>> from bloomberg world headquarters in new york, this is "market makers." the facebook hangover is over and the window for tech ipos is wide open. investors are hungry. is there a race to the public markets? pollution, traffic, all reasons not to drive. we will debate the theory of peak cars and its impact on detroit. new process a center. why they are shielding their most viable data behind these

doors. good morning. stephanie ruhle is on assignment today. doubt, you are watching the canadian hockey team. you must have had your pom-poms out. the newsfeed. the top business stories from around the world. above its closing record level today to erase all of this year's decline. flying past 1850. 1851 now. fell six percent before rallying the last three weeks. activist investor carl icon is icahn is-- carl blasting the ebay board.

he says at least two board members are competing. being accusations, icahn proposing his own board of directors and wants to separate paypal away from ebay. trish regan will be speaking to carl icahn later today. the battle that keeps on going, men's wearhouse we think it's offer for juice of a bank. they rose their offer 10% to $1.8 billion, and could go .igher it is a battle that began in october when joseph a bank offered to buy men's wearhouse. out in silicon valley, the word is going on with the markets, it is time to cash in and go public. ipo to considering an just a number of companies .onsidering this ipo path

with us now is jon erlichman. he is in los angeles. he broke the roku story. david menlo.is david, why is this happening now? >> the prime example is what happened with facebook and whats coming upf the blue with a valuation of $16 billion. anything along that kind of technology, people think they can get 2x, 3x of what they thought. new fundingived back in may. any idea why they did the ipo now? >> it may have less to do with those vc's meeting their money back now. it is more about the opportunity

resented as the business gets bigger. we are seeing roku and the apple cast, ae, google crone lot of these streaming devices, so the market is getting bigger quickly. our understanding is, in the case of roku, something they think about is, if we could be public, we can beat up your play in this area. apple has a lot of businesses they focused on, the same for google and amazon. if we would go public, we would be a standalone. we have been hearing recently that maybe later this spring we could see a new version of apple tv. we do not know what kind of form it will be, but it is possible the timing of roku could be motivated by apple on one hand and apple on the other. people keep on talking about

what amazon may do with streaming video. you do not have money today, you will need it for tomorrow potentially. one thing we see with these devices are lots of iterations. one of these players looking to sign up as many content players as possible. when you look at what is available on apple tv compared to six months ago there is a big change there. everyone is hungry to offer better service. roku, we will be able to tell the story of a company that has technology that it is licensing to others out there that want to stay competitive to apple tv. i am thinking of the smart tv manufacturers. they talk about selling their operating system to tv manufacturers and that becomes a secondary revenue source for them. but you are right, there is a

lot of change happening, devices are getting better, and that leads to a potential need for money. the impetus for going public the same as 10 years ago? is it for cashing out for shareholders? >> without a doubt, they want to raise money for the company -- >> but is this different from 10 years ago? i am thinking about candy crash. they did not need the money to go public. is usuallyo, it first into the marketplace gets the largest market share. anybody that wants to come in along this chain cannot do so successfully. >> david, i want to get back to p, to thet of whatsap degree that it's a valuation changes the game for others that want to go public. how can you build comps off of

this? markett we see the reprice any company with anything close to what they have ? stocks are clearly at an all-time high in america, but nothing touching a $19 billion valuation out of the clear blue sky. >> that is the point, how you build comps. in order to do that, you have to drink the kool-aid. >> all investors will not be like mark zuckerberg. >> no, and the smaller companies will hold back and say, you obviously want us for our intellectual property, or our service, but overall, we do not isnk $2 billion, $6 billion not enough. >> is that a bubble in essence? >> the markets will continue to

take it because the ipo's are not at that level yet. we will have to see a company like roku -- and i am not saying --thing negative about them but people envision them as the little box next to the tv. what is that differentiation with other products coming out, and will they be any things peschel? >> -- anything special? >> here in new york city, we see what happened with whatsapp and we say that has to be a bubble. what are people saying out there? is it a case of the true believers saying it is truly worth $16 billion, or is there perhaps some skepticism along the west coast? >> people are starting by looking at what facebook is doing. there is an embellishment that part of their future business

could be something that they did not have and that is why they had to do it. when you factor in the ipo and you factor in at what price you sell, this becomes a part of the same strategy. if your company is successful enough for you can get the bankers to sell you, we could consider the ipo, that is a good place to be, especially considering if facebook or someone else comes knocking on your door, and you can find the right home for your business. some smart strategies behind it, and that is why some of the companies considering going public and that being acquired. i have a feeling we will continue the conversation. jon erlichman, david menlow, thank you. >> today marks the start of the world mobile conference in barcelona. .e are there caroline is moderating a panel there.

i was interested, what was your biggest take away from the panel? koomb, the rock star, he is the man that everyone wanted to hear from. when he got to the stage, there were cheers, everyone tuning into with the newly didn't did -- minted billionaire had to say. he had a surprise announcement when we were chatting earlier. it is that they are building on whatsapp services. they will start to incorporate voice. these developers out there taking away revenues to range from others by offering 99 census year, messaging and

calls. that was the key take away from this announcement coming from jan koum. and also, the way that he continues to be surprised by the 416 users -- 460 million users they have now got. he talk about his pricing structure and how that may have to change now that facebook has bought it? >> he says no change. they will remain independent. that is what he was trying to get across, even though he is selling out $19 billion to facebook, they will leave us independent. he wants to remain close to the company's roots. in the was brought up former ussr, he is ukrainian. privacy is important to him, and the ability to affordably talk outside of your country. he moved to the united states when he was young and could not continue those conversations.

he wants to make it affordable and that is why he is taking to the roots of the company. that is why he is passionate from that point. he got a message from australia from a woman who was said that she could not contact her family and was sad. he personally made the whatsapp app for her before they launched. how is it was negotiating with mark and he said, it was fun. these guys go hiking together, on valentine's day, were hanging out together. they obviously have a good relationship, and he says he will remain independent. it is for $19pe billion. thank you, caroline. >> if someone were willing to offer me $19 billion, i would call that fun, too.

a new theory that the automobile business is on the verge of stalling. you heard about peak oil. now we will be talking about peak car and how it could change detroit. >> how to keep secrets away from the next edward snowden. how about bearing them in a cold war bunker? that story is next. you can also watch us streaming on your tablet, phone, and on bloomberg.com. you can also watch all of our interviews streaming on apple tv. ♪

>> global auto sales have been searching for years thanks to the growing middle class in the developing world, but now one analyst says the world has reached what they are calling peak car. our hero chief jeff green is with us, along with our own tv guide -- your official title --

matt miller. i think about peak shale, and that means we have run out of oil. what is peak car? figuring, whatre has happening will continue to happen, and what this report of peoplehat a lot are inferring is, maybe 100 million is where it stalls out and we chug along, which still seems like a lot of cars, 80 million last year, but the ,roblem is, they are sizing up and there will be plants that have nothing to do, or not enough. >> obviously, the difference in peak oil in peak car -- automakers will continue to produce even if there are not able to buy those cars. >> like in europe. >> before the financial crisis,

gm and ford were making as many cars as they could, and if they had extra, they would sell them to read of fleets, government agencies. >> essentially we are talking about saturation. >> yes, and when you look at where the growth will be, it mexico and thein rest in markets where they have captive automakers where they want to take advantage of the growth. continuern world will to go after that growth, so it could continue content verse -- and you need to get worse. >> the problem here is urban migration. if you want carmakers to expand forever, urban migration is a bad thing. 50% of the global population is have 9to a city, will billion people living in cities in 25 years.

it is a problem because they do not want cars. like no one not will drive. they are sharing cars. sharing economy is changing the way that we buy our automobiles, but we still use them. >> there will still be 100 critics,ars, as iihs but a lot of people are not even getting drivers licenses. of people have drivers licenses, and you do not have one. >> what about technologies that promise to revolutionize the industry like hydrogen power or the self driving cars? couldn't that cut down on some of the traffic and pollution, which are clearly two of the obstacles to car buyers? >> but it also cuts down on the need for everyone to have their car. if you can go on and autonomous

, you probably do not need a personal card. 100 years ago they were having the same debate about the course in missions filling up the cities. years later, there were no horses, so there could be another technology waiting out there. transporter, is a but there is something that we have not thought of yet. waysone is thinking about to get around conveniently, but lessar has become convenient. the majority of new york city residents do not own a car. >> you are proving my point to my husband, i do not need to know how to drive. thank you so much. somebodyhe weekend, bought a piece of baseball history. we will tell you what it costs to own babe ruth's world series

watch. ♪

>> my trip to california last week let me with a new appreciation for drought. the state is simply running out of water. here is what the federal water authority had to say on friday. the bureau says it will be sending no new water to farmers in the central valley this year. because of your interest and expertise in commodities and agriculture, and this new announcement from the bureau of reclamation, i thought it would

be a good topic to bring up. i think it is important to bring attention to this drought. californians even do not appreciate what they are looking at months from now. the farmers do, as they have to make decisions now on their plans. >> and this was not their first drought. the lack of technology helping them to get water when there is none is pretty staggering. i wonder if this is the catalyst that will change that. >> we live in an egocentric world. needis a democracy, so you a plurality of people to make something happen on the scale of something like dissemination, investment in solar technology. people do not really care that they are running out of water until they are running out of water. that is probably not going to because water will be prioritized for drinking use and health and safety -- differentout the

areas of where the water gets to and where it is siphoned off from. >> people do not understand the miracle of the central valley. it is essentially a man-made phenomenon. northerndiverted from california, from mount shasta, flows down into the sacramento delta, not far from san francisco, and then is diverted to feed the central valley. if there is no water available to divert health -- south, as there is this year, the farmers in the central valley on the western side get nothing. there is no rainfall there of any substantial quantity, no groundwater, no aquifers. we do not feel it over here we have so much water over here we do not know what to

do with it. >> we will be speaking to one of the best hedge fund performers of 2013. trying to keep top-secret data out of the wrong hands. the immediate answer is in an old cold war bunker. ♪

>> welcome back to "market makers." are the top-performing hedge fund managers in the world, and all this month we are bringing them to you. we crunch the numbers on the best in the business. their flagship fund gained 23% in 2013 and is up almost three percent this year so far. their chief portfolio officer and risk manager is with us. let's talk about what is working in these markets. these are times when it would

seem that you could almost bet on anything and it would go up. s&p 500 up 30% last year, just hit a record high. if things hold, we will close at a record. , a hedge fund manager's point from a hedge is -- fund manager's point of view, what is your strategy? >> last year, the s&p 500 was up 32%, the percent -- second-best sharp index in 50 years. >> explain why the sharpe ratio matters. trying to do in an equity long short strategy is giving you an uncorrelated return to the index. as much return possible as low volatility as possible. that is how we measure ourselves. last year virtually everything went up. the way to make money last year was not to lose on the short side.

if you look at the most highly shorted stocks, they outperform the market by 15%. >> because people were forced to cover? >> that is part of it. you had low inflation, so you can get multiple expansion. three hundred $51 million of flows into global equities. so that lifted all of those. million of flows into global equities. >> so can we see more flows into expansion? view which differentiates from others, the most negative view, is if growth in the u.s. accelerates. well last year because quantitative easing was robust. now that is behind us. the fed is going from a tale into a headwind. when you think about what they

do from a risk perspective, they look at volatility. now that they will get out of he you will be able to get back to shorting that companies and succeed. want to dowhat you when the s&p succeeds, just hope it works? testimony, hawkins if you talk to money managers like ourselves, it sounds rather dovish. but if you talk to bond managers, they say they will go forward with the taper. our view is this will go forward, the fed wants to get is af qe, and that different environment for equities than last year. >> where have you been most successful globally investing? >> it has been equities. the biggest spot for us has been china internet. if you look at them, the group of securities was up 85%.

that is still a spot that we like a lot this year. >> you have talked about ali baba. does this change now that the growth economy has detonated? >> most are massively positive or negative. we are negative on the industrialization side. on the cheap credit funneled into the system. but while we are negative on some commodities, there is this burgeoning middle class in china that will really have to grow to the consumption base. if you think about per capita consumption for the middle class, it is where the u.s. was in 1964. on top of that, imagine if the internet was created in 1964, and you had the ability to skip brick-and-mortar and go straight to e-commerce. that is an opportunity to grow. >> do you think of them as an

emerging market? this, they are too big at point. our growth is probably a little lower than they report anyways. i would get worried if growth does not slow. they have to make this transition from fixed asset investment to more consumption based. do not allowey growth to slow, and allow reforms, they risk the chance of a real crisis down the road. they are going down the path that japan when 30 years ago. >> what about non-china emerging markets? >> a big negative spot for us. >> massive underperformers last year, you feel that it will continue? befor those that want to invested in emerging markets, the valuations are cheap. we believe that flows are more relevant here. if you look at the price and flows in emerging markets, it is above 0.8.

we see contagion risk possible from that. i would distinguish from emerging markets and frontier markets. east weke the middle still like and we think prices are discounted enough that there is still potential upside. >> so the theory behind the fragile five, you buy into? >> absolutely. >> you are bullish on stocks in saudi arabia, are you still? >> we have had to give you a huge years from a performance perspective. it is one of the few places in the world where we can buy stocks with single digit earning multiples, single-digit growth, and five percent dividend yield. it is a favorites part but you have to be careful on what names you select. >> isn't there good reason why no stocks trade at single-digit earnings multiples? >> there is -- >> and what is that? have,ry conversation i

all of the discussion is about risk. all they want to hear about is the geopolitical risk factors. saudi arabia is now less sensitive to oil than it used to be because they have spent so much on infrastructure. stocks are cheap because 98% of that market is retail flow domestically. with time, when the market opens up to direct investment, everything will be bid up, and that is when we could be reducing. we are playing against retail domestic flow. there is tremendous amount of idiosyncratic alpha. >> how long before the market is open to foreign investors? >> i hope never. >> so you can take it vantage. >> exactly. so you can take advantage. i think we are at least two years away. >> much more from passport

capital. we will be back in two minutes. ♪

>> we are back on "market makers." we are here with the chief marker portfolio from passport capital, one of the best-performing hedge funds in 2013. , $19 billion valuation. what do you make of them? >> it is difficult from my perspective. our team has crunched the numbers, and from an acquisition per user cost, it is reasonable. this is a bull market for tech. crazy things can happen. the thing that is misunderstood is not necessarily the investment opportunity, but how

tech is transforming the global economy. that is something we are focused on. >> can this company possibly generate enough value? that is what lots of people are struggling with. cynicalt that i am about it, but i am struggling to see $19 billion. how did you see that it would generate enough value for sure book -- facebook shareholders? >> they are using a different kind of model also. >> yes, and they are looking far out. facebook is trying to protect their moat. when you look at their growth compared to twitter, it is fast. i am skipped call myself and am probably not smart enough to rely on ourwill guys. good news is we do not have to be long on something like that without being short on something else to hedge it. some of theeresting company sold for $19 billion but

only had 55 employees. how do you see that changing the world? >> infrastructure development in the 1990's, huge cost. cost.ex now it is very light. it is about keeping wages low and corporate profits high. -- from ourspective perspective, what people are not focusing on enough is how tech is changing the implement situation. if you think about the last 10 years, the big labor arbitrage was building a manufacturing center are broad, off shoring, cheap wages. that has collapsed to a degree. perspective, you have all of these new efficiencies being born out of technology. robotics and automation will keep pressure on jobs. what ise fed discusses

cyclical and what is structural, we think it is more structural. technologists and futurists believe it. investors are buying into the theory. why are economist not seeming to recognize the trend? >> you do not have a longtime series of data. my background is in the quants. i will not be able to model that . economists do not have an understanding of how this will change their model to really factor it in. >> another thing you say is relevant here is, fracking is nothing new in houston, nothing new here, but what is the distinction here? two hotspots icr houston and san francisco, and it is the energy renaissance, and technology. both are very disinflation area.

right now, inflation can rise, but we see this persistent pressure as a function integration and tech. >> lack of skilled workers in both arenas at the end of the day. >> what does that mean for the macro economic backdrop? even though you are trying to be market neutral, it is something you have to consider. >> absolutely. if the fed is going to fight this as a cyclical issue, it will keep on the date of easing going longer. we think that they will run out of bullets and what they are doing is less productive. if you think about the last five years of quantitative easing, the analogy in my head, it is like a bowling alley where you have the bumpers down the side. at some point, we have to pull them out. suddenly, people will have balls missing. that is like equity investing. in the last few years you could

not miss as long as you were long. that will start to change as the fed removes liquidity. >> what keeps you up at night? equities --of liquidity of equities. volatility was so last year because the fed was involved. we believe that volatility will again to pick up. shock from emerging markets is also large. we see what is happening in the ukraine and venezuela. that will only worsen as the paper gets more aggressive. and china. if they do not move to a more induction model, it will be tough. >> how afraid are you of brazil? >> not very. much more of those other three spots. >> great to have you here. garry, portfolio manager from passport capital. having a pretty good 2014 already.

>> a bunker designed to survive a nuclear attack. sounds like the perfect place to store secret data. that is coming up next on "market makers." ♪

you can still buy secrecy in switzerland. it is not in a bank vault that inside a mountain. talked his way into a converted cold war swiss army bunker deep inside the else -- alps. the alpine lakes look picturesque but they are the first line of defense for a data vault inside of an old swiss army command center. surveillance and infrared doors must be closed before the next can be opened. anger print scans matched. module entrances, one at a time.

i am walking inside the mountain, about 70 meters long. i have gone through seven security barriers, biometrics, three nuclear blast walls, and i still have a couple of more to go, including a hermetically sealed door. karate black belt and former french air force officer purchased the bunker, one of 16,000 under from the swiss army in 2007. reservoirs of mountain water pure enough to drink cool the servers, lowering the electric bill. clients can rent rose of storage lockers or even an entire room. for ventilation, a sick day, post office, and a map room. if cyber commandos tried to storm the bunker, you could shoot at them through these apertures.

a self-contained city designed for an attack that never came. is like anrity onion. before you get to the data room you have eight layers of acuity. -- security. >> but the biggest risk is internal. >> you have to be careful about your stuff, your customers, when they give you proper id, that they do not have bad intentions. >> they could be posing as journalists. >> that is why we will be checking you before you go in. almost got locked inside, but he is back in berlin with us. this kind of thing seems to make a lot of sense in the edward snowden era, but these people invested long before those revelations. what was the idea behind this data bunker? >> initially this is where the

swiss air force would be in case of nuclear attack. you could see how you would switzerland. when this owner purchased it in 2007, initially he thought it was so big, he thought about storing artwork. about having individual lockers. as it turns out -- but we were thereg about at davos -- is so much concern about security and data protection. an entire industry in switzerland will be cropping up trying to capitalize on the ands penchant for secrecy turned that into something bankable, if the banks ever go bust. so their goal is to bring all the data in. you can shrink the data so that you do need -- do not need much space, but you do need a cooling

system, and they have that mountain water. wayair is a bit humid the it comes in, but they can do server storage there on the cheap. sois secure, but i got in, it is unclear how secure. are so charming, you talked your way in. good to see you. every gold bugs dream, a huge vault where nobody can get to it. we had a pretty exciting day on friday. here we got to take a look at some serious swag. a babe ruth pocket watch, mohammed ali's gloves. the watch sold over the weekend $717,000 to an anonymous bidder. that was a little less than a road expecting it to go for. from the 1923 world series. jeffs their first world jb

-- championship before they got the rings. would you pay for that? >> absolutely not. do you believe in memorabilia investing? >> i believe in hard asset investing. however, this sold for quite a lot of money. those boxing gloves from mohammed ali, they sold for $837,000. you can see them. i cannot believe he was allowed to touch them. memorabilia investing has been around for quite a while, but they had taken off from the 1980's and baseball cards. playing hockey card knockdowns as a kid with my wayne gretzky rookie card, and

now it is worthless. a lot of people are doing this as an alternate investment. you have the typical wall street and real estate, collectibles are now growing every year with people putting these things on their walls. you cannot put a coca-cola stock on your wall. >> fairpoint. wayne gretzky any did have some puzzles in my apartment, my husband is a collector of the beatles. >> the question is how big the market is. >> and how much people are willing to pay up. >> it is time for bloomberg on the markets. a look at what is going on. the dow and s&p 500 creaming toward new highs. closes at this

level, it will be a record. development in ukraine driving stocks higher. we will be back in two minutes. ♪

>> live from bloomberg headquarters in new york, this is "market makers", with erik schatzker and stephanie ruhle. upping the ante, carl icahn says there have been lapses in at ebay.room >> blue screen of death. help -- will the change help revive the faltering canadian company? >> the challenges of building a new company. you're watching "market makers."

and i'mk schatzker, alix steel in for stephanie ruhle. it is time for the news feed, the top is the stories from around the world. star boardst between capital and lobster -- red lobster. move wouldsaid the not require a shareholder vote, and it plans to plead the spinoff this year. pope francis is overhauling the vatican posner europe\/ -- vatican's bureaucracy. an italian cleric was wondering with -- charged with laundering millions of dollars to the vatican. in about a month you will not be able to call for movie listing information, you could blame new technology and j.d. consumer habits.

it is so old school. >> i have never used it. >> activist investor carl icahn wrote a letter to the ebay investors expressed in his desire drive the company spin off its units. us for more.oins >> we have some fireworks now. now ebay is really firing back. let's just backup for a minute. carl icahn issued an open letter to shareholders criticizing to board members. in april they have their annual meeting, and there is an op eternity -- an opportunity for board seats. karl and his team are looking to get those two. how is it possible for the current origin engage in any meaningful discussions about stockholder value when at least

two board members are directly competing with ebay, and he gets into that in detail, one board mostr is hiring the talented employees, and unknown third board member is routinely funding competitors while buying companies from ebay for significant personal richards -- riches. the ceo seems to be clicked asleep. completely is, --question >> they do respond to these allegations specifically. nd theent on to defe sky deal. saying that he was on the board, and he had an investment in skied. skype, and he made a lot of

money. here's what ebay has to say about that. the board determined that mitedse of these li synergies between ebay and skied, it would be beneficial to divest them . . >> carl icahn, mudslinging, never. you have no choice but to work with them. >> it seems like tim cook and had some -- and carl icahn had some dialogue. >> this is just the beginning

for john donahoe, it he was on bloomberg just last week with me saying he is not interested in devasting paypal right now. >> we look at how ebay and paypal can be more successful, and the board and i continued to believe that the best way is to gather. ebay makes paypal stronger. it makes paypal stronger by helping grow faster, it provides more data, and it provides a strong financial foundation that will make it more successful as part of ebay than separate. >> we're looking forward to your interview with carl icahn at 3:00 p.m. on street smart. watching. >> when he says it is the most blatant he will ever see, i cannot wait to talk to. >> today is the start of the frence.world con

there are plenty of new gadgets and belt, especially by asian companies. tell us about the things that you have seen. >> we are actually getting things quite cheap, mozilla was a new cheaper phone, android operating systems for emerging markets. nokia was hot by microsoft, and they are using an android operating system. the asian players, trying to move the global -- developed markets with some high-end technology. we have a new smart race let -- bracelet. htc, less than an hour ago,

once the biggest maker of isrtphones in the u.s. trying to reignite, and is just and failed a new midrange set of phone. it could be an comparably beautiful, hopefully it is not overtly substance. google making the first acquisition of motorola, to the microsofte you have buying nokia business, what is htc up to? >> in the past two years all of that position has gone very well. the only acquisition that they a significant chunk last year.

much, butnot blazed it spoke with the chairwoman of htc, and she told me that they're going to look to be stashing the cash. >> we want to be open-minded. of windabout in terms back shares -- buying back shares? >> i think that is a strategy for our shareholders. she says they might stash the cash and other companies, but they also like to continue buyback shares. shares.g back

they need hot new products, and they said this might win over a few more fans. >> there are lots of cool things to see, that is our bloomberg business correspondent caroline. let's bring in john butler, he joins us now from princeton. is it all about who is going to cheapest, best, low-end smartphone? >> it is a great question. what you're seeing right now is you're seeing a shift away from that premium phone category that apple plays in. they really dominate there with the iphone. of 2013,urth quarter for example, the premium segment shrunk by one percent, wherein low-end phones you saw almost 30% growth there. what is happening as there is a shift now from the developed markets over to her merging reagan's -- emerging regions good they are all saying --

regions, . they are all seeing growth. 5c?hat about the downey cannot move too far market without giving up profit. they are making money on the flash memory. gigabytes torom 16 32 gigabytes, you pay $100, and apple pays $60 for that memory. they cannot play there, but the market is moving down, and we're talking $250 or less. >> it seems to be about samsung versus apple. unveiled the galaxy as five. what is the competition like they're on the high-end? >> it is growing. htc will be introducing a phone called the htc one-two.

it is actually a very beautiful device. we are seeing all of these chinese players playing in the low end of the market, and over time, they are going to move up market.- up samsung and apple are going to have their hands full. >> that apple seems to be able to put up these extraordinary gross margins, and samsung not so much. is that samsung's strategy to try to put out better phones, at lower margins, and kind of hope that they take enough share that they whittle await apple's advantage? >> they have taken a shotgun approach to the market. if you look at where they play, they are all over the map. they have high-end phones like bs five that is coming out at the show this week, and they have low-end phones that are $200.

they are playing well in those emerging markets. there, whichargins was what i was alluding to with, apple. right now it looks like they are about protecting the margin. >> we talk a lot about china when it comes to the low-end, what is the distinction here between india and china? >> india is a very crowded market. clearis crowded to, to be , but china is such a huge market, and they are just beginning to see that upgrade from those feature phones. when i say that, i want you to think about those clamshell phones that we used to have. everyone is thinking to upgrade to smartphones. in india, they just seem to be a little more competitive, much more price-sensitive consumers,

i would say. >> fascinating. thank you so much for joining us. >> when we come back, ford is giving up on microsoft and turning to blackberry. we will tell you what that means for those companies and you drivers. >> the wine business. hedge funds for the fruit of the vine. ," live onarket makers bbg television and streaming on your phone, tablet, and at bloomberg.com. ♪

>> ford is swapping microsoft for black harry potts software -- blackberry posco software. it is the operating system that runs the communications inside your car.

was the time the detroit automaker made this switch? you have seen the microsoft software inside ford cars, and you have heard the litany of complaints. was it time for them to ditch microsoft? >> it was overtime. as consumers, we are used the foibles of microsoft in our laptops and pcs, it is different when it comes into our vehicles. --is almost driven single-handedly driven the satisfaction to the basement. intertwineds so within the vehicle, it is not going to be easy for them to extract microsoft. >> is that why took so long to make this decision? the problems are not anything new, alan mulally has done

genius like work at ford. this appears to be one of his few errors. >> the car manufacturers have to partner with other firms in order to do these systems. it is not an area of expertise. whether it is a traditional supplier, or in this case and mark are soft or a black area -- intoberry, ford is forced an impossible situation. -- bugs have never gotten out of our laptops. do you think we will have a blackberry car in the future, and apple car in the future? >> that is not where we are going. cars going to wear our will be dumb terminals for our handheld devices. you had a great spot on what is happening in the cell phone market all over the world, those

bones are still reliable, so useful, and so good at navigation for consumers that the automakers are never going to be able to keep up with that. what will happen is that we will bring our devices into the car, the devices will do the navigation, and the car will remain the same old hard way. that will not change. >> what is the value of a company like qnx then? it is one of these hidden gems. -- is it the future of the communication system inside the car? >> for now, for ford. blackberry moved into automotive with that acquisition. it is not something that the consumer interacts with. to the extent those systems help the cell phone link up with the vehicle and function quickly, they are important. ultimately, that is all the consumer wants, it is not going to be a customer facing

operating system. >> hang on one second. isn't there some form and function associated with the operating system? i have seen some of the video and some of the photographs of installed in the kia, and to the degree that that is qnx, it looks ready simple and pretty good. >> that is the point. if it looks simple and can near isbetter yet redisplay what on the handheld device, that is going to be a win for the carmaker. until we get to that point, this is going to continue to be a battle. blackberry is an unlikely name , but they have the possibility to bring forward an edge here. we are not analysts on technology side, but blackberry seems like an unlikely choice. >> what is a car company that

does this better integration the best? >> no one doesn't really well -- bestit really well, the choice is to not get the map system options, and just use your handheld device. right now there's not a carmaker above a six on a 10 point scale. >> do not like the tesla software? there's plenty of distraction, especially buchanan surf the web while driving. but it seems to be comprehensive, and. a robust operating system. >> if we can bring something that delights the consumer and screen size, that is a win. the handheld device is only a partial solution.

outhank you for sorting qnx, and whether or not ford is making the right move. >> a big payday for big names in kkr. numbers for you next on "market makers." ♪

>> we are approaching 26 minutes past the hour, this is the time when bloomberg goes on the markets. a quick snapshot of what is happening in the broad markets, because the s&p 500 is headed toward a record close. , theopments in the ukraine possibility that perhaps they nment fasta gover enough to avoid a default is

encouraging able to pick up stocks almost a percentage point. >> in terms of individual stocks, we are watching joseph a bank. it is the deal that will never end. 12, itfer expires march would be about $1 billion. they terminate a separate power, men'sny wearhouse will take it. >> there's no value left for the holder. >> they hate each other so much, you wonder how it integrated would work. >> a critic will be here to help the pretentious

mumbo-jumbo and understand what those white ratings really need -- mean. ." this is "market makers ♪

>> it was a big year for the billionaire cofounders of the best-knownggest buyout firm, kkr. they each made more than $161 million in 2013. and -- bloomberg cost of bloomberg's devin. how did this work? are making more money, they are selling investments, taking investment public, strategic moves. they increase their dividends to shareholders, and who are the

biggest shareholders are the founders. >> put this in context of other ge site -- pe sites. >> we're doing some forward calculations, the filings are due out for blackstone and apollo. by our regulations we think that the chief of apollo will make about $370 million. ceo will maketone at least 310 million. keep boosting their dividends they will not make the same sort of money this year. last year they all admitted it was the best years and they have gone public, and they all said that it has letter to slow down -- has started to slow down. new death meant and dividends -- proving difficult

investments and dividends are proving difficult. these are going to all of their stockholders. if we were stockholders we would've had a more than hundred percent increase in our dividends. >> it is what separates a guy like ravens from a guy like john paulson. in 2008, a lot of that was paper profit. he held lost some of that money since he has suffered in subsequent leaders, this is cash. >> it is their money to do with what they will. ofwhen they change the year realizations and you go to the cyclicality, how long is it and what happens in the middle? >> the whole cycle lasts about 10 years. you raise your money, you invested, you get your proceeds, and to the new sell it all out and that takes about 10 years.

>> that is a long way. >> but then it correlates with the equity markets. these equity markets continue to be strong, they will continue to sell as much as they have until it is all gone. >> he might make $370 million, we did a little bit of earnings comparison. is a bignimum wage debate right now, it will be a big debate going into the new aberdeen thousand 14 elections -- the november 2014 elections. it turns out he makes the annual minuteswage every 24 for the year. >> wow. keepnezuela and ukraine forcing president obama to change his script. ♪

matter how much president

obama wants to focus on the domestic economy, events overseas keep getting in his way. the latest is the ousting of the progression president jacob the row russian president of the ukraine. al, how should the president be handling these situations? already covered the comments he has been making about the ukraine are being mocked. he gets in trouble when he draws red lines, because you cannot enforce those red lines very easily. this is a very precarious situation in the ukraine, without any short-term outcome. the worst outcome would be if vladimir putin decided to go with. in. most people i talk to thought that was unlikely, it is too big

a risk even if vladimir putin is as unhappy as he is. billion, where is that aid going to come from? wasad as the old regime that was toppled, the opposition has a corruption history. the ukraine will continue to be a nightmare. >> in terms of $35 billion, it seems like the imf is going to be a doing a lot of the heavy lifting. this raises the point of how relevant is the u.s. anymore and foreign policy? >> it is more relevant than any other country in the world, and less relevant than we were 30 years ago. barack obama, this is a year where there are all kinds of really big uncertainties and foreign policy, iran, syria, the south china sea. if these turn out all right, it will be a big year for him.

in the ukraine for example, captivate our attention. there has been some extraordinary video footage, and we're going to get the same thing from venezuela, because those protests to not seem to be ending soon. you and i have batted around this question many times before, to what degree do americans care about foreign policy? and to what degree can it help or hurt the president? him, it cannot help him much. successes do not really matter. killing osama bin laden was the exception to that. breast -- orn unrest, or troops on the ground can cause great harm. look at benghazi which has been enormously exaggerated, that has hurt a little bit. through all the tragedy of

losing that american ambassador and those three other americans, that was a minor incident compared to other possibilities. >> president obama has made very clear what our present foreign policy is not, but what is it? >> it is not easy, certainly intervention is out. it reflects the american public. grahamcain and lindsey are totally consistent warriors and that's -- in this, but the american public is sick of it. we are in the longest war in our history, they want people to come home. they want us to affect change, but without any risk. this is the american doctrine after world war ii. >> i think you nailed it. success cannot help, failure can

only hurt. great to see you. >> thank you. >> we will be back, talking about one of my favorite subjects. reviews.as well, wine ♪

>> welcome back. this classygnize pose? arrow-liked merrill neediness that extends all the way through -- it is wine talk. reviews, last year

founded his own line wine resource. >> thank you. i did not write that. >> is one of of your former colleagues. it reeks of the snooty pretentiousness of wine reviewing. i do get people to think of wine reviews differently? >> everything that we do at venice is driven by that exact ambition, that goal, to make wine accessible as much as possible. i want to walk into a restaurant in america and see a great bottle of wine on every table. is around that. >> you target less high-end and more the population like me you might not know what about wine but likes to ring get -- drink

it? >> whether you are a collector, we have a lot of reviews like that, but we have a review called a ventas favorite, it delivers outstanding quality. explore all things wine, for anyone who likes wine. >> i know that you are trying to open wine up to a broader audience, and make it more accessible. you still give wine ratings. talk to me about the ratings, because i'm one of those people 25,000 ratings, and want to understand what is the different between a 92 to 96 , and nothing less than 70? >> there is a whole thought process that goes into wide a right review -- writing a wine review. should i drink it today, should

again five years, should i drink it in 10 years? there are all of these things for people toeasy understand. in the 96 point range for your life-changing whites. -- a are just been a full beautiful wines that represent three parts of california that i am particularly enamored with, starting with the sonoma coast. this is a pain own a warrant -- nior, wine of great perfume. it is not that complicated. around $60. you understand what i'm talking about. you go there, it looks like it is apple central, and then you

go to the mountains, and the bc -- and then you see pinot noir and chardonnay. wines, but ier-end love the straight cabernet for not too expensive. ish.s >> that is not accessible to a lot of people. >> the entry level is to go to you stillers, and getting all of the quality of production at a lower price. >> i was looking at the drought in california, which is clearly a problem for the california winemaking industry. it would play to an excerpt of the conversation i had of been a general -- with the general manager of this winery.

here is what he had to say when i asked him if there was any truth to this idea that drought years for dues the best wines. >> i think that vineyards are unusually resilient compared to other crops in a drought. lose thenlikely to bind themselves, but there is a practical limit to how much a can ripen a cluster of grapes. you want a dry climate, you want a certain level of concentration, but you get to the point where you cannot do the work that it needs to do. >> so how much of a threat does the drought in your mind those to the california wine industry? to what degree are drinkers like alex and i going to notice? >> one is an effect on quantity,

and the other is in effect on quality. vines are very sensitive, they're very much like people. they haven't accumulated history of things that have happened to it. what vines do not like is shocked. forou have dry warm weather a long time, that might actually be favorable to having shocking events that are really stressful to vines. the quality of the vintage is really the determinate in the last 4-6 weeks. you cannot make any estimation on the quality coffee can only talk about production. other areas open up of the united states? >> first you're going to have 2012 about an abundant year, that is not just this one vintage but this whole context of california wine.

actually create a little bit of surplus. down,s flat to slightly and 2014 is too hard to say. if the production were to be slightly.gov that would open the opportunity for other markets in other regions to make up for that. >> share with us what you see in the future. what are you going to do with your business? >> i want to go to the billion dollar business model, with a lot of hard work. international wine cellars, the wine advocate? what opportunities are they not exploiting? >> perfectly good opportunities, but we look at the world a little bit differently. we have the most modern technology platform out there, the most modern tools, the mavs, a lot of things in development. technology is a big leader for

us, where a lot of the rest of technology asiews a means of dissemination. >> we have to end it there. differentiating himself from the wine crowd. ♪

>> that is going to do it for "market makers." thank you do alix steel for joining me.

we're going to talk to one of the best-performing managers of , the ceo ofw marathon asset management. >> we are approaching 56 minutes past the hour, which means that bloomberg television is on the markets. great intoalking derivatives with the options insight. the smbd action in option as it closes at a record high. 'm joined by our derivative strategist. how much higher good this take us? >> we look at volatility, and historically over the last 13 months, we have been suppressed below that level for around 23 days on average. this persistent elevation in futures, thatx

gives a couple of weeks where the market can continue to work higher. the s&p has moved just about nine percent on average during the eight prior volatility events over the last 13 months. we targeted at 1900 over the last couple of weeks. t it is back-and-forth in -- it is back at 14, and before it had a low 12. do you see any indication we could get back to that level? >> i think it is, and you want to targeted at 12. dr. ist of the terms really right where you would expect it to be. the curiosity is that the short and. we expect that to online, and with that unwinding the equities would go higher. facebook, the bloomberg options monitor is showing a

surgical options -- a surge in call options. what is going on there? >> it is bullish across the board. facebook came in a little bit, it is now about 3.5% higher than thursday of last week. call volume was the highest it has ever been. ewth that, you also have sk that is inverted. investors are paying more for calls than they are for points. it is fairly rare. really on facebook, it is bullish across the board. >> how long do you think that will last? >> as far as the interest? >> in the calls being more active and more effective than the puts? >> it could last until the march expiration of a given the volume of trading we have seen over the last week in facebook calls.

actualerms of your trade, you're looking at hertz global holdings. this is after the budget reported earnings. what you have in mind? 13%, theyof more than have guidance for 2014 that was the concern going into that report and guided the line. is that thereer are activist investor that have got involved. eventually, they looking at seller spinoffs. we want to capture the next uy 29ngs as well, and b -- wendyall spreads 9.34 call spreads. $29 or $34 call

spreads. we want to be long and levered out the midyear. >> thank you so much. we are in the markets once again in 30 minutes. "lunch money" is up next. ♪

>> live from pier three in said mrs. o welcome to "bloomberg west." i am emily chang. we are moments away from mark zuckerberg taking the stage at mobile world congress in barcelona, the biggest gathering of the world's top mobile players. we will have his full conversation live for you right here with instant analysis. this is just days after he struck a deal to buy what's at