tv Market Makers Bloomberg May 18, 2015 8:00am-10:01am EDT
good morning. you're watching "market makers" at our new timeslot. erik: greek banks running out of time again. oil arises as the islamic state runs over ramadi in iraq. stephanie: also, g.m. on the updated tomorrow -- camaro. we bring you up to speed with the headlines. here is our news in focus. >> the fbi will inspect the windshield of the derailed amtrak train in an attempt to find out what hit the locomotive before it crashed. the ntsb says there is a mark on the windshield about the size of a grapefruit. >> alibaba is being sued by the company behind rands like gucci ad alexander mcqueen. they accuse the chinese e-commerce company to -- of
allowing the sale of fake goods. >> tim cook urged graduating seniors at george washington university to fight injustice. >> the sidelines are not where you want to live your life here be world needs you in the arena. >> russian president vladimir putin showed off his ice hockey skills. he played in a match as part of celebrations marking the 70th anniversary of world war ii. he notched an impressive eight goals. [cheering] erik: now for some other news making headlines. a number of deals. another big takeover in pharmaceuticals. and a pharmaceutical -- endo international will by par pharmaceutical. here is another deal in the
retail industry. ascena retail will buy and taylor for about 2.1 billion dollars. that is a 21% premium to friday's closing price. just barnes is one of its brands. stephanie: a favorite. the islamic state now took over a city about 60 miles from baghdad, ramadi. they overran security forces and raised the black flag in triumph. thousands fled the city and there have been reports of civilian massacres. iraqi forces supported by the u.s. led airstrikes. in waco, texas, a shootout between members of rival motorcycle gangs. they opened fire at a popular restaurant. nine were killed, all gang members. another 18 were injured. police were already at the restaurant when they shoot out
the game. they said they shot a number of armed bankers -- acres. -- bikers. erik: the "pitch perfect" sequel is singing right onto in. this was the follow-up to the hit about an all girls a cappella group. the reboot of the 1980's hit that brought mel gibson to stardom, "mad max." stephanie: i do not think that you can reboot it. erik: i think holly could -- i think hollywood is out of ideas. stephanie: look at what disney has done. people are taking a page out of bobby eggers book. it seems to work to remake things. low risk, big returns. erik: low risk does not make me
excited. we want to give you five things you need to know. number one, greece. greek shares and bonds are -- after reports greek came -- greece came close to missing a payment to the imf. greece hopes to reach a deal by friday with the creditors. all of a sudden, greece is back on the front burner. we will talk to hans nichols about this -- stephanie: was a really on the back burner? erik: it seemed like greece was just bumping along. now there are bigger payments in july and august, and there are questions about is greece can make its next payment in june. plus greek banks are running short of the collateral they need to post to the central bank to remain leg late -- liquid. stephanie: is that breaks down, houston, we have a problem. oil trading at around $60, extending gains after reports
the islamic state took control of ramadi, the capital of iraq's largest province. 60 dollars is where it has been hanging the last week or so. when i was at the commodities conference, a lot of people were saying around this range, i think we are going to hang. but citibank said that oil could go down to $20 a barrel. certainly not where we are now. erik: perhaps. we are underscoring the idea that in a different world and time, the islamic state taking ramadi could have sent oil on it take rally. not anymore. stephanie: we bring in our friend julie hyman know she has number three. julie: it is not just greek bonds. european bonds overall. italy's 10 year bonds rising for the first time in three years. in the u.s., we are not having a tumble in treasury prices, but
there is a positive and some of the action we saw last. a lot of it comes back to greece and the perceptions on the effect it has on the effect it could have on the eurozone. stephanie: guess what i have. number four. the dollar is trading stronger this morning against every single major currency. it is climbing from a four-month low ahead of a is the week for u.s. economic data. we will talk so much about retail data this week. many retailers have been affected by the strong dollar. many people say it will be good for the u.s. consumer, what we do not see that consumer spending much. erik: the dollar has reversed its declined slightly, but if you look at a chart, it is way down from the deke it reached in mid-march. number five, remarks from charles evans, a voting member
of the federal market committee. he says the fed needs to hold off raising interest rates until early 2016. he has not been among those pounding the tables for those wanting an increase in june or july, so this is no surprise. the backdrop is constantly shifting. you always have to reevaluate the remarks in current economic conditions. conditions now are not so great. more are coming around to his view -- stephanie: more people are coming around saying if you look at u.s. economic data, it is not that great. but leaving interest rates this low for this long has its own set of problems. erik: sure but put yourself in the position of someone on the fomc. you may be worried about economic distortions, but there is little signs the economy is picking up steam.
there is no inflation we can see, or very little -- stephanie: let's just leave interest rates where they are, let asset prices rise, let money managers and professional investors make more money while the regular consumer is not affected. okie-doke. turning back now to greece. i want to bring in our international correspondent, hans nichols. tell us what has happened. >> we had a greek government official deny reports, deny the fact that greece is considering a cyprus-style bailout. there has not been any public talk about a bail in. the idea that this week government official is denying a bail and has spooked markets. the 10 year up. that is on the bad news. the medium side, the eu
commissioner for the economy was speaking in berlin. he said some progress is being made, but he cautions there is a lot more work to be done and there are still big issues with tension and labor reforms. what are the red lines for -- and the troubling thought is that may be to -- tsipras is not in control of his party. a left-wing party will hold a meeting to decide their red lines. mr. tsipras may be the politicians that -- one -- wants to interact with. erik: i would like to focus on the spanish economy minister. he was speaking saying that greece has no room left to maneuver. the reason i bring him up is to harken back to our coverage in
january and february, where they emerged as the hardliner in the backroom discussions with the greek government. hans: i do not want to say he has a vested interest, but he wants this bailout on track. in spain the government does not want to collapse. they see any inch they give to the great government is a possible opening for their own government. so he has been one of the hardliners. if we do this on a spectrum, it is the eu commission that most once a deal. then you have the 18 19 finance ministers, 19 if you count greece. it may be the international monetary fund. they may be driving the hardest argan. of the 17 point 2 billion euros still left, 3.6 billion is controlled by the imf.
you need to bring christine lagarde along. stephanie: how likely is that to be the case, bringing christine lagarde on board? hans: she has been pretty hard. the latest report out of what her leaders are telling her, her contract group, is that greece needs to fulfill the program. it gets back to what does that mean? labor and pension reforms. every time you hear a syriza politician, they always say pension and labor reforms are nonnegotiable. that seems to be an issue. stephanie: thank you for joining us. our international correspondent hans nichols. erik: next up, we hear from mary barra, gm's ceo on chevy's "new" camarro.
julie: welcome to "market makers ." update on deals and potential deals. buyout talks between intel and all terra have resumed according to the washington post. altera already rejected an offer from last month according to people familiar to negotiations at the time. but their shares are up 6.5% this morning. then there is the done deal. ascena retail buying and taylor for about $2.6 billion. it is 21% higher than ann's closed friday. ann shares rising. erik: thank you. another look at some of the top headlines.
airlines are expecting a record number of passengers this summer because of an improving economy. airlines for america predicts u.s. carriers will fly 222 million passengers from june through august. it would be the record from 2007. a marine corps osprey made a hard landing in hawaii killing eight -- killing a marine and hurting 21 other people. the vehicle was almost scrapped for years ago after failed test flights. the parent of gucci and -- has filed suit in u.s. federal court against alibaba, claiming they proffer from selling fake merchandise. the parent company withdrew last year after alibaba agreed to stop the sale of fake goods. erik: --
stephanie: general motors released a new camaro. matt was there with a front row. camaro outsold ford's iconic mustang the last four years in a row, but ford has gotten a real head start. matt got an exclusive first look at the car with gm ceo mary barra. i especially like this because i am from the garden state. in my high school years -- matt: this is an important car in your history. for mary barra, the camaro really matters. when i first met her, i asked her about the corvette. the c7 was you out. she said she was interested in the bu 28. she first wanted a pontiac firebird, the sister car of the camaro, kind of. this is the brand-new, six
generation camaro. i to get out with a few laps in detroit. impressive. i like the fifth generation, but it felt heavy and difficult to see out of. though the rear visibility has not changed much, this felt more nimble. i like the transition -- transmission better. erik: witted mary barra have to say? matt: i talked to her a long time about the camaro by also wanted to talk about other things because i just read "road to power," which is good if you want insight into mary barra. she is really into silicon valley having studied at stanford. she wants to bring tech to destroy it. she put $1 billion into the detroit tech center. >> ima big believer in stem education. there is already a war on talent in some fields.
it is important to encourage middle schoolers to make sure they pursue math and science. for us to have state-of-the-art facilities and the way we do work, it is important we get the best and brightest working on our products. matt: she is very into technology, evidence at general motors. onstar one of the first time to put gps to use for civilians and it became popular. a lot of technology gm has they do not tout much. feel economy, they have cylinder deactivation. if you're cruising and an eight cylinder car but going at 60 miles per hour, it will shut off for cylinder so you get 30 miles per gallon. it is amazing. erik: why is the camaro so important to gm? matt: the camaro -- we talk about halo cars.
i do not know what they make -- erik: i had recent experience in the third generation camaro. matt: we have a picture of your red convertible. you were impressed -- stephanie: was that when you're going down northern california recently? erik: what better ride. matt: i noted you did not love the interior. they have read done it. but they have such incredible detail. you had white seats. they cannot do that because genes rub off on them and people think they are dirty. they came up with a special kind of leather to deal with that. the camaro is one of the performance cars. the best-selling one in america. erik: better than the mustang? matt: until this year. gm owns that market. they have 20% of the u.s. performance car market. that kind of technology travels down to the other cars you or i buy. listen to what mark royce told me. >> our technology before leo
develops around the track and these cars. you see the cars all the way through the top-of-the-line corvettes will have technology we developed. it is very important to our dna. matt: that is at least one excuse for making a con us a ton of performance cars. they have eight cars with over 400 horsepower. there are a ton of car guys and gals. mary was very excited. stephanie: you think mary likes being called a car gal? matt: would you call her a car women? that is not run -- roll off the tongue. car lady sounds antiquated. girl, she obvious he is not. stephanie: i would color ceo and leave it at that. erik: matthew, thank you. our own matt miller with exclusive stuff from mary barra.
' a record run of weekly gains. it is the longest weekly street of gains and at least 30 years. could the rally in oil get long in the tooth? here it is bob from cme. good to talk to you, as always. >> how are you? julie: i am doing all right for a monday. what do you see here, given the supply demand dynamic have not changed that fundamentally.
will we see this run-up in oil? >> they have not really changed. that is one of the reasons why your comment about the rally getting long into the is accurate. i have been looking at possibly 66 dollars. oil going into the 70's now seems to be completely geopolitical. with isis moving into ramadi and the spike overnight. the oil supply glut has not changed. saudi arabia pumping at record numbers. they talk about pulling back but that seems like an empty promise. -- you want it looks like bees slumped in rig counts may be bottoming. you have devon occidental and chesapeake raising the output guidance. the rally may have found a cap somewhere in this mid-66 level. it includes a short of any
acceleration of geopolitical problems. julie: when you talk about those problems even that move of isis into ramadi, it is not a huge movement, right? we are not seeing multiple percentage gains in oil on that news. even if we get various conflict points around the world, how much of a boost with that give to oil? bob: very temporary. i do not think you see problems from that region, short of closing the straight. this is a market that will be in bear territory for a long time. when you have the demand from the summer driving season though it looks much lower than 2012, we have refineries pumping at record level. refineries are producing crude oil products at the highest level since 2010. you see a potential product but now - -glut now which could help
the economy globally. what we are seeing now, the market is giving us the price where shale makes sense. they show us that price where shale makes sense. it looks like where we are at now. you look at where we are long-term, you have the -- julie: it sounds like what you described is a sideways scenario. is the price of shale, supply demand dynamic staying the same will we see much movement up or down at this point? bob: that is what i think. i think the rally is cap at this point. the sideways movement over the summer seems to make sense. supply and demand is not changing in the short term, but in the long term, we have demand destruction. people think that is --
it is things like tesla and the leaf. that is on a train that cannot be stopped. the global supply glut cannot be stopped. north american producers have seen a 20% to 30% decline in servicing. there is no stop assuming -- no stopping that train of the supply glut in crude. julie: bob iaccino thank you for talking about the oil prices. stephanie: thank you julie hyman. we take a look at the top headlines. call of the consolation prize for endo international. they agreed to by par pharmaceutical in a deal valued at about eight alien dollars. -- $8 billion. endo lost a bidding war two weeks ago. charles evans is in no rush to raise interest rates, speaking
in stockholm. he said inflation is way below the fed target, so great should stay near zero. >> and>> this a forecast, i think the committee should refrain from raising the short-term interest rate until there is much greater confidence that inflation will be at our 2% inflation target. i see no compelling reason to be in a hurry to tighten financial conditions before then. stephanie: the senate has said it will wait until it is confident inflation will rise to the 2% level. >> amtrak trains are rolling again from philadelphia to new york city. the fbi is entering the investigation and agents are looking into reports that
something hit the windshield moments before it derailed. gas prices are surging just in time for the peak driving season. the average price for a gallon jumped $.22 and the survey points out this is $.93 lower than a year ago. coming up here john mark will join us to discuss the importance of the apple watch and the company's partnership with bugatti. julie: did you catch the finale of "madmen men?" if you are watching you better bring snickers with you. ♪
>> good morning once again there are some big calls from the street having a big impact on the markets. scarlet: let's start with yelp. yelp was downgraded to neutral from overweight. this is a little bit of catch-up. the yelp share price has not been at $70 since last october. this has to do with yelp looking for a buyer. they look for a takeover or i'd buyer. according to gene munster, a takeout is already priced into the shares and a downside is $38 if a deal doesn't happen. any guesses on who might be acquired?
facebook potentially, and priceline. >> what about google? >> google was not mentioned. stephanie: when you google a restaurant or a store yelp is the first listing that you get my always think of google and yelp. to be honest i am not a big yelp user. >> i am down on yelp, too. that is where i bookmarked the wild boar. >> i am not a yelp person. >> even at $46, down from 70, yelp is trading at 337 times 2015 expected earnings. scarlet: maybe you do need a buyer like google which has tons of cash.
stephanie: what do i know about people getting yelp reviews? >> nada. >> that's my point. scarlet: when someone writes a review and it has typos you have to disregard it. m km, the banking analysts saying he still finds goldman sachs pretty attractive. stephanie: rutger university alumni. scarlet: he says the fed has become much more predictable and they did not try to lower investor expectations after first-quarter results and that is one reason why he likes it areas otherwise, there are upside opportunities and europe getting more normalized and some
investor repositioning as well. >> what do you think? >> goldman sachs, is it a big surprise? aren't they often ahead of the curve? >> i like david trone and i want to like this call. i go back to this issue of the guidance. in part of this manipulation game. you're trying to determine the direction of the stock and how good the company feels. >> you don't like the process. >> precisely. i am a hating the player, i am heading the game. >> second quarter is pretty similar to the first quarter. so the conditions that led to those results are still there for the first quarter.
stephanie: thank you for giving us the latest. overnight we learned islamic state forces captured the islamic city of ramadi. of uti crude is trading on $60 a barrel? i posed that question to david many at the commodity debates right here in new york city last week. remember, he thinks oil is going one direction, higher. let's see what david had to say. >> $70 is a good bet. very simply we think that prices need to move higher to bring rakes back. -- rigs back. we're in the process of balancing the market. we are starting to see production flat line.
we have to get the u.s. machine started back and the only way to do that -- stefanie: is there something specific you can point to or that you are waiting for? >> i think people are waiting to see if there is a supply response. we are starting to get that but people want to see it take hold and accelerate. it is slowing down. we are in a holding pattern to see whether or not rigs get picked back up, whether we do begin to draw inventory as most expect that we will. it is the point that people get comfortable that all of those premises are correct and we know what needs to happen. >> opec is trying to win back
rates. stephanie: what are you most nervous about? >> as it has ramped up it has covered stuff the rest of the world was not able to. if it grows as we expect we will need the industry to ramp back down. stephanie: why is it so important for keystone to go through? >> in the keystone example we are getting to choose a trade partner. if we can choose where we are getting barrels from wide wooden we with our neighbors and an
industry and government that is friendly. to the extent that we can displace exports and imports from other areas of the world. seems logical we should do so. >> there is lots that can be done as far as using permitting across state lines and sharing agreements and to sharing technology in order to help mexico as we move forward. stephanie: you are a super talented measure, what happens when you disagree? >> he encourages independent viewpoints. we look at a lot of the stuff and we live and breathe it. we get around the table and
everybody throws their opinions out and fortunately he likes to encourage that and is willing to take an opinion other than his own. >> his favorite question of the interview was that one. >> he was starting to get uncomfortable there. david many of bp capital. he claims that boone likes healthy debate, i don't know. i would like to be a fly on the wall during one of their houston morning meetings. >> the economist dan on reality on the science behind incentives. what really makes employees were carter? -- work harder? ♪
>> if you're just joining us this is a good time to bring you up to speed on the morning's stories. president obama is banning the government from providing equipment to police departments, months after police in ferguson wearing military gear broke up protests. the takeover today in the women's apparel business, the retail group has agreed to buy the apparel of ann taylor and incorporate it for $2.1 billion. that is 21% more than their shares closed on friday. disney's pixar is going back into the theaters after a two-year absence. "inside out" debuted at the cannes film festival in france.
those are some of the top headlines. stephanie: before we get to commercial i have something special. asking the question is my partner smarter than a sixth grader? eric: almost certainly not. stephanie: contestants are in middle school. they are being tested on geography so i want you to listen closely to the final question. >> is completed the proposed dam would become the largest hydropower plant. it would be built near inga falls on which african river? >> grand inga near inga falls on which african river. you're good with accents, are you good with international locations? >> this is probably going to stop me. i can only take a guess.
the zambezi? >> wrong. take another look. the grand inga dam would become the largest hydro power plant built near inga falls on which african river? there is the bell, what is your answer? >> the congo river. >> congo. >> the correct answer is the congo river. >> congo would've been a good guess. not your backyard, but let's try canada. here is a question from your own backyard. one of the world's largest dams is the thin crude dam, 300 miles from edmonton to alberta. located on the northern end of what lake? eric: athabasca?
stephanie: the answer is mildred lake. eric: pardon me, gigantic mildred lake. i could tell you that athabasca is nowhere near mildred like. stephanie: in eric's defense he doesn't currently live near canada. eric: i enjoyed that. stefanie: we will bring it back soon. when i worked at deutsche bank they made us do a speed test and they gave everyone a map of the united states with no names and you had to write down every state. i will not give you the answer to that i knew the test was coming and i studied for it. so i did well. maybe that is cheating. or maybe that is getting an edge. still to come, what goes around comes around in economics. we will be talking about why this man's nobel prize-winning
eric: are you trying to justify the s&p 500's record high? pros are looking backward for inter--- inspiration. jenny, welcome to market makers. what is the q ratio? jenny: a somewhat unusual measure of stockmarket valuation that looks at the share price of all the companies in the u.s. compared with what it would cost to replace all of their underlying physical assets like machines and factories. eric: hard assets. not good will.
jenny: no. eric: so what is the point? that there is a theoretical replacement value for corporate america? jenny: people who are believers in this metric say you're looking at companies in the past six years who have not taken their profits and put them back into the company we have heard this line of reasoning before. jenny: james tobin is a nobel prize-winning economist. eric: jenny with the latest on the cube -- q market.
>> life from bloomberg in new york, this is market makers with erik schatzker and stephanie ruhle. erik: good morning. it is 9:00 in new york city. we are on at our new time. stephanie: we've got another greek deadline and another islamic state victory in iraq. we've got to look at retail earnings, key indicator on what the economy is actually looking like. we've got a lot happening this morning. erik: let's begin with those merger monday stories. there is a deal in the drug sector that is one of two i will tell you about. they are buying this business
and generic. this is an retail, they are going to buy and taylor. -- and taylor. they are the parent of dress barn. stephanie: amtrak trains are rolling between philadelphia and york city. it's the first time they have traveled that route since the crash last tuesday. the fbi is entering the investigation. agents will look into a report that something hit the train moments before it derailed. a surprising announcement from the white house, president obama is adding the government from
providing military style equipment to police departments. that comes months after police in ferguson, missouri wore military gear to break up protests. a study found there is a risk that police might miss use high-powered weapons and armored vehicles. erik: the world's richest man is weighing in on income inequality. bill gates told cnn that a person making up $40,000 a year is better off then an equivalent salary decades ago. innovations like the internet have improved the quality of life. >> it understates how much things have been improved. it doesn't mean we should not worry about middle-class income. the comparisons overstate the lack of progress. erik: he said it's nonsense to suggest that tax rates discourage innovation. stephanie: in horse racing, we
may have some history in the making. american pharaoh has gotten one step closer to the triple crown. that has not been done in 37 years. the pharaoh did not mind the mud. he can take the crown with a win at the belmont stakes two weeks from now. guess what, it wasn't just a win, it was a win for the city of baltimore and they need one right now. erik: when i find interesting is the possibility that the belmont will be moved to that of the track. stephanie: we are going to go from baltimore to long island to greece. erik: the greek banking system is verging on collapse. michael mckee has been following this crisis for the past four years.
it's the gift that keeps on giving in some respects. michael: we are finally getting to the end game. they don't have the cash. even worse they are running out of money in the banking system. bank deposits continue to flow out of the bank. they are down to 2005 levels. the ecb allows banks to go to the great national bank to borrow money. they are running out of collateral to put up. they may have enough to get to the aging -- end of june. if the ecb imposes a bigger haircut on the collateral that they are taking it, they may only have four weeks left. that could be a real crisis for greece. stephanie: if that's crunch time, let's talk about how realistic it is for greece to get their act together.
michael: they are going to have to do something quickly. they are virtually bankrupt. over the weekend, a letter surface from the prime minister to christine lagarde. he said we don't have the money to pay you. they made the payment by shifting money around. it shows you how close they are to the edge. erik: the thing is everybody is talking about june. june is important only because it gives us a sense of how much time is left for greece to be able to negotiate a deal. once june is over it has smaller payments to the imf that gigantic payments to the ecb. michael: how long does the endgame last? this could drag out for months.
stephanie: i do understand the story. i think we need to be doing the show from greece for the entire month. the major setback thank you for joining us. a major setback in the fight against islamic state. after they seize control of the largest providence the city is just 68 miles west of baghdad. thousands of fled and there are reports of civilian massacres. john kerry says he is still confident that they can be defeated. >> their funding and financial mechanisms have been reduced. their movements in areas where they are air patrols in other
capacities have been reduced. stephanie: let's get to elliott who joins us from tel aviv. john kerry says he is still confident are you? elliott: the official position is they may have lost this battle, but they expected when the wider war. this shows the limitations of their airstrikes. it also shows the deficiencies in the iraqi security forces. they are putting up more of a fight and they did in moz all the year ago. they were still not able to defeat the islamic state. they are leaving the city. they are under the total control of the militants. erik: what does this mean in
terms of driving the islamic state out of iraq? elliott: i believe it's an ongoing process. there will be further challenges ahead. the pentagon spokesperson says this does not mean the campaign has turned. they expected some losses. they are still confident they can beat back the islamic state. it shows the limitations of the iraqi security forces trained by the united states. they cannot seem to push back the islamic state where they need to. stephanie: prices of oil rallied off this news. this is not as much as we thought they would have a year ago. elliott: there are other tensions investors are watching right now. there is an aid ship making its way to yemen.
this runs the risk of some kind of showdown between two of the biggest oil producers in the world. you've got iraq they are putting pressure on oil prices. stephanie: thank you for joining us this morning and giving us the latest. erik: don draper may have said goodbye last night and we will be sitting down with a real-life don draper next. andrew robertson is a madman. stephanie: he is going to be joining us in just a few minutes. we are talking about how the advertising industry is changing the way it sells us things. we've got to talk about this snickers campaign. ♪
the most iconic ads of the 70's was apparently the brainchild of skirt chasing don draper of "mad men." after 92 episodes and the seven seasons, the show has come to an end. in the finale, don draper after fleeing new york has an emotional breakthrough resulting in this 1971 at coca-cola commercial. andrew robertson is not hold up doing yoga. he is joining us now. first of all, what did mad men and that don draper character do for your industry? andrew: it got the industry talked about, not necessarily positively and that usually a
good thing. stephanie: it made us understand the creativity behind it and how emotion ties us so much into what they do and what you do. andrew: emotion is what drives behavior. we have done a lot of work on this. there is a guy called peter field who did a survey in the u k about brands that had one effectiveness awards. we knew that they worked and they look to see if they won creative awards. there was a coalition -- correlation between the two. brands that used emotional advertising tend to have high effects. if you look at the prophet or the brand. stephanie: it's super sexy it's upsetting. that's we know don draper four. andrew: the science of it is understanding that we like to
think we feel it -- behave like spock but we are much more like homer simpson. our behaviors are much more driven by primitive urges. a lot of work has been done this. there are two molecules to get stimulated by different experiences that really matter. one is dopamine confidence and last and the thrills and spills. you get buckets of it if you take cocaine. that is a highly addictive molecule. if you can stimulate the production of that and attach that feeling to a brand, that will drive behavior. the other is oxytocin. that's the molecule of love and belonging and security and trust.
if you can stimulate the production of that molecule and attach it to a brand, the next time the consumer sees that branded triggers the retrieval of that wonderful feeling and they act. erik: advertising has become this scientific on a regular basis? how often do you take an ad and study human response to that ad on that deep of a level where you look at the production of naturally produced human chemicals. andrew: you are testing ads before you make them. you can't's test them without a finished piece of work. we had a hypothesis and we thought we would tested. we took five brands and we took each brand to pieces of key work. one that we knew worked reasonable well and one that worked exceptionally well. we had a lab test respondents
for their protection of dopamine and oxycodone. -- oxytocin. in every case, the production of them accurately predicted the sales outcome from those pieces of work. stephanie: why is snickers doing so well? andrew: it produces a lot of dopamine. it's got a lot of twists and turns. stephanie: bachus to the campaign. andrew: the campaign is a combination of high impact, high reach events. it's like running a commercial in the super bowl with the brady bunch and danny trejo and steve boucher. we combine those big moments where you get the surprises as
you work through the 32nd commercial with storytelling in all the places consumers spend time. you re-create that experience. for example, on google search we found out that when you type in words, you often misspelled them. we found that the 10,000 most commonly misspelled words and the versions of those misspelled words. we paid to buy the misspelled words. you don't have to do much because nobody wants to buy misspelled words. when people typed in a misspelled word, upward, thing that says you're not you when you misspell a word.
we did a thing on it tender -- tinder. people make lots of bad choices on there. we created profiles of characters who had things wrong with them. if you swiped right on tinder a message would pop up. stephanie: that is amazing. andrew is going to stick around. he will be back with us and you will be back with us. erik: this week is all about retail. we will be hearing from lowe's, home depot target. what will this tell us about the consumer? ♪
stephanie:>> you are watching a market makers and i am julie hyman. goldman is saying that las vegas is a proxy for the broader markets. it has a large footprint. the shares are down by 1.2%. we have seen many of the casinos operating. china has imposed corruption controls of crimped the business. stay with us. we'll be right back with more market makers. ♪
we need to begin our conversation with greece. a newspaper is reporting that they have a compromise solution for greece. instead of having to meet that 3% target, they would be allowed to post three quarters of a percent of gdp and 2% next year and higher levels in later years. it's a proposal. tracy: i think there are two things here. it's being portrayed as a compromise and a lot of the short-term pain has been taken off the table. there is still a lot of long-term pain there. the second thing is everything has to get past in the greek parliament. that is not certain. the difficulty that greece has
struggled with is they want to maintain ecb funding while avoiding as much of the austerity as possible. stephanie: how are you going to avoid long-term pain for greece? they've been in the situation for years. how do they avoid it? tracy: i think that's a fair point. there are a lot of political and financial factors that are combining around the end of may and the beginning of june. there is a big imf payment coming up. we have a big eu leaders meeting in europe later this week. eventually, we will get some of this sort it out. the big question is how. erik: the greeks would get something in return. they would get profits from the securities markets program which help european debt.
this would be after july. there is austerity in this. they would have to implement fiscal members that mean spending cuts. tracy: that's going to be tricky. you're going to have to convince that political party and people in greece that they can take more pain. stephanie: what else are you looking at? tracy: we have fomc out today. we have charlie evans speaking this morning. it's a big week for fed speak. everybody wants to know when the first interest rate rise is going to be. six years of low interest rates wasn't enough, we need seven. number three is the u.s. economic data.
we have talked about that a lot already. this is a huge week for economic data. it starts out slow. it just keeps going and going. we have a jobless claims and consumer price index. we have mortgage applications. stephanie: there goes the bell. thank you for giving us your thoughts. we've got breaking news. julie: this has to do with a court ruling dealing with intellectual property. they get a mixed ruling in its patent infringements case against samsung over mobile phones. the court of appeals for the federal circuit said samsung did in french on design, but did not violate trade dress. that is a legal term that refers to characteristics of the visual appearance of a product. it is like what it sounds like. the judgment must be adjusted
because of that mixed ruling. this has been going on for quite some time because apple did sue samsung in 2011. the second case is pending. a lot of big deal news is coming up. another deal with pharmaceuticals. take a look at and no pharmaceuticals. it is making an acquisition this morning. they are acquiring par pharmaceuticals. we been watching those shares as well. erik: thank you very much. have you ever wondered what incentives make employees work harder? is it social rewards that drive people or financial ones like your holiday bonus? our next guest has it all figured out. he is a professor of behavioral science at duke university.
he is the author of a new book. dan, great to have you back. it's nice to see you. what works? cash or social rewards? dan: let me give you a quiz. we did this experiment at intel. this is a place where people come for four days, very long shifts. they have four days on end four days off. they make chips. what's nice about making chips as we can measure how many chips they make. your productivity would be harder to figure out. people who make chips, we have a measure. intel gives them a bonus if they perform at a certain level.
it's a threshold. there is no bonus on the second or third day or the fourth. that is what they do. we said let's do a control condition. let's do something where we give people nothing and compare that. we set another condition how about if we give people piece it, a social thing. it's hard for them to send people pizza. they agreed to do a voucher for pizza. it's not exactly the same. stephanie: you're taking up the whole community environment. dan: we send people a koppelman. one group is getting a complement. one group is getting a voucher for pizza. one group is getting $25 and one
group gets nothing. which of those four performed best stephanie:? stephanie: i'm going to say complement. erik: complement. dan: this is a trick question. this is what happened. on that first day of the first shift, all methods worked better than nothing. they were all identical he better. this is what happened. on the second day, there was no bonus involved but things happened. the people who got money on the first date worked harder on the second day. they were worked hard and today there is more money. they went down and then they slowly went back to the control conditions. they lost about 5% of
productivity giving people money. that is the thing they were doing it generally. your intuition was wrong. you created a bonus because you thought it would help, clearly it did not help and it hurt your performance. let us change the compensation for top management. maybe your intuition about that is wrong as well. what happened to the other rewards? the text message from the boss went up in the same way and down slowly. pizza was somewhere in the middle. pizza was more in the social realm, if it had been like real pizza. there are so many jobs in which we rely on people to perform at a higher level. we can't create a specific contract.
there is a lot of discretionary effort. what gets people to want to exert more discretionary effort? we have to play people and we should pay people well. it is often not more money but something they care about. stephanie: before the crisis when it was all about getting paid the most amount of money possible then the crisis it's and you can't pay people anymore. they realized how much they hate working at banks and how poorly they are treated. dan: what was the function before the crisis? it will keep score. you are feeling appreciated. i talked with the head of a big bank and i asked what happened to me give somebody a bonus of $1 million? i own some shares in your bank. i want you to give them a hug. if you can buy me a beer he
said we would never give some the a hug or buy them beer. this is crazy. money is money and it can be a substitute for other things. in banking it's been a substitute for a lot of other things. where not doing it the right way. erik: does this square with the research you have done? andrew: emotion drives behavior. if you can stimulate chemicals, you can create it. give people a hug. dan: oxytocin is a very interesting neurotransmitter. i will ask yourself how much of your job or anybody's job is the thought that we have your bonus
versus what do other people expect from me? how do i facilitate them? if you really rely on the goodness of my heart, you can get me more interested if it is something that is close proximity and something about the people around me. there are ways to get people to care more. money is one of them, but it's not the most optimal one. let's structure the enjoyment of people with money and other incentives, everybody could benefit. people could be happier and produce more at the same time. stephanie: we've got to take a quick break. i love this conversation. erik: when we come back, we will talk about walmart and home depot, they are all reporting earnings this week. ♪
stephanie: we are back. and your is still here. all eyes are on retail this week. urban outfitters kicks off retail earnings today. later we'll we'l hear from walmart. macy's and jcpenney had mixed earnings. the question is what can we expect in this second round? our own olivia sterns joins us now. last week even though gas prices were cheaper it doesn't seem like people were in the stores. olivia: that is why we care. the picture of the u.s. consumer is fuzzy. jobless claims are at a 15 year
low. gas is a lot cheaper than it was a year ago. consumers have been losing confidence. retail sales were well shy of forecasts. consumers are not spending any gas money, we are looking for a bottom-up read trying to figure out if the slowdown in retail in the first quarter that was evident was the sort of transitory factor that we have been talking about, the weather and if it was a more meaningful slowdown. stephanie: we know that walmart were among the companies that raised wages. when they make more money, they will spend more in the store. could we see that? olivia: walmart will be reporting. we want to see if they said anything about how much pain
nine dollars an hour is going to get into their bottom line. it's not going to do enough to get a smile on their face. it's not going to reduce turnover. we will see. let me take you back to what we learned last week. macy's reported. they came in it worse than expected. they said sales were down by 7/10 of 1%. that was not good news. they cited another transitory factor. they saw a slowdown in tourist spending. the good news for macy's is they maintained their full-year. nordstrom is in a more expensive price category at the higher end of the market. jcpenney and kohl's, they are turnaround stores. urban outfitters comes in after the bell. stephanie: what better place to
buy a rubik's cube then urban outfitters. erik: let's look at top stories. the primacy of greece says he won't strike a deal to get more money at any cost. they are running out of options. banks are running short of the collateral they need to stay afloat. that may pressure them to seek a deal after bringing ship with eurozone creditors. there was a major setback for iraqi forces as the islamic forces taken control of ramadi. militants overran security forces and raised the black flag in triumph. they're been reports of civilian massacres. hammadi is just 68 miles from baghdad. target wants to freshen up its food aisle. the company will deemphasize the name products and showcase healthier foods instead of packaged goods.
the grocery operation is one of the 10 largest in the united states. the houston rockets are on their way to the western conference finals rid they beat the l.a. clippers 113 to 100. james harden had 30 one place. houston came over a three games to one a deficit. stephanie: we are going to have more on incentives that make people work harder. stick around. ♪
and andrew. dan, i want to start with you. we talked about dishonesty. you have a movie coming out this week. that is right up the alley of a guy in the advertising business. tell us about the movie. dan: the research we have done on dishonesty, we have been tempting for people to steal money from us. i roll a dime and pay people based on how it comes up. you decide and you rolet. what did you decide? you get five dollars. the other conflict, do you change your mind after the fact? we get people to do it 20 times.
people are really lucky. it's amazing. people cheat a little. we have done a lot of these experiments around the world in different ways trying to see when people cheat more and less. one of the questions was to what extent is a little cheating the same as big cheating? we get together with a film director. we invited big cheaters, dope in sports, insider trading, we invited them to talk about their dishonesty. we asked about what the first step they took was. when you look at those stories, aside from one guy, they were all slippery slopes. they say i cannot imagine doing this. the first step they can imagine doing that. stephanie: bernie made off, his first step you would've been ok
with? i haven't been able to talk to him. he is a neighbor. he lives in north carolina. he is not far. i tried to talk to him. i did talk to his judge. his judge does not believe that he planned it. if you plant something like this, you would live on an island with no extradition. this took a long time. i don't know what happened towards the end. in the beginning, i can't imagine he was planning this. there would have been lots of different ways to go. the only exception of some of who was not on a slippery slope with some who grew up in a crime family. he was educated with no morals.
even he was interesting. he had no morals as far as the rest of the world was concerned. he had tremendous world -- morals within the family. you talk to him for a while and he looks like the guy does not care. he cares a lot. it made me think that my undergrads are not very different. when i asked them how many illegally download on their computers, they all do. stephanie: it's part of their culture. dan: in the crime family the idea that we have morality in specific ways is important. it means that if we want to find dishonesty, we have to find moral codes. it's not about the backbone of somebody.
once you put them in a particular situation, things can deteriorate. you come to the lab and we have two experiments. one of them you can make some money. the most you can make is four dollars and the other one is $40. flip a coin and we'll see which one you get. no matter what you flip we say oh you got the low when. the research assistant says listen my boss is not here right now. if you will pay me two dollars i will pretend you get the other. how many people give the bride? what percent? guest: i am afraid about 60%. erik: i was going to say in the 30's. stephanie: i am going to go 90. dan: 90.
this is not a happy result. what happens once people private, they cheat and steal much more often. this is disturbing. most of the time people are honest. the moment you bring them to cross -- to a corrupt system all of a sudden they forget everything they know. imagine you go to a new job or you got elected and you come to a new position and all of a sudden somebody tells you the system is not designed. stephanie: that was our big reveal for the end of the show. wow. does any of the surprise you? andrew: i think we all operate in this tiny little world that surrounds our own head.
those standards keep moving. if you learn that the system you're operating in is corrupt that is how people behave. dan: my research center is going to be called the center for advanced high site. -- hindsight. stephanie: an athlete or team did everybody loves, they could cheat and not realize. we've got to go. i'm going to say that was a great monday. erik: that does it for today's "market makers or co we will see you tomorrow at our new time. ♪
in the private equity firm has found a way to catch them out. >> is the art market in a bubble? $2.7 billion sold at auction just last week and there is concern the bubble might be about to bust. we will talk to the head -- >> can they revitalize the sport of golf? we are talking to that of the u.s. golf association. ♪ olivia: good morning. erik: let's get you right to the markets and give you a look at what is happening in the market. the dow industrial briefly hitting a record high. overall, quiet day. equities are kind of unchanged.