headquarters in new york, this is "market makers." what's up --not really. .hatsapp facebook shells out $19 million -- $19 billion. >> the world's most productive >> live from bloomberg ag area shriveled by a historic headquarters in new york, this doubt. is "market makers." >> welcome back. erik schatzker reports live. >> dozens dead as government and this segment is near and dear to protesters clash in kiev. me. they are wall street's young the world responds with tough guns, the twentysomethings that words, but is it enough to work insane hours for a pay prevent the civil war? checks and what kind of life is welcome to "market makers." it? >> i am filling in for erik russe spent years schatzker. he is covering the drought for us. >> we will be joined by him in following entry-level workers for his book "young money." the next hour. it was number 18 on the amazon >> i miss me some erik schatzker. bestseller list this morning and

>> excuse me. he is here with us. who matt levine is with us i miss the guy. i want to stand california writes about the inner workings of wall street and like me, came because there is an incredible from the business, a derivatives story out of palo alto. background. an earthquake in the mobile messaging market. 19k zuckerberg spending did you go through an investment banking training program? >> i did not, i was a lawyer billion dollars in cash and stocks to buy whatsapp. first. i skipped the insane hours and left law for banking because up users use every day. up a lifestyle would be better. >> i came from that background. it has an unproven revenue model. i went through a sales and training program at credit cristina alesci is here and paul suisse. >> you are alive. >> guessed what, i love that kedrosky. business. what made you write this book? facebook justifying $19 >> i wanted to shadow eight billion? analysts because wall street, even after the crash, was a huge that is like out of an austin magnet for talent from ivy powers movie. >> a lot of explaining to do as league universities and other top colleges. i was curious why people wanted we are seeing the stock react to still do this when the rest of the world hated bankers. this morning. this goes to show you how much what was so appealing so i facebook needs user growth and wanted to dive into the subculture and spent three years how much it is going to pay for user growth. tracking with these young men and women everywhere the went. another storyline that will be i wanted to come up with what i

think is a pretty nuanced and developing over the next couple of hours and days is how much it paid to keep whatsapp out of competitors hands. humane portrait of what it's >> that is probably a huge part like to be young on wall street. >> where are the eight of them now? >> some of them are still in of the price tag. finance and some of them have >> google may have had interest. left into technology or done other things with their lives. >> what was your biggest take this is facebook posta very ,efensive move to stay relevant away? >> my biggest take away was that these are very hard jobs. to stay cool, and to own your they work insane hours. network. they want all communications there is something called the with your network. banker 9-5 when you work from 9 whatever it is, they want you to a.m. until five a.m. the next communicate over one of day. that is pretty common. facebook's platforms. >> how much of this is keeping i think there has been a huge transition since the crisis. it out of google's hands? int we see especially it is not really an explosive recruitment numbers from the top colleges is that wall street is growth story, is that -- is it? much less of a draw than it used to be. it used to be the default option >> not an explosive profit if you went to harvard or yale or princeton. i don't think it is that anymore. >> you still have thousands of growth story. kids dying to get in. but an incredible growth story. on friday afternoon, i was in 500 million photos shared per the car next to my husband who day. runs a trading desk at a bank on huge are gob smackingly the phone with the prince and kid and he gave him an offer and

the princeton kid said this is a numbers. dream come true. you are not paying for revenue. is it fair to say that people you're probably paying some kind don't want to work on wall street anymore? of negative optionality. >> if you look at the data -- in >> what kind of revenue? 2006, if you are a princeton >> 6 billion people breathe air. senior with a job graduation, there is a 46% chance that job is on wall street. but it is free. that is no longer nearly as big i have been using whatsapp for a member and harvard has gone from 28% to 15% are in many years. >> i love both of them. students want that job but not they don't cost me anything. the overwhelming plurality it >> what is the point? >> the way to look at it -- take has been. >> is it fair to say these eight twitter as an example. kids hated life during those eight years? 250 million active users. >> i wouldn't say they all hated life but they hated it to some in the neighborhood degree. >> when you were in early lawyer out of law school, i might think of $1 billion in revenue in being a lawyer is pretty 2015. -- 500 million, grueling and miserable. that's life when you are 25. >> i think that's right in the going to one billion users. corporate and financial world. when you are in that world, you what kind of revenue command -- can they add? lose the perspective of people who don't work in corporate finance and investment banking there is no reason that you and law firms. is it fair to say that the

couldn't see similar numbers without creating an awful experience. culture of wall street is truly twitter has not been destroyed by building a revenue model into it. tortuous and morally bankrupt? i read "the devil wears i am comfortable with the idea product." that there is a revenue model many girls are working making here. that said of the story is not the issue. the deeper issue is what $22,000 per year getting their asses kicked. discount could you apply to >> i don't think they would be ?acebook earnings doing it if they did not think there was a problem retaining people. >> in 1999 when tons of kids where is the moat here? want to go to tech and banks in --fromto bring relaxed, everybody seemed to go back to banking after that. is this just to wall street is january, one of the cofounders of whatsapp talking about why and it's been successful this long for a reason? they won't be advertising. people go into because they want to make all that money? >> i think people want to feel he said that is not what they want to do. >> our company is built around good about what they do. i don't want to be hated for their job. after the crisis and the technologya great occupied movement, i don't think ceos cared about it that much. companies in silicon valley that for the young people, it was monetized by advertising to disruptive. their users. they saw friends and family we felt that we wanted to take a different route. members questioning their decision to work on wall street.

putting advertising on something that is painful. >> did you work in banking so personal that is your phone because you wanted to do the right thing and have your and putting advertising in the friends and family be part of you or did you want to work there because it paid that way of people trying to money? communicate and wanted to stay for me personally, i wanted to do it because wall street is a in touch and messaging each other would be so, and our mind, wrong. >> so they do not want war every single day. it's a battle. it's the nature of the business and i am a east and i like that. >> i think you're right. advertising revenue. they want more users. how will they make money? >> that is a good question. abouting that kevin talks the user number out there. in the book is it used to be the 450 million users -- we do not case that even if you did not feel that way, you would go to know how many of those are wall street anyway because it was a default path for liberal paying users. arts majors and people who were not sure they wanted to work in you only start paying after the finance. first year. it was just an easy job to fall into. it is really hard to even come i think that has changed and now it is really the people who are up with a revenue estimate. competitive and dreamed about i have been using it for working on wall street. >> the people going there now years. actually want to be bankers. >> i don't think i have paid. they are not just doing this as a two-year stopover on the way to their true passion. >> we need to talk about >> let's talk blackberry instant messenger. something else you wrote this week that has absolutely it is one of the most viable everyone on wall street talking. it is your "new york magazine" things that had.

i loved it and still i started piece about up private party at a private love, invitation only, using an iphone. what does this mean for blackberry? >> oh. tell us who was there and what happened. >> so sad. >> i should have been there. >> this thing is such a it was the annual dinner of cap dinosaur. up a fight which is an 80-year-old secret society. there are all kinds of issues with the valuation. phi - it consists of there is an asset to be sold here am a but i don't think this the bigwigs of wall street ceo's materially changes what you will get out of the sale. >> what does it mean for candy crush? and private equity executives and hedge fund guys. if you are paying $19 billion people like wilbur ross are on for whatsapp -- there and sandyweil and jimmy >> candy crush -- if it is $19 lee. billion for whatsapp, what on jon corzine, dick fuld. earth is snapchat worth? >> it could go and apply the he was not there but he's on the same metric -- $40 per active membership list. it was a who's who of wall street. i wanted to sneak in because i wanted to see what goes on user -- that seems to be what we behind closed doors. >> what did you see? are looking at if you look at it on a market user basis. i am i wall street enthusiast. >> weight. my mind is blown and i am

-- wait. massively disappointed, were you? >> absolutely. >> i rented a tuxedo. the numbers on the per user basis are all over the map. i go into the saint regis hotel to see what is happening. i agree. i see a bunch of millionaires and billionaires dressed in drag. look at linkedin, twitter, as part of the induction facebook valuation's. process, new members have to you are sitting at over $100. dress in drag and had to do skits and musical acts. some of these acts are quite look back in history. offensive. >> offensive how? >> sexist jokes, homophobic hotmail,osoft bought occupydigs about the you're looking at similar prices. these prices have been paid for a long, long times. jokes. there was really offensive stuff. >> just this morning, i saw paul i think people are going in the qualey apologizing saying my wrong direction by getting hung up on the $19 billion. brief remarks were at the event that is the reflection of a and did not -- they were part of company that has seen stunning growth over five years. >> is it too soon to evaluate the spirit of the event but did mark zuckerberg is a dealmaker? not reflect my views. >> absolutely. the thing i have a hard time >> yeah. with -- what was the spirit of the event? [laughter] >> you were laughing at me. i would be humiliated if there >> i think that is a great was a hidden camera in my kitchen and if they saw

question. zuckerberg just decided, i am conversations i might have with going to hang out with this guy, my husband or friends or my children. at the end of the day, if you we are going to spend valentine's day together, we are are a public figure, if you or someone who is a newsmaker and going to each covered sexist,making racist, strawberries, and that i will lead him -- give him $19 billion. homophobic remarks, what will be is someone that looks at this the fallout? >> i don't know. my hope is that they realize that this dinner and this secret on the face of it, it begs the question, does facebook think society is a really dangerous and destructive thing. its own stock is overvalued? i told one member that i think does it think that now is the you guys should turn it into a time to do this kind of a stock deal because we have the charity event and go do something good for the world one day per year. >> have any contacted you? >> they have and they are not firepower behind us right now? >> which was the lesson of the pleased. 1990's. i don't want to elaborate too much but i will say that after too many companies did not use the original, i wrote about this overvalued paper to do transactions. in a british for back in 2012 -- they sat on it hoping it would go higher or they used cash. these are not people who enjoy kudos to them for doing the right thing, which is using the paper. >> this is the biggest deal being called out especially at private events where they are dressed up in sequins and since aol bought time warner. leotards. >> the biggest venture capital >> do you think the young people deal ever. >> should we change the way we who you followed would one day

are using facebook? hope to be in a society like this? i read this and i am embarrassed is it just a suite of apps that for those people. i'm not proud of it but if you people care about? turn the clock back 10 years or people sure love instagram and five years and say to me that whatsapp. >> a lot of these people who are would you want to be part of a using these products have society with these titans of industry, i would have said yes. >> you would have said yes? >> i would not have realized absolutely no idea that facebook is the owner of these products, this was the content. which is even more remarkable. how do those young people feel you have to ask yourself, what about these iconic figures? does that imply about facebook >> i asked them after the event also you asian? that must -- facebook's and described it to them and they laughed. they could not believe this valuation? existed. one of them said it sounded like something occupy wall street what does that mean going forward? if it going to be a series of would want to make up of they acquisitions? wanted to turn sentiment against bankers even more. >> you sort of read the story of -- is it going to be a series of acquisitions? old-time wall street and people sometimes get into the industry because they have heard the stories of excess and zuckerberg is buying users debauchery. i can imagine there are some young people who actually do want to one day be there. years this still that he already has. >> that is a great point.

cristina alesci and paul exists, we will know that nothing on wall street. about kedrosky joining us from the culture has changed california. if they turn it into a charity event, it will be a good development. readt's find out if people if you're wondering where the $19 billion is going, it is not going here. sequoia capital is the big winner. "young money." congratulations to kevin roose it invested $8 million in whatsapp back in 2011. and matt levine. that is so crazy. when we come back, the other estimatedworth an super bowl champ is the company that makes the winners rings and $3.5 billion. we will talk to the ceo of are being made jostinm's when we come back. ♪ instant billionaires several times over. talk about valentines. >> apparently, they signed the deal on the wall of the place where he used to get food stamps. that is what our producer told me. he used to get food stamps and now he can buy a sizable chunk of walmart. >> indeed he could. we will have more "market makers " in just a few.

did notruce in ukraine last long. we're the 20 people killed in kiev overnight. -- more than 20 people till then kiev overnight. i he has gone from coming and were company to creating an internet shaving start up. we will speak with jeffrey rader. ♪

>> welcome back. we want to get straight to breaking news out of the ukraine. the death toll is rising in the continuing violence in the capital and around the country. the latest numbers from the interior ministry said that 13 police are dead, 64 protesters have been killed since february 18. the interior ministry says 551

people sought medical assistance as of 8:00 a.m. and 32 are hospitalized as of this morning. fighting resumed this morning after a truce was declared last night. diplomats spoke to presidentyanukovich but there were no comments on that truce has broken down. the u.s. progress -- press byretary says he is outraged the things he has seen on the streets in ukraine. we will be back after the break. >> the situation in ukraine is ♪ getting worse by the hour. deadly clashes ended a short-lived truce between the government and opposition leaders. the associated press reports that government snipers were seen shooting at protesters. the death toll stands above 50. director of dragon capital joins us on the phone from kiev. and the chairman and ceo of .reylock capital

are intell us where you relation to the protesters and what the mood in the city is. located aboutis 20 minutes from the main artery which is occupied by the demonstrators. the mood is obviously very chaotic. the population here in kiev is in a state of shock. we have never experienced such a level of violence in the last one the three years. -- 23 years. there have been very chaotic scenes. shooting on the population.

that violence went both ways. the population is replying with live ammunition. the situation is definitely best described as chaotic. >> protesters have gotten into military depots, gotten hundreds of thousands of rounds of ammunition. it is not just on m in mission -- independent square. the reverberations are felt elsewhere. you can't get cash, you cannot fill up your car with gas. it is probably difficult to get food. i imagine that all of these things are quite different from normal life. >> yes. if you look at the situation in parallel to other similar events , you have egypt, tunisia -- goodgives a bit of a

background to understand. there are a lot of rumors going around. a lot of uncertainties. what i can say with a high degree of certainty is that the petrol stations are limiting the access and restricting the delivery of gas. haveof the atm's difficulty to get cash. you have these kind of rumors that float around. it is not helping calm the >> have you worn your high minds and the mood. >> peter is sitting there in the school or college or grad school offices of dragon capital. class ring lately? it is a live situation. chances are if you have one, it comes from josten's. hans, you are in new york. the company makes another well-known ring that you might better know as the super bowl i said it is a little early to ring. invest in the debt. you have gone into the market already. >> our viewpoint, looking at it the super bowl champions all get one from josten's. 's, is still publishing school from outside, is that this is

yearbooks. not something where we are hereve the ceo of josten's really on the verge of civil war. >> you don't think so? with us, chuck moody who is two >> no. is that this is really months on the job but this is a company that has some history that goes deep into people's lives. a population that is rising up against the corruption of the thanks for joining us. country. what is your take away from your versusseeing an eu first couple of months on the job? >> man, i would say the great russia, but it is the population trying to push out the regime. joy for me is to come and join a company with roots and heritage dating back to 1897. is not an overwhelming debt. there are big maturities coming it's a company that celebrates up. the moments that matter whether yesterday, we saw a big it's in high school or college capitulation selloff. or in pro sports or collegiate we have seen a bounce back and sports or other types of moments in our lives to be able to be a bond prices amidst the violence today. part of a company that truly you see the country celebrates those moments is just a real joy. >> how do you combat the other completely coming apart at the seams, which would be civil war, it is not about time to sell them -- step in if you are in companies that truly celebrate the moments that matter in real our shoes. >> do we see viktor yanukovych time like facebook and instagram when you can cherish those moments rather than wait for pulling back a little bit? your book to come out at the end

of the school year? his inner circle is incredibly >> that's a great question -- wealthy and have a lot of access i think we are all in an era in the west. they are concerned about eu where technology is becoming sanctions and getting bank much more important. accounts frozen. the relevancy of how we they're concerned about not getting into their 80 million communicate or create those pound apartments in london. they have good -- and putting moments or store those moments that matter are different than they were in yesteryear. pressure on him to de-escalate a little bit. >> we have read about how the i think there is still a great within that niche oligarchy is splitting. what is more important is that category that is important and the deputies are switching the memorabilia at an actual parties. hardcover that comes with it are great devices. they are in parliament now. also our technology continues to evolve as it relates to online they are short end of the curve to get a quorum to have a vote. capability, the ability to procedural power. upload photos and video, the ability to create massive amounts of photography and activities that can help create he will dig his the story whether it's a school heels in and try to push back. or a student or a parent. it's the ability to create that in different mediums is really if you do not think there will be a split in the country, i there today. don't think there will be, what is still strong is the chances are this might be the ability to actually been to that. >> what kind of innovations do

sunset for viktor yanukovych. >> i want to bring in alix steel you need to get on top of so you can combat these social mediums to explain why this would be that are encroaching on your business? >> for us right now, it's just such a difficulty for some of the players. why is this country strategically important? >> it is responsible for making sure that we properly connect well with their students. transporting 25% of european that means the ability to natural gas over to europe. actually market and target them ukraine makes a big chunk of for the variety of products we change off of that transport. offer besides just your book it is important strategically in activity. terms of russia. we are also involved with a lot of other graduation it is very important because it announcements, diplomas, regalia, rings that are gets 70% of its own natural gas obviously important. from russia, despite the fact that it is ranked 29th in the the ability to personalize world in terms of reserves. activities, the ability to create your own ring -- we have it puts a very intense debt erdman on the country. the ability to design your own ring online, to create that it owes russia over $3 billion. personalization that i think is really important today for kids. missedte energy company how is it that we create a sense of the story? the most recent deadline to repay that. it's the story of one or 18 or the story of a school. how is it that we find a way to ukraine is very necessary for capture that story in different modes? russia, but it really is held nothe seattle seahawks have

hostage in some ways by natural gas. >> peter, let me throw you the chosen their ring yet and you final question. said personalization is what are you hearing as far as important. what will it look like? >> right now, that decision has support for one side or the other? not been made. the people that you are talking with, that you are interacting we hope we can partner but that with day by day, do they back decision has not been made. the jury and echo order that we have been fortunate to do the -- that jürgen echo -- last years super bowl before that with the baltimore ravens. josten's has been fortunate to president or the opposition? thatat i would say is do 30 of the last 46 super bowl rings. we are very proud. we have been able to do the last there is a high level of frustration with the current major league ace ball. we will deliver the boston red government and a high level of sox in april. frustration with what has happened in the last few years. we had a chance to do the miami it is not aipt -- heat nba champion winners as well as the chicago blackhawks. bad word to describe the we feel like we are on a run situation. right now, being able to do the last four major sports and we the country is pulled between east and west. hope that will continue with the those lines are shifting. latest super bowl champions. they arebout signet, there is a prevailing feeling across the country that somehow taking over company after

company. are they knocking on your door? >> i cannot say they have the president has to move to the knocked on my door. next stage another step out or we are still trying to get a sense of where we are at and how is it that we change our organize early elections. that does not mean that the trajectory and how do we create relevancy for our products. entire country is in favor of the european union or russia, i love the idea of being able to but there is definitely prevailing feeling for the power bring a heritage brand back to life. >> we have to leave it there but in place that something needs to happen. thank you for joining us. deadd over 40 people shot ♪ -- it has shocked the mentalities in this country. it will help move things forward. >> peter, we wish you -- definitely continue to stay safe. thank you so much for joining us on the phone. thank you for joining us as well. and to alix steel. now, we are going to take a quick break here on "market makers." when we come back, we are going to talk about this drought in california. erik schatzker has been out

there reporting on it all week. ♪

>> that is it for "market makers."

tomorrow, i had a chance to sit down with the one and only super model, petra nimkova. >> how come i never get these assignments? >> she will talk about the 50th reunion of the sports illustrated swimsuit issue. legendsart of the category. she has been the magazine 11 times. each time more beautiful and we will talk about her philanthropic work. she lives in haiti. matthew has decided to take a trip to haiti. >> with that, we will give you a look at the markets. bloomberg television is "on the markets." julie hyman has more. it's a live via. -- olivia3

there is increased volatility in the emerging markets. jerrylevy in dallas where the weather is much better than it is here on the east coast. let's start with a big moves we see in emerging market etf's. live from bloomberg is it down to the violence in the ukraine? >> i don't think that is the headquarters in new york, this is "market makers." only cause. there is some influence there. the eem market is a broad-based the hour.ast fund. is 40% more volatile than the it is time for bloomberg's on the markets. s&p 500. take a look at some of the in terms of options come these front months to the put side is individual stocks moving this hour. blackberry. got a big pop this hour. higher. they still have one thing left, that means bets are still being if not their dignity. made to the downside in eem and it has been and a bearish channel. they have blackberry messenger. >> people are trying to figure the likely direction of this will continue to move lower according to the options out is there a defensive move that google could make your? markets. >> how about the week his blackberry interesting to manufacturing data out of china? them? that is ainly think

-- is blackberry interesting to them? >> maybe they should buy contributing factor to this index. facebook messenger. >> when we come back, we are another thing to consider is japan, not only weakening gdp talking distressed investing. we will be speaking to one of growth but they've got a value added tax growth -- tax hike the managers of the best distressed funds in the world. coming up in april and that will ♪ weigh on the markets. there is pending added that some things could start to move in april. people are watching how the new sales tax increase will affect japan and china as well. there is a lot of import/export between the two. >> we are watching facebook this morning after shares were actively traded after the social networking site announced it was buying whatsapp for $19 billion. what to make of this deal? tech l you are in bubble and - $19 billion seems astronomical. if you boil it down to the numbers, many folks said they paid about $42 per user.

there is a lot of overlap and i don't see it as a big boon for facebook but it is a block to google. this would have been better in google's hands but options markets are making and even that. bias oneno directional way or another. going into the earnings report, options markets are building in more volatility for facebook. i would probably lean more to the bearish side at least for the longer term for facebook. >> it's an incredible amount of money for a company that actually does not make any money. it positions mark zuckerberg is a big deal maker. another tech company like is google. strategy playing google options? >> i like google. i like their acquisition and i like the google fiber. that's an area where we want to focus in the coming years. i am buying the april $11.50 call and selling the march 7

expiration $12.40 call. it is a diagonal spread. week, i am collecting a little bit of premium. the goal is google to move higher and as long as they are above $12.23 by april expiration, i will be in the green in this trade. i think google can easily make that goal. >> you're not alone all on google. 75% of analysts rate it as a buy. we are back "on the markets" in 30 minutes. "lunch money" is next. ♪

>> welcome back. all this month, we will be talking to the world's most successful hedge fund managers. ," welcome to "lunch money the ceo of solis asset where he tied together stories and businesses. take a look at the big deal? how management joins me now. about fiscal's -- facebook's $90 chris, welcome. time when people are billion deal? will google see it? criticizing hedge funds, you did outperform the market. in nation, the cap answers the how? >> the key is to find call for higher wages. opportunities that are -- that s walmart next? have more upside than downside. you are taking some asymmetric risk.

look at the you are achieving results, as opposed to just finding undervalued assets. >> do you feel like it is played out? are there opportunities left? >> there are. some are in smaller cap companies. some of the larger distressed funds havestress created that. >> can you actually find liquidity? a smaller sized company in high-yield, can you find enough? >> you can. last year, and our top 10 performers, we had six that were equity, post bankruptcy equity. to that were distressed and two that were liquidations. you find opportunities. >> what about liquidity?

were to turn and you are in midsized companies, can you get out? that makes me worry. everything sounded great in 2007. >> there are definitely lesser liquidity issues that we have learned lessons from. we are avoiding those. you do not have to get that small. >> you like the shipping industry. >> we do. opportunity. a lot of european banks are starting to sell. we started getting involved middle of last year after looking at 50 or 60 different deals. what we are finding on what we have seen recently are that the rates have started to come up. they are very close to the bottom. if you look at the supply curve that are coming online

versus ships that are coming off line -- it is a favorable environment. >> how do you get to see opportunities from european banks? one would think if they are selling, they have kkr and blackstone sitting there with their arms wide open. how do you move into this? that was the theory for all of the guys who raised money. >> the reality is that we are in their everyday. they are calling us because we trade with them everyday. on u.s., on europe, whatever the case may be. we have developed nice relationships in the shipping area. we are pretty much seeing the deals. some of them, we might be too small to participate in. they won't much bigger chunks. you have bigger guys that are taking the whole thing down. we have turned down 10 times as many deals as we have done and

we have found many great opportunities. >> the media loves to say there is no business to be done. is that the case? force at same as it has always been? >> is it a little less -- it is a little less. pre-2008 and into 2009, it was a little more robust. there are still billions of dollars a day that are being traded, i think it is just among lesser people. specifice looking at a asset class. how concerned are you about fed action? >> the last time i was here with you we talked about policy risk. i think it still exists. i am not as worried. the fed has been pretty clear in their message. they have stuck to it. they have demonstrated that they're going to stick to it. my concern is the lack of predictability. we're pretty comfortable with the fed doing what they are

saying they're going to do. >> what does keep you up at night? >> what keeps us up at night are the bigger, more global issues. what is happening in other countries. we had a little taste of potential contagion last month with south america. that was a concern. we thought it was overblown. it seems to have petered out at this point. those are the bigger concerns. >> how does that affect you? when you thought the emerging markets were cracking, what did you do when you went into work? a question ofis really understanding, is it going to have a long-term effect or is it going to be short term? in 1998, we had much more of a longer-term effect. that was only 6-8 months. you have to get your arms around whether or not it is going to be -- how drawnout it is going to be and what do you need to take action.

it has no impact on any of our investments. >> before we go, is there one trade you like best and one company? >> our favorite investment is mgm studios right now. comeback.it a "robocop" is the movie. >> that's right. >> he is the ceo of slous. in 2013. when we come back, can a startup called harry's do anything in terms of breaking into the shaving market? ♪

harry's is taking mustaches everywhere by storm. ae 11-month-old bought 93-year-old german razor factory for $100 million. the company is sharpening its

edge against beard busting edge.ths shick and are those warby parker glasses? >> of course. >> that would have been a headline. [laughter] >> let me ask about harry's. against theompete mock three -- mach 3? i didn't know anyone used a different razor until i was 35. it is just weird to think of someone using something else. >> we try to deliver people better and better shaving experiences over time. it is important to think about what we did not feel was great about the industry before. expensiveridiculously the race replacements are.

hard to get products in the store. >> gillette cartridges are so expensive they are locked up. you can grab a sixpack and some smokes -- >> you can grab the smokes. bag --anted an amazing batch of products. our handles, we make our own razor blades. we make shaving cream. >> how can you afford to do this? improving the experience would include raising the price. >> we have a really efficient business model. we are the only vertically integrated branded the world. we make our own product and sell direct to the world -- customers. >> know the brand us that in the world? >> not in shaving. >> gillette is almost a monopoly. they must control so much market share. >> we want to offer customers

choice. we sell direct on our website. we get to know our customers. after they come to shop, we e-mail them and tell them that we want to do better for them. we want them to get to know harry's is a brand. >> you are social media monsters. you advertise to me so much in my twitter feed. what kind of intel are you doing to think any that razor? >> [laughter] talk to us about your social media strategy. >> we as social media as one channel to talk about our brand message. to let people know about harry's in a super authentic way. we have a ton of inbound interest in harry's on social media everyday. it is a great place for us to interact with our customers. it is a challenge and a fun challenge to do it at 140 characters. we take a lot of pride in it. it is part of being a direct

brand. you have to be active on social media. >> you advertise on facebook. give us an understanding of how much that cost to you. >> it has been a really interesting and exceptional channel for us. we have an amazingly engaged facebook community. we spend a fair bit of money every month. >> per user, just so i can understand, around how much does it cost? >> to advertise on facebook? the way that it works is that you pay on a per impression basis. the cost really varies based on who you want to target and how that works. it is not a clean answer. we use it essentially to drive people back to our community, to develop close personal relationships with them so that we can be responsive to what they want and need. we drive them back to harry's.com so we can get to

know them even better to deliver a better and better shaving experience. >> you mentioned the shaving cream. there has been this commercial on radio lately. >> is the shaving cream the secret? >> we have found that people overspend on razor blades and then under invest on shaving cream. shaving cream help and to moisten the harasser you get a great shave and helps to moisturize your face afterward. >> fully integrated end to end. what is next? warby parker, harry's, what is next? >> we just bought a razor blade factory for harry's. it is in germany. it is in the middle of germany. members,01a7 new team newr exciting for us -- 427

team members, super exciting for us. >> how old are you? >> 33. >> much of that cost? >> $100 million. we did it for two reasons. we are saying so much demand for harry's. people love our product. 90% of our customers tell us they want to reorder. very few companies in the world can make high-quality razor blades. toyou are not going to china get razor blades. >> these are the only people in the world who can make the blades a special one-off product that we would be proud to sell. we have tons of ideas around how we can innovate and make the product better and better. my cofounder is in germany working on that right now. it is super exciting. >> he is 33. you know how unimpressive the two of us are? >> he is in the jesus year. >> he bought a $100 million

factory during his jesus year. >> i have done substantially less. >> then jesus and jeff. >> think is a much for joining us. we are going to take a quick break here. when we come back -- >> the record drought hitting one of california's biggest industries. >> biblical proportions. >> we will speak to erik schatzker when we return. ♪

>> welcome back. i'm stephanie ruhle. drought stricken california businesses are struggling to stay alive as reservoir levels dramatically drop. erik schatzker has been in the region for several days this week for more reporting on the growing crisis that has left much of the world's most productive agricultural industry desperate for rain. yesterday, he spoke to michael jackson, a federal official

responsible for water administration and central california. >> we are still up one of the driest years on record. >> have you ever seen it this bad? >> i have seen the lake this low, but not when we have not had snowpack to support filling up behind it. >> you are looking at this, you are looking at the snowpack, you are thinking, what are we going to see three months from now? >> that is right. >> what are we going to see? >> hopefully mother nature is going to help us out. >> if she doesn't? >> it will be a struggle. for everybody. throughout the state. the governor has declared the drought an emergency. on president was out here valentine's day, as it would be. in recognition of the situation that we are in. it is bad for everybody if it does not rain. at just making enough water releases for public

health and safety needs. >> this is just so people can keep drinking? >> that is correct. >> erika striven cells to pass a -- eric hasarish at driven south to paso robles. >> i will be back on monday. right now, i am still taking a close look at what is going on here in california. the state has bigger agricultural industries. but what is more important than wine? i am here with neil collins, the executive one maker and vineyard of california's most prestigious wineries. whatus out by explaining you are dealing with right now. and your fellow winemakers. >> it is the area and the state in general. a massive lack of rainfall over

the last couple years, particularly this year. we are hanging around at about 2.3 inches since july. normally we hope to be in the mid 20's by now. >> you're getting 1/10 of the normal rainfall. >> really insufficient. normally, we would be knee-deep in clover top green right now. >> it is dry. what does that mean? you're the head winemaker. what does that mean for the grapes? >> normally we do not irrigate here that much. we have been here getting already for over a month because we have seen this coming. the grapes need some moisture to grow. long-term, wethe will drop fruit, we will print. therune. there is not moisture in the soil to carry us. >> there is a big problem with theoretician. if you cannot get it from her -- irrigation. if you cannot get it from a reservoir, you have to tap

groundwater. it is a scarce resource. >> we have our own wells on the property. but no rain, less water. we are starting to run a little dryer. we are pretty prudent and have been for the last five years. is not a drought, water is a scarce resource for us. if we can grow without as much water, we are trying to do that anyway. if it does not rain, nothing is going to grow. >>, petition in this area, i have heard, for that water is getting very intense. >> it is getting pretty intense. as more wineries move your. that is part of the problem i suppose. and also more people. the whole area is growing. more residences, businesses, agriculture. agriculture is driving a lot of the area. it is a tough one. in some areas, it is tougher than others.

>> how is it affecting your business? going to drop a lot of fruits. we will have a much smaller harvest than we normally would. some are dropping their entire crop for this year just to save the vines and give the vines a break and not push them to grow. >> that is an expensive decision. >> it is a huge decision. we will certainly carry less fruit than we normally would. we will have a lot less product to sell. each is a bummer. -- which is a bummer. , at itsttle of wine root, is farming. >> is there the possibility at all of a silver lining? ofear these stories in spain

tough conditions producing the best wines. >> sure, everyone is going to look for a silver lining. maybe for the consumer. less rain means more intense bottles of wine on the table. potentially, i don't think -- us getting not rain -- there is not much of his over lightning for anybody. -- could we see a scenario in which you face a tough year, but you produce some of your best bottles? >> there is the potential of that. we're just going to try to maintain our normal standards. we do not your gate much as a rule anyway. .e are irrigating more we are running upon sin doing more than we normally would. it is not a great feeling. it is not what we want to do. but we have to keep these guys happy. >> i want to thank you for sharing your story. that is neil collins.

they would love to see some more rain. >> thank you both. we will be hearing more from you later. creek.s tablas there is nothing going on that right now. be back iners" will just a moment. and the next hour, things are going to get spicy. what it is like to be a twentysomething making plenty of dough and working insane hours? is it worth it? we will speak to the man who has the inside story. stay with us. ♪

>> live from bloomberg headquarters in new york, this is vote market makers." wall martretreat -- ins they had lower profits 2014. can the new ceo turn things around of the world's largest retailer? >> a bad idea? the facebook $19 billion acquisition of whatsapp has everyone talking but one analyst downgraded the stock. hottest money is the oak on wall street. it is the inside story of a new bankers and their struggles in

the post-crisis culture of the streets. the books author will be joining us. welcome back to "market makers." >> erik schatzker is on assignment in california. i want to talk walmart, the world's biggest retailer, is taking another big hit today. it released a disappointing forecast after u.s. sales the last quarter. julie hyman has the lowdown on the numbers. it's easy to point fingers. they are not blaming cold-weather. >> they actually did throw cold-weather in there. many retailers are saying that. the weather was to blame for people not leaving the house. walmart has a lot of other things to contend with. it trotted out the things it has been talking about, the fact that the economy is tough the

lower income consumers and shoppers are still struggling, the cuts to food stamp benefits which they brought up a couple of weeks ago. it is also now talking about higher health care costs. it does not talk about the affordable care act, mostly higher enrollment in health care programs and that is increasing its costs and talked about currency headwinds. there was a lot of different things to blame in this particular report and for that forecast. >> does this mean anything for doug macmillan who just took the post as ceo? it is a continuation of what has been going on at walmart. in terms of what he is doing, inasmuch as if they can do anything to solve these issues, it is focusing more on the smaller format stores. it is an interesting situation. on the call with media today, the walmart executives talked about how at the regular walmart super centers, people are still doing their stock up shopping. they go and buy a lot of stuff.

what they are missing out on is the in between fill-in shops. people are going to dollar stores in regular supermarkets of they will more aggressively open these smaller format stores to get those fill-ion shoppers. >> walmart can boost its own bottom line. let's ring in blue -- let's bring in a move that walmart made a move yesterday. it may support an increase in the minimum wage. the gap has promised it will raise wages whether or not congress mandates it. this may be a counterintuitive move that helps warm up -- walmart. >> they said they are neutral on the proposal before congress. if shoppers have more money in their pockets, that could be good for walmart. they get so many people coming in and it also raises your cost base. wal-mart does not pay most of

its workers minimum wage. it pays most of its workers more than minimum wage. they only pay 10%? >> do they have to have a ripple effect? >> it seems like that is what has happened in the past. they have had wage increase and they have talked about it then goes up the line. workers, --of their one percent of walmart workers get manways. obviously, if walmart is concerned about food stamps as a source of income for shoppers, it seems like a lot of its customers are minimum wage earners if that. the minimum wage while they would have to pay a little bit more to their employees, it raises the income level of its customer base. andives them more money maybe put competitors out of business. >> potentially, if you are a

small business and your minimum wage goes up and you are paying most of your workers minimum wage, that can have a serious effect in your cost structure. it is hard to know without knowing walmart numbers what kind of effect it could have. >> what is the rationale some of these companies have saying they would potentially raise the minimum wage? it's pretty clear that republicans have said they would lock any -- they would block any minimum wage increase a why would companies do if they don't have to? >> the cap is raising their minimum wage and it will be $10 by 2015. many people at the gap make more than minimum wage. they said if we pay our workers more, we will have a better in-store experience and no give us a competitive edge. >> is their data to show that? >> it's an interesting time to do that because of many other places are cutting workers and there is anecdotal evidence that

the in-store experience is suffering and many places because you don't have the same quantity. >> when customers are sensitive to prices, if you were to go to a store and your choice was lower-priced items or better customer service, what would you go with? >> both, ideally. >> the gap is still offering the deals. they are aggressive. >> this is something they are there is limited foot traffic in the mall where the gap is they so you want people to commit to your store to get a great experience. >> we should point out that the gap may be doing this for ethical reasons while walmart is likely doing it for strategic business purposes. the gap is still a big corporation. thanks for joining us, linzie.

stephanie, always a pleasure. >> don't i know it? eric, come back soon. not everyone is sold on a position of an analyst that downgraded facebook shares. he no longer likes them. plus, it's a book that is the talk of wall street -- " young bankers" open up about their jobs and long hours, is the money they make worthwhile? this is " market makers," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com. ♪

overpaying for whatsapp? $19 billion sounds like a lot. brian wheezer says it is hard to justify that price even though he says it may be the cost of doing business when you are

competing in a world against google and apple. brian joins us to tell us why he is -- he has downgraded facebook shares. jon erlichman is with us from california. does whatsapp make any money and what's the outlook for their profits their -- their profit proposition? >> it's not clear. it does not seem the company is clear either based on the comments on the call yesterday. you could presume that eventually -- it is not clear at all. >> for $19 billion, that is a sharp maybe, isn't it? i don't know any other way to put it. >> jon erlichman? >> yeah, no, the answer is not really. in some markets, they are trying the subscriber model where you pay a little bit.

it's important to highlight that facebook does not care about that. they were very polite and answering the questions from people on the call but this is more about -- it is a land grab. i went back and looked at some of the transcript from recent facebook earning calls because anyought zuck would provide hints on them doing something like this given the size of it on the fact that we know that analysts will say 19 alien dollars -- $19 billion. he said doing stuff away from facebook as part of the game plan. the way people communicate on facebook is different from other platforms. they want to cash in on all of the different areas. this is a very hot one and it's the price they had to pay. >> the way i communicate on facebook is by using facebook messenger which does not seem that different an experience than whatsapp.

it was almost exactly the same. it was free texting on my iphone. true, we all have our ways of already using facebook related stuff. the way that people are checking messages tied to facebook is not as immediate as it is with the messaging apps. facebook is aware of that and mark zuckerberg said that on the call. he said there are clear differences between facebook messenger and this product and it's that real-time communication taking place and facebook is not really able to capitalize on that. >> is there a way of knowing if there was a cover bid? did facebook have to pay $19 billion because someone else was pushing the price up? >> the commentary from the call said not directly. you have to think that indirectly, the whatsapp founder

would have been aware of what google might have been willing to pay or someone else could have paid in the future. there must've been some number which they said we would walk away. >> you recently downgraded facebook. facebook is starting to look more like a suite of apps. >> mark zuckerberg said our shares are overvalued so i will pay. i don't know they are thinking a long the lines of enter new show -- institutional investors. they are looking over this over a long time horizon. in terms of the downgrade, you have to account for the fact that there is nine percent dilution immediately. if you are not replacing that with some amount of cash, how exactly can you not change your target?

coincidentally, i was in the middle of raising my asked that tatian's further advertising revenues. -- i was in the middle of raising my expect tatian's of advertising revenues -- my expectations of advertising revenues but i had to downgrade. >> that makes sense if there's no upside. you mentioned the possibility of a subscriber model for whatsapp. the company is not going to be able to do any kind of advertising in the short term because the ceo and his team are said to be maintaining autonomy and they have been incredibly vocal about how they don't want any advertising marring their product experience. the only way they can make money is to charge for it. >> i don't want to set the expectations high for that. they were clear they have been happy with the instagram experience which is to get something else that people are hungry to use in a mobile-based communication tool.

even with instagram, they are not rushing anything so don't expect them to rush anything here. >> this is a $19 billion purchase. >> their thinking is the same. my question for them is -- there are hugely popular services like whatsapp in the asian markets already. careful about where they said whatsapp was most powerful. i talked about europe and latin america and india. if it does not have huge success in those markets which they certainly, i suspect, they think it will, if it doesn't, i think this becomes a bigger factor. in terms of what they will actually make money from advertising subtraction stuff, they don't want to talk about that. . they are bringing on a

partner for mark zuckerberg as much as anything. the fact that the founder of whatsapp will go on the facebook board is significant. fails, theysapp brought aboard a person and that's clearly a long-term relationship. >> does any of this make you feel like we are in some sort of tech bubble. it feels like 1999 when everything online was the hottest thing ever until suddenly it wasn't. >> there is a lot of that going on. i would not characterize that as a facebook problem. i think the valley as always had that problem. when you have a world where you have multiple wires willing to pay inflated rices come you end up with inflated prices. >> there you go, thank you so much for joining us. the senior analyst at pivotal

and jon erlichman joining us from california. when we come back, california's record drought. it is hammering the ski resorts out there and we will go back to the golden state with erik schatzker when "market makers" returns." ♪

>> welcome back. california continues to suffer from one of the worst droughts in its history. the dry spell is causing pain for many of the states industries including northern california's ski business. erik schatzker joins me now to talk more about this situation. last week, you are living it up in deep powder and they'll but it's different in california. >> it's a much different situation. i traveled across the state looking at how this drought is affecting different industries.

right now, i am in the middle of a vineyard, not far from the pacific coast that i began the week at mammoth mountain, the third most popular resort in america and the good -- in a good year, he sees maybe 1.6 million skier visits. many of those people come from los angeles. as is a very different situation. the sierras have about 13% of a normal snowpack and you can see it when you head to the top of mammoth mountain. i spoke with the ceo and chairman of the board at mammoth, rusty gregory. this is what he told me. >> a bad year is the kind of years we have had the last couple of years. there are good years in terms of the guest experience and the business in general but in terms of financial results, the volatility recently is here because of excessive drought in california. it has made it much more difficult. what wer, we are off of

would typically expect to be, about 25% revenue, and that works its way down for the organization. it makes it a challenge to manage, day to day basis. thateminded every day mother nature owns this place and we just rent it. every time we think we understand what will happen and we run our projections and do our modeling and talk to our banks and my partners, mother nature does exactly what she wants to do and i've got to do it all over again. >> the fact of the matter is that everybody in california is at mother nature's mercy. think of the farmers in the central valley. this is the single most productive agricultural land anywhere in the world. rainfalls in northern california, it coats the sierras with snow, and that water melts and collects in reservoirs and find its way to the sacramento delta where it is sucked down with pumped into the central valley.

this is land that does not normally get very much rain mortar at all and only became productive because of man's involvement because of this complex and controversial water distribution system. farmers, when they can get it, they've got water in the reservoirs. if it is not raining in the hills around the central valley and you are a renter like this guy i will interest -- introduce you to, you got very few options. joe morris does grass fed beef. he does not send his cows to livestock tends to feed on corn. they subsist on grass alone. listen to what he had to say as he explained the kinds of decisions he had to make as a result of the lack of rainfall. >> as the drought became progressively worse, i have some kind of shot dead dates by which i need to execute a drought plan which i have written down.

part of that is to sell unproductive animals and part might be to liquidate the herd or move the herd. into january and no rain came and then february, i crossed one of those dates i said i've got to liquidate the herd because we will be in a disastrous situation not only for the animals but for the land itself. >> when you talk to a guy like joe morris, standing on the hillside overlooking this spectacular stretch of land that he wrenches, it is enough to make you cry looking at these animals who don't have enough food and he himself does not have enough grass on the land to fatten up the animals to up point where he can turn them into the bp needs to sell to make a living. >> it's horrible to see that, obviously.

you have to have sympathy for the guy. in a sense, it is also a sign -- if you try to manipulate your surroundings and try to manipulate mother nature to serve you, it's not always going to work out in your favor. thatere is no question everybody is at mother nature's mercy. water is life and if there's no water, there's no life. it is driving people to make interesting decisions. for example, they are planting different grasses or they are husbanding the land in a different way so it retains more can bee and the animals raised on it longer without degrading the quality of the land. at the end of the day, there is no water, there is no business, there is no life -- that's the story. lookinghat people are at here in central california. you can imagine what it will be like for los angeles 3-6 months from now. >> thank you for giving us the

latest. it makes a difference to have someone on the ground to see the climate. erik schatzker will be back with us on monday. we will be talking about the future of wall street, there is a new book out there called "young money." ♪