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tv   Market Makers  Bloomberg  August 19, 2014 10:00am-12:01pm EDT

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>> live from bloomberg headquarters in new york, this ," with erikakers schatzker and stephanie ruhle. >> home ownership could grow even faster. who is going to do all the building? ballmer is unleashed. he is bringing his personality to the nba. trish regan spoke with him. plotting his comeback, the best golfer in the world is sidelined by injury once again. are you betting to get -- that against tiger woods? >
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>> you're watching market makers. >> i am alix steel. golf fan, buthuge i enjoyed playing the game. >> you got to sit down with tiger himself. that is pretty cool. >> and rory mcilroy. he could have a career grand slam. he is only 25 years old. things inputting perspective. we will have that whole interview in the show. these are the top business stories. home depot rose today. the biggest retailer in the u.s. beat estimates. they also raised the full-year forecast. consumers are spending more on a renovations.
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bhp will spin off into another company. they weresays expecting a buyback for shareholders. there was some disappointment. james shirov has died. at price waterhouse coopers. he was also a lead director at goldman sachs. a why is there such disconnect between housing starts and homebuilders. homebuilders of not been this optimistic in years. brokehows that they ground on 1.1 million homes in july. that is two thirds of the average between 2003 and 2007. michael mckee is here to explain why. >> there are a lot of problems out there for homebuilders. there are number of workers, according to the homebuilders. jobs in amillion
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recession in construction. they gained back 800,000 of them. that is a real problem. homebuilders come to market and they need more workers to try and put holes in the ground and raise the foundations. according to the national association of home owners,, some specialties like carpenters and framers there is a real shortage. >> what are they doing instead? >> they asked that question. most of the people who were in that business when the recession started have left the business. if your job goes away for five years, you will find something to do. he went back to school and founder the work. they are not being enticed back into the construction business. one reason for that is it is not pain as well as it used to. we talk about how nobody is getting a raise because wages are going up to percent year. the last quarter, wages for
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construction workers only went up 1.2%. they are losing ground. it is starting to change. but there are not going to be enough people out there to do the jobs. >> surely this is a fixable problem. i won't say that carpentry and plumbing and electrical work is unskilled. it is skilled labor. it is not highly skilled labor. it does not require a phd or an advanced post secondary education. why isn't the demand driving more supply? >> demand doesn't drive supply, but it takes away to clear -- all while to clear the market. when you look at how things start, a lot of shortages in the 1990's were filled when housing starts took off in the early 2000's. we had peaks up to 2006. nothing happened in the recession. now we are seeing the shortages again holding down housing starts. that should bring more people
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into the industry if they start waging -- ways in -- raising wages. >> it reminds me of the trucking industry. there is a shortage of truck drivers and there's a call to raise wages. >> we talked about that with a number of economists. there seems to be in east those out there that short-term stock by holdings achieve down the costs. that is what ceos are focused on. they don't have enough confidence they can build enough topline growth to spend that money. until they do, it is a problem for the economy as a whole. >> you are going to stick with us and we will continue with the housing theme. we just heard the issue. we don't have enough construction workers to help with the supply. we are seeing increases elsewhere. >> where there is demand for new housing we are seeing more construction. we are seeing this in some of
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the big, expensive coastal buildings -- cities. those markets is 50% ahead of what is normal for them historically. in texas and oklahoma, those are mostly single-family homes. they are having a mild housing bust their. you don't want to have an overhang of overbuilt homes that you have in other parts of the country. the point.ves housing is not the national market. it is a bunch of local markets. they are incredibly distinct from one another. >> we need to look at construction at the local level. there is a different logic. the places that were not hit hard in the housing bust are seeing big price rebounds. they are lagging in construction. the places that avoided the worst of the bust are the ones that are back to normal or ahead of normal when it comes to construction. >> is it possible that some of
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the reason is they overbuilt fairly recently and now there is a large supply of relatively new construction? >> markets that were hit worst in the bust have over buildings. even though inventory is tight in a lot of markets, the vacancy rate is still high. builders do not build where there are a lot of vacant homes. >> it raises the question about the data we are seeing and whether we can really trust it. the south is one of the areas that was overbuilt last month. housing starts are 26%. this month they rose one and 9%. 36% in june and is down 28% this month. is it this volatile or is something wrong with the data? >> the starts numbers themselves are based off of a fairly small sample of what is going on. the volatility, even at the
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national level, the numbers bounce around even more. we look at the permits data at the local level. that is a much larger sample and you can really see what is going on down to the local level. this includes places that were very hit hard in the housing bust. there is a building boom in texas. when you look at the regional level, it does not give you the whole story of what is going on locally in construction. >> it is really a renters market. that is what we are seeing being built area when does that supplies start to weigh on the home price appreciation or are people not making enough money as we thought they were? that has slowed down demand. >> there is huge demand for rental because people are starting to move out of their parents homes. they are renting. >> it is expensive. more are also seeing rental supply come into the market. rental construction takes about
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a year or a little more than a year. he saw a big boom in apartment construction last year. it is at a 15 euro -- year high. that is a big increase in the conceded building. double-click some edge off. -- that will take some edge off. thehis does not compare to 1.8 million at the feet. where can we go with a shortage of workers and the questions about whether people are going to move out? normalooks like what a term longer might look like. keephing that is going to us from being right at the normal is we are going to see this increase in new households. there have been several years of young people living in their parents'homes. about 2 million households that don't exist now that should.
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that will give us a boost in demand when they moved out of the parents'homes. that could move new-home construction up a few years from now. we should settle in around 1.5 or a bit less. >> one of the things it intrigued me about the work you have done is the impairs and between new york city as a renter market and san francisco as a renter market. is doing well but san francisco is on fire. >> san francisco has had a huge increases. it has been going up 10 percent year after year. it is only about half of that in the new york area. job growth has been much faster in san francisco. it is twice as high in san francisco. toppedsan francisco ever new york before? >> the growth is so much higher.
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this could be a first. affect rentalis rates in san francisco? >> they are seeing a construction boom in san francisco. it is a boom relative to what is normal for san francisco. they are building very little housing. >> if you look out the window and there are 100 story apartment towers going up, that will not be allowed out there. youn coastal california, have less land to begin with. you have mountains on one side and the ocean on the other. you have stronger building back thens that will amount of construction. san francisco builds west typically than almost any place relative to its size. for two-bedroom apartment
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$3500. let's take a moment to take that in. >> this is like my mortgage. thank you so much for this. it was great to see you. we have a rescue plan for retail. >> he won't pick up a golf club for another month. of theoods is never out spotlight. i sat down with him and rory mcilroy last night. ♪
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>> american apparel lost nine cents. the ceo says he sees a lot of good news in the report that was out yesterday. he says it reflects well on him. trish regan's vote exclusively with him yesterday. i am not surprised to hear that. a loss of $60 million is not
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something to write home about. that is significant. narrower than he had been seeing. this is a pretty important quarter. it was basically just temp they're running things. this is my report card. there were only 12 days that i wasn't there. i close the distribution center and organized payroll and put inefficiencies. you get all of this drama going on. he is still there on a day-to-day basis, effectively running things. even though he doesn't have the official title and the board has pushed him aside, he is responsible for the day-to-day operations. he is traveling from store to store to make sure things are in order. he was at an apparel conference in las vegas when i spoke to him last night.
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he was very positive on this report. he talked a little bit about the declining sales environment. he said this is not something that is specific to his company. he said there was a lot of cold weather in the industry and it was a challenge. is looking at all of the potential competitors out there like forever 21 and cap. -- gap. he has to take market share. >> i think it is great that he was making tough choices when the stock was trading at one dollar. when he was the ceo and had been since 1989, it was $15. >> net income was down 185%. one quarter is not going to make his report card.
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is he confident he is going to come back? >> this is a guy who eats and sleeps his company. he breathes this company. it is his whole life. that is very clear. he will make that clear when you talk to him. this is all that he does. there is obviously a lot of drama surrounding this. there was a lot of drama. the board moved to have him removed. this is going to affect sales. customers may not like hearing what they have heard about him. he said in response that in the end, the customer is not affected by the drama. they might be inspired by him surviving this corporate battle. young people like a survivor story. i want to win. if he is determined to stay there at the company, no matter what his title is.
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i can be sweeping the floors and i don't care. the title is insignificant. >> no matter how low that goes. >> thanks trish. about 20ee you in minutes because you spoke with the new l.a. clippers owner steve ballmer. >> he has a lot of energy. >> in the meantime arrow post i'll is looking for a lifeline. they are asking the former ceo to stem its decline in sales. onlycan apparel is not the company the suffering. the ceo left the -- for the now defunct cupcake company. olivia sterns has more on this. >> i am not sure that he lives he was thereit, for the heydays from 1996 to
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2010. this is when the stock peaked. since he left, the stock has fallen 80%. this is a very troubling tenure for thomas johnson. thatnalyst tweeted out this is the worst 10 year in specialty up peril retail history. margins shrank from 16% when he left to -8%. they are losing money now. trish said that american apparel lost $20 million, they lost $37 million. this was better than analysts had expected. sales were down 13%. wonder, what a sign of desperation is pointing to when what other tricks you have in your bag is bringing back your old ceo when things used to be better and it is an entirely different retail environment now than five years ago.
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>> shares are up about 10% today. investors are excited that they are taking a page from the book of jcpenney. they hope that the former ceo has the magic touch. a lot of analysts are skeptical. one said that the ceo of change may not help much. but were known for basics, consumers don't want basics anymore. the market has changed. teenagers are not spending their disposable income on close. they are spending money on phones and apps. the money is going to apps. >> this can't be that much more expensive. >> it is the basics. teenagers are not paying a premium for that kind of thing. the fashionply aspect of it.
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they are hoping that a 68-year-old can bring it back and run it. >> we had gilbert harrison on that last week. he said that most of the time they spend it on high-tech adams and then spend $200 athletic shoes. this is a tough time for all of the teen retailers. abercrombie and american eagle have all lost market share. nobody's stock is doing well. >> they're going back to the future to try and revive things. we'll be back in a couple of minutes.
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>> we are approaching 26 past the hour, it is time for on the
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markets. the stock is down today. they had a historic spinoff of its assets and getting rid of silver and nickel. the stock is down he does investors were expecting a buyback. they did not get that. this is not what they were hoping for. this is truly a historic day for this company. this is a $120 billion company. this is a complete reversal from the big mining buildup of the last decade. >> it raises questions about the rollup strategy. do they need to become production houses across a base of rashness and regular metals. this could mark the end of the commodities super cycle. they been saying this for while. that would be pretty darn painful. >> the consulting firm that did
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not want to say bad things about a client. that cost them. the nbaatest owner of makes his public debut. we're going to hear from steve ballmer. ♪
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>> live from bloomberg headquarters in new york, this makers," with erik schatzker in stephanie ruhle. >> this is market makers on bloomberg television. >> happy tuesday. slappedork state just price waterhouse coopers with a $25 million fine. report that from a was supposed to detail the business the bank did it illegally with countries that were blacklisted i u.s. authorities. that is what the report did
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until they sanitize the language. this highlights the conflict of interest between auditing and consulting. matt levine. have i got the chronology of events right? inthey did some bad deals 2002. they did this report and six years later they were fined for it. >> whether it is price waterhouse coopers or many andrs, they cannot audit consulted the same time. this is evidence of that. you are developed -- here to tell us something different. >> there is some truth to that. in this case, they when it ended with a were supposed to do. they hired a separate consulting firm. has nothing to do with the
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auditing work. they hired an accounting firm to do this. you could call it an audit of all of their illegal transactions. >> is there something wrong with the $25 million or the band for two years or anything else that has bubbled up? this is an interesting case. >> they revise the language of the report. they basically said that bank of tokyo did 100 billion dollars of bad transactions with iranian companies. they won't do it again. the new york regulators find them 200 $50 million based on this report. then they went back and looked at the report and said that they had change the language to make it look like it was less bad. is that worth $25 million? i don't know. this is begging for mercy from the bank. that does not seem like that big of a deal. it looks like they may have
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missed some transactions. when they said they did $100 billion in bad transactions, maybe dated 200. nobody knows that. the only investigation was done by the company itself. this is hard for the regulators to know what went on. >> is that just them being incompetent? or is this a problem with consultancies across the board. >> it is a problem with this sort of engagement. they are working as a consultant for a company that is begging for leniency. they want to say they are sorry and did all of these bad things. they don't want to list all the possible bad things. pwc noticed some problems with the investigation. they should look into this sort of thing. .he bank said no they do leave it alone. they missed things because they were told by the client to miss them. >> why isn't this a conflict of
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interest issue? how pwc could be incentivized with the allure of more consulting work. it's to their advantage not to take a hard look. forced them to split up into auditing units and consulting units, whether as part of a separate company and look into the research that was maybeith wall street, that wouldn't happen. you have auditing companies that could be pulled in to do this kind of work and consulting companies which would be assigned to do different things. >> this is consulting work. >> if this is reviewing transactions? >> this would not be an audit. they are an auditing like work. sometimes this doesn't have
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anything to do with scrutinizing illegal transactions. >> this isn't inherent in the actual work. they were hired to find the stuff for bank of tokyo to confess to. you wantor a client, to minimize the bad stuff to confess to. that'll be true no matter what kind of company is or whatever you call it. the conflict is not from the type of firm about from the fact that bank of tokyo and its consultants are investigating itself. >> should they have paid more than $250 million? >> i think that is what is going on. they've investigated themselves and came up with this money. the new york regulators think that might not be right. >> that is fine. that is a good point. that raises the question as to how regulators come up with the fines they do, like $9 billion. are they just figuring out which the wind is blowing. >> they have to read lie on the
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companies to figure out -- rely on how much. a columnist with "bloomberg you -- you." >> i read him everyday. coming up, steve ballmer wants to make los angeles forget all about the lakers. he is not forgetting about microsoft. trish regan spoke with them. ♪
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>> steve ballmer paid $2 billion for the los angeles clippers. now he has to turn that into a champion.
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trish regan is back. she spoke to him yesterday in los angeles. see that $2 to billion. is a lot ofit money. we talked about asset evaluations. he said the market overall is pretty steep. even basketball teams are expensive. this is a price that he was willing to pay because he really wanted the team. i did ask him about the money. >> los angeles is a unique market. it is a phenomenal opportunity. when you look at tech companies with no earnings and future valuations and a lot of downside, the clippers looked like a really well valued team to me. there are tech companies with market debts of $150 million. the clippers make money. we need to get leaders in place.
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i am retired. i am not looking for a new full-time job. we will strengthen the business side of the clippers. >> when you look at microsoft now and you see the leadership in place, how is it going? >> i think he is off to a fantastic start. people like to think it is a short-term gain. it is not. businesses get built in years. i loved him and his work when you work for me. i think he has had a good six months. it will take years before we really know how well he is doing. >> 18,000 people were laid off. >> that was a decision of the management team. >> this was his decision. when we bought nokia we knew
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there were redundancies and things that would need to be done. they decided what that looked like. toy use that opportunity make some other changes that he thought would streamline and make microsoft better. supportive.s that is why we put them in the job, to run the company. i lovedat i did and everything we were doing. owneeds to develop his vision. he gets to articulated in his own time. we can challenge him and asked questions. he has got our support. when he was to speak on that, he can. there are some fundamental things that the company has to do for its future. he puts that under the umbrella of mobile first, clout first. that is going to require new technology and hardware
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technology. there are new places to go and he will describe how he wants to get there. >> where are you going to sit during the games are you going to be courtside? >> there is no question. i don't know what seats are available. we have great fans with the clippers. they have bought a lot of tickets. that was the number one thing we were joking around about with the coaches and players. where do you like to set? >> i always thought i wanted to sit under the basket. the players thought that was a weird idea. they say to sit in the middle. that makes more sense. you will figure that out. >> that is a good problem to have. i am looking forward to seeing you on the sidelines. enthusiastic fan. when i go to the games i am a fan. >> are you going to give mark cuban a run for your money? >> he said he will be as
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hands-on as possible. i am not a person and micro manages. he could not say enough good things about doc rivers as a coach. he said i may ask questions. we did not talk basketball. he said he would ask questions, but he believe all of that to doc rivers. i will focus on the business end and get the right team in place. he mentioned the interim ceo. he said he has done an amazing job. that has been a labor of love for him. it sounds like parsons will be there for a while as they transition and try to find the right management. moree a feeling he will be involved than he lets on. >> he is not going to be just cheerleading. >> > he wants to succeed. >> thank you for bringing this to us. you flew in from l.a. overnight.
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>> thank you, trish. talks up, another athlete about the future of golf. i sat down with him last night. ♪
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>> last night was a big one for nike. they just resealed -- revealed a new set of golf clubs. it was hosted by jimmy fallon. we were hanging out with the two biggest stars of golf. i was there with cindy davis. it she does not need to sell a lot of these vapors, she does need pros to validate the credibility of the brand. i asked tiger if vapors will be the clubs in his bag when he returns to play in december. >> we will see. i need to do more testing.
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i was getting close to putting them in play. out and i had to have surgery. why came back, i was very limited in what i could do practice wise. i did not want to test anything. i played with my old stuff. this time i will have more time to test it out. i was excited. shocked to seend the ball flight and how much better it was. >> what determines if you are married -- ready to make that change? >> if it works for me it is in the bag. if it is not better than i will not put it in the bag. >> how is your back? >> it is a bit stiff. i've been sitting and standing the whole day. the rehab process, i have to go through that again.
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i did not do any damage to it. >> golf is in a bit of trouble. you have seen the numbers. 6 million fewer people are plane then backing 2000. courses are closing by the hundreds. how does that change the way nike looks at golf? >> we see this as an opportunity. i say that because we have innovations. we have never been more compelling. world golfts of the is going through transitions, but in other parts it is growing. where there is a growing middle class, you see golf growing. >> doesn't matter as much to nike that in the north american market is shrinking. you do so well selling golf to non-golfers. >> we have a portfolio of products.
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we are able to leverage the products we sell as well as leverage our geography to keep a stable and growing business as we have in the past years. >> you already know that the rise and fall of golf's growth tracks pretty closely with the arc of your career. beyond the tiger effect, how can you affect -- explain the problem the sport has to attracting young people and young men. the was at the age with advent of the golf cart. so many of us were introduced to golf through caddying. we would work in the summer and carry bags. most kids have two cell phones and 15 batteries. they are typing away. they want everything instantaneously. golf is not like that. we are trying to get kids to play. we want to make the games
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faster. it is just different. participation is hard. it is neat to see other top athletes like michael jordan play golf. to see tony romo and different celebrities play. all of these other athletes way the game of golf and play well. that is where you can make golf cool. >> golf needs a savior. another tiger woods. and there isn't somebody who has the same extraordinary record that he had as a young man and as a maturing golfer, what happens? >> the good news is we still have tiger woods and he is still teeing it off. he has a lot of records to break. we have a great new generation of young athletes coming along. we have for a mcilroy and some of the others that are out there. you can see that energy come
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through. of how you get the next generation. see the energy that this new group of athletes as. create amplify that and energy for golf. >> the truth of the matter is nike needs stars. they need that to sell it stuff. before we heard cindy davis does great even when it does not sell a lot of irons. the premiumeated brand in golf. whencan sell $85 shirts titleist is selling shirts for $30. there is a much higher profit margin. people want to be associated with the game. they need stars like tiger woods.
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the arc of golf's popularity tracks with tigers career. people started to drop out of in 2006. as tigerup happened woods winning masters after masters after masters. >> i talked to ricky fowler. he is taking the opposite track. promoting a lot of nine-hole games instead of the 18-hole games. he has golf boys on youtube. it is a sort of bringing it down so people can really relate. it brings the fun back. the trick is going to be shorter games. in thee could be courses city. tiger said it is a matter to get the kids off the screens. if you can make golf cool again, people want to lay golf. it is fun.
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it might be frustrating, but it is fun. statistics are shocking. 6 million fewer people are playing golf today than in 2000 . dick's sporting goods says golf is its most challenging business. this is in instructional decline. >> you spoke of another up-and-coming star. >> rory mcilroy is the man of the moment. he has won two majors back-to-back. does golf need a savior, a massive megastar like tiger woods? >> i don't think it needs another tiger. it needs a few guys that are winning and are competing in majors all the time.
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i would love to be that guy. that is the role i am trying to play. only't think -- there is going to be one tiger woods. that is for sure. i am trying to develop in my own sort of role in the game. i am happy with that. >> rory mcilroy definitely does not want that monkey on his back. he wants to be the first rory mcilroy. he is also downplaying the idea that at the age of -- what is tiger, 38? -- he could be half of the way to beating niklas. there needs to be a lot of great players in the game. >> he wants to take the pressure off of himself. >> he comes across as a very modest and mild tempered young man. great interview.
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we appreciate you bringing it to us. i actually know something about golf. >> we will be back in a moment. we will talk about google's next deck -- decade. ♪
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♪ live from bloomberg headquarters in new york, this is a book market makers." >> happy birthday, google. it is celebrating 10 years as a public company and 1400% return or investors. what will the next decade look like? >> higher education, lower value -- why do so many americans think they are not getting their value when it comes to paying for college? we'll put the question to a former yell president. we will talk with the former new york city commissioner ray kelly about ferguson, missouri. >> this is "market makers."
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let's begin this hour with the newsfeed. these are the top business stories from around the world. july saw a big jump in housing starts, almost 16% which is the fastest pace in eight months and be the highest estimates. the highest-paid executive at bank of america will now be the banks sold chief operating officer. ntag had scared the job with david arnell. he was paid more than $50 million last year. that hethe correct year became the co-chief operating officer. manziel as if johnny will be writing a check to the nfl. and a classless move, he flipped the bird to the washington bench. he is likely to be fined and he
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later said i did not think it was a positive. how self-aware! >> good for him. googlenniversary to after 10 years being public and shares are up 1000% versus 150% and the nasdaq. a company that most of us use every day is different now than it did in august, 2004 so what will it look like 10 years from now? on technology. we will asks our guests. worse, i stillor look at google and i think an ad search firm that makes money through advertising and i do my searches and it has cool products. what will i say about google in 10 years/ >> google is going to be driving
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your cars, it will be monitoring you a home and you will have auto devices connected via robots. robots andle to do internet access. that is just the beginning. we have no idea what amazing technology google is developing. we are headed into a google everywhere world. >> does that mean that google will not be anad revenue generator anymore? >> i think it's ultimate goal, even if none of these great things happen, if they just maintain the position as the whatitive source of truth, is the closest inanimate thing we have to a vision of god? we send up information and hopefully we get information back. what is more benign and trusted in terms of a source of
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information in the world and google? i realize that sounds a little moonbeam but as long as they maintain their status as the most trusted source of information in the world, they will do just fine without driverless cars or any other products. the future looks pretty good for them. it's hard to improve a $400 billion market cap. in -- doesn't google me to sell ads at the end of the day? i'm amazed about governormoonbeam sitting next to you. and thinkok way back of how google started, it was an for many yearss the sword -- before they started to embrace the ad wars,. they probably stole that from a company called overture.
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yahoo! had a stake in google so that's a little-known and long forgotten story. it's important when you think about what the founders of google had in mind when they started. they were not thinking advertising. they adapted to advertising and found a way to make that work. who knows what their ultimate thinking is with driverless cars and robots and other experiments? what i think they are doing is trying to figure out how people use computing and where people are and what people are doing so that they can be there pushing ads to it. whether it is an android phone or a car with auto navigation, they will want to be there to push you ads and will do whatever it is whether it is relevant searches or driving you down the freeway, they want to be there at that moment to sell you contextual ads to make money through advertising. >> i want to dwell on the word you used -- trust. i guess i trust google. i use it every day for so many different things. i don't think there is anyone
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orrce of information functionality on the internet i use more than google weather is as gmail or a search engine or youtube. google and does it matter whether we trust google? >> i trust google right now. i worry about what happens 10 years from now if larry page is replaced by an evil larry page. can you imagine the type of power and knowledge and information that google has? big brother would be envious of what they have. i worry about the future but not about the current management. all the things that google is doing takes us to a scary world. >> would that be an undoing? how would they prevent that? would they stop using products because of that? >> we cannot stop it. kurzweil is working at
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google now. he is a friend of mine and i have heard was plans are pretty wants google to understand what we want and to give us what we want before we wanted. even before we do a search, it tells us what you're thinking of. somewhere,ed to go does their reservations and takes care of our basic needs. that's the type of technology they're working on. google has big plans and i could be a wonderful world in which we have a benevolent corporation helping us or it could be a scary world in which they have more power than governments and big brother ever dreamed. >> aren't we already kind of their with facebook? people don't trust facebook but they use it. ifthat's a great product but microsoft pulled off what google did -- microsoft has more information than the nsa. google has executed their brands so well.
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andou think steve ballmer bill gates could have aggregated information the way google did? you could add dick cheney and darth vader to that team and had an evil empire feel to the whole thing. google has aggregated a position at the very hub of everything we do and yet we still think of them as being benign. this is not only a technology victory, it's a victory around branding. believe it or not, rupert murdoch is commenting on this. let's share with you a tweet from rupert murdoch -- calling the kettle black a little bit. >> you are making reference to the phone hacking scam. >> i am, we have these two options, the evil death star that is google or the wonderful and amazing religious google. what is the third option? >> the third option is no
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google. it is entirely possible that someone will come along with a better mousetrap. as desktop search goes way because the desktop is less of a primary contact for computing, someone else will come up with a better solution whether it will be people using facebook to find the world's information which is what the initial google goals were or something -- or somebody with something else. the pace of innovation lets people create companies out of this shell out of netscape and microsoft. that's where google came from. i remember hearing about google from kleiner perkins. they were on the board of exciton there was no google. there was yahoo! and excite and there were all the search engines. the notion that there could be something else entirely to replace what we use google for cannot be discounted given the pace of technological change. that is what google is trying to
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prevent by going into every conceivable direction to see what people will be doing in the future. it may be something entirely new 15 years from now. from robertation murdoch was interesting because you also have to talk about the losers. when you go from a $10 billion market cap to 400, there is a loser in their. the biggest loser in the last 10 years has been newspapers. if you are to give a statistician the revenue subscriptions from newspapers which have fallen about 2/3 and gave him the revenues of google and did not tell them what they were, he would tell you with a high degree of confidence that those two flows are highly correlated. mediambest thing the old industry ever did including rupert murdoch was let google cull their data. they sold it to the highest bidder. tv does not let you do that. they don't let comcast and time
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warner do that, they charge them. google really decimated a lot of print and a lot of newspaper companies and old media. google only needs nine people for $10 million of revenue. google killed don draper. oryou are on the forefront are at the forefront with the people on the bleeding edge of intimidation -- of innovation. do she do you see the kind of company that might exist that will relegate google to microsoft-like status? >> yes, i completely agree. he and i see the same future happening in silicon valley. we see this coming out of nowhere and disrupting the industry. that is what google is worried about. i know it's founders lose sleep about someone coming out of nowhere and making them absolute
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-- obsolete. y are doinge the driverless cars and other things because they want to be on the next big thing and they want to acquire everything. google acquires many companies. anytime a promising new technology comes along, they buy it because they want to own it. that's a great lead-in to my question -- what is the next company that google needs to buy? >> i cannot guess. there are hundreds of them. no one knows. >> what would you tell them? what should they buy? if we could guess, we could be billionaires. we cannot predict it. the other killer of the newspaper business was a guy sitting in his apartment san francisco called craig newmark who started craigslist. that decimated the classified advertising business and helped kill the newspaper business.
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it's a cliché but is probably some guy sitting in his apartment coming up with some new idea with two other people and they will fight about it and one of them will have pretended to invent it and they will get m we will talk about their ipo in five years. >> it did not totally destroy the classified advertising business. at $2om was valued billion, wasn't it? >> it's different than it ever has been. >> you can let that ring. this is a technology segment. craigslist and google are the ones who punched through subscript in advertising and when you look at print online, you are talking about but i believe most of those companies will go out of business. when you look at facebook and google, you're talking about to
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snow whites and the seven dwarves. they have been putting everyone out of business. >> who would they buy? >> i think they should by the new york times company. i think it's a trusted brand with an incredible newsroom with deep pockets and a credible technology. >> they could do for the times what jeff bezos did for the post? >> widow know if that will work her in -- we don't know if that will work. i think it would be an incredible combination. >> thanks so much, guys. that was a fascinating conversation on where google could be. we have a death star and the awesome google and the no google. those are our three options >> coming up, reversal of fortune perhaps as islamic militants in iraq lose control of the crucial dam. >> plus, trade education like a business? we have heard that before but this time the former yale
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president wants to start with college trustees. he is here to tell us why. this is "market makers," on bloomberg television, streaming on your phone, your tablet, and and now available on apple tv and amazon fire. ♪
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>> this is "market makers." in iraq, government forces and u.s. warplanes are pressing their attack against islamic state militants. the rebels suffered a serious setback when i lost control of the country's largest dam near mosul. right now.he phone there have been some conflicting reports as to whether or not the kurds or forces associated with iraq as opposed to the islamic state have been able to retake control of the dam definitively.
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what did you see? i was about a mile from the dam. it was manned by kurdish fighters. they have control of the dam itself but there was fighting to the southeast of their. there was one extraordinary army where the iraqi stopped and got into it huge forces andth kurdish after a few minutes, they dispersed. it was a clear indication that the two sides are not getting along very well although they are working together against the islamic state. >> you have been speaking to people near mosul and surrounding areas like erbil. did they feel as though we have seen the peak moment for the
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islamic state, that the combination of the u.s. bombing and the islamic state have turned the tide against the insurgency? few hours, we were in a small village a few miles from the dam which was completely empty for the past week. some of the families have trickled back from the turkish borders. they feel a little more confidence in the area. [inaudible] >> thanks very much. amazing that he is there. we will be back in a couple of minutes on "market makers." >> the classic car boom and we will look at who is spending
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close to $40 million on these cars and why. ♪
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>> for collectors, owning a classic car is a passion but with more and more people entering the market for classes, the prices are reaching all-time highs. we went to the nation's biggest gathering of vintage car aficionados to find out what is selling and who is buying. ♪ >> this is like our christmas. >> there are billions of dollars of collector cars here. >> there are thousands of cars on display here and thousands of cars that are for sale. monterey as off in
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a car show where they are judged in these auctions came to town a number of years ago and it has created this gravity where this is the place that the world watches to see how the car market is doing and not just to see which cars are the prettiest. ♪ you painted with a 10 inch brush and you say the market is doing well and that's true. when you drill down, you can see certain makes of cars have been performing that much better than other types of cars. arris have been a sending and the comparablemaserati goes up as well. >> everyone is talking about ferrari but there are so my other cars that are doing well. the mercedes market has been doing well and porsche and jaguar and all the european sports and racing cars.
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>> the benefit of collector cars unlike buying a yacht or a new you are playing depreciation, you may have to pay a good amount of money but that car is almost guaranteed to hold its value or go up in value. we always encourage people to buy a car they love because whether it goes up or down in value, they on for a long time. >> it's all about the love of the car and sharing it with other enthusiasts. i don't think any car was ever purchased with the resale value. if i owned one of those cool cars now that i have a drivers license, i would want to drive it everywhere. it would not keep any value. up, a revolution in higher education in higher education and one former ivy league president says major changes are needed to keep u.s. universities on top. ferguson, rayg
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kelly says there is one key to ending the violence there. ♪
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>> live from bloomberg headquarters in new york, this is "market makers." govern ounces all the rage in corporate america thanks in part to activist shareholders and boards are being held to a higher standard. a group of university trustees wants to bring the same accountability and oversight to america's colleges. say is nothing short of america's global leadership in post secondary education. the group is produced a report -- has produced a report.
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we have the former president of yale university. welcome. analogy thatthat the college system in this country needs the kind of shakeup that activists abroad to corporate america? >> i think it is a strong analogy. education, at higher while we are strong at our best universities, a lot of our higher ed sector is under criticism to an extent i think has never been equaled. criticism is justifiable and it focuses on it being too costly, there is not enough student success, employers complain that even college graduates are not ready to go to work, they are not able to solve problems and
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think independently. communicate able to what they find. and so, i think this criticism is well taken. it calls on university and college trustees to be more activist. >> to step it up? >> and make sure the colleges are cost-effective and the education they are providing to students is successful and students are actually learning and getting what employers need for them to be successful workers in the global knowledge economy. >> what are trustees doing now? in the last several decades, trustees -- it depends -- it varies from place to place -- in general, they have become too passive. they see themselves as boosters
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and fundraisers and not as active partners with the university campus leadership in insisting on high standards, cost, and good student outcomes. >> if you were to grade the college trustees as a group in f, what would+ to you get? >> i think it would be pretty make it -- mediocre. different universities are very different. i am the chair of the board at cuny and the board there has been very active and we have changed cuny tremendously as a result. standards are up and student outcomes are better. cuny is still the most cost-effective of all the big public university systems. i think most trustees have not seen themselves as really active partners. > you go to a trustee and
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saved these of the five things they need, what would they be? >> the most important thing is student success. are students learning? aboutes need to get data whether students are learning, what the value added is so they can compare students who major in this area to students who major in that in terms of student outcomes. i think student success is the number one thing. the next most important would be the cost-effectiveness. many universities are just pricing themselves totally out of the ability of most people to afford them. is a perfect segue into the next question -- america,k to corporate
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these days corporate america is all about shareholder value. that's what the activists are about. value,ingly is about outcomes for expenses. why isn't there more of a focus on cost effectiveness and the american education system and, more importantly, how do you measure it? the president talked last year about the need to come up with a scale to measure the effectiveness of an education totem and then to grant -- provide funding for universities on that basis. it was a controversial subject but it seems like it needs to be done. >> i think it does and i think the president's approach to grading universities and putting the money in the universities that are performing is a reflection of the criticism that universities are out of control in terms of soaring costs and they are not focused on student success and student learning
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outcomes. >> if that's true, that is a scathing indictment of the college system in this country. the paper has just been released. varied people who signed up for the report, no dissenters in our group. i am hopeful that the report will be well read. it will be seen as controversial to those who think the faculty should run universities and have the last word on everything. this report says the trustees need to have the last word. it needs to be the board, the trustees of the university, who have the last word on every critical aspect of the university's performance from its cost to its student
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outcomes, research performance, etc. >> how do we change things/ you talked about some of the solutions. it has been a long time since i was at university but the entire post secondary education system takes its cue from the leaders like stanford's and yale. do those colleges need to engage in less of an arms race? if they did, would that change the way other universities behave? >> the truth is, harvard and stanford, they are operating in a class by themselves. they have so much money that they can afford to operate in a way that most universities simply cannot. they are not a good model for a place like cuny which has a fraction of the money that a place like yale has on a per
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student or per professor basis. the more typical universities need to give much more attention to the critical issues of their performance. what are the students learning? are they being successful? can they get good jobs only graduate? what are the graduation rates? they are shockingly low at many of these universities. university be more cost-effective/ >> what should an average college tuition cost? what is the best price? know, to me, it should probably be about the same as the k-12 system -- >> $450,000? >> no, much less. new york is high but not that high. >> high school is about $42,000.
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>> is it really? >> what is the dollar amount? for think the dollar amount the private universities, their cost structure should be about half of what it is now. >>wow. >> that would mean taking a lot of cost out of the system, taking a lot of waste and things out that are not contributing directly to student success and the student learning outcomes. >> one of the targets for criticism in the american college system is athletics, particularly division one basketball and division i football. and the crazy incentives it creates in schools like michigan or ohio state or florida state or lsu. what should we do? should we pay college players? should college sports move out of the university system into a junior pearly? > -- pro league?
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>> yale does not have big athletics and neither does cuny. so the places i have been associated with do not have that problem about linux being out of control. as somebody who reads the newspapers, these big sports schools, these big public universities, athletics is completely out of control. the students who participate are , theearning in many cases coaches make 10 times as much money as the president, not to mention the faculty. i think athletics is generally out of control and i think it is up to trustees to insist that college presidents bring it under control. that means students need to be students first. they need to learn like other students and many to be held
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accountable like other students. it means that the money that is generated by these big-money put back intobe more academic pursuits, not just into building huge football stadiums and so forth. >> thank you so much. he is the chairman of the board of trustees at city university of new york. >> coming up, missteps in missouri and why ferguson exploded according to one former big-city police commissioner and what we have is a failure to communicate. >> ♪
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>> this may be a textbook case of how not to handle a disturbance, the killing of the unarmed black teenager in ferguson, missouri. police have been criticized from flooding the streets with swat teams and armored vehicles and refusing to release information about the case. with us now is the former new
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york police commissioner ray kelly who is now president of risk management services at cushman and wakefield. it's a pleasure to have you here and we appreciate your perspective on this. what do the police need to do now? >> you have to preface everything by emphasizing that ferguson is a very small town that is confronting an event that has the world focused on it. they don't have the resources understandably to handle this type of event. they are using agencies from all over the state. when you say what has to happen now, what has happened in the past as in the past. now they have to continue to communicate as best they can with the leadership of the community. it seems to be a consensus that there is a relatively small number of people who are committing crimes and the
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majority of the people are peacefully demonstrating which they have a right to do. we have to focus on the people committing the crimes and identify them through observation post or what have you or take pictures of them and then you move in with the teams to take those people off the streets. >> how do the police start to rebuild trust? even going after the small group of criminals, we need to look down the road -- how do they do that? >> it will be difficult, no question about it. the fact that they have very few officers of color in the department, three out of 53, it's kind of remarkable in a city that is 2/3 african-american. i think they have to increase that diversity and increase the size of the department perhaps through federal grants or what have you in an all-out effort to get police officers of color. i think they need to have open dialogue and more communication. that the pastors
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and religious leaders of the community are a conduit to get out to the community at large. they have to strengthen those relationships. a reallyou have to do in-depth examination of everything and there are lessons learned from any big police operation. you do things you would not do the next time it comes your way again. >> commissioner kelly, part of the problem appears to be that night after night, white police square off against black protesters in riot gear with armed personnel carriers and tear gas. that ises an image almost impossible to interpret as anything but something reminiscent of an apartheid state.
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those are the words that people have used. is there another way to do it? >> we can debate whether or not they should have that equipment. the reality is that's what they have. >> but should they be using it?? >> there are disorderly groups and people committing crimes. i think they should be arrested. there is a lot of police there and i think you need more. in new york city, you could have 1000 police officers at that location and they don't have that so they have to rely on other agencies. they have to rely on the equipment they have. i'm not certain what people are recommending. officers want to go home at night and they will wear that equipment to protect themselves in the vehicles are given to them by the government. it affords a certain level of protection. i drastically change that think would not go over very well with the front-line
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officers. legitimate issue as to whether or not the military items should be in the hands of local police. >> let's talk about that -- have police forces in this country, whether they are in ferguson, missouri or the texas border patrol or perhaps even new york city become too militarized? >> i think there is a difference between the texas border and new york city. and ferguson. i think this equipment should go to locations where you could reasonably expected to be used. i would submit that perhaps they should be stockpiled at the state level and maybe the five largest cities. new york has got very little of this type of equipment. the agreement the city gets his usually doj grants or homeland security grants. and dolegitimate issue they need armored personnel
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carriers in small towns? >> should this be the flashpoint event that drives forward the debate on this issue and ultimately forces change? >> i don't think it is a flashpoint debate. i think it will be debated. officers will use the tools and equipment they have. they have no choice at this juncture. to totally change and say we are not going to use this equipment or use the armored vehicles, that is unrealistic. >> do you think the nypd needs to be armored more? >> no. i'm not recommending it. that's the reality on the ground -- soguson so it's backed expecting it will probably not happen. >> you talked earlier about communication being the key to moving the situation forward in the way we would like to see. what kind of communication? how do you take charge of a situation like this and
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communicate effectively? >> you have to identify community leaders and ideally, you would have the relationship in the past and be able to do that. one of the ways that may work and has worked in other cities is to work through the clergy. there are several clergymen who have been relatively prominent there and you have to continue to try. these are not easy conversations. there will be hostility but you have to continue to try to get the message out. you have to talk about changes. that the community is looking for. >> what will end this right now? >> i think some sort of determination on the part of the prosecutor as to what is going to happen.
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people will not necessarily want to be engaged. >> a yes or no answer -- would help with the president went to ferguson? >> i will stay away from that. >> is in the risk management business now. >> thank you so much. thanks for being with us. >> "market makers" will be back in two minutes. ♪
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>> that wraps it up for "market
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makers." >> the future of higher education in america, what should they do to resolve the situation and ferguson, tiger woods, rory mcilroy, we covered the gamut. >> tomorrow, you will not be here. you will be on vacation. >> you may have noticed i am in my out the doorgarb. stars ofow, one of the the republican committee, paul ryan, we'll talk about a new book and that's coming to a set 10:15 a.m. eastern tomorrow. >> i will not have a television. but we are streaming live on bloomberg tv. >> we hope you join us for that tomorrow. bloomberg television is now "on the markets." >> thank you so much.
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we are looking at derivatives because it is time for today's options inside. equity armer investments dan joins us from the floor of the cbboe. the u.s. stock market has all but recovered from stumble last month in the s&p 500 is within half of one percent of its best level. what is the read on this about of success? >> right now, you are seeing significant momentum. you are seeing some money come from europe because it looks like europe is stagnant and is flowing back to the united states. i think that's part of the reason why you see the markets working in unison. the bond market went up last week with the stock market. uco momentum driven recovery but it will run into resistance we believe toward these high levels in the major indexes. >> we are seeing treasuries for the most part moving in tandem with equities. the yield on the 10 year is still 2.4%.
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the correlation we see across asset classes, does that worry you? >> that is something we place a close -- we pay close attention to. we specialize in volatility products. the markets goen up, people feel they are diversified are not so diversified so we keeping close eye on the vxx and look for a way to play it in the volatility it >space. >> the symposium for jackson hole begins tomorrow. there is focus on what fed officials say regarding the interest rate outlook and when they will begin to raise interest rates. how is that going to affect short-term behavior of stocks and options? >> we feel that moving out of this next phase into the october where liquidity is coming up the table and we get the fed minutes and the statements coming out of jackson hole that this will create volatility.
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in july, we saw volatility cheap and we saw a dislocation in the markets and volatility spiked significantly. there is a high probability of something like this happening into october so we expected to add to the volatility in the market. >> if you're looking for another volatility, what kind of trader you suggesting that comes to the vxx? >> we are looking at playing toward the october area because we feel we may push up to new highs in september and will see some dislocation. we're looking for the october 14-17 call sprayed which is a 5:1 risk reward rate. it's going to give you the opportunity to play for a possible move and rebalancing of equity exposure versus volatility. . >> why october? we move into september,
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there is the possibility we could see this market push up for the next week or two. october has typically been a volatile month. as we roll into october, that's when the liquidity winds down and we see other headwinds coming as we roll toward the next earnings season. >> especially with midterm elections. thank you so much for joining us. we will be back "on the markets" once again in 30 minutes. "money clips" is up next. ♪
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welcome to "money clip." we tie together the best stories, interviews, and videos in business news. steve ballmer is in the house. the new owner of the l.a. clippers makes his presence known as only he can. tiger woods. he carries the nike torch with golf sensation rory mcilroy. kurdish and iraqi forces take back the mosul dam with the help of u.s. firepower. airbnb turns things upside down.


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