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

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>> live from bloomberg headquarters in new york, this is "market makers their cow --." over his drive for more cash. they want $1 billion for overseas expansion. president obama is in china talking about the economy and human rights. can he break the logjam and get the civic trade talks going again? steve schwarzman discusses his pledge to hire 50,000 veterans are in good morning. i'm erik schatzker. >> i am stephanie ruhle.
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>> yes you are. where are you? >> i am at the conference in midtown. bloomberg justat don't want us together. all last week you were in vegas. now i am across town. i just set down with mary jo white. i will share that interview with you in the next hour. we are going to be speaking with some of the smartest minds and biggest voices in terms of regulation. forward to it. we will talk with greg fleming from morgan stanley. i want to get everybody started with the bulletin. the cost of being too big to fail just went up again. the financial stability board proposes new rules to have ranks have loss absorbing capacity. this would be about a third of
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this in debt. once you figure it -- figure in s, banks may have to maintain 20% of assets. those western sanctions are sinking russia's economy. the bank of russia protects that gdp will stagnate next year. this is because of the conflict in ukraine. the central bank also said that the ruble has fallen too far and that sent currency trading higher against the dollar. president obama is in china where he is talking trade and the economy. .e arrived in beijing he told leaders that growth in the region can only help the united states. nearly half of all economic growth outside the united states is projected to come from right here in asia.
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that makes this region an incredible opportunity for creating jobs, economic growth in the united states. >> another item would be jumpstarting talks on a trade deal that covers 12 countries but not china. had more than $1 billion in net deposits last month. they hired will gross away from pimco. they are trying to rebuild their brand. the firm manages half the assets it did in the year 2000. just five months after raising thatbillion in a round valued it at $17 billion, uber is looking for more cash. early -- in early talks for another $1 billion. cory johnson is with us from san francisco. why so much more money? >> why not is the answer to the
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question? the ducks are quacking. there is a lot of money in these markets. lookingthat what we are at is a company where investors are wanting to fall into this kind of deal. they raised about $1.2 billion in june. they had a $17 billion evaluation. this will likely exceed that. huber has a lot of expansion plans, not just in the united states and europe. asia is a very expensive prospect for expansion up. they are looking at a lot of things. the echo financing as a strong part of that. that can only help them. huber is in 10 indian cities. in 10 indian cities. that is a kind of thing that can entice drivers to start driving for them or move their driving
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over. >> i get you on the why not. let's remember one thing it, we are talking about equity. that means given away part of the country. maybe it is worth it? terms ofw what the this financing round is likely to be? >> we don't exactly. we don't know exactly what this deal is. there are a lot of interesting deals happening around silicon valley. e fors probably round uber. they want particular kinds of financing. we rarely find out about them if there is an ipo or prospectus. a liquidation preferred a deal wherehis is the investors are guaranteed to get their money out first. it is somewhat common in venture capital investments across the
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deal. every investor wants a preferred investment. there promised to get their money out if there is a bankruptcy or a cell the company. then there is the double-dip preferred. round investors are promised not just the return of their investment but they will keep their equity even if there is a down run or the deal is at a lower valuation. their investment will be made whole and the percentage of is ratcheted up to keep the existing steak and they get their money out first. these of the battles that are happening behind the scenes. the second most important thing next to price is the kind of liquidation that is amenable to them. there are in between rounds for these preferences are not fully double dipped. these of the battles of happen behind the scenes.
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,he late rounds we read about these are the kinds of terms that they are insisting on for these big evaluations. >> i am going to test your uber knowledge. do you have any idea how many open jobs there are at uber right now? and these are just the jobs advertised on its website. these are corporate jobs and not driving jobs. >> i do know that they are adding as many as 35,000 jobs the year. thatu were to look at justin the u.s. labor statistics, it is an important driver of the economy. these guys are adding so may jobs in this country and around the world that it starts to be interesting. what is happening in san francisco is what would it mean to the limo market. 130% ofe gotten about
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the market. there are more cars on the road now as there were four years ago when uber launched. they have expanded the market in a dramatic crash and -- fashion. >> this is a company that we still talk about as being a startup. there are more than 500 corporate jobs advertised on the website. i was going to printed out this morning, it was going to take 61 pages. >> the corporate jobs about the big deal. that speaks to why this is attractive. they've have to own the cars. new drivers,5,000 but they don't have to hire them. they are the vague. -- vig. >> gori, thank you very much. esco -- west coast
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editor at large. getting out of washington has to feel good for president obama. he is in beijing, how good does that feel? talks aboutzman what he is doing to servicemen and servicewomen. we will be back in a few minutes. ♪
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>> president obama is in asiang, it is a trip to that will take them to burma and australia. he is there for the apec summit. he talked about the importance of asia to the united states. growth of all economic outside the united states will come from right here in asia. that makes this region an incredible opportunity for creating jobs and economic
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growth in the united states. let's bring in eli ratner. now he is the deputy director for the center for new american securities. presidenthe reasonably hope to accomplish in china? looking towhat he is do on this trip, the administration is sober ride about the relationship with china. there are areas of concern. the chinese president is asserting a more xenophobia chinese foreign-policy. willing to engage in some of the difficult economic reforms to move the economy forward as well as be proactive about international political issues. the practical implications are
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that instead of searching for a , ther sticker framework obama administration is going in looking to manage those areas of difference and enhance cooperation. >> how difficult for that is the president? what they are doing domestically ought to be good for global growth and good for opportunities for american companies and european companies. at the same time, threading this needle between this and the aggressive stance. >> it is difficult. relationship is going to be a mix of competition and cooperation. this is not going to be like the cold war. good not going to be a relationship like we have with other allies. we will live with areas of competition and this agreement
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and chart the way forward with cooperation. this is an incredibly complicated relationship. what can the president say? we know that he ran into trouble raising cyber security issues with the chinese the last time. americans want to hear the defending at least the human rights standards that we celebrate. >> he will be raising the issue of hong kong and the protests there. he will raise concerns about cyber security. i think the most important thing to look for is not the rhetoric or beijing, are they actually able to enhance areas of cooperation or manage their differences. we're likely to see announcements about new measures for military relations and preventing crises. we will see movement on the go she a she and's for a deal on
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climate change. there are ongoing discussions about investments and other areas of cooperation. they want high-impact areas of cooperation with china and not solve a complicated relationship. how much common ground is there between the united states and china on climate change? >> there is common ground in so far as it is a priority for the obama administration and the president and john kerry. the worsening pollution situation in china, i lived in beijing for two years, it can be choking at times. this is become a political issue in beijing. this is something they have to solve. they are incentivized to find ways to work with the dead states on technology and clean injury to improve the situation.
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the devil is in the details. we do not agree on the approach. beijing would like to see developed economies burden the lion share. china are the largest polluters in the world. they must take responsibility for themselves. the alignment of interests is indisputable. there has been some criticism about expertise on china in the white house. justified? >> i think we have a very good team there. there has been a lot of continuity from the first administration. i just don't agree with that. >> thank you very much. a china whoxpert on is no longer with the administration. at least they are down one. up, president obama says
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keep the internet open. he wants it regulated like phone companies. would be terrible news for cable providers. ♪
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>> president obama is taking sides on net neutrality. is whether cable and phone companies can charge providers like netflix for a fast mind it would get their content to consumers faster. peter cook is in washington to explain it what it all means. this is a big piece of news.
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>> this is a big piece of news. on ais an unusual move president to weigh in on something like this. run the fcc and he has been trying together support for a proposal to regulate and change how the traffic on the internet is regulated. he has tried to take a hybrid approach, to win support both from the service providers as well as from public advocacy and consumer groups who fear that if the rules give too much authority to the internet service providers that they will create fast lanes and slow lanes. the president said he does not want to see anything like that. he wants to see strict rules that are service providers from locking or throttling traffic and restraining traffic of any kind. this is a big deal for him to weigh in.
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the fcc was thinking about moving as soon as december 11. he sent them to marching orders, do this my way or i will be very upset. it is in an dependent agency, they can choose to go a different direction. >> wheeler and the rest of the fcc is charged as an independent agency as this passionately as possible. the president opens himself to charge the political interference. >> he does. it is going to be clear. he has had this position since he was a candidate for president in 2007. he is sticking to his position. the challenge is this is an issue that has been in the courts. it is likely to head back to the courts. the question is withstanding legal muster.
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-- he wants to pass something that will pass. does he listen to the president and move forward, can he craft this in a legal fashion? what pressure will he get from the internet service providers? >> why is the president weighing in on this? why now? >> the fcc is under pressure to move soon. there was talk they could rules in the last meeting of the year. this is a present looking for some legacy issues. internet would be a very significant legacy. legislation is going to be much harder to come by. this is a president looking very carefully at a legacy issue. he made this commitment when he was a candidate for president many
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years ago. >> think of her lane up the situation for us. let's see how this is by not in the markets. this is time for us to go on the markets. matt miller is in the newsroom. how have cable stocks responded? >> we saw a huge dips at first. then they came back a little bit. we are still seeing drops in the cable and internet service providers. comcast, for example, was down 6% for a moment. they are down three and a quarter for sent -- percent. comcast, cablevision, charter cable, time warner cable, they have been hit much harder than at&t and verizon. the dips were twice as much in every case for a moment. that was the knee-jerk reaction.
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some of them have also responded. for rise and put out a post saying it views less regulation as the region -- reason the internet has gone to the place that it is. you can guess what verizon is going to say. they would prefer to be regulated as little as possible. back to. up, citizens financial posted its first earnings report after being spun off from the world bank of scotland. street,iff of wall stephanie just sat down with mary jo like. you will hear comments at the top of the hour. ♪
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>> live from bloomberg headquarters in new york, this is "market makers." good morning once again. i am erik schatzker. stephanie ruhle is in midtown manhattan just a few weeks away. what is going on a? >> i am here. we are discussing the biggest rift facing banks. analyst and he joins us now. in this regulatory environment, we are two weeks past the giant spike in volatility. many people are blaming
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liquidity on dodd frank. is there a chance we are going to turn things around? stopping like that were to happen, it is not going to happen likely. it is designed to reduce the risk that banks take. this has made it clear that he wants to reduce the amount of securities financing .ransactions i you will see continued liquidity squeezed. i think too much is in the eye of the beholder. in my opinion, i would say it is hard to say that things are designed to reduce systemic risk
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are too much in the aftermath of what happened in 2008. forward, we are going to see that volatility has turned up too much because we pushed what the banks could do down to a greater degree than is advisable. we will find ways of dealing with that. that is a long term thing. i don't think that dodd-frank is going to get reopened. >> there is of course the volcker rule. there is the fed's interpretation. morning,ve seen this there is this new concept of total loss absorbing capacity equivalent to 20% or more of a banks risk rated asked -- assets. what does this mean? start, that is one
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that we are not particularly worried about with respect to the big u.s. banks. clear on having heard these messages over the last couple of years that they loss absorbing capital. 20%.are at or above i am not worried about it. weigh onhey will market making it capability. >> is the problem that there is some form of regulatory arbitrage? banks are not subject to the same regulation and it gives some banks and advantage? >> there is the risk of that. with respect to u.s. market
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making, there are some large european banks that are involved and not subject to the same regulations. degree that they are operating in the u.s. and do come under federal oversight, i am not that worried. >> this isn't going to spark banks to game the system. infinitely adaptable and anything they can do to keep the wills turning, they will do. >> loophole in susie us. >> they are very good at finding them. systemicer from a perspective, i much pressure of these banks under? we talk about regulatory pressure that they are under. they are also operating in an environment of zero interest rates. we see this in japan and the ecb. i would say this, the banks
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have gotten use to operating in a low-interest rate environment. if you look at the net interest margin, they have stabilized. a lot ofeally see thesure coming from persistence of low-interest rates. if low interest rates persist, economic growth is continuing to be very weak. environmentst rate really shows us that the economy is not recovering. that is the biggest question and that we've got. >> is that the biggest risk that banks face? >> i think poor economics globally and regulatory restrictions that we were
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talking about before. turned up the heat on short-term risk anduts more pressure on the wrist taking businesses that are so important to keeping the wheels greased for global liquidity. >> how impoant is it for banks to perdition themselves for noter rates question mark just the first when it are going to get from the fed it, the subsequent ones that follow when and if they do. jamie dimon has been talking jpmorgan.tioning long-term rates of gun down. perspective, how key and important is it for a ceo to try to time the market that way? >> what we have found is most of the benefits that banks get from short-term rates, the
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benefits, come from short-term rates going up. there is not a lot of positioning. in terms of managing risk and being in position for not losing a lot of money, the banks are airing on the side of caution. that is the right thing for them to do. >> thank you so much for sharing it with us. >> my pleasure. toi am going to send it back bloomberg world headquarters. >> i will see you again shortly. we are going to be talking what consumers really want from a bank. ♪
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>> it is taken 16 years to finally get public. this is the second largest ipo
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of the year. brad, it is good to see you. >> good to be with you. i would like to know more about fromitizens is a standout a very crowded field in american banking. there are more than 6000 american banks. what kind consumer are you going after? what we have found that consumers are looking for in clear and just to be simple and easy to use as a bank. they want products and services that are easy to understand and easy to use. launched something we call our bank better initiative. we want to make banking simple easy for our customers. we recently launched a new checking product that has been a big hit for us. it is extremely easy to avoid fees. you cansit a month,
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avoid your fees. these are resonating with consumers. >> describe your typical consumer. who is he or she in terms of education, income, location. >> >> our bank is primarily in the northeast and mid-atlantic. is everyday america. customers who need their bank for everyday products and everyday services and we try to make it easy for them. >> you don't see value in trying the more affluent customer or the person who is ofng to have more numbers services or the wallet share and maintain large been imbalances? >> certainly do we do see value
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in affluent customers. we have several products and initiatives targeted for wealthy in affluent customers. our objective is to serve all of our customers extremely well. we think there is a big need. explain to me how difficult, one of the challenges right now for a bank like yours to make money in a zero interest rate environment. it is well documented that the regulatory environment has been difficult the last few years. , itindustry environment makes it challenging as well. are a finding that there number of opportunities in the marketplace. there is aing that
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need to better serve affluent customers. we just launched a new product we are excited about. it allows customers with student loans who have graduated and are in the working world to refinance their student loans. benefit ton a huge many of our customers. they were finding that they had no other options. we give them the ability to refinance that. they are saving $1500 he year. people call student loans and auto lawns the next bubble to burst. what is your view? reasons we are so excited about the student loan product that we have, student that has grown significantly over the past two years. it is the second-largest debt in the country behind mortgage debt. we think there are a number of
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ways that we can help our customers effectively manage that debt. is an attractive marketplace. about 1200 a branches in 11 states. what is the future branch banking? >> what we are seeing in french ranking is transactions are moving out of branches more and more all the time. more sophisticated teller machines, mobile capabilities, taking a picture of your check with your phone and doing a transaction way, volume is coming down in branches. we believe branches have a huge future in retail banking. our interaction with our customers will be different going forward. it be helping them find financial services and products to help them manage their lives.
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the conversations will be different. transactions may be more self-service. increase the return on the real estate investment that you are making? pay rent on those locations and they are often prime real estate. >> they are. there is a seeing is need for locations area locations -- customers want to come in and talk to somebody. the footprint of ranches is not going to be what it was the past rid the large 6000 square foot branches are going to be fewer and fewer. footill see more 1500 branches, much smaller real estate used differently. large size of a apartment. thank you very much.
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up, something to come home to. steve schwarzman talks about his promise to hire 50,000 veterans.
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>> welcome back there it i'm stephanie ruhle. blackstone has made a big to hire 50,000 veterans over the course of the next five years. they have already hired 18,000. with veterans day coming up tomorrow, i sat down with steve schwarzman and found out how it's going. >> it's important. it is a moral thing to do. it is a good business thing to do. these are people who disrupt their lives and sacrifice physical being. they have enormous difficulties
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as a group compared to regular society. i think we oh them. fortunately, they are well trained and disciplined people. we do very well when we hire them. really done on a long-term basis. there is self-interest and it as well. forget, they have the highest suicide rate. 20 and 25between veterans a day take their own lives. when i think about things like it makes us of blackstone want to do something positive to help them with their lives. >> is the government not doing enough? >> i think society is to do more. the business community is helpful. it could do more. this isn't the hardest execution
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. you just need to commitment. you need the belief and you need companies that can use people with this kind of training. >> is there a clear business case? some would say if there was a clear case then the government should get involved. >> the government initiated this. obama done by michelle and mrs. biden. they are chairing this activity of the white house. they feel passionate about it. i was at a meeting where mrs. obama was addressing the business roundtable. on the case as to why the business community should help. i bought what she was selling. i had been in the reserves. i had a feel for what military people go through. the white house has been useful welcomedble and
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suggestions. it is a team effort. i would give them high marks. >> should she reach across and say to her husband, let's stop calling them wall street fat cats? >> that's a completely separate issue. military, they have a major amendment to it. >> do you feel a get enough recognition for the great work you're doing with veterans? >> it is not something where we are looking for recognition for say. we are just trying to do the right thing. this is the right thing for these people and our company and for society. >> will you start similar programs for other groups that are underrepresented in finance like women are minorities?
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>> we can only handle so many things besides our basic business mission. we aren't equal opportunity employer and we are growing rapidly. we are open to all comers. the summit you have set up, that is how you find this talent. should you do more? are there enough jobs for the demand? >> there are never enough jobs. if you have a big unobserved group of people, i think we are making major inroads with the military group. we have our own theater. withe operating directly the defense department trying to get them and they are very open to this. toy want to give us access people who are going to be demobilized. you can start matching them with jobs.
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society, ite out in is much harder. i was talking to general dempsey today. they are open and what to be ,elpful to create career paths assuming people will leave the military. once you have access to these people, the ability to place them is an philly better than trying to find them in society at large. >> steve schwarzman speaking about veterans on wall street. watches my mother market makers every single day. her commentary is usually on my hair or my dress. i have already heard from her. what a great american. that is the story i want to hear.
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it already made her week and it's monday morning. >> i think it's terrific. companies like blackstone and jpmorgan have made a commitment to hiring veterans. it raises an interesting question for me. steve described this in terms of compassion. doing the right thing for society. this is corporate all tourism. i celebrate it went comes to veterans. if you can define corporate activity in those terms, nonfinancial terms, it opens up an avenue surely for a conversation about other things like immigration or the environment. people feel a certain way and there is clearly a do the right thing for society concept area it is difficult to define. least the conversation is being started and they are doing great mark -- work.
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>> we'll be right back. ♪ . .
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>> live from bloomberg world headquarters in new york, this is "market makers" with erik shatzker and stephanie ruhle. >> president obama is not neutral about the net. he's calling for the toughest rules possible to protect the open internet and company should not be allowed to pay for faster delivery of their internet content. sec chairman, mary jo white, talks with us and said the watchdog has too much bark and a bike. facebook and linkedin -- bloomberg sits down with billionaire reid hoffman. it is 11:00 here in new york
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city. i am erik schatzker. stephanie is at the conference a few blocks away from here in midtown manhattan. we're going to begin with the top stories in business and finance around the world at this hour. net neutrality has been a hot button issue in silicon valley for years. should internet service providers be able to charge extra for a so-called fast lane? president obama says the internet should be regulated but like -- regulated like the phone industry. it clearhould make whether you use a computer, phone, or tablet, into providers have a legal obligation not to block or limit your access to a website. cable companies cannot decide which online stores you can shop at or which streaming services you can use. and they cannot let any company pay for priority over its competitors. debating this very
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issue and it is clear how the president wants the agency to rule. are feelingrators the impact of the president's remarks. comcast and time warner dropped 3%. the mcdonald's turnaround plan may be gaining some momentum. sales fell 1%, an improvement from september result. mcdonald's has been streamlining its menu and streamlining its --rican operations of stop operations. uber is in talks to bring in a billion dollars to pay for expansion. they just raise $2.2 billion and you -- in june. the ceo wants an even higher valuation. the biggest shopping day of the year began for china's alibaba. it is single day, the closest thing to valentine's day.
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to give you an idea of how big it is, alibaba is expected to bring in three times the revenue of cyber monday in the united states. for theg is in china event. stay with us for coverage throughout the day. stephanie is down at the conference in downtown manhattan. it's all yours. chair mary with sec jo white. some people have criticized her .f being very tough maybe she has not been as tough as she needed to be. we started talking about dodd-frank and the reason -- recent spike in volatility of the market and the lack of liquidity can be blamed on the new increased regulation. in terms of the impact of dodd-frank.
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that is being studied and assessed. some of the volatility is part of the markets. i don't think there is an indication that dodd-frank is causing the issues, but it bears goingng and we are forward. >> specifically in the credit markets, more and more individual investors have gone in to start trading loans. the market has not been regulated yet. when will we see the sec step in? this in newbout york a couple of months ago and made that point and also made the point about a number of things that need to happen. the fixed income markets have not been the beneficiary of all of the technological benefits the equity markets have enjoyed. some of the things have already happened in the last couple of months to make things better.
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execution rule has been forwarded to the staff and there will soon be a regulatory notice in terms of greater disclosure for the principal transaction. that deals with the illiquidity issue to some degree. >> the illiquidity market also high-frequencyof trading. what do you think about it? >> there is no one thing that is . the markets have benefited from technological changes and it describes a lot of different strategies. publicly that we have investigations of wrongdoing by high-frequency traders and other kinds of market business.
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is very clear what we are talking about -- if there needs to be a change in the rule, that's separate from enforcing argument appeals should which the sec continues to do. where studying it soup to nuts and we will make changes. we have the strongest, most resilient markets in the world. investors inted terms of investment cost and liquidity, but that does not mean they are perfect. we want to optimize level playing field fairness. week, it was reported that an outside company was required -- was reporting high-frequency trades before anyone else got them. >> i think what you are alluding study thatademic
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indicated in some cases it went both ways. the information on edgar may not before it hits the which has been in place for a number of years to get maximum information out to the public. itre are subscribers who get . we are in the process of looking at the studies and doing an system andof our obviously the goal is to make that information available to the public 100% of the time. that the studies don't have at their disposal. >> we spent so much time comparing today to 2008. are there bad actors? do we have as much confidence today in ratings agencies?
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do you believe rating agencies are behaving better than they were in 2006 and 2007? lex we have a credit ratings office now. we have inspections of the major one and did a dozen dodd-frank rulemaking's. it is something i think all of those measures strengthen. something to constantly have a focus on. >> do you believe wall street is getting made message that it does not pay to circumvent the message? >> we are sending strong messages -- >> are they listening? lex i think they are listening to a degree. our programs are designed to make sure that happens, but it is something that is a constant, evolving set of issues the regulators have to pay close attention to.
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, it seemed voters voted against overregulation. what this last week's election mean for your agency? >> i would not purport what the causes for individual votes for, a strong agency. we welcome congressional oversight of our important responsibilities. the sec will continue to operate way.- in a professional >> as a prosecutor, you were known for being extraordinarily tough. we have not seen that much enforcement actions that you held this role. will we see you go for some big fish? >> i would take issue with the premise on that. we don't have criminal enforcement powers that the department of justice has, but we had a record year last year. i made a bunch of changes when i
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came to straighten -- strengthen the enforcement program. we had 755 cases brought last year, over $4 billion in penalties, a record year for the sec. and the quality of cases was enormous and cutting-edge. we brought our first anti-retaliation case against a firm. cases,market access rule so i think we are doing an awful lot ofwill stop the financial crisis record is normally -- is in or mislead strong. ceos and cfosre or other senior executives. >> should more action be taken by ceo's? criminal is not in your
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jurisdiction but lack of jurisdiction when there is at play under the ceos, should we be calling them to task? >> the evidence would suggest absolutely. take that evidence as high up as it will go because that's where you should be going for a strong enforcement program. biggest risk we take in terms of regulation? >> it is hard to name one. we are focused on a number. .e have done a lot already the systems issues -- i think it is a mistake to say these are the 24 2015. you want to be watching it as it moves and evolves and one of the benefits is you bring together the financial regulators from
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across the space to identify emerging risk. >> do you have enough of a budget to execute which you need to do? >> never. point three 5one billion. can't do asings we well as we should for investors in the market and i will continue to argue for national funding. >> that is my sitdown with the sec chairwoman, mary jo white. >> terrific, as usual. coming up, president obama was himself a real market maker this morning talking about net neutrality. plus, how wall street is we willg millenials -- talk to the president of morgan stanley, greg fleming.
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>> you are watching "market" on bloomberg television. president obama has come out in favor of what he calls an open internet. he's laying out neutrality which means whether internet service providers can or cannot charge websites for priority access will stop ultimately, it will not be the president's decision. but if thethe fcc, agency follows the president's lead, it will have a big impact on cable companies. here to talk about what it means is cory johnson, "bloomberg west 's" editor at large. given the fact the president appoints three of the five commissioners on the fcc, it was always going to have lyrical overtones. but now that the president is whating in to the debate, does that mean? >> it gives cover to the fcc impose a title to
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regulatory environment which is the most onerous type of regulation that can be placed on these internet service providers. chairman wheeler just last week came out with his own plan about net neutrality which was more of a hybrid type of plan and less restrictive. it appears the sec and white house are not on the same page right now. >> we want to think about this in terms of what the plan is -- of what the president believes .s right and wrong silicon valley has been lobbying aggressively in favor of net neutrality. say something about the amount of money silicon valley is spending lobbying in washington and the success it may have had resonating in the white house? does sayk it something. it says the president is not listening to money being spent, which is shocking that will politicians are not looking where the biggest bucks are.
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lobbying money is coming from comcast. they spend more money lobbying than any other company out there, flat out, are none, except for one the literary contractor. comcast has spent fortunes trying to keep the president from saying what he just said. title ii is part of the communications act but the reason it is so important to silicon valley right now is because companies in silicon valley want an equal footing with consumers. even the big companies, even netflix does not want an unfair advantage. they don't want someone like comcast to hold them up and say if you want your movies to get to the consumer faster than your , then you haveon to pay us. that is the system we have right now. netflix is making those payments and does not like it. is the last about mile of competition, what the
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consumer seesnd how quickly they can see it. >> hasn't netflix been talking out of both sides of its mouth? i seem to recall netflix signed an agreement and days later criticized internet service providers for charging fast lane access. >> they paid to play but they don't like having to do it. battle is not netflix versus amazon -- imagine of comcast wanted to stream their movies faster than netflix. who think their internet connection is fast enough in the u.s.? faster than we are accustomed to in the u.s.. the service we get is quite slow. the notion other companies are providing service across time warner would see their stuff even further slow down. netflix is paid to get ahead of everyone else but they don't
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like to have those payments. >> to what degree should we put the blame on slower than korea internet service on the fact that we don't really have a widely adopted situation and higher tolls for priority access? >> this goes back to the medication policy at the beginning of telephone service which is universal access. that is what the president is calling for -- the most purest form of internet access. everybody is on the same page. paid prioritization strikes people the wrong way, particularly the folks in silicon valley that have to have universal access to the broadband and the structure. if i spent tens of billions of dollars building out my network and now the government
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is going to tell me how to manage my traffic -- >> you spend tens of billions of dollars in a monopoly, government granted monopoly. >> that is why you have seen the cable industry and fcc generally work pretty well hand-in-hand to come to some compromise. that is what chairman wheeler put out to the marketplace -- some sort of compromise. president obama's comments were a surprise to the marketplace as we can see by the stocks will stop >> does silicon valley ?ffer facts and figures does it quantify what the impact would be? if the fcc were to favor internet service providers, cable companies and gives them the right to charge a toll to get the content fastest?
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>> they offer a high-speed fast lane for certain providers -- notof the big concerns is whether startups have a level playing field, but if the big to create their own competitive services. we see this with video-on-demand . imagine if comcast had their own service like uber. a request for an uber car is going to happen more slowly than a request for a comcast car. issues companies are concerned about that if the fcc is not clear about the responsibilities of the internet service providers, the responsibilities they have to the consumer, if they're not clear, they can stop with the new bill of services that will hurt the companies trying to
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come up with new kinds of services. >> senator ted cruz sent out a tweet saying net neutrality is obamacare for the internet. the internet should not operate at the speed of government. we will be back in just a couple of short minutes here on market makers. ♪
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>> coming up on "market makers" -- what do millenials one from
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wall street? digital is changing everything. you will hear from greg fleming. twitter taking flak at for a slowdown in growth. we will ask reid hoffman what he said. ♪
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>> live from bloomberg world headquarters in new york, this is "market makers" with erik shatzker and stephanie ruhle. >> good morning. it is 11:30 in new york city. i'm erik schatzker. stephanie ruhle is across town at the sifma conference. >> i am here with organ stanley's greg fleming. focusstanley is shifting and it has been a huge when to the company. but how are you going to keep financial advisors relevant when etf's are so expensive? who needs private wealth
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management? >> we believe advice is going to remain the cornerstone of wealth management for a long time and we get questions about robo advisors and technology and will we lose market share and things like that? we think in a very volatile in 10, 20,world that 30 years, all of these are tools the advisor uses to provide asset allocation. think the advisor is by anythingreplaced along this dimension. success of private wealth an unintended consequence of income inequality? they're more rich people and more were people out there. >> i think it's a function of the difficulty of trying to manage money for yourself. if you look at the market cycle
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in the last 20 years, there's a tremendous amount of volatility in the world. sparkolatility can quickly. look at the environment we had just a month ago. we have a german factory ordered number that comes in light and the stock market number pulls back in a big way. that, you want a financial advisor who's driving the thinking and saying we have a good, long-term strategy. >> i have a question -- i spent a good part of last week at las vegas at a conference called money 2020. it's all about financial technology and innovation in financial services which usually termed a bad thing. there are startups trying to this intermediate companies on any fund. you have seen products like
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motif which is supposed to be a do-it-yourself financial advisor . what are the chances in your mind that technology in and of advisor?n replace the wax we don't see that happening are. -- happening at all. we think financial advisors will be in place for the near term. the digital experiences we are providing our clients is as good as it might be able to get somewhere else. we have the scale and profitability in our business to invest from a technology standpoint to stay ahead of the curve. seede not looking to technological innovation or anything in the technology will -- technology space to these startup firms and they don't have the capability we have to invest in technology the way that we are. we have a top-notch technology team working with our financial advisors and we are convinced -- wee will in the next
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will invest in digital technology again and again. >> what does individual technology look like? >> they feel good about the u.s. economy. when you talk about where around the world are you comfortable with? positive jobs report we have had and the progress the economy has made over the last three or four years is impressive. withat does it look like new entrants into the market? are you seeing more people invest today than you saw last year? see is theg we did retail investors buying more than they sold. >> hedge funds are stepping out.
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>> they were obviously rewarded with the snap back. the individual investor feels positive about the u.s. and more nervous about the u.s. and is focused on whether the problems outside the u.s. -- china has a lot of leverage coming. are you going to capture the next generation of potential customers? people under the age of 35 are not saving money. >> the millenials today will represent about half the workforce. $20 trillion to be or $30 trillion that will go from baby boomers to millenials over the next 20 years. todayre not significant
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but they will be over time. >> millenial's love the blanket statement that we hate banks. >> we don't think we need to rebrand. we just need to make sure we are from a digital standpoint as good as anyone else. they are not going to look to me with a financial advisor every month. they might have an annual meeting with a financial advisor but deal with them on a day-to-day basis. training program for financial advisors and we are trying to attract millenials into that program. as they move around, they will have millenial clients. your priorities at wealth management has been to get your client to do more of what people do at merrill lynch, which is to borrow from morgan stanley, whether it is securities based lending or residential mortgages.
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what i would like to know is how far do you think you are from closing that gap to have morgan stanley do as well as merrill lynch and u.s. trust? >> that's a great question and it has been our top strategic priority. stanley wealth management, we have a very large bank with $130 million of deposits. these are the cash balances of our clients they leave in our account and the best thing we can do is lend them back to our client in the form of a mortgage or securities based loan, tailored lending for high net worth clients. -- over the last two years, we have increased our balances in the loads we're making to our clients by $15 billion. i think we are in the middle innings in terms of closing the gap, we still have a ways to go. will be looking to broaden
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the banking services we offer and compete with banks had on across the landscape, including day-to-day banking. we have a lot of momentum behind it. >> how much does increased regulation hold your business back from growing? one would say dodd-frank in the volcker rule has held the back but in private wealth, where does it hold them back? >> we spend a lot of time working with regulators. new capital standards and legislation like dodd-frank did not have as direct an impact on wealth management and individual investors in part because that business through the credit cards was not as volatile and part of what might have caused the credit crisis. while we have a tremendous amount of things we are interacting on, our ability to grow going forward has not been
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impacted by legislation. >> the volatility we saw three weeks ago cause a liquidity crunch. who you think the individual investor is going to retreat from this fixed income asset classes? ago, if youeeks needed to sell a high-yield bond, good luck. this is what our global investment committee is providing the client. clients need to be aware rates are going up and the fed is in a tightening process. from an asset allocation standpoint, that gets factored in to the work financial advisors are doing with clients. whether that means less liquidity in different pockets, i think that is probably the case. >> clearly, private wealth has been a big win for mortgage down -- for morgan stanley. does that mean you have james ormond job boston mind? >> these the together the right mixture.
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when he first did it in 2009, not everyone was saying wealth management alongside the asset bank and wealth management is a great business mix. it has taken five years for many people to look at this and say it is a good model and morgan stanley is well-positioned. we are focused on driving it forward now. >> thank you so much. i have to point out that two weeks ago, this man ran the new york city marathon in three hours and 11 minutes. chew on that. it three hours and 11 minutes, he improved his time in the space of one year by 16 minutes. can you believe it? >> it bananas. >> thank you for that plug. >> that is greg fleng. back, he introduced mark zuckerberg to one of his earliest hackers and cofounded
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one of the world's most popular networking sites. you'll hear from reid hoffman. ♪
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>> the annual conference kicked off yesterday in half moon bay -- emily chang was there. she got an exclusive interview with reid hoffman, founder of linkedin and partner at greylock. >> reid hoffman, and am original member of the paypal mafia. one of the things people have been saying yesterday is is is the right time for paypal to become a newly public company as soon as it spins off from ebay? reid hoffman said it would be great if they did not have to stand up to the scrutiny of quarterly earnings reports, but on the other hand, it will be good for investors to get an idea of what those reports look like. i asked him will paypal be an acquisition target and if he is
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concerned about that. he said of course. companies like google and alibaba will be interested in taking a look at alibaba. but when it comes to alibaba, he thinks alibaba might be more interested in something else. >> if you want my speculation, have zero inside information. i think alibaba would be more likely to go after the marketplace first. >> what do you mean? >> ebay. and again, have zero information. but if i look at how they are trying to play in terms of the global market, that might be the first step. >> i thought that was interesting, that alibaba would be more interested in ebay. have any he does not inside information but he knows alibaba has been taking a close look at this transaction. thathairman said to me
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they are paying attention to this transaction, so we will be watching what they do and how alibaba spins off paypal. >> i know you had a chance to speak with one of the savviest investors. the russian entrepreneur, yuri milner. >> yes all stop we spoke with yuri milner. where yuri milner, mark zuckerberg and and we gigi are honoring scientists, giving away millions of dollars, certainly in terms of the award and it rivals the nobel prize, but giving prizes to scientists making scientific discovery in the realm of physics. these are things you and i probably don't understand. about whether
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there would be another silicon valley. listen to what he had to say. hard foroblem is it's this infrastructure, which is a combination of mentors and investors and venture capitalists and late stage funds. it takes dozens of years to build. it is also a network effect in a way, so it is extremely difficult. it takes dozens and dozens of years to put these various pieces together. i don't know where the next silicon valley is. >> will there be another? >> it is possible but difficult. >> thank you very much.
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i want everybody to tune into bloomberg west for more of both of those interviews. makers was quote will be back in a short moment. ♪
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towers that tower over central park. that is going to do it for "market makers. sitting down with the cofounder of the carlyle group, david rubenstein. we will talk about everything from the theoretical size -- he manages $203 billion.
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how much more could they manage? and where it is go after it has expanded into energy, credit and hedge funds? you will hear from david rubenstein tomorrow on "market makers." we will be back in just a moment. ♪
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>> i'm matt miller. it is 56 past the hour, which
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means bloomberg television is on the markets. take a look at where indexes are trading two and a half hours into the day. it turned around midmorning and now the s&p 500 is up .20 5%. the dow jones industrial average gaining what it lost earlier. 500 is closed -- has closed at a record level, 38 times this year. joining me for today's options inside is a derivatives strategist from mk m holdings. i want to talk about the vix. about the levels when it was really fun, but we are looking at a subdued reading of 12 and change. what is going on? >> there's a lot to be gleaned from volatility.
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just last week, the spot vix was down 14, so the futures curve was steep getting a bit. what we know from the last two years is that this usually lasts four to six weeks. with that, stocks typically move up at not the same pace from and weut grind higher take a few percentage points. >> what about the vix index? at theseng to remain levels? >> exactly. the 10 to 12 range has been in place over the last few years. the spot vicks stays there and the rest of the curve remains pretty stable. that is a good actor up for stocks given the typical seasonal did. and bygrind higher mid-december, typically over the
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last couple of years, we are lateng at mid-december, december for that but a nice year-end rally in front of us. >> i have been focusing on mcdonald's this morning and broke the october sales numbers. they were down, but not as much as anticipated. do you look at this stock from an options standpoint? >> is probably more bullish. here, that's right the consensus target across the street. you saw some big call buying to the 97 strike in january. certainly bullish there but call skew is as deep as it has been. definitely more bullish than were analyst's are now. it seems like analysts are turning a little more positive. >> i want to look at a couple of
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trades you are analyzing. .ne of them is oil that's interesting because we dropped down to $75 and change and bounced back up to $80. the relatedok at etf, implied volatility popped this 75 to 80 range could contain it for a while. there's a lot of implied volatility to come out of that and if that is the case, energy stocks, which are the worst performer year to date, the only sector down on the year could do better. the emp names.n 65-70 calling spreads. you make 370, 70 or higher at expiration. >> this is the oil and gas drillers.
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>> thank you so much for joining us all stop we are on the markets again in 30 minutes. stay with us. "money clip" is up next. ♪
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♪ >> welcome to "money clip," where we bring you story, news, and video of business news. here is the rundown. leaders headed to asia, all eyes are on vladimir putin, who says his economy is stable. jpmorgan, we will hear from the woman who could not stay cry -- could not stay quiet about what she calls massive criminal securities fraud. ringing back to mcrib is not going to be a quick fix. christopher bailey joins us for an exclusive.


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