barges. it is so narrow actually that when you have two big ships that are crossing, they do this thing where they basically head straight at each other -- >> and one has to give. we have to leave it there. thank you so much. we really appreciate it. we will be on the markets again in 30 minutes. ♪ >> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> #fail. the fed denies citigroup's request to turn more capital to shareholders more than five years after it almost collapsed. this bank remains its own worst enemy. what a ceo michael corbett doing wrong? >> ncaa pay? the right to form a union. the other sign that they may start paying college players. we get reaction from the commissioner of the biggies. -- the big east.

>> can the rest of the network with stan "american idol" rating collapse? you are watching "market makers ." i am erik schatzker. wife and am scarlet fu in for stephanie ruhle. we thought it would be quiet. not really. >> know, think about a, the president is in the vatican, the banks are in a freefall. >> let's start with the newsfeed. the top business stories from around the world. the u.s. is ready to cut its stake in ally financial. 95 million shares in the auto lender in an ipo. this stake in the buildup company 17% from area seven percent. the offering could bring in as much as $2.7 billion for the u.s. king digital falling again today in its second day of trading. shares falling almost 4%. wasmaker of candy crash crushed as its first day of a publicly traded company.

it had the worst performing debut of the year. dogged by theeing fears that it is a one-hit wonder. almost 80% of sales come from the candy crushed game. ukraine reaches a deal with the imf over a bailout. $27 billion. helping ukraine to avoid default . the bailout package comes as ukraine faces dwindling reserves and the threat of a third recession since 2008. the first installment could come as early as next month. >> scarlet, anyone playing close attention to u.s. banks already knows what happened to for those who don't, citigroup failed the fed's stress test. citigroup was denied an opportunity to return more capital to shareholders, which is not to say, scarlet, that citigroup cannot pay dividends. it can. .01 aividend is just $ share per quarter. it only buy back 1.2 billion

dollars of stock, which was his previous authorization under last year's fed stress test. he bottom line here though is that this was a surprise. of the 30 banks it stress tested, and the only ones to fail were citigroup, a ions, and thez quantitative assessment, we know that last week, plus 34 and banks, hsbc, royal bank of scotland, and one from spain. i should ask that the three foreign banks was absolutely withering and worse perhaps that would had to say about citigroup but nonetheless, citigroup is a shocker because this date is now under the management of a new ceo, michael corbett, a button-down guy who is supposed to be returning the bank to respectability and writing the ship, so to speak, not just writing it but tightening it up. >> denna goldman sachs and j.p. morgan i get their initial plans approved? and bank ofachs

america. jpmorgan did fine. goldman sachs and bank of america asked the fed to return a certain amount of capital to shareholders in the fed said no, that is too much, but we will give you a mullah goal and let you have another bite of the apple. on the second attempt, they did fine. the question no one ultimately, is for shareholders to answer. the shareholders of citigroup are disappointed. take a look at the stock price. >> michael corbett is disappointed. >> michael o'neill, the chairman of the board, has to be disappointed. >> vikram and is smiling. >> i am not sure if he is smiling, but we might as well put that question to paul miller, a former federal reserve bank examiner, and he is sitting here with us right in new york city, a real privilege. characterized it for people. are we getting it right here? is this a shocker, a black eye for mr. corbett? >> he has only been there for -- >> he has not been there that

long. >> but the problems go way back to 2005, 2006, 2007 -- >> maybe even before that. the cowboy era. >> i have always said he'th ese banks are too big for anybody to manage, and to get citi right -- >> bank of america with a broken bank, too. bank of america past. -- passed. brian moynihan got the approval. is doing something better than citigroup is doing. >> b of a, their problem is mostly mortgage related. countrywide heard that institution. again, something that moynahan inherited. citi was put together over 20 years. very complex. nobody really knows how it works. assets all over the world, 100 different countries, credit card

and mexico. that is going to take a lot longer to work out all of these problems, and the problem with both the ma a and city if they do not own their cost of capital yet, and without j.p. morgan and wells, they earn their cost of capital. citi and to be of a are not enough. be a vague idea and a little bit with capital management. citi has a longer way to go. >> clearly the blame is being laid at the feet of michael corbat for the time being, but i have to wonder whether all roads do lead to the copresident of the bank, the ceo of the global operations. citigroupbell covers for bloomberg. he is the former ceo of the mexican unit food just recently uncovered a shocking 400 million-dollar fraud. should we be talking more about him and less about corbett? but abett is the ceo,

mora bought is the crown jewel of citigroup. corbett has talked about look at mexico, it is a great example of what we can do any emerging markets was of emerging markets is obviously what citigroup wants you to think about for their growth and going forward. perhaps it is a black eye form adina mora, defrauded mexico, and it is making it much harder for corbett to accomplish what he wants to accomplish. >> how much money and time do banks like citi, like jpmorgan, should they be spending more on it? >> they spend a lot on and it is getting worse every year. even things like zions are spending millions upon millions of dollars to hand in the stress test. and they're still not getting it

right. it is probably -- i would say this. back in may 2006, 2007, 2008 time, banks and not understand the structure. they understand it now more completely. but millions upon millions of it goes into this process, probably too much. >> of it making it to -- >> the fed says it is moving the goalposts. on a qualitative basis, the stress tests are getting harder every year. that is part of the point. >> they are getting harder, but this year, the fed has worth the bangs better than they did in the past. last year, they failed a couple, this year they said you know what, you are asking for too and, lower it a little bit you pass. >> that brings us to the next point, why were they allowed to reselect their plans and get it approved?

>> the citigroup fail was a qualitative fail, as the fed puts it was a basically they had questions about their stress testing processes, and in the fed's document, they said about citigroup's with physically, citigroupout specifically, we do not believe you know how to project revenue or losses across your global operations. >> paul, what is the point of failing citigroup in the first place? there are a lot of people that within say in a truly stressed scenario, if we face a near depression again, and the treasury department were not there to bail these bank that, they would all fail. >> they were all fail, yes. >> so the stress test is merely an academic exercise? >> we went through. capitalism percent back when amu failed.ed, whil we are not doing it again. >> what the fed is doing in the

government is saying we have the backs of these banks. we will guarantee the deposits of these banks in crisis. no matter how bad it really gets, we will not make the banks go to market again i quit it with lehman and we will guarantee the deposits, however we will over regulate you to the point it is painful. with citi, it was an easy target. citie fed is taking out as a loser? >> the fed now is picking winners and losers. zions is a loser. that is not really what the feds are supposed to be doing. >> it is worth noting that what the fed said about citigroup with their reprise has is that they asked the bank to fix in the last year that were not there is you know, some kind of picking winners and losers and some randomness here, but to some degree, the banks

did not fix what the fed told them they needed to fix. >> i mean, let's not forget there are some winners here. 25 of the 30 banks iddid pass. permissionrica got to quintuple its dividends. wells fargo even, which you might argue, paul, was among the best position banks going into the stress test them without permission, -- stress test got permission. if we were to turn the argument upside down, can we say on the basis of the stress test that by and large american banks are pretty darn healthy and should be able to return as much capital -- >> the banks are very, very healthy. it is mainly driven by the liquidy that is provided by the banking system into the u.s. economy, which has made the banks strong. they understand the risk controls better than they did 6, 7 years ago. overall the banking system is much healthier.

probably some of the healthiest we have seen in a couple of decades because of all of this. >> all of these banks stocks ran up like crazy last year. morgan stanley up 65%, some of the other banks i decided were up 30%, 35%. how much -- i mean what needs to change this year for people to price in an even more meaningful capital return next year? >> you need economic growth. you need a bank earnings to go up. i think banks have gotten ahead of themselves a little bit because what people are really nothing is rates will go up. that is why the banks have done well. when they started tapering back in the summer, that is when these banks have really taken off. that is still out there in the street that rates are going up and when they do go up, these banks will benefit. >> so your view on banking ultimately depends on your macroeconomic -- >> macro economic -- >> it is all about gp in the end. >> it is. >> pomo here is an analyst at paulnd co markets -- miller is an analyst at fbr and

markets, back in campbell -- dakin campbell with lumber. -- with bloomberg. >> controversial to say the least, it is not involve the president sitting between two ferns, either. >> and what to expect when google's c class shares started trading. you are watching "market makers ," on bloomberg television, streaming on your phone, your tablet, at bloomberg.com, and apple tv. ♪

>> with the enrollment deadline for obamacare fast approaching march 31, the white house is pushing hard to get the word out to the young, healthy democratic that insurers need to make the system work. our washington correspondent megan hughes joins us. megan, this is been a pr push of mammoth perceptions.

what is the word here? marks. got pretty high we talked to add week about this in their push to get millenials, to get younger people signing up for insurance, and they have done a lot of things right. i asked what was the best of what was the worst. one of the best was no surprise the between two ferns video. million hits so far. they say was a good idea to bring a comedian like zach galifianakis, and it'd feel like a natural conversation with and hist obama comedian, so that is done really well. of course, there have been some plots. they say one of the biggest is the ncaa march madness affordable care act bracket that the white house put out. it was basically the sweet 16 reasons to sign up for health insurance. not so much of a feeling of authenticity. a little bit cheesy. >> what came up with that idea?

came up with that idea? [laughter] >> adweek will not be hiring them any time soon. >> print ads, some in colorado that target college students like one that says got insurance? physical. talking about someone meeting a good-looking guy and maybe i need some birth control. that one has definitely raised some eyebrows was up it is important to point out here, scarlet, that is a state advertisement but it is not paid for by the exchange. it was put out by a liberal group and of course it has gotten a lot of republicans firing saying this is belittling people who have lost their insurance because of obamacare, and you have got this outreach to young people saying hey, free birth control. there was a another one, hey, if you fall off of a keg at a keg party, do not worry because you have health insurance. >> oh, my god.

that is too much. critics would say that is encouraging reckless behavior. >> people supporting the campaign say yes, it is shock value, but it is only a campaign on social media. they are not putting these up on billboards or buses. they are really trying to get these things to go viral, get those young people to sign up. egan, besides- >> m going to adweek, how do we know if the ads are working? >> it is a good question, and i think the group is going to be in the pudding when we get the final numbers after the enrollment deadline, but i can tell you a couple things so far, erik. there was bad news for the administration. a poll that came out from kaiser thejah the -- shows that majority of uninsured americans do not know when the deadline push --espite the >> even after the sweetest 16 reasons, they still don't know when the deadline is? [laughter] >> that is right.

you have to think about -- who is this reaching exactly? i also heard our colleague, al hunt, saying they really put this fish out pretty late in the game, so how much of a difference at this going to make. i do have to say age-adjusted relay some numbers this week. they say they got one million -- i do have to say that hhs did release some numbers this week. they said they got more than one million people visiting that website, they did hit the 5 million mark. they're trying to get to 6 million before the end of the enrollment deadline. like they have got to keep calling on lebron james' mom to push them over the hurdle. >> the lebron james psa that is adweek also give that one high marks. you have got a lot of young men watching espn, not cnn, but they see someone like lebron james -- i had to say, i am from cleveland. lebron james is not my favorite person. but a lot of people that do like lebron james -- >> lebron james is a turnoff for those in the ohio area.

thank you so much, megan hughes, our washington correspondent joining us on obamacare. spot ofe plans a third shares, so confusing, and that is why traders love it. we will be talking about it with julie hyman when we return. ♪

>> a week from today google will not effectively split its stock, but it is not your typical stock split. this is a move that consolidates the power of its founders. our julie hyman has been looking into this and she is with us now. >> they are creating this new class of shares will study of class a shares and class b shares, class a are the ones you see traded under the tickles symbol goog.cker

any cd class become a super voting shares, not publicly traded, held by the owners, like sergey brin, larry page. 10 votes for everyone in vote of the class a shares. so effectively the two founders own 15% of the stock, of the publicly traded stock, but they control 56% of the vote. the new class of stock will be classy and will trade under the ticker symbol ggoogl. it will have no voting rights. everyone who has an a share will also have a c share. it will split because the price of each will go down and should be equal. in theory -- in theory, they will trade in lockstep. maybe a discount for the nonvoting shares. google has added of a legal settlement with a massachusetts pension fund that suited over this whole thing, that it would actually reimburse them if there's a certain discount

between the letter a and c shares a year from now. >> julie, this has been a process for two years. what is the point? >> the point appears to be to consolidate the founders' power. >> larry and sergey. >> yes, exactly. this is not an imminent threat imminentt -- an threat. this is a long-term way for them to keep the power of the company. >> it is very defensive. they as you mentioned, they are already in control. >> they are. if you issue stock to page people -- to pay people or for other reasons, there has been some speculation that this would be an avenue for them to have more currency for acquisitions, although there is some debate over whether that is actually going to happen. >> so what happens if everybody gets confused? >> everybody is already confused! that has already happened. the company has issued a

different set of explanations for all of this, but there is some confusion. >> it sound like an opportunity to make money. >> for arbitrageurs, yes. >> senior markets correspondent julie hyman on google's ineffective stocks split. ♪

>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. ," onis is "market makers bloomberg television, i am erik schatzker. >> and i am scarlet fu in for stephanie ruhle. >> if you know anything about the housing market, chances are you are wrong. got buying and selling real estate all figured out? don't be so sure. to tell uss here what everybody gets wrong about housing and what he sees in the years ahead. welcome back. >> thank you. >> great to see you. i say that you have built a real estate investment business, and

that is true, but i also know that while you were at pimco, you spent a lot of time trading and investing in mortgages, so you knew a few things about real estate before starting the encore funds. what does everybody get wrong about real estate/ it is so easy to make generalizations and assumptions, but i know, and we know having watched for the past four years, that's they are often proven incorrect. >> one of the things i would say is if you are in the real estate market as an investor or developer, you have to rely on the boots on the ground, and knowledge of the local markets, and what the market typically gets most wrong is defining a market at the top or the bottom, for instance, at the bottom in many are saying that miami had 60,000 unsold, vacant condos when in fact be world number was less than one third of that, and today we already know that miami and miami beach $1500 to readto

thousand dollars per square foot. >> why is there a such a big gap between reality and perception? >> i think a lot of it is aggregated data -- >> extrapolations. >> a sensational data that catches the news. in theconsensus marketplace, many thought that miami would simply slide into the atlantic ocean, that as a viable city in america or the world, that it really was on its back and could not recover. here we are five years later, and miami is very strong. >> ok, so if your experience proves that you need boots on the ground, why do so many people persist in being long-distance investors, absentee landlords who think that they can time a real estate market from thousands of miles a way? >> i think there is a flaw in the discipline of many asset allocators who are invested in

real estate -- >> like whom? >> it could be consulting firms, it could be large pensions, endowments, foundations -- >> so they feel more and more pressure to invest in hard assets, pumping more money into real estate, taking it out of stocks and bonds, and making enormous mistakes in the process? >> it is the process that is the issue. still relying on the clip board, check the box due diligence and what we call desktop due diligence. you have to be out in the field. they say location, location -- >> due diligence on that lot like mobile signing. >> right. you cannot invest in real estate the same way you buy stocks or bonds from a trading floor. that does not work. you have to be on the ground, you have to know every block of every community, and you have to do it on a micro level, not on a macro level.

you mentioned miami. what happens in miami is not applicable to what happens in california. >> exactly. the different cities in california are all different, and he that goes with the no cities are unique, so you would not compare san diego to the different areas of orange county, l a, san francisco, or sacramento. turned out to do better than people thought. as you point out. have you got to miami and taken a look at your self to see what was and was not foreclosed? what is worse than people think? -- andhave to follow this is one of the disciplines when citing and doing our due diligence, you walk population growth, job growth, the new millennials who are looking for housing want to be in an urban area, so the city -- you want to be in the

center, not on a suburb or the periphery, so going into cities that are growing, where jobs are plentiful, where people can -- tenets can go out there front door and find amenities that they want to fight within walking distance, including public transportation, is critical. so to answer your question, you go to the -- >> stockton, california? >> well, we are now looking at stockton. i would say areas of the midwest remain an issue. , lessere you have older updated infrastructures without the a miniaturized -- without the amenitized conversation -- >> i am sorry to interrupt you, but you have been doing this for a long time. what still surprises you about the real estate market? >> this cycle has to be taken into consideration when

evaluating the real estate opportunity. remember, we had a very different, deep recession that was at the heart of the global financial system, so we knew, and the new normal phrase, to alert people that this would be a 10-year cycle, not a quick upturn followed by fed tightening and another quick cycle. and location, we are about five years into this recovery, but we are only at the onset of an expansion, so many are saying a business cycle downturn, which obviously would not be good for real estate, is inevitable in two years to three years. i would say it is more like five years. madettom line, if you have 50% in real estate, now is not the time to sell. >> real estate, remember, includes many different sectors.

residential real estate differs from office, so in residential, it depends on where you are, erik, because in new york, the apartment markerts are already trading to a low for cap. a lot of the 10-year-old property because of the lack of supply of new multifamily coming into the market is trading today at a five-cap rate, which as a traditional spread, very expensive 10-year treasury, may look like an attractive historical spread, but there is risk of cap rates expanding as treasury rates rise. so you look at some of the forecasts for treasury rates, many are saying, working off janet yellen's -- we will tighten six months after the end of tapering. so if the fed begins to tighten 25 basis points initiative its nine meetings through 2016, we will end up with fed funds just

beginning ofhe 2017. treasury rates about 4.5% and mortgage rates about 5.5%. >> big picture looks different. >> it looks different, and of course that occurs with a stronger economy, implement, and income, -- employment and income. >> bill powers, former managing pimco, now owns his own investment business called on core. >> credit cards, fees, and unfortunately now it also includes a cyber theft. we will take a look at the strategy that one credit card insurer has put in place. ♪

>> i am erik schatzker. you are watching "market makers ." investment banking? nope. commercial banking? asset management? it is credit cards.

card management returns a 20% return for jpmorgan and produced $4.2 billion of net income. eileen is the ceo of chase card services back with us here on bloomberg television. i want to begin our conversation by talking about security. there was an announcement last month from mastercard and visa, chip and pinup on technology. why did it take so long for the card industry to embrace this key security opportunity that -- had we had it -- probably would not have seen what went wrong at target? >> first of all, chip technology in general whether it is chip and pin has been around for a long time. i look at target as being a defining mourn -- moment for us in terms of the u.s. where retailers and banks need to work together to make it happen. it is classic chicken and egg. the resellers have to update their point-of-sale systems, but there are no cars with chips, so not a real reason to do that. on the flipside, if the

retailers are not have the ability to accept chip cards, not a good reason to put them on the card. to me, this is the opportunity for the retailers and banks to get together and actually make it happen. >> it takes two to tango. you cannot put all of the blame on the retailers. charlie sharp, your former colleague, right now the ceo of visa, said it is unfortunate that it takes something like a target breach to get people focus. he says it is the right thing to do but it requires both the merchant and the issuers, which is to say the banks, to work together and that both groups have been resistant, and he should know. he ran retail financial services at jpmorgan four years. >> that is a very accurate statement. to me, what is important about target as it has gotten everybody on the same page, everybody moving forward, and it is an opportunity for us together -- we want to be a safe, secure system for consumers to use their cards, and so do merchants. our interests are totally aligned. >> the chip and pin is prevalent in europe but not in the u.s.

some might argue it is yesterday's technology. what does tomorrow's technology look like? >> if you look at fraud, there is card presents. i give them my card, they swipe it. tip technology is the best we have in that environment today, and it does a great job. it really illuminates a huge amount of fraud. the problem is if you eliminate fraud in one place, it go somewhere else. the piece would need to follow as an industry is digital product, the online fraud, and the solution that we believe is right for that is called tokenization. we look at a model that says chip technology for the point-of-sale and tokenization for the online, and that together -- >> how does that work if i go online and i try to buy something off of amazon? >> think about it this way -- tokenization basically replaces your real account number with a secure token, and that is what the merchant uses to complete a transaction. >> there is a new number every single time. >> yeah. and if a transaction is copper

mines, all the fraudster -- is compromised, all the fraudster gets is this token, where the real account number never transfers. >> eileen, so long as we do not have the technology, how much is fraud going to cost? of ourd has been a part business forever and what we have done up until now if we have invested a lot in fraud monitoring, we do a lot in terms of looking at things like on someone's car -- let's say for example you have a fraudulent transaction. not times the consumer does know it. we are able to see it, we take it off the statement before the statement even arise. fraud has always been something we put a lot of time and energy into. i think now we are seeing with both tokenization and chip a really good way to eliminate it or reduce it significantly. >> illiquid these have come way down. -- delinquencies have come way down. every issuer is different.

our fraud have come down over time because they have invested so much in our point of sale infrastructure and our fraud tools. look at it this way -- consumers do not like to be disrupted at the point-of-sale. when i pull out my card -- >> they want the instant gratification. >> right. but the thing they hate more than that if they hate having fraud on their account. where they are focused on improving all the good transactions, declining the bad -- it is not perfect, but when you look forward between chip and tokenization, it will solve a huge problem. >> i want to ask you the question about the chase cards. they love to trumpet at the card of choice for the wealthy. your data demonstrates this. 3/4 of your revenue is net interest income. why present yourself as the premium card issue? i thought rich people were not supposed to carry card balances. >> i do not think we position ourselves that way, actually. we have over 50 million accounts and we and the spectrum from high net worth folks to affluent to mass affluent.

we really serve a broad range -- >> but you do have the largest percentage of cardholders b $250,000 annual income. >> the customers in that segment, we have the highest, we are the primary card and our customers' walle.t. >> you are glad to have everybody. >> yeah, exactly. >> it used to be that you could not make money off customers who pay their balance off every month. is that still the case? >> they are very valuable. >> how is that? >> transaction volume. >> we have transaction volume -- do not forget, we have more than 20% of all credit card transactions go over a chase card, and that is a $2 trillion market. we have a lot of revenue that we get from spending. some of our more affluent cards with the rich reward programs have annual fees, so we have a

broad revenue model of which different cards have different drivers. >> eileen, we want to thank you for joining us. is the ceo of chase card services, the most routable business at jpmorgan. wife coming up, "american idol" was one of the most profitable shows for fox. is it still? the ratings keep going down. when was the last time you watched "idol"? >> how about never? >> i have not been watching it. >> even scarlet fu does not watch "american idol." we will take a look at the numbers when we come back. ♪

>> "american idol" is heading a flat note in ratings. fewer than 9 million people watched last thursday, the smallest audience in five years. in 2006, it was averaging 30 million post-up what does it mean for fox? for a closer look at the data,

we're going to bring in the director of research for horizon media. does the show still make money at this point? >> it is still the second most intuitive 30 seconds on television. it averages over $300,000 for a 32nd unit. it still makes i would think hundreds of millions of dollars for fox. >> so what is everybody worried about? >> you compare "idol" to "idol" in 2006, and if you compare it to what is going on right now on broadcast tv, it is still a top 10 show, demo 18to 49. it is the highest-rated show on fox. >> should fox be concerned? >> i think so. it is not headed the way i think they want. the ratings follow-up has been the last two years approaching double digits. they could do something like cut back on the show, but like cuts and it -- about on the show. >> cut that expensive.

makes reportedly $70.5 million and she is only one of four judges. lo makes reportedly $17.5 million. and some of the younger upstarts like the "voice" are holding their own. >> even some of the shows like the "voice" is losing a little bit. this week, a kind of hid some lows. i think that is part of it is that, you know, four years, "idol" had the franchise alone command in the "voice" and "x factor" came in. there has been an erosion of young viewers who will get fatigued a little sooner than older viewers, so it has gotten a little older, but "x factor" is going to be canceled. it is not coming back next year after three seasons, so i think that will help. >> you mentioned making the program shorter. right now, you need to commit how many hours a week? >> i think it is three hours a

week, 56 hours over the course of the whole season. then if you are watching the "voice," that is another three hours. it is a huge time commitment. you see what abc did with "dancing with the stars," cut it down to one hour, two hours. or even starting the show in february instead of january. build demand. is still verydol" profitable. but to the degree that perception is reality, how much of a contagion effect might be perception that "american idol" is losing its mojo have on other parts of the fox franchise? >> i think fox right now is number two in 18 to 49. which rbc hadbc, the super bowl, the nfc championship game, they have shows like "the following" and some comedies. they have about 20 shows in development for next year post up what they have done, kevin riley has done is we're going to

look at these things year-round, go away from the typical broadcast season, and just order shows as they come in, and if they like them -- they ordered six shows this year. it is a strong station group. fox is the largest station group in the country. creatingne a great job original series that are very popular with young viewers an online. also, there is -- you know, fox sports one. >> if the value in "american idol" is that it is a live event, what is the value proposition that people can watch on demand? >> actually, it does not do that bad with dvr's. it does pretty well. but the show does not syndicate well. if you have seen the show, you are not going to want to watch it again. also, netflix is cutting down on scripted shows. netflix and amazon have been in talks with scripts. once the show has aired, it is

news, it is like live sports or something. but there is a significant amount of time shift in people who might watch it a little later. >> got you. right now, not enough people are watching it, even with 9 million. >> including me and scarlet. >> i stopped watching. >> we are the problem. >> brad adgate. i don't think you are the demographic they are chasing. 18 to 49. >> am i really the target demo? >> you are in the money demo. >> the first and last time i will be on the money. do we have time to do "on the markets"? >> yeah, let's look at how things are trading. the big news was citibank failing the stress chest. >> citibank getting slammed, but alcoa doing quite nicely. it had to do it with the ruling, positive, the market seems to

agree, the stock of 6.5%. we will be back here in two minutes here on "market makers." ♪

♪ >> alive from bloomberg headquarters in new york, this with erik makers" schatzker and stephanie will. >> the new microsoft ceo makes his public debut and is expected to introduce office for the ipad. will this be enough to save the companies flagship software? what's a labor dispute that affect how colleges pay their top athletes -- if colleges campaign the top athletes. is a badhink this idea. >> sheldon adelson -- potential gop candidates are going to las vegas to try to win his support. but more importantly, his money. you are watching "market makers"

on bloomberg television. it is 11:00. i am erik schatzker. tephanie wu, in for sarah ruhle. --wears hoodies >> take that, mark zuckerberg. >> that is how they do that. one day after missing the stress citigroup is falling. the quality of the revenue and loss forecast across the business -- for more than 100 countries means that citigroup is not allowed to raise the dividend over one penny per share or buy back stock. a music streaming service has held early talks with investment banks -- and formal talks for spotify may begin next month.

spotify has declined comment. after 2 years of testing, it is here. the waffle tocco. a breakfast sandwich rolled up by taco bell today, a waffle shaped like a tocco stuffed with eggs in your choice of meat, bacon or sausage. this is a move by taco bell to break into the breakfast business. open at 7 a.m. to lower the early morning crowd. what do you think? >> i am not into that. i think that they have done too far with the waffle tocco. would you feed that? >> no. >> is is where you don't fit into that. >> i am not eating a waffle tocco. i am an advertiser's worst nightmare. my kids will not be eating waffle toccacos. nadella isceo satya

making his debut, he will make his debut in san francisco and introduce office for the ipad. joining us is our bloomberg west editor at large, cory johnson and the senior analyst at stanford bernstein. he has a $47 price target on microsoft shares. cory, why don't we start with you. you are out there and you will see office for the ipad in a few short minutes. how important is this for andone like nadella microsoft? >> it is a symbolic thing for microsoft to embrace this platform. apple devices being sold the microsoft devices. they want to be like lotus 1-2-3. they don't want to -- that to happen to them, they want to be across platforms. oracle tolla brought the microsoft cloud. this is something they did not expect microsoft to do. he knows they have a different place than they did 10 or 12

years ago. this is a way of reaching out to the consumer. this is all about the enterprise and offer 365 in making this relevant to corporations that find themselves filled with ipads. they want to do that with microsoft software. >> mark moore dollar is here in new york city, nodding his head. does this mean something to satya nadella? >> microsoft cares much about this move to cloud subscription, a has beenatya nadell the last couple of years working on, the move to the cloud. idisagree a little bit -- also think about the consumers and the $3.7 billion consumer makee revenue and had we sure this is protected and if they can move that, even a portion of those users can drive all of that revenue to the move to subscription. both sides of the story drive to

corporate and make it more relevant, part of the move and protect where they can on the consumer side. >> here is one thing i am wondering about. $3.7 billion in consumer revenue. how valuable is that to microsoft? versus thehis get enterprise revenue? >> right now, the street gives it zero, no value whatsoever. >> why not get rid of that, why don't they become an enterprise business? and allbout the xbox the questions with office and if it goes to the ipad. >> they can do that but they cannot get rid of that. >> they can get rid of the debacle that has been the surface. >> this is revenue and there is no reason to throw it away for a good margin business. will dodella -- nadella is drive aggressively on the enterprise. this is the enterprise story but where they can, they might as well keep that if it will generate profits. why not? in the end, don't throw away

what is working if you can keep that going. as cory said, he is absolutely right. this will be an enterprise story company with them protecting where they can. >> cory, i want to talk to you. institutionally, what is the them andhip between microsoft? >> if this will be a boon to microsoft and the additional 365 revenue coming from the introduction today, 30% of the revenue from this project is going to go to apple, through the apple i store. is the point of enterprise versus consumers. there has been a fundamental change, a really dramatic change in the way that decisions are made about corporate use of technology. because what we have seen because of the ipad, with the iphone people would find a way to use them at the company all the way to the ceo level.

but with the ipad they said, make that work on the network. we will have that in the business right now and i will not wait for microsoft to come along the way. and bring your own device. change in the way that this is purchased on a corporate level. this is a fundamental change and it is very threatening to the guys who would go in, not just microsoft but the oracles of the world. we can see that in the falling sales of those companies. right now what is happening its devices arebeing -- being introduced by the users and the corporate i.t. department, does not have the power that used to have within the corporation. >> i would agree. i think that the endgame related to office is subscription. rented by users and across all the mobile devices that the user has, being able to monetize. office is a product where over 50% of the office is pirated. even within corporate there is a sniff again portion that is ms.

licensed. and think this is per user, this is per user per device. i kristoff has a huge opportunity to monetize this on the consumer and corporate side, and anywhere they can they will drive that story and they will use office on the ipad as a key way to drive that. >> which market are they chasing, is this the united states or overseas in china, where more of the mislicensing is taking place? is a developed country, not a developing country solution. they are not as prevalent in china as they are in the u.s. and therefore microsoft is going to drive into that more. but anything that microsoft can do to eat into the piracy in china and more emerging markets will be good. >> are enterprise workers going to go along with this? adobe is doing the same thing with their photoshop and the

customers are resistant. they don't want to pay $10 per month and $120 per year, they will go with something else. if you are a microsoft office user or a pirated office solution, microsoft is trying to force you into user-based licensing, why not go for google docs? >> in the corporate world it is not free, you have to pay a fee for it and there are things like opening excel spreadsheets, that don't work well in the google docs environment. think of the filing. corporate comes in and they have to buy office, from 250-400 $95 per user. to $495 per user. if they come in and do the audit and they find that you are out of compliance, they will nail you to the wall. they will charge you an enormous amount, in terms of fees and other things to be under compliance.

microsoft comes along and say that for $12 per month, you can put this on up to five of that person's devices, and we will give you a single license so the software police will leave you alone and you will go from laying -- paying cash up front to having this -- >> and this protects the revenue stream and makes the more relevant, on more devices and it drives the whole story. all about moving to the recurring revenue and the clout subscription, protecting and driving growth where they can. >> mark, thank you. johnson out in san francisco, waiting to see office for the ipad with his own eyes. >> backlash on kickstart her. turns out the early investors in oculus are not happy with the t-shirts that they got. >> and big changes may be in charge -- and big changes may be on the way for college sports.

we will talk to the commissioner of the big east. "market makers you are watching -- you are watching "market mobile devicer and on television and on bloomberg.com.

>> first, bloomberg. oculusy backers of the kickstart her campaigns are mad facebook bloomber acquisition of the company. here to join us is a man who studies crowd funding at the new york school of business. thank you for joining us. before we get started, set the record straight. designed to was fund nonprofit organizations and other charitable work, not small businesses. >> this is a reward-based platform. the reason whym, people donate to these products, comes from the cloud running platform. and so, it is constructed to

think about why people donate on these platforms. they donate because they are getting something out of them, pre-ordering a market product, or because they believe in the identity and the cause. my counter is him. >> what is the reaction from those who put money into oculus early on, and now see that facebook is reaping the demo -- the benefits. >> this is buyer's remorse? >> you have to look into why they buy these platforms, and who these people are. it has disappointed them and now they are outraged. the reason they are outraged because they did not see a big tech giant coming in and buying up this company. they did not donate money for commercial reasons. you are in the crowd funder -- >> whose fault is that? it is their fault. if you can see that oculus is trying to build a commercial

product, ultimately, the guys in business to try to develop something. you may not know, as a kickstart her donor, whether or not this will become -- kickstarter donor, you don't know if this will be a commercial success. that is the whole focus, to make that and sell that. >> there is a difference in expectations between those who work on these platforms versus those who donate, on crowd funding sites. >> so they were had? >> a lot of people are disappointed and outraged because -- >> you studied crowd sourcing. what are some of the trends that you see out where and what is the -- out there and what is the impact of kickstarter on there? indiegogo are between a rock and a hard place. if you're an entrepreneur, this is a way to pump in money to kickstarter, maybe they will do something spectacular.

but if you are a donor, you are outraged because you did not give this funding and that is not why you put in this money. -- thend the job that jobs act going to take care of this? >> a are now waiting for comments from the public. when this is past, what we will see is the credited investors -- and the investment. right now, only an investor with a certain amount of income can contribute to the crowd funding platforms, but as time passes you can see the definition is anyone who is making $100,000 per month can put in five percent of their income and people below can put in up to two percent. >> you are looking at basically a tool of investors, expanding -- >> we will see platforms, platforms where people can buy small equity states in oculus ventures? >> when you put in $100 you will

get a piece of the company. >> and if this is taken out by facebook or the public -- or goes public, you can have something just like the venture capitalists who have bought in. >> imagine that. because you studied this, how much of a game changer do you think it will be? >> huge. right now this is about $30 billion. predictions project that this will come in to place and you are talking about a $300 million investment. this is also for the investor -- the investor, and event -- and an investor like me, across this platform. $30 million to potentially $350 million in a matter of a few months. >> the people who donated to oculus on kickstarter knew that they would not get a return. knowcrowd funding -- they that they might get a return and

they would be that much more disappointed because there is the prospect of return, not guaranteed zero. >> with these equities, they are aligned. of this or yout can get none of this. what happened with kickstarter -- they did not have any of this for the cofounders. >> this had to happen at some point. thank you so much. the professor at the stern school of business. >> he studies crowd funding and crowd sourcing, and now he knows how -- now we know how those people on kickstarter feel. >> outraged. >> next, we will have the commissioner of the big east conference. they will be right here.

>> president obama is in rome

today, continuing on his european tour. he has started a press conference with the italian prime minister after meeting with italian officials and pope francis. white house correspondent phil mattingly joins us. is he making any progress on the ukraine? >> what you have seen from him today is what you have seen over the last few days. he is with prime minister renzi and he is trying to reunite europe with the united states as they continue to confront this issue. the big question going into this trip was europe and the major sanctions right now and the way that the europeans have lined up behind the united states and the president during this trip is something the administration is taking as good news. thehat is going on behind scenes? john kerry is involved in this as well. he is trying to make sure that any middle east peace process is not derailed. >> you have seen this all hands on deck on the foreign policy side of things.

one thing that we were very interested in, the nsa allegations from edward snowden have resonated more in europe than anywhere else. we have been asking senior officials about this and this is a point of contention during the behind the scenes talks. the officials say this comes up but they feel that they have dealt with it, they deal with that in a way that is open from their perspective. european officials have acknowledged that publicly, these are issues that still exist and they still want more answers from the united states. >> this is a source of tension. what about the u.s. discussions with russia. have there been any conversations scheduled to take place between the u.s. and russia? >> we don't have any allegations -- any conversations directly from vladimir putin and president obama. has a factepartment channel open and secretary john kerry has a good relationship with his cohort, i guess you would call it, in russia, mr.

lavrov. that has been unnerving over the last couple of days and everyone who has seen the troops massing from russian soldiers -- you're different areas of the ukraine on the border, they have also heard nothing from russian officials. there is a silence going on right now and people are very worried about what the russians are planning, whether or not the forces inside the ukraine are next and until we get public the administration officials will be very concerned about what this may mean. >> where is the president going next and what is his next stop and what will his next message be? >> we will see him hammering on the issues of unity behind the ukraine. he had that visit with the pope this morning. this is not only good for him internationally, this is good the popeomestically -- as a 65% approval rating, way above the president, they can

use that with a political perspective and he aligns closely with the vatican when it comes to income equality. we have seen it back home and in the united states. we have heard of the administration officials working to try to push the agenda when the president comes back. pope'saine and using the visit to try to hit again on that message but he started with the decision. >> thank you, phil mattingly. our white house correspondent. if you want to tune into that live is conference of this happening with president obama and the foreign minister mikael renzi, go to bloomberg.com. the live press conference is taking place right now. >> it is almost 11:30. >> i am going off to radio. you have a lot coming up. >> a busy half-hour. in store for college sports. the commissioner of the big east conference.

>> a big conversation there. >> can you pay college athletes or should they be able to unionize? >> we will be right back on "market makers," at least erik will be.

♪ >> alive from bloomberg headquarters, this is "in the " with erik makers schatzker and stephanie ruhle >> i am erik schatzker. stephanie ruhle is off today. big changes in the ncaa, college basketball players are calling for pay. and a green light to form a union at a college football team. is is the beginning of the end for college sports as we know it? kerman of the big eastern the thate, she was --

she knows much about college sports and also charles decamp from radio. question,r the beginning of the end or end of the beginning? >> college sports are in a very interesting place. i have learned a lot in the last several months as commissioner of the big east. frankly, the whole landscape as a little bit more complicated than most people understand, when we think about the economics of college sports, the ,alue proposition of the ncaa for students to come and play sports to their universities. >> should they be paid? >> i don't think that they should be. i think it is a complicated answer. i talked with scott beforehand, i wish we had two or three hours to go through all of the issues here. i don't think that they should. i think the value proposition of

college sports is a good one, you can go play for university and get your education paid for, represent your school and be dot of a community, and -- that -- >> that does not apply to every student athlete. >> most student-athletes aren't sports that don't produce revenue. thist's talk about this -- only represents the top-tier football and basketball players. those of athletes we are discussing. those are mainly the programs for the athletic department and in ohio state, they give back -- give back to the university. this is about football and basketball. to would be hard-pressed find a swimmer or a squash player who say they are not getting enough. showing up with lights and cameras to show their swim meet. >> your conference, the big east basketball conference, if just cast -- if jeff kessler's

lawsuit prevails and the top athletes were to get paid, how would this change things? >> this is a discussion i have not had with my president, and i don't think any commissioners have. we are moving in a direction of what some people refer to as enhanced benefits for student athletes, including football and men's basketball where the value of the scholarship is grossed up. in c rule -- ncaa rules that are not being covered will be covered under the model that is envisioned. i think that the sense of most is that this will go a long way in addressing some of the concerns, including concerns that were addressed in the northwestern claim, about health and medical care. but in terms of paying a salary, treating students like employees, with everything that goes with that, the tax implications for those students, what this means in terms of their relationship to the

school, i think those are very complicated issues and i can't speak to the northwestern situation. i am not a labor expert and i don't know what they were looking at, but we have to look at the philosophy -- philosophy of being a student and playing sports. i think the value proposition is the right thing. >> the key thing is you have courageous players demanding change. for so long was looking to maintain status quo. now you have the university presidents and athletic directors talking about that -- this came from the athletic directors. let's give them $2000. the haves and have-nots and the power conferences looking to do their own thing. they generate so much more other networks, some of the schools -- texas has its own network. there are things they want to do for their athletes that other universities cannot. >> to what degree should these athletes, at the end of the day,

the athletes are making the case, be careful for what they wish for? >> there's always the law of unintended consequences. we mentioned the tax implications. is it likely that the irs would tax the value of a scholarship? if these athletes are looked at as employees, would they look at this as a revenue source? >> it is unlikely that just one thing would change. say that they are out to form a union and get paid. of these universities may decide they don't want to sponsor a college sports team. they want to share the burden of that expense, and they would rather find these teams become junior professionals. >> that could well be the case. there may be a de-escalation by some, because of what this would require, and that is certainly tough. nobody really knows for sure. but i think that the point i want to pick up on right now, that's got made is that there is

a misconception about where the money goes. money is flowing into the system because of the value of these sports in the commercial marketplace, but that money is going back to a lot of other sports. we can certainly see that in our conference. >> there are schools with millions of dollars in revenue. >> they have been generating television money in a sport like basketball, there is already a discrepancy. but i think that when people think about the money that is coming into the system, they don't really understand, entirely, that this is going back out in the form of money back to the institution to pay for scholarships, to fund championships. 89 championship smugly from men's basketball television contracts, they are funding all those championships and dissertations back for performance in the ncaa tournament. this is given back to the school for a broad base of programs. >> they say i don't care what happens. my job is not to figure out how

you fund your attendance. is whatant to see happens is legal for the football and basketball player. what shakes out for the system, that is hands-off for me. but what is happening right now, under antitrust law, is illegal. >> five years from now, the cauldron is bubbling. do you think the situation for student athletes across the country, if this is swimming or squash or football and basketball, does not matter, will this be better than it is today? >> i think that the system right now, for the non-revenue-producing sports, what student athletes get to go to a school like villanova in the big east, -- when they get to do that, that is a good deal. i was a student athlete at the university of virginia, i played women's basketball and got a full scholarship. this was a time when there was nobody in the stands and the

sport was not generating a nickel. --were bringing honor to you to the university, we were representing you in the basketball games. but to go to a school i might not have gone to, to get a free education and be part of that community was a great value proposition. for a lot of student athletes that is very solid. i would hope that whatever system comes out, that we are all experiencing, preserves that. as it relates to other sports, there is a move, even without litigation today, to make it a better experience for student athletes in terms of the benefits they will be getting. >> it goes back to, be careful what you wish for, who knows what the future holds in store. the big east commissioner, and our own man on sports, scott. and the 2016 republican nomination -- candidates are

spending this weekend in las vegas, but it is not to gamble. or not gambling the way you think. and apple television, and their new viewing experience, with live streaming and on-demand video. ♪

>> 4 of the top contenders for the republican nomination will spend this weekend in las vegas, in an airplane hangar. not just any, but the one where billionaire casino mogul sheldon adelson keeps his fleet of jets. the will try to win financial backing that decides who gets to run for the white house. former businessweek national correspondent josh crean is hotel inhe venetian las vegas. let's begin by talking about who is out there, who is meeting with sheldon adelson? >> you have 4 blue-chip republican candidates, chris

christie of new jersey, former florida governor jeb bush, and 2 dark horse candidates, scott walker and john kasich, the governor of ohio. all of them are considered mainstream, a likable republicans. you don't have ted cruz or rand paul out here. that is because sheldon adelson spent $93 million backing a fringe candidate, newt gingrich. this time he wants to spend his money to get a republican elected president. you have 4 guys out here rattling the tin cup, hoping that he will put his money on them. >> that is his whole some of the republican hopefuls who we know are out there, don't bother coming to vegas, some of you have no hope of winning the nomination and as such i don't want to see you? >> it is unclear. aid, heto marco rubio's is considered unelectable candidate but he is not out

here. he was down about six months ago at an are jc event. -- rjc event. there is paul ryan of wisconsin, who some people consider electable and he was the vice presidential candidate in 2012. he is someone i would consider a contender. other big ones out here have been invited to this private dinner, in his private airplane hangar, and they are in the running, for some of the financial backing. weekend,course of the they will sit down for one-on-one meetings of -- with and make a adelson pitch to him about how they will get to the white house in 2016. >> what happens and maybe i'm getting ahead of myself, rand paul is not invited because he is an isolationist. we know that sheldon adelson cares deeply about iran and israel, what if they get behind rand paul?

he do then? >> he is a big israel hawk. that is his big issue. i think that he may have a problem. we are in the era of freelance billionaires who, if they decide i don't like a nominee or a front-runner, they can take their money, if they have enough and he does have enough, and back another candidate the same way that he did with newt gingrich. the shortcoming of that kind of strategy, we saw that play out in 2012. it was newt gingrich to kind of blow up the mitt romney presidential candidacy. sheldon adelson does not want that, and if he can get in early enough and back one of these electable republicans, he can avoid that kind of a problem and and hisuelch rand paul prospects heading into 2015. >> let's talk about his domestic priorities. what does he want to tell these candidates who are out there? when will we start hearing from

them because they decided that there are things they have to start saying to win his backing? >> i don't know that he will issue a set of positions to them. he is obviously well-known as a former policy hawk. he opposes internet gambling for obvious reasons, because he owns a lot of casinos and does not want online competition. that is an issue. he is big on limiting economic regulations as most republicans he, but as you may expect, is not big on social conservative issues, he does not come from the mike huckabee, rick santorum wing of the party. the candidates who will appeal to him are going to be the electable ones, who are essentially just mainstream, solid republican candidates who have a solid position on israel. and look like they could appeal to a broader segment of the electorate. tojosh, i look forward seeing more of your reporting.

following the four republican hopefuls. they are meeting with sheldon adelson. coming up, time to negotiate like a pawn s tar. -- star. we meet with rick harrison, the host of the popular show on the history channel, next. ♪

>> the art of negotiation. few know it as good as rick harrison, the host of the history channel's "pawn stars." >> i would like to sell this watch. >> ok. >> i am rick harrison from "pawn thes," i probably have busiest pawn shop in the united states. we buy three thousand or 4000 things a month -- 3000 or 4000 things a month, i probably do 500 negotiations -- 5-50 negotiations a day. be a nerd, read and read.

do this -- it is a really neat watch. this, i have no idea. this will go down 3000 meters. nobody dies 3000 meters. whatricing -- you ask them they want for it and you are opening up. how much are you willing to pay for it? >> i did like $3000. >> -- i would like $3000. >> you have to be willing to walk away. if you will not walk away you are not negotiating. you are being forced to buy something. will give you that for the watch. the day you start taking advantage of people, they will find out about it and they will tell their friends. and you will not have a successful business. the watch it like this would be right around $2000. this is a deal.

>> if you want to learn how to haggle, you can go deal with a carpet vendor in its temple, or you can watch rick harrison here on bloomberg television. we will take a short break, and we will be right back on bloomberg television. ♪

>> that will do it for "market today. tomorrow, we have much more

coming your way, we have the ceo of royal caribbean. cruising has been a difficult business lately. what can will caribbean do to get people back on the ships. right now this is almost 56 minutes past the hour. it is time for bloomberg "on the markets," and here is julie hyman. >> thank you, erik schatzker. we are diving straight into derivatives. stocks are trading higher and the s&p 500 is on track for another record close. joining me now with a closer look, we are joined by larry schober right now, the chief gnvestment officer at sss alternatives. he's joining us to talk about what is going on here. little bit about what is happening in the macro, this is a little bit dated, actually. let's talk about what is going on in citigroup. the shares are falling after they failed the root -- the

latest stress test. this defined expectations. thatxpectation was citigroup had improved. and now it seems it has not as much as they have been insisting. the giller stocks are falling. what is going on in the options market? -- thiserm structure tends to be higher than it needs to be -- front volume seems to be much higher than it needs to be compared to back month volume. let's face it, this is the second time that this has happened in three years. investors are starting to say, where is the progress? that said, implied volatility has come off slightly, and we are seeing the structure up at about the 80th percentile. the demand for downside protection and citigroup. >> do you have a particular strategy when it comes to citigroup. am shockedrish, i

the stock is down more than 5.5%. i would look to be buying with the volatility and selling twice -- to help pay for the volatility. this is fair, this is a little bit elevated, a little bit bearish, i would say. so you are taking advantage of having the short term there buyout for the options trade. >> what do you think about the bank, overall? >> i think they had a great ripped last week and that is the reason that they are not down more than 5.5%. let's face it, we will have a higher interest rate environment, that is great for the banking stocks and multiple arbitrage. if they are trading lower than the spx, that is the net interest margin. i continue to like the bank but i right now. for cit >> we have an incredibly volatile group, you are looking

at the triple the kicker, -- triple d kicker, to name the company and the enormous swings. how do you play that? it seems like it is very tricky. >> it is very tricky and that is why you have to look at the options market. volatility is up 53% in may. this was very elevated and i think that the stock will peter off just a little bit. you can sell twice as many may-45 and pay less than $.10 for that right what -- right now. the most you can lose is $.10 and the stock will go down by 45 -- then you have made five dollars and you don't start losing money until the stock is around $40 per share. >> it sounds like you think -- you think that there is going to be some more volatility but not as much as we have been seeing?

is that how we should read that? >> the implied volume is 53%. that, in no way is elevated for 3-d systems. it has been much higher than that. it is settling into a range. it is a good company on paper but i think it deserves the fall a little but in the next six weeks. >> larry, thank you for joining us. markets,e back on the "lunch money" is next. ♪ . .

>> welcome to "lunch money." where we tie together the best interviews and business news. looking at the menu dashers what we've got -- the search for malaysian flight read hundred 70. the big part of it happens inside a london satellite company. we will take you there. over the world's biggest watch -- there's a lot at stake to win sheldon adelson's money. it doesn't hurt to know how to haggle like a pond star.