer behavior is going toward streaming. digital downlink band the purchasing of digital, and cds is decreasing. vinyl is going up, but that is a collectible like a t-shirt as a concert -- at a concert. the question becomes subscription model versus advertising model. you are absolutely right. and you raise an important point earlier, which is the idea that it is going to be integrated into the bundle of tellico -- telco services. at&t has to swallow in the early days to add on beats music, or else they have to raise the price. otherwise the quack i am not -- otherwise --
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has to feel that you are getting it on your phone just like the coverage in the country. why should they not just when out a song there and a song here but since they're not getting the full album bought? >> i think the quality issues, i think you're spot on. i think that part of the problem in music as a whole is that there's way too much music. beats is trying to solve all of them. there is so much music, how do you rate it for the discovery of new artists? that is where beats is going to do a great job. >> is it too much music, or too much music package the long way -- wrong way? a song on make a
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your computer, not knowing how to read or write music. when that happens, there are way to meet people that feel that they can make music, that should not be. >> what is the best album you've heard lately? >> that is a really good question. , this isrobably say really obscure, there is a band , which is ameadow psychedelic rock band out of washington dc that had me really impressed. >> you heard it from andy gershon first. >> thank you for joining us. when we come back, we're going to talk about your money, and what you should do with it this year. kkr.4 outlook from stay tuned. ♪
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>> welcome back to "market makers." the hour, it is time for bloomberg to take you on the markets. i know this may come as is a prize, everyone is talking fitness, their new year's resolution. the sportswear maker lulu lemon and it's lowest -- hit its lowest mark in two years. >> that is a stock you can see right through. ha ha. this has been a dog of a
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stock for three years, but they are trading higher today after talk of acquiring elliott. -- being acquired by elliott management. singer is knocking, you better watch out. >> what does kkr see in the year ahead? we are going to renew an exclusive -- bring you an exclusive and a couple minutes. >> we will find out what is in store for bmw. ♪
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>> live, from bloomberg world headquarters in new york, this is "market makers", with erik schatzker and stephanie ruhle. investor to do in 2014? simply stay the course. atbal macro asset allocation the private equity giant kkr, the manager is here with us. from have been at kkr three years now, and when we work first there, our vw was a outlook on the team.
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oure trying to lead with and capital alongside her investors. our view was you could step in to credit and get equity like returns, but without the volunteered the -- without the volatility of equities. we have a very similar view this year, which is if you're going to be compensated to stay out of nds,rnment wants -- bo overall what i would say is that you buy government bonds when there is dislocation in the market. what we are seeing is ever met ons as one of the greatest risk in the market. riskt's look at those assets for a moment. we know how they perform in the public market, just look at the s&p 500. what about the more liquid assets, like privately traded credit for example? valuations moved
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lockstep with others? >> small businesses and medium sized businesses around the world need capital. weathered his private lending in the u.s., what we call special situations europe, or fade to give urgent markets, there's -- they need an agent of change to give them capital, so they can grow their businesses. since the great recession, that really -- that traditional banking model has not come back. i think nontraditional banks have stepped in and helped out to help the committees grow. > --ompanies grow. >> why's that a smart equity move when the financial services are doing it six years later? >> it takes away your babar, it takes away the ability of the -- your buffer.
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i do not think there is the same velocity of lending out there. what is the fed, europe, the bank of japan, they are all trying to encourage lending. that is not where we are today, capital is very difficult to come by. it is a much different actor -- act up. leverage is way down, and there's not the same availability. >> on a macro level, do you see the u.s. economy wreaking out against -- against, the very least, other developed economies? >> i would say the job report is an aberration. >> it kills me when you hear weather.- tehe were we not expecting the gold -- cold. --we were not is expecting
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expecting it to be as extreme, that cuts down on construction and other things. the government last year was over a percent drag on the economy, this year it will be between zero and -30 basis points. gdp should accelerate 100 basis points just from the lack of government this function. are we having a breakout? no. are we having less dissension in washington and and less of a headwind? absolutely. was four percent normal, is going to be closer to three percent. >> does it make more sense, if you're looking for upside, to go shopping in europe about or go shopping in emerging markets? especially if your outlook is 18 months? >> i think within emerging markets, you need to focus on
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places like mexico, where they're doing better things with her balances. thinkd say in japan, we there is an upside. we think is going from being less bad, to steady state. there are still a lot of monetary stimulus. >> what do you want to stay away from? >> government bonds is one thing, stay the course. thus -- and that is just because it is not returning, not because it is risky? hadast year, because you such a government drag, that that had to stay on hold and be super accommodating. this year the government is going to be less of a drag, so the fed will be less accommodative, we will have a little more tapering. generally i'm a we are going to have a little bit stronger growth. it is going to be more volatile, that is one thing you're definitely going to see. i do think -- do not think money comes into the deadlocked
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markets go at it and you're going to be compensated going out on the risk curve around the mediterranean up. >> going back to japan, initially, or for the past 12 months, it is all about that's been all about monetary spansion and abenomics. deal,e see the suntory and the deal for sprint, does that mean that they are right that this is happening? >> we have had a great presence in japan over the last few years. the big thing to focus on, is do you get job increases -- wage increases at the base level in 2014, especially march? >> isn't happening -- is it happening? >> that is when they reset it. weaker yen, japan has gotten cheaper, not more expensive, even though it had it up or he percent year.
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-- 40% year. >> when you say you like europe, where? >> more on the periphery. >> this is a man that likes his risk. oneverall, you will see percent to two percent gdp growth, but what is going to happen is the periphery is going to grow faster. rants will be flow, the netherlands will be slow, but ireland wesbanco or particle, that is where the rate of change is better. >> even with financial services? >> i believe that they stress test, which will be a big inflection point in europe will tell to the upside. -- tilt to the upside,. . i think that people will take that as a positive, not a negative way that is a debatable point. i do not think that europe is in a structural bull market, but as you saw last week about spreads
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collapsed in the periphery. i think that ultimately will have some follow through to the equity market. >> so your advice for the time being a stay the course, but for how long? what could be the catalytic double element or events that would change her view -- developments or events that would change your view? >> the cyclical sectors, housing, energy, they start to roll down. the other thing, ultimately, the fed will get in the game at some point. we had a wonderful backdrop for the monetary base is continued to grow. increasing monetary basis over history is pretty good for risk assets. at some point they're going to slow that, and it will go the other way. a lot of investing is about rate of change. rate of change is still positive even with the taper. at some point they will start to withdraw liquidity from the system. ecast isrnal for
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2017. we think we are in a deleveraging cycle, but we think overall in terms of the private sector or are, it continues for quite a bit longer. >> great to get your thoughts. thank you for joining us. , head of global asset allocation at kkr. >> when we come back, we will talk with the head of sales at the luxury carmaker bmw. >> if you miss any of our interviews david can watch them on apple tv. it is a brand-new experience featuring live streaming on demand videos. ♪
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from kkr wascvey
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just here talking about how as an investor you need to stay the course in 2014. >> the fact that he thinks we have room to run, and he's comparing this from 1995-1997, we have not had anyone say that. i've talked to so many people in the last week who of said that i'm going to take a little bit of money off the table because 2013 was so good. but if you hear kkr say it is good and only going to get better, you want to stay on. likes his a man who risk, shopping in the european periphery. >> we are not going to mexico, we are going to detroit, for the auto show, where matt miller's going to be sitting down with the head of sales at the end of you. you're watching "market makers." ♪
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>> welcome back to "market
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makers." matt miller has gone to detroit for the detroit auto show, and matt has been interviewing all of the top executives of the our companies. it right now he is at the bmw booth.-- i know you cannot resist a hot ride. m3 was really the sports car enthusiast go-to. best itlways been be has always been be first choice for fast cars. this is the m4. th sense. m3 in some lower, much wider, slightly longer. it is a big step forward.
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you make a very valid point, you had the m3, it is still the icon of the brand. classic color you have chosen. and has become a huge trend of the shows, but you guys have been using carbon fiber more than any other carmaker for longer. everything from the eye three, to the i-8, how key is that? >> we decided a couple of years ago that the use of carbon fiber was something that had a very good future ahead of it. cars, weight out of our this is something we wanted to really pioneer in summers backs -- in some respects. i can tell you, you will see it and a lot more products as we go
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into the future. >> i was looking at the two series. another trend of the show has been more affordable luxury, getting more people involved. it is that with the two series is about? >> it is a step up on the radius generation. -- previous generation. it has a lot more luxury features involved as well. this happens to be the performance level, which is the level between a normal car and the full m products. we feel that the u.s. will be the biggest market for this car. >> this makes me think of the have been they growing bigger and bigger. >> it is where bmw really started out and had success. this car, in terms of size and
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positioning, this is a son or daughter of the 2002. >> one of the cars you have been successful what is the x five. and it's for three generations. ,ou know have a smaller version the x three and the x one. how long do you think it will be a big moneymaker? agot was about 12 years that we decided to embark on the x products. the x five was a runaway success. a sav, becauset it is not a sport utility vehicle, it is a sport activity vehicle. >> the x for is a coupe urgent of the dutch version of the x
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the x3. version of more customers came a new to the very loyal, many have bought a second one already. goodu have been going size, smaller size is their. will he see a bigger one? never say never. we have really started to develop this. million cars a year under the x line will be sold a year, and we continue to look at what is possible. >> thank you. miller, you, matt having the time of his life up there. to --ar busiest is enthusiast does not after his
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obsession. we will be talking about a bullish bet. ♪
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>> that will do it for "market makers." tomorrow, ben bernanke's legacy, and what to expect from his successor janet yellen.
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take -- speak with the former sac chairman. >> liver television is on the markets -- bloomberg television is on the market. >> it is time for today's option insight. to support more advanced smart phones. of your strategist and analyst who so that covers semiconductors recently upgraded , or initiated, i should say, more technology. this has to do with the china connection, kinney walker through that -- can you walk us through that? 4g expects to ramp in china for the sharply 2014. this is at the heart of that. >> the strategy on this is
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interesting, because it is just a straight up by the call, which is not something i hear too often from the guys i talked to. it may be a $17 call? y, why not a up buuy risk aversion strategy? strategyery option needs to have four legs, and we are talking about implied volatility being pretty low. pretty significant opportunity. a nonlinear payoff. in a case like this, when we are seeing significant rollup from intromobile of 4g lte thousand 14 to buy a stock that 2014 in atly - in
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stock that stand to benefit anyificantly, we do not see downside. >> that is not far above where it is right now. just in time for it to get there. >> that is an option series without a bi -- with about a 25 delta to it. a 25%means think of it as chance that the option ends up in the money when the stock gets approach 100.ill of thelso an indication option knowledge the that is embedded. owning the 17 calls, moving the when the stock moved up sharply will give you the investment. risk that are the
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there are going to be other competitors in the chinese market who are maybe going to wins above the constructs from chinese mobile? the contracts from chinese mobile? >> there are about a million 4g handsets. the delta is really going to come out of china mobile, and situated right there. there will be competition, but we think that we will be one of the winners. >> are there any other catalysts? >> what we are seeing our design wins.- are design chipclude an integrated , through qualcomm.
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expected exposure through these next few earnings. people believe it is the sustainability of growth in china 4g, that is what we are playing for. >> thank you. we will be watching to see how it does for that may $17 call. we will be on the markets again in 30 minutes. ♪
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>> welcome to "lunch money." let's take a look at the menu in motors. we will road trip to new york. -- two detroit. aluminum? a ceo, dealmaker jimmy lee opens up on how he got where he is in his career, part of a weeklong series here on bloomberg. tribute to the former israeli prime minister laid to rest. finally, more than just the words. golden globes, they had

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