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tv   Bloomberg Markets  Bloomberg  May 12, 2015 11:00am-12:01pm EDT

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point $4 billion for their ad technology but what are the pads for a long content sites like covington post? we had an exclusive interview with the cofounder, up next. >> it will hundred $50 million gift to yale university and how does the multibillionaire decide who gets the fortune. olivia: access to banks to keep growing, but must banks say they don't want to get burned. olivia: good morning and welcome back to "bloomberg market day." i am olivia sterns. pimm: i am pimm fox. the big story is in bonds. they erased most of their selloff but you can see they have a 30 year yield of 3.02%.
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more than two and a quarter percent -- more than 2.2 5%. the losses over the past hour that have been recouped in this follows the biggest drop in 30 year bonds since 2013. also, in europe, the u.k. guild spanish tenure bonds, there you go. take a look. yielde seeing the market move higher and prices go lower. people still selling bonds. olivia: interesting to see yields peek up on the perfume. -- on the personal. -- on the peripherals. you can see there is a risk off mood around the globe. s&p 500 index benchmark index off by one 4/10 of 1%. the dow jones off by 50 points and the nasdaq down by about 24 points. we are off session lows. let's get a look at the top headlines. the nation's largest wireless carrier has agreed to buy an internet pioneer.
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the rise pay $4.4 billion for aol at $50 a share. well became famous for dial-up internet service and the tagline, you've got mail. the company has developed tools with selling ads on web and developing high-quality video and that looks like what verizon really wants. the first time secretary of state john kerry has had direct talks with vladimir putin in two years. he met with the russian and carry wasy expected to see if it will push for russian rebels have a cease-fire in the ukraine. they blame the u.s. for the ukrainian crisis and accused the obama administration of trying to isolate russia. vote today in the senate on the transpacific trade deal. they will vote on whether to fast-trackent obama authority to negotiate the agreements. the president is at odds with allies including labor unions, liberal groups, and other
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democrats. they argue it will cost american jobs and result in lower wages. one of the opponents, elizabeth warren and president obama has made it clear he disagrees with her. obama: elizabeth is a politician like everybody else and she's got a voice and she wants to get out there. i understand that. on most issues, she and i deeply agree. on this one though, her arguments don't stand the test of fact and scrutiny. olivia: the president not mincing words on the trade deal. senator warren argues that giving president fast-track authority on the trade deal would help wall street executives get rid of roles at the -- after the financial crisis. the president said that was flat wrong. pimm: senator richard shelby causes proposed revamp a work in progress. the chairman of the senate banking committee may unveil his bill today and it would remove some of the tougher restrictions from small and medium-sized
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banks. it would also increase congressional scrutiny of the federal reserve. said it is hard to get used to what is happening in the bond market. earlier on bloomberg tv, the chairman of blackstone group talked about the european central banks stimulus program and its affect on bond yields. hadt means that you relatively fragile markets with giant fire called the ecb. they were busy buying and that drives yields to unrealistically low levels. the idea that you pay somebody interest who issues a bond, i mean, as the buyer, the bond is actually sort of, you know, almost completely unprecedented. right, unprecedented. meanwhile, financial markets are in for iraqi regime shift when the federal reserve starts raising rates. that is according to new york fed president.
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butey says the first rate for the federal reserve since 2006 is going to happen implications or capital flows for exchange and asset prices. foreshadowed well by the u.s. central bank. he made his remarks in a speech in surrogate. sir richard branson's virgin group says he is getting a new game. the company says the new enterprise called virgin sport is going to take a run out what they call it discipline toward a fitness events such as running and cycling. the announcement says branson has hired harry wittenberg as the executive and she currently runs sick -- new york city road runners. the new firm would be headquarters in new york. olivia: those were your top stories. still to come, much more, including verizon making that $4.4 billion bet on aol. about -- big banks meet big
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pot. they need financial services to go but a lot of banks don't want anything to do with it. pimm: a picasso painting sells for $179 million, smashing previous records. we will show you some of the other top pieces of art that were ever sold at auction. back to our big story of the day, verizon has agreed to acquire a well in a deal valued at $4.4 billion. that sent a will shares soaring. mccracken joins us now to discuss this all and on the eric of the former chief executive of the huffington post which is now owned by aol, at least for now. jeff mccracken, let's start with you. who needs the deal more? jeff: a well because they will launch a streaming service later this year -- aol because they launch a student service later this year. they have become more of a mobile advertising company and they introduced something recently that would allow marketers and companies the best
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place to put their ads. the two things will come together now. story: we reported this first in january and we said back then that they might not buy all of a well because everyone was wondering my verizon would want a wells content, mainly huffington post, do you think verizon is the right home for huffington post or should it be sold off? eric: it's a little bit like comcast wanting nbc universal. what you are saying are the pipes of trying to own media and content. the reason for that is what content goes advertising. huffington post, aol has done a great job since they owned huffington post. it continues to be the number one destination for news and they are huge on facebook, social media. their brand is synonymous with news for new generation. i would think it -- that if they advertising,ken in
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owning this kind of content would be valuable. pimm: jeff mccracken, does that make sense? just a will a content leader or just a pipeline for ad dollars? jeff: more of a pipeline for ad dollars. they will keep huffington post for now and they get tech crunch as a deal. -- a $4ollars -- a form billion deal is not the biggest deal they will ever make. is $4.4 billion. may be less than two years ago -- jeff: they have the money to do this deal. i think what will happen with huffington post will take a few months to decide. if they have to sell it off, it will be a small venture or deal for them. olivia: erik, back to the prospect of sign-up huffington post. privateorting that equity firms might be interested in buying huffington post.
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you think that would make sense? eric: i doubt it. i don't think it has yet. it's still much of a growth division or company. i don't believe -- i haven't seen the numbers, obviously, but i don't think they have the cash flow so they are looking for. pimm: eric, how much you would -- how much would you pay for huffington post? when we sold it for $330 million, i was on the record saying i would like to keep it for longer because i thought a few years later will it be worth $1 billion. olivia: what do you think of the job tim armstrong has done at aol? he is a polarizing figure and some say, look, he did the company from $15 a share to $50 a share. has tim armstrong been good for aol? he has been terrific. not only because of the share rises but because you turn the company around to the point where it is a leader in video, a
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is a leader in video advertising, which is of course where all the money is going. it is moving from television to video. he has positioned the company so it can be acquired for 4.4 billion. while it is a drop in the bucket for verizon, it is a cash transaction and tremendous whether a well shoulders. pimm: you are the m&a editor here bloomberg, if you missed out on by aol shares and getting taken out at $50 a share by verizon, what should you be buying right now? jeff: you would get away from technology and look into oil and gas. that is where the next deals are coming. on a well, it's not a high premium. olivia: 17%. jeff: and maybe 20% over the last several weeks. we don't think yahoo!, at&t, we don't think anyone knows is looking to buy. olivia: in terms of heat of the market, a well with the market peak, do you think aol has once again hit the peak?
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jeff: this is the peak and becomes part of verizon. will you think an investor look at this week and draw a line connected to the other peak and come to a conclusion -- jeff: yeah, it felt obviously down to 15 a share or below and $50 is a pretty good deal. olivia: i want to push you on this question -- the 18th -- the time warner deal signaled the height of that tech boom, do you think verizon buying a well is once again telling us something about whether or not we are in a tech boom? eric: whether we are at the leak is the question. -- peak is the question. you have basically a huge monopoly. i think these are transactions of the past. i don't think they are indicating what will happen in
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the future. olivia: thank you. former huffington post ceo, eric capote joining us. eauo joining us. pimm: still ahead -- olivia: it $150 million grant from a successful alum. decidestell you how he to give away his wealth, next. ♪
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olivia: welcome back to the bloomberg market day. go straight to julie hyman with a look at what is happening right now. julie: i just want to take another look at the broad markets because we have really seen stocks come up off the lows
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and also the selling that we have seen in the bond market has debated considerably. let's take a look at the chart with stocks because we had s&p .901% and ituch as is now off one third. it looks at what has happened, according to traders, is that essentially, people have said, well, maybe now is the time to come in after all the selling and try to snap up what is perceived as relative origins or inappropriate level to come in and buy. we are seeing some of that action is the bond market as well if you take a look at the 10 year. you see a very similar trajectory in yields which have been rising earlier today and the yields are coming back down as people buy. also news in the last hour, the security exchange commission saying they are filing fraud charges for a company called itt educational services as well as the ceo and cfo. this is alleging the company and
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executives fraudulently ancealed poor performance and leading financial impact of two student loan programs. if you take a look at that stock, itt is down 31%. it is now only less than $100 million in the market and has collapsed over the last several years, given increased scrutiny. you can see other educational stocks falling as well. i mentioned, take a look at that five-year chart and the declines we have seen in itt educational. pimm: ouch. thank you, julie hyman, on itt educational. that's a mess. olivia: it is. mcdonald's will soon have fewer choices. outdoor menus will be simplified. the company wants to speed up ordering processes and they will $1.50 toe items in the three dollar range.
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they are cutting prices in china. gm announced price cuts on 40 models across the buick, chevy, and catalog rance. they fell almost 9% last month in china. chinese automakers have an increasing market share by offering cheaper vehicles. it is hard to believe, but sobering times in russia and ukraine are causing headaches at carlsberg. the company reported a wide and loss in europe, citing economic turmoil and political unrest has caused slumping beer sales in the region. carlsberg beat estimates for overall profits but it is russia's largest brewer. those are your top headlines. pimm: steve schwarzman and the billionaire chief executive -- executive of blackstone group has made big investments in the market and paid off well. now he is giving back, $150 million to his alma mater in jail. he spoke with erik schatzker and stephanie ruhle about the need for philanthropy. >> i have looked at giving
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substantial money to yale over time. that people in life tend to find me now. this is not a surprise. they approach me with a few alternatives of things that might be of interest and this one particularly was of interest to me. stephanie: isn't that the challenge? people find you. you are one of the most accessible people in the financial industry, especially in new york. you must get calls every single day from universities, where the causes, medical research. how do you decide where to put the money? great question because it is not exclusive to me but the people who are sort of in my genuine situation. we do get calls like that. all the time. it's very difficult to figure out which one of the many, many worthy things you support. haveo every buddy needs to -- everybody needs to have some
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focus on that means something's don't get supported that you would love to. erik: you and bill gross and others, too, i mention i would have to see bill gross and he told me, i believe it was the first time he ever tallied it up for anybody, that over the course of his life he is given away $700 million. he still has lots to give away. to have any idea how much philanthropic you have been today? >> i don't keep score. it's not like again. over time -- million to are $300 this watchmen dollars and recently, this gift of the new york public library. it adds up. >> it's supposed to add up because if you do well, you have an obligation to society to help other people. i think my grandfather did that and you can't take all this stuff with you -- erik: bill plans to give it all away. he and his wife -- if they are
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not going to give it away while they are alive, they will give the rest of their foundation and the kids will be in charge of giving it away when they are gone. what you do the same thing? >> you have to find a way to dispose of most of your wealth. the tax system really encourages that. companiesate large and own significant ownerships, then you have to dispose of that in some way for the good of society. pimm: house blackstone chief group executive, steve schwarzman, speaking with erik schatzker and stephanie ruhle. addition to is in the very large gift that he has given to the new york public library which is undergoing a major renovation as part of that philanthropic effort. olivia: i remember there was a huge stone nation at the time and i like what he told erik schatzker and stephanie ruhle, yes, he is giving 150 million dollars to yale and gets a called him up a few years ago? the dean of admission of harvard admitting that rejecting steve
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schwarzman as an 18-year-old was probably a mistake. pimm: you try to keep your friends very close and even those who reject you even closer, perhaps. olivia: i like it. it's still to come on the bloomberg market day, greece pays off a major debt but financial issues are far from over. we take an inside look at the country's financial odyssey. ♪
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olivia: greece faces many deadlines and they own the national monetary from approximately $880 million. pimm: spain's finance minister has same that their situation is getting increasingly complicated. bloomberg explains why. david: greece is emerging from deadline to deadline. the skies over europe get cloudy again. losing seems to be in worse
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shape than many economists thought. slower growth and a debt to gdp ratio of 180%. this imf payment of 180 million dollars is a lot of money but a small fraction of greece's total debt which is 368 billion dollars. if you were to take the combined fortune of the three richest men in the world, bill gates, warren buffett, and carlos slim, you would need an additional $140 billion to get greece out of the red. as soon as greece makes a payment to one of the creditors, there are more deadlines. just look at june. four deadlines. and at the end of july, a bigger billion thatst $4 it has to make to european government on july the 20. greece has been thinking european finance ministers for more money to pay. they have been saying in turn that greece, you will not get any more money without meeting conditions. maybe pension reform, changing the way you pay government workers? if greece gets more money, that
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will buy the country a little more time and get greece to the end of the year. what happens next? we have had two big airlocks and it is likely greece would need one -- a third bailout. in order for the money to be there when they need it, negotiations with cap to start right away. olivia: that was bloombergs david girl of a nice example and expiration. pimm: and a wonderful picture of the metropolis crumbling. solution andd-aid they are just kicking the can down the road and buying more time. they are muddling through. nothing suggests to me that we are getting any further to a real -- haircut or -- pimm: kid raises an interesting question for the european commission and central bank, the imf and all the people who lent the money, you have an entire economy about $250 billion --
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the a package is worth 278 30, so this is a round robin thing where they keep paying back the imf and pay back the creditors in order to get more money. it does not make any sense. if you -- even if you had -- olivia: it does not make any money. the credibility of all these institutions, i would argue, has been eroded in the process. ultimately, many economists say it would cost the eurozone more money not to bail them out and cost them more money in terms of finances. pimm: it doesn't sound good. olivia: we will keep talking about greece for many many months. pimm: the story that keeps on giving. all right, olivia. still ahead, the government is punishing big banks for pot. ♪
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pimm: welcome back to bloomberg market day. i am pimm fox. markets are closing in europe and we go to jon ferro in london. john: thank you. let me wrap up trading day in
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london. in has been an ugly session for european equities. down byf by 1.84% and almost 2%. to round things up, the main industries are up by 1% as well. you can get all doomsday scenario went european equity is worse considering the stock is still up 16% from 2015. we have had remarkable gains and we're coming back a little bit. the volatility in equity market has that -- is right here. the global round bond. spain, france, here is the headline. it got higher by seven basis points. 0.68%. equities selling off and bonds selling off. the euro getting a little bit stronger. .8 of we are up another 1%. you see that on table as well. i will bring the sterling because it is higher by .6 of 1%.
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up .5 of 1%. this one right here at 2015 hi ahead of a quarterly emplacement from the bank of england tomorrow. pimm: back to you. thank you. in london. a look at top stories. in russia, secretary of state john kerry just wrapped up talks with russian president vladimir putin. the first time the two have had direct talks since before the crisis in ukraine. kerry has sent out a tweet saying he had a friend talk with president putin and the resident -- and the russian foreign minister and both sides set low expectations. russia blames u.s. for starting the ukrainian crisis and the united states once proven to stop backing the rebels. carrieris the largest in the u.s. and they have found a way to expand in video and online ads. verizon has agreed to buy a wealth for $4.4 billion. 2-d dollars a share and that is a 17% premium to a was closing
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price yesterday. verizon getting a company that owns huffington post and a collection of international news sites. verizon is also getting a was adept technology which uses high-powered machines in to buy and sell ad space. closing arguments are set for tomorrow in the boston parent -- boston marathon bombing trial. they will begin deciding whether he should be jailed for life or executed. the last 44 defense witnesses said he told her he was sorry for his crimes. u.s. cattle ranchers are in a position they have not been for almost one decade. they are increasing the sides of herds. -- the size of herds. the sword foster because of a shortage, so for the first time in eight years, the u.s. cattle herd actually increased. still, the herds are not much larger than they were 2013 with the number of cattle hit a six decade low. those are your top headlines.
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next half hour, secretary of state john kerry meets russian president vladimir putin today for the first time in two years. we are expecting remarks and details from kerry following those talks. paintingicasso shatters an option. selling from one of 179 million dollars at christie's in new york yesterday. we will show you that the most expensive works of art ever to go to auction. also coming up, gm's compensation fund hopes to finish all victim claims by july. -- the number of the mission that has hit 100. we will stay to the administrator of the fund, kim feinberg. we have breaking news on the oil markets. we will bring in julie hyman standing by. julie: comments coming out of saudi arabia as well as opec. saudi arabia say they posted coup production for a second month to the highest level in at least three decades. that helps to raise that opec
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oil output as the same time u.s. is showing signs of slowing. saudi arabia increase the daily output at 13,700 barrels in april to an average of 10.30 8 million. that is according to data that it gave to opec. at the same time, opec coming out and saying overall, global 390supply went down thousand barrels per day in april. declining supply in opec also says the demand for opec crude was revised upwards to 60,000 barrels per day. 229.3 million barrels per day. that is overall. to opec, the demand supply is in favor potentially of higher oil prices. you are seeing oil take a leg up on the screen behind me. those saudi arabia headlines about the boost is not affecting oil prices negatively, perhaps because opec is also saying supply overall is still constricted. pimm: thank you.
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you see that oil prices up about 2% right now. wants togovernment help a banking business but the banking business just says no. no to the business of legalized marijuana. generated $3 billion in sales last year and mostly cash. the businesses have nowhere to put it. keri geiger and adam pyramid, founder of the marijuana consulting firm madmen are here to explain. explain what exactly is the state of the marijuana business and why do they need bank accounts? >> marijuana generates $3 billion a year in legal sales, in states where it is legal you have a clash of federal law. under federal law, marijuana is illegal to buy and use. under state law, in 23 states, go to buy d.c., it is and sell in certain situations. you have this caution federal and state law. in between is the banking system.
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thanks are federally regulated institutions and until they get a green light from their federal regulators, which they have not until this point, they are able to take this business comfortably because they still could be violating federal law by taking cash from marijuana sales even though it is legal in certain states. pimm: adam, i come to you. can you describe, is this a situation where the government needs to get its act together or the banking industry? adam: i think the banking industry has made a huge effort. even at the federal level and you look at what the department of treasury has them with memos they have issued outlining how banks can thank the industry. i think they have done all they can. it is on the bank side. will it have to be rescheduled as we hope for through the cares act? . think that's probably right but in the interim, even after rescheduled, i think it is up to big banks. they have a traditional risks nobody is talking about and i think that is the impetus for all of this. it's great we are a 3 billion
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dollar industry this year and hopefully we will be $18 billion industry by 2018. these things have billions of dollars of institutional capital, a lot of conservative, and there is a real pimm: risk in taking on the business. can you tell us who are the biggest businesses in the marijuana industry? who would be the biggest customers for the banks? adam: moving forward, you look at those who are holding license is. cultivation, production facilities. a lot is made of the retail on the dispensary and i think there is a lot of coverage on that, especially in colorado. that is not the industry especially moving forward. carolina is the third most popular state in the country and they have a program that is unlike any program that will be rolling out in any other state. i think moving forward, you look at these restrictive licenses, for example in new york, where they will issue five license is. those licensees are going to be the customers. those are the customers who are going to have the money that they are looking to bank. the other misperception is all
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the cash. we are looking at colorado and there is a lot of media cover, but moving forward by looking at nevada and what banks have done and looking for to new york on i think this will be a cashless industry moving forward, even on the retail side with kiosks and banks picking up money from kiosks. offe will be hands transactions. i think it comes back to the banks, the reputational element of thanks, we are hopeful the cares act or something like it will get pushed through and we will get rescheduled down to a two or even a 31 day. in the interrupt, it is an issue. finding big banks to bank our business. regional banks has stepped up, so there are banks for this industry. i commend those banks and hopefully, when the big eggs come on board, people won't leave the regional banks that were first to move. kerry, you said there was a challenge. but kind of responsive to get from the big banks about this business? kerry: they were clear on the
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issue until it was a federally legal thing to buy and sell, they are not going to be able to take the business. get guidance, as said earlier from the department of treasury and department of justice, it was like a roadmap on how they could take this without violating any money laundering, regulations, and other compliance issues by taking in these deposits. agencies sayeral it's ok to take this, the banks will not be comfortable. there were too much risks. for that to happen, you have to wait for congress. pimm: adam, tell us what kind of money we are talking about when people go into these dispensaries and these shops -- how much are they spending? 50 dollars,erage, $70. it matters if it is medical or recreational. it matters kind of taxes we look at in state by state, but you are not talking, again, there is
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overhyped, but you are not talking about somebody dropping $1000 or $2000 in cash and being a huge issue. people are spending $50 to $100 on the retail side. pimm: thank you. the founder of medmen. and thank you to keri geiger. still ahead, pablo picasso's painting sold for 170 $9 million yesterday at christie's auction house, making that the cost of artwork to ever be sold at auction. 170 $9up, if you got million was expensive, we will show you what $150 million will buy you. ♪
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pimm: welcome back to bloomberg
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market day. let's go straight to julie hyman with a look at what is happening. julie: i want to take a look at the movers today. the bigger one and has been is pall corporation. the biggest gain in s&p 500. wall street journal reporting 80's in nearing a deal to sell itself near a valuation of $10 billion. the stock is up 18% on that. who could be a buyer? perhaps dan her and thermo liner scientific buying -- for that acquisition. if you look at how those stocks are performing today and you look at dan her and thermo fisher, hopefully, we can. there we go. they are trading higher but derma fisher is not, so it looks like folks are tried to place their bets on who could be the winner of that acquisition rates. take a look at international flavors today. that company came out with its earnings. earnings per share cannot ahead
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of estimates as did revenue. the fact -- that stock is trading lower. the company says adjusted earnings per share and operating profit will be up in the low to him and single digits it currencies do remain at the current level through the rest of the year. also looking at edward's life sciences, the unfortunately tinkered eww. neutral over at j.p. morgan because the stock has been sold off about 15% since mid line -- mid-march. saint in has confidence in the conversion of the surgical valve replacement market. that should benefit edwards life science system. that three times fast. thank you very much. let's get a look at top stories crossing the terminal. in nepal, rescue crews are using heavier clement to search for survivors after another deadly earthquake. the magnitude 7.3 quake hit hardest in remote mountain l'sions outside of nepa'l
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capital kathmandu. more than 1000 people injured. they expect numbers to rise. last month's quake killed more than 8000 people. greece is hurting for cash but managed to make a eight hundred $40 million debt payment to the international monetary fund today. minister says the company campaign for liquidity crisis and a couple of weeks if there is no deal for more bailout money. european countries are refusing to release more money until greece comes up with an economic reform plan. the u.s. senate is preparing for a test to vote on the asian trade agreement. legislation being considered with president obama to get cash today to negotiate a deal. the president is aligned with republicans on this issue and many democrats say it would hurt u.s. jobs and cut wages. those are your top headlines right now. pablo picasso set
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a record at auction yesterday, "les femmes d'alger" or "the women of all cheers," set a new world record for the most expensive artwork to be sold. the price tag -- $179 million that surpasses the estimate of $140 million. in addition to the picasso, an anonymous buyer paid $140 "pointing men." the most expensive sculpture sold at auction. expensive, here it is. francis bacon's three studies of -- "the studies of lucian freud," which sold for 140 -- $140 million. they were all auctioned off at christie's auction house. bloombergs betty liu has spoken to big hitters who are also art collectors and i imagine a couple people who might have been interested in these works. betty: we talked about billionaires from china and
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russia and elsewhere come to new york city and they buy these penthouses, right? fort $30 million -- pimm: got to put something on the walls. at thoseen we look price tags, we think they are getting out of hand, but a $30 million penthouse is a bargain compared to what you just talked about, what you just showed. pimm: i know you had an interview with hiring weems, did any of these asset priced figures figure and? betty: not those specifically but he thinks the markets are fairly valued right now. he says we are not in any kind this point in at stocks. he actually said he thinks we are in the midst of a correctionist. i want to play for you part of that conversation. >> i think we are long overdue for a 10% correction. we have not had one since 2012. one now.e could have
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i think that would converge some of the investor optimism or concern and that would set a platform for the market to do better later on this year. i askedou know, pimm, him, the markets are fairly bad and the economy is doing well. why do we need a correction? he say, look, we have had a long run, about seven years. it would not hurt to see a , give bit of a pullback people a buying opportunity. he still thinks that stocks will move higher this year. i said to him, what about next year? you say, i'm too old to think about next year. he was like, i just think one year at a time. pimm: does he talk about corporate profits? says, earnings -- he earnings need to be on track. the dollar did not hit as bad as some people thought for the first quarter. we will see if the dollar stabilizes. oil prices he predicted as well will stabilize. pimm: around $60 a barrel?
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betty: there's one caveat, if we do get a deal with iran, that is the unknown right now. that will be a strong positive for oil prices and it will -- he believes it will cause stability in the oil market. pimm: really? it will drive prices lower because there are more oil to world markets? betty: he felt that in fact, it would be beneficial -- prices might drop a little bit but it would be beneficial and not that big drop we have seen over the last months. pimm: thank you. ready luke, we have more in a few minutes. much more with asked on vice-chairman coming up at 1:00 p.m. eastern on bloomberg. plus, 100 deaths blamed on gm's faulty ignition switches and there may be more. we will hear from the man charged with running the company's victim compensation fund, ken feinberg. ♪
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julie: we are coming up on 50 past the hour, we are on the markets. a quick look at what is going on right now in stock. earlier today, we saw steep declines across the board. now they have really abated with all the major averages now down less than .5 of 1%. let's try to make some sense. joining me today is kevin kelly, chief investment officer at recon capital partners. kevin, let's talk about today first. what happened here? it seems like almost when europe closed, they were having a big bond selloff, when it closed
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things started to calm down. kevin: things were really calming down. over 90% of the constituents in the s&p 500 have reported, so all the news is out there. they have given their guidance. investors have an indication of where things are going to go hopefully over the next months. volatility actually measures that 30 day performance going out, so right now the markets are not see much volatility. you saw a little bit in the yield sensitive sectors, utilities but they have rebounded back. even though interest rates have risen across the globe, you are not seeing a bunch of selloffs because people will still be -- julie: we did see volatility today at least. we saw it in yields and we have seen in stocks to some extent. debbie with the federal reserve spoke in europe today saying, no matter how prepared people are for rate increases from the fed, there will still be market reaction. does that give folks pause at all about these discounting and volatility will happen?
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kevin: it should not give them a pause. we are looking at a 10 year treasury mark. volatility is up 40% since april 24 and you are starting to see rates rise. this is to and more normal level and interest rate. that is until the fed does something and they think that is now out in september. julie: i want to talk about the tree you have on the s&p 500. giving your outlook for volatility, talk us through it. kevin: the trade is to capture in option premiums to turn your portfolio into a comfort call. so market exposure -- we are looking at 2135 on the s&p 500 in we see forecasts -- year forecast below that. everyone is not expected to move. 21-35 and about $13 on the s&p 500 and that is not until june.
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it did not really moved last year. we are seeing this deviation of the s&p 500. you are capturing some of that option stream. although we may have a channel, the volatility may be three or four, so you are tampering -- capturing a premium for not a lot of movement in the market. julie: this might seem like a silly question, but if you are selling a 2135 june s and p call, who is find out? considering it is where we are -- above where we are right now. the targets are all below that, who is taking the other side of that trade? this might be a technical question but i am. is. "market makers -- market makers come out there and they will balance the books and causing people, on a day like today when in the morning markets may be skittish, a lot of people will pay up for insurance premiums so the market makers can help balance that on the other side with calls. julie: i would not want to get that called necessarily come
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june and on the other side of the trade. so, you are saying what we are going into right now is a historically quiet period and all the news you see does not deviate you from that. kevin: it is quiet as we can see from regulations. people are not taking outlandish debts, so a lot of people are putting on hedges so you don't have outright debts we talk about. a lot of spreads so people know the risk exposure going out. julie: thank you. always good to talk to you. we will have more bloomberg market day after the short break. ♪
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10:00 at san francisco, noon in new york and midnight in hong kong. welcome to bloomberg market day. verizon agreed to buy a well in a four point $4 billion deal and
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