>> live from bloomberg headquarters in new york, this is "market makers." tiger?hless he says enforcers are too scared to go after the biggest names on wall street. they are angling for high-paying jobs at corporate law firms. ouch. fixing fannie and freddie. we have an exclusive interview with a democrat who opposes the plan to online the housing giants. what does he want to do instead?

h hedge funds will be listening. >> we will hear from the former agent pfizer has hired to put a stop to it all. >> good morning. you're watching "market makers." >> i am stephanie ruhle. a lot of market chatter that we need to dissect. first, let's get to the news. >> these the top business stories from around the world. the u.s. cover he will drive the global economy this year. had its forecast for worldwide growth. it reduced expectations for brazil and russia. citigroup is settling up. they agreed to pay more than $1 billion to settle claims by investors in mortgage cap securities. citigroup is still facing action

from regulators. in germany there is a deal for art stolen by the not sees. it is held by an art dealer for decades. had art in his apartment for decades. billion. that is what two of the biggest drug companies in the world have been ordered to pay in damages for hiding the cancer risks associate with the diabetes drug. this is some serious business. thought that was how much they made. that is how much they are paying in fines? are not uncommon. will likely happen is the ultimate figure will be revised down. it is and i've watering figure. a man who was taking a

blockbuster drug. it was bringing in foreign half-billion dollars a year in sales. -- $4.5 billion in sales. it was a vital drug. he said it caused his bladder cancer. they hid thed that risk of cancer knowingly. are labelingmments the drug saying there were cancer risks associated with it. it'd been on the market for 12 years without that warning. they both came out and said they are going to vigorously challenge this. shales -- shares are selling off. they are down by six percent in tokyo. they say this remains an --ortant option for td treating type 2 diabetes. they deny that it causes cancer. >> as we look at the case law

and other decisions, can we draw any conclusions? >> one case it might be comparable could be what happened with merck in 2005 over vioxx. annals are saying that they might have to pay $30 billion. in the end, they only paid $5 billion. that is still a lot of money. we spoke to one analyst who said the market is talking about a 40 $950% knockoff of the billion figure. it is the lot. >> the year has started with a bang. it seems like they buy day we're hearing about a big deal after a big deal. to a 27% jump in the value of transactions announced during the first quarter. the picture gets murkier when

you dig into the details. talking alesci has been to the biggest names in m&a. --'s look at the marquess murkiness. >> a depends on what numbers you need to show. goes, we deal volume have seen so many big deals we have seen that number explode. you can see it on this chart. thecially if you compare first quarter of this year to the first quarter of last year. blue bars, at the when it comes to number of deals, we have been relatively flat. investment bankers do make money on lots of smaller deals versus one big one of the same value. deals, theymassive can negotiate these down. if you are a banker, what kind of year do you want? ofi did speak to the head

global m&a at goldman sachs. this is what he had to say. >> the pipeline looks good for the rest of the year. it was pretty strong activity. increase in volume over the first quarter of last year. the two things are most notable were the size fans action, we had more deals over $10 billion. second, was the nature the deals. they were strategic deals by blue-chip acquirers. we saw m&a from comcast, --ebook, full flag and, ands like an, -- full flag swagon, all big firms. i think we're good to see more

deals across health care. point if you are making earlier, for quite a long time the point people were making is we were seeing a big deals. now that we are seeing them, we are not seeing enough of them out. >> laster, we had all of the conditions that were right for m&a activity. we had equity markets that were strong. all of the things you would typically see. we ended the year with a complete flop very if you look in the value of deals last year as a percentage of market capitalization, that was the lowest since the 1990's. how you measure it. perhaps the high water mark we reached in 2007 was an aberration of the times. that was just like everything else about we believed to be true back in the bull market days. the last bull market, not the

one we're in now. >> goldman has been the top dog as far as tables go. i have not seen goldman's name on a list. >> that is something that we talked about. here is the thing. they do see more deals and here is why. do havenvolvement we right now and what we are starting to see in the market is one where ceos are willing to do a larger deals. this is the first time in 45 years. if you talk to clients about transactions over the last 45 years, they are intrigued by the intellectual interest. we have an environment now were the conditions that have been rateslike low interest are still there. there is no crisis on the horizon. we feel in the last couple of quarters there has been a positive equity market towards m&a transactions.

that is counter to anything we have seen in a long time. that is starting to generate additional interest by companies and ceos. haso your point, goldman walked out on some big deals. the time backing warner deal. they must've been paying them to advise. at the way thek blue tables are calculated, the markets there -- market share numbers are studious. oldman did not advise on whatsapp or more in stat -- morgan stanley did. puig the revenue figures out of get thes -- when we revenue figures out of the banks, that might show a different picture. to measure one way

market share in the business. that is one that people focus on. i think we are less focused on where we are at the end of the quarter than we would it -- be at the end of the year. we feel good about our franchise. to get to ben is number one at the end of the year. everything we do is the number of deals. the dollar value is more about deals than anybody else. we are number one. >> the value of deals, number of deals. when a no really care firms like goldman and morgan stanley, and i think everybody does it, game the tables? sachs stanley and goldman trade money they were owed in exchange for credit. >> when a banker walks into a

client and they are pitching, the first page of their deal book is here is where we are in the table. it is a hard argument to make. they are all gaming the system. >> that is a bunch of bs. >> what isn't? marketing as a bunch of bs. >> salesmanship. i think you are always trying to game the system a little bit. >> thank you. alesci, thank you. coats?ctives wearing lab we will show you how big pharma goes after drug counterfeiters. his bossesawyer says were too scared to go after wrongdoing on wall street. you're watching bloomberg television. ♪

>> you're watching "market makers." i am erik schatzker. untold story of ineptitude of the securities and exchange commission or it could be a case of sour grapes. this is the talk of the securities bar this morning. a longtime sec trial attorney agency a fearful organization of lawyers who go easy on companies they regulate. phil mattinglynt is as fascinated by the story as i am. not only is this a parting shot at the sec by a retiring along your, he actually says he tried to get the sec to go after goldman sachs executives in that $550 million case. he wasn't successful. tell us more. critic of how the sec

has operated in the wake of the financial crisis may have found their voice. to a talking point, he gets what -- what theye been have been wanting. they police the broken windows of the street level. they are unwilling to go into the penthouse floor. that is basically what everybody has been saying on the critics side of this. the sec is more than happy to take on a low-level fraud. they're not willing to go into the c suite or the biggest firms. he was willing to go after his bosses. this is a farewell speech. there is not going to be any repercussions. his point is that he has had bosses whose names we all know that made little secret that they were there to punch their ticket. a lot of wall street critics point to the regulators and the

justice department and save these lawyers are here to punch that ticket and go to a higher paying job at a private firm after they are done. they have found their voice. >> when he gave these remarks, or any of these former bosses in the room? have they made comments cents -- since? >> the people familiar with the event say there were 70 people in the room and he got applause afterwards. he was on his way out. everybody knew he was on his way out. according to people for your -- from a leader with his work, he was upset about how things turned out with the goldman sachs case. he made recommendations in that case to go after more senior at paulson.eople those recommendations were not taken up. he moved off that case. there is a little bit of spite maybe in these remarks. this is something -- >> maybe frustration.

absolutely frustration. we have a trial attorney, these are the cases that they care about. this is really put their work and hours. if you have somebody above you who is not looking at it like you are, it can be extreme a frustrating if they undercut your recommendations. >> i want to thank you for bringing this story. what iswant to know going on, we turned to tom sorkin. he spent almost 20 years at the sec in the division of enforcement. he rose to a senior post. thank you for making time for us. i want to talk about these allegations. however we want to turn them. it is like pouring gasoline on a fire that has been slowly burning under the sec for years. how much truth telling is going on here and how much of it is sour grapes? >> the perception from the story

you read today is that the supervisors at the sec did not listen to all the voices of the room. i found my experience there to be the opposite. the vision -- division was being led into thousand nine, he looked to the staff for how the reorganization should occur. reorganized. whenever he had a big matter abouteeded a decision whether to bring a case, he also listened to the voices in the room in a manner similar to the way he reorganized the division. my experience is quite different. i had my subordinates in the and he would listen to their opinions over mine. i had a different experience. >> did you work with james

kidney at any point? >> our house and not cross. i knew him and he was a very good trial attorney. i am surprised that he would have these statements to make. i read of this is that he did have an opportunity to make his points known and at several points people above him decided to go in a different direction. >> his allegations go beyond just that had voice -- his voice wasn't heard. goldmanved paulson and sachs. he said they regularly were too scared to go after the top dogs on wall street, the people and firms that it is charged by congress with regulating people --. lawyersbecause these working at the sec were concerned about what kinds of jobs they would get in the private sector after leaving the agency.

does that ring true to you? fromhave heard that federal judges. i don't find in my experience that was the case. there are very talented attorneys to go to the sec to perform public service. there is a lifespan that you have the sec. at some point you have to leave. some may say that the corporate world is better because people and counselc and go those same corporations as to how to abide by the law. >> they can take those expertise and get paid handsomely by these corporations and teach them how to outsmart the system. goldman sachs has deeper pockets than the sec does. >> i don't think they are outsmarting the sec. i think they are well represented by professionals who understand how the sec works. they understand how to advise

their corporate clients on how to comply with sec regulations. in thet possible that backs of the minds of these people, they were thinking about the future? let's be honest, these are settlement negotiations. toothyoduce a less result. in any other case, it doesn't really matter. if they would've thought of their careers as sec lawyers that were going to retire at the sec and not from a corporate firm. i would say there is an equal voice on the other side that would say the bigger the headline you grab while you're at the sec, that will turn into bigger dollars when you get on the other side. aggressive many

professionals in the division of enforcement want to grab headlines with their cases and the bigger the action generates bigger headlines. there is another side to that. talented staff at the sec are ministers of justice. they understand their role as being a balanced arbiter. they will make well reasoned decisions and listen to everybody up the chain in arriving at the right resolution. >> great perspective. thank you for joining us. we'll be right back in a moment. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> you are watching "market makers." i am erik schatzker. >> and i am stephanie ruhle. >> who are you going to believe, the imf? the imap says the global economy is growing. predicting a financial of coppola's -- apocalypse. in a new book, he takes on financier's agreed and the impending armageddon for the dollar. jim is back on market makers.

we have heard some of this before. what is different now? >> nothing is different. >> you are not going to sell books by saying nothing is different. >> books are hard to sell. i would rather sell hedge funds. look, the system is larger. thing that can happen is an exponential function of scale. you make the system bigger, you have a bigger collapse. that is further down the timeline. the analysis is fundamentally the same. >> what is the ultimate thesis here though? is the biggest problem in the world. the world wants to the fleet. the central banks and governments cannot have deflation. hurtsates bad debts and the banks. they print money. if you print enough money, you will collapse confidence in the dollar.

the dollar is backed by confidence. [indiscernible] money issued by an insolvent central bank. how long can i go on before people walk away from it? >> let's work with your thesis for mama, that the dollar is ultimately backed by confidence. where would we be confidence-wise if the fed had not nothing, if the fed had engaged in quantitative easing and not inflated its balance sheet to trillions of dollars? people would argue that we would be in a depression. what kind of confidence is there in a depression? >> we are in a depression. if the fed had not done everything they did, things would have been much worse in 2010, no question. but we would be much stronger today. we should be having 7% growth.

we cannot have that for a long amount of time, but you can for a short amount of time. we have one point nine percent growth as far as the eye can see. i would much rather have much more robust growth. v. fed truncated the >> as an investor, why do i care? as long as central banks are doing whatever it takes in the irket keeps chugging along, am confident with that safety net. i want to buy him feel good about it. >> the safety net has holes. it cannot go on indefinitely. >> why not? >> i was in asia and australia last week, and i say the fed is in a dilemma. said they can do a trillion dollars or $12 trillion. people said, why doesn't the fed right off the treasury debt?

they actually could do that legally. >> someone economists, and there are some, say the u.s. is wereaching is gay velocity the economic recovery will be self-sustaining and the fed can begin to back off what quake -- >> we had green shoots before. nobody has a worse forecasting record than the fed. they do a one-year forward forecast every year. 2009 addicted to thousand 10. off every year. >> who cares? ben bernanke said once we get to 7% unemployment, we will he done with the taper. but we have not even begun. >> listen to yourself. who cares about destroying confidence. i care. i think investors should care. >> they should care, but the way people invest, but -- like the way the vote, it is what they care about today. term. they thought long

unfortunately, they do not. >> that is absolutely right. stock market down 30% a couple years from now, you concert of kiss those investments to buy. look at warren buffett. he is getting out of cash and into hard assets. >> what about new york real estate? >> that is exactly right. the fed talked about this in chapter three. the fed is manipulating every market in the world as far as interest rates. i do not like to be in a manipulating market. >> the other thing investors care about is results. this is been an operating thesis of years for some time already. let's rewind the clock for arguments sake to the bottom of the equity market. march 9, 2009. since then, the s&p 500 has returned 175%. gold is up 40%. is measured by the

hedge fund research brought index, up 20%. so your thesis has not delivered results -- yet, perhaps. but what do you say to somebody who looks at the chart? >> two things. that is exactly the chart i would expect to see. as stocks are in a bladed higher are zero -- as stocks manipulated higher with zero interest rates -- they sold 400 tons of gold in 2010. 200 tons went to india. where did the other 200 tons go? they are not transparent about that. they are funded by u.s. taxpayers do it why will the imf not tell us where that gold went? pick starto cherry points. go back to 2000 and you will see a very different chart. >> and for folks who read your book tonight, what should they be doing in the market tomorrow? >> i recommend about 10% gold. >> not always.

70 will read your book tonight. what is the take away? -- somebody will read your book tonight. what is the take away? to make money or preserve wealth? you can make money today and lose it tomorrow. we talk about the own money in the u.s., the 100-year all money. in europe, some of that money is 4000 years old. you cap they survived and they say a third, third, third. one third gold, one third land, and a little cash. that is how you preserve wealth for the long run. >> i wish i was in the position to preserve the wealth. i am not. congratulations on the book. >> thank you. ds. rickar in the next hour, we will be talking to the chief economist at the imf olivier blanchard. >> before the, we have senator

brown at the powerful finance committee. he said wall street should not be afraid of him. peter cook is our exclusive interview. ♪

>> welcome back to "market makers." congress saysin his push to rein in too big to fail banks is not over. ohio democrat sherrod brown wants to see even tougher rules for the nation's biggest banks. this man could be the next chairman of the banking committee. peter cook set down with brown earlier today. peter joins us now with more. >> absolutely. sherrod brown things too big to fail is still a problem. he says all you have to do is look at the markets to see there is still that implicit subsidy out there for the nation's biggest banking institutions. because of that, it is still a problem. his concerns about to be developing's have been

well-known over the past couple of years, but as you said, they are getting even more attention now on wall street. there is a chance brown could become the next chairman of the senate banking committee. he told me his goal is not that big banks out of business. >> almost 20 years ago, the largest banks in this country, their total assets were about 16% to 18% of gdp. today those six banks are over 60% of gdp in the aggregate. that ain't concentration is not good for our economy, anymore than concentration in any other industry. i work with wall street tanks and community banks and regional banks, credit unions. want to make sure that the 11 million people of ohio are .reated fairly by the banks wall street banks have had too much power, clearly, in the marketplace. it does not lay well for the economy. it is not just anti-competitive. it is really bad for the economy in a small number of banks have

that much economic power, and frankly, the political power they have with congress and with regulatory agencies. >> your bipartisan bill with senator vedder of louisiana would obviously place new rules and restrictions on those large financial institutions. what is the status of that bill right now? do you have any commitment from democratic leadership? >> you can see from the introduction and they have at bloomberg and others given to this argument, this idea, that and the fdic have proposed higher capital standards. it was not only because of that bill, but it is in response to the realization of so many players in the economy, so many economists,so many so many regulators that the banks have to have more capital standards, whether it is coming out of balls will three or whether it is coming from these agencies to washington.

clearly, higher capital standards would have met -- it is something that should have happened earlier. i think our legislation is playing a role in that. we will continue to push it because it is clear that too big to fail is still with us with the subsidies of the largest banks get at the expense of taxpayers and in an anti-competitive way are bad for the economy. >> you are telling us that maybe reform, fannie and freddie legislation, that could be a vehicle for moving some of the ideas you put forward. >> any discussion about banking reform almost always have an element of -- does this lead to more bank concentration? i want to see more community banks -- i do not want to see them brought up by the big guys. i do not want to see more failed smaller banks or big banks either. but i am always concerned about what policymakers do or don't or let happen. it could lead to more bank concentration. that is one of the concerns i have with the reform of fannie and freddie, the gse's.

the secondary markets. we need to approach that with caution. >> what is going to happen with fannie and freddie legislation? is it going to happen this year? obviously, you are not totally on board. >> i do not think it happens this year. there is no federal backdrop to the proposal which would mean no more 30 having your mortgages, maybe no more 25-year mortgages. the house proposal would cause total upheaval. groups like the realtors think it is a disaster. the community banks and a host of others do, too. there is no agreement between the house and senate yet. it will not happen this year but it is something to think about on the road. >> the current proposal in the senate, some negative major surgery. is major surgery needed? did we get by with something less obligated? >> that is the question. a number of your reporters discussed that with me and others, that there may be a simpler way to do this.

my view is if you look at a piece of legislation, you have to compare it. you have to ask if it will be better a year from now or five years from now than the status quo. that is ocular yet. that is why in acting something as complex as this, we approach with caution. >> there is a possibility and the next term of congress that you could be considered the next chairman of the banking committee. that has got some people on wall street nervous. >> they should not be nervous. it is mostly out of my control. senior members make the decisions. democrats keeping the majority is part of that. i talked to wall street people all the time. i disagree with them a lot. i am an ally of the community banks and credit unions and work , andthe ceo of huntington i work with the ceo of keycorp. i have a very good relationship with the financial committee in

my state. they go to a town hall in front ,f jpmorgan chase employees 13,000 employees on this one campus. i worked with them. i wish them well. i think i do not want more bank concentration in this country. it is bad for our economy. from are still a long way sherrod brown getting the gavel in the banking committee. it is a very real prospect. it makes a lot of people on wall street nervous. we should also talk about china briefly. president obama has been better than his predecessors on china on the currency issue, brown says, but he is still not working needs to be on that issue. >> thank you for the great interview. aders around new york city are crying and worried. peter cook, thank you. we going behind closed doors to show you the lab eight pharma uses to hunt down counterfeit drugs. ♪

beware. if you have ever thought about ordering drugs online, this story might make you think again. olivia sterns looks at the black market for counterfeit pills and what big pharma is doing about it. >> it is the drug trafficking you do not hear about. more than $75 billion worth of fake pharmaceuticals are sold globally each year. inside these filthy makeshift paint, oftened sheet rock are just some of the toxic ingredients founding counterfeit pills sold online to customers around the world. it is a problem so big that pharma companies like pfizer are now policing it themselves. at the counterfeit lab, scientists are doing the leg or. the evidence they gathered here will then be used to prosecute the perpetrators. her pfizer, it is a winning

formula. their incentive is to protect the brand. today, they are training me to spot the real deal. how can you tell just by looking at it? that is hard to tell. inside, we find everything from chapstick to celebrex. of counterfeit is viagra. >> there is something that looks fake about it. >> can you tell which is real? step 1 -- document the sample. step two -- the physical exam. >> the logo color shifts from blue to purple. >> step 3 -- chemical analysis. here are the four real viagras. four -- filed a report. then it is handed over to brian donnelly. after 21 years of the fbi, he is working for pfizer. >> we probably average one

conviction per week. these are cases we bring to law enforcement or law enforcement does based upon our training. it is important for us to have patients recognize that when they see the pfizer name, they know it is our product and we have gone through all the regulatory process to make it safe and effective. >> but the black market is growing annually at a 20% clip. at that rate, it is no wonder police need outside help to keep up. with us once again is olivia sterns. olivia, i am not concerned, although maybe i should be. >> i am concerned. >> i am interested in one thing in particular -- generics or brand name? which is likely to be fake? >> brand-name medicines that are on patent protection, things he might be embarrassed to get a prescription for, like viagra, are more likely to be counterfeit.

anothers medication is one. out,was reporting this the threat across is of substantive generics which are actually in the legitimate supply chain. you may get one of these. >> that is a concern the fda has about a particular drug. you go back to the 1980's, most of the medications or ingredients from drugs in the united states were either made in the u.s. or in europe. today, 80% of the ingredients and 40% of the finished products come from overseas, mostly from india and china. what that means is that even u.s.-manufactured generics and brand-name products have to secure their supply chains in locations where the regulators are not up to the job. the chinese and indian regulators are underfunded and do not have a broad enough level

of competence to oversee their vast markets of hundreds, even thousands, of producers. >> that is frightening. 80% of actual supplies in the generic medications, whether or not they are manufactured abroad or in the u.s., they are coming from suppliers abroad. the one you mentioned, recently the fda discovered it in a plant in india which was infected with flies and they cannot close windows. these are plants that supply u.s. manufacturers. >> what is the take away? i am scared and concerned, now what? >> the takeaway is to try to find out where your generic drugs are coming from. we need this to be a bigger political priority for washington because the fda cannot be a global police officer. >> i am pretty sure the person who i am picking up my prescription from where the drugs are produced, i do nothing they will have the answer. >> they know where the suppliers of these drugs are from. they are not always necessarily

labeled, the country of origin. a lot of critics are calling for that label. >> so interesting. >> the poll -- the point is that this is not simply an issue of big pharma trying to protect itself. >> big pharma are trying to protect these valuable patented drugs like viagra. and 85% of our drugs are generics, so there are lives in mid-threats to that supply chain. >> seconds aqa -- do not be embarrassed if you are buying viagra. >> olivia sterns. a fascinating story on the black market for prescription medication. 56 past theroaching hour, time to take you on the markets. u.s. markets green across the board. >> kind of unchanged. meaningful --67%

is a gain of .6% meaningful for the nasdaq? generally not. ♪ . .

>> live from bloomberg world headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. lex shifting into high gear -- the ims says the u.s. recovery is the strongest in the world and will drag everyone else along. we will talk with the imf chief economist. startup guy -- ea founded expedia and zillow and is now preaching the gospel of entrepreneurship around the world. >> let's drink up. it's one of the legendary names and champagne. we will have the chief winemaker

and its new vintage bubbly. welcome back. >> we are talking global growth this hour. >> in deed are. the imf says the brakes are off the u.s. economy and it will drive local growth even as emerging markets like brazil and russia slowdown. we will hear from the imf chief economist at just a few minutes, but first michael mckee is here with more of the economic outlook. there's no one better to break it down for us. >> you are not going to want to open the moet, but can i come back to that segment? the world and most of the countries will experience better growth, but not as good as the imf hoped back in january. mobile growth, three point six percent this year, but the u.s. at 2.8%, among the strongest of the developed economies.

is significantly marked down. they've got their additional sales tax and the stimulus has run out and are not increasing monetary stimulus. are seeingreasons we slower growth overall in the world. but not a bad picture. the imf does assume the fed raises interest rates in the third quarter of 2015 and they see a 20% chance of deflation in europe. marketsthe emerging like brazil and turkey will not do as well. were russia they take to task for the ukraine adventure. that will knock down their growth and we could see contagion from that as we go forward. the have some advice for ecb -- do more to ease monetary policy. the u.k. should rebalance its economy and not depend so much on housing. prepare for capital

outflows as the fed gets closer -- >> those remarks should not have gone well when mario draghi said the same thing at the last ecb press conference. >> normally, policy makers don't like advice from outsiders. i think she considers resell something of an insider there. >> if you are an investor, what's your take away? >> not a whole lot. forecasts, sodp this is the 84th will stop you don't really need another one. but he gives you an idea of what the global economy is doing in some countries you might be thinking about and give you a holistic picture. the imf will be coming out with the second part of their essays on global financial stability and people look at those very closely. >> i don't know if you've done the math but if we were to take

forecast, how much money does that translate into? >> that's a good question. i don't really have a figure for that. in the united states, we know the economy is 14 trillion, that would be about $140 billion, but that's just the united states. you are looking at an enormous amount of financial capital around the world. >> that is the reason i raise it. i wasn't accusing you of not doing the math. it's that .1% doesn't seem like a lot, but when you apply .1% to a very large number, all of a sudden you're talking about real money. >> the whole world is coming back now. not as good as january, but we will see a better 2014 and 2015. they have marked their figures for the out years but overall we are not going as quickly.

a lot of continuing problems in japan and europe and now the eastern european issues with ukraine. >> thank you for breaking it down for us. time now for the newsfeed -- the top is ms. stories from around the world. amazon appears to be climbing to the top of another business. the world's biggest internet retailer says it has surpassed hulu and apple in streaming video usage. video streaming's on amazon prime almost tripled in the last year. it is another hit for hbo. you know i love talking about it -- the season premiere of "game of thrones" attracted 6.6 million viewers on sunday. the biggest audience for hbo show since the finale of "the sopranos" in 2007. american moms are reversing a trend and staying at home. according to a poll from the pew

research center, the shares of mothers who don't work outside the home rose from 23% in 1999 to 19 -- 229% in 2012. the recession cap some others out of the workplace and others figured it was better to stay at home and -- under to stay at home and then pay for child care. today is equal pay day -- president obama spoke about yesterday. women continue to make $.75 to a man's dollar, so your women say i simply don't make enough money in my job to afford childcare. >> you do, and it is a real problem. >> when we come back, we have a lot more to cover. economiste imf chief with us and we will ask about the global forecast we were just speaking about. >> making congress and see things his way. we will talk to the cheek -- the chief lobbyist of the equity industry.

you can watch all of our interviews live or on-demand on apple tv. ♪

>> welcome back to "market makers." tower to the people -- that mantra is the key to startup guest shouldr next know. rich barton founded expedia and cofounded last door and zillow. today, he sits on the board of five companies, invest in a handful of startups and was just appointed to a presidential panel that promotes global entrepreneurship. he just returned from a trip to china where he was scoping out a startup team there. he joins us now from washington dc with some of these insights. what is a like for startups in china right now? innovationnt of happening in china especially in the internet space is really difficult for us, at least me as

an american, to wrap my mind around. i thought i had seen exciting times in silicon valley around the internet, but what is going on there is mind-boggling. for instance, we went and visited alibaba. the alibaba headquarters are like this thing out of star trek. i felt like a colonial governor walking in to pay fealty to my new overlords. these guys do the propaganda video and talked about a trillion dollars worth of gross merchandise value they plan to sell this year, which i think is five times the size of amazon.com. exciting and humbling and i came away quite impressed. >> what you are saying amounts to myth busting for many people because as you well know, the conventional wisdom around china and entrepreneurship and technology is they don't know how to innovate and that's why the chinese government conducts cyber as you dodge -- cyber espionage, to steal secrets from

the western world. are both things happening? think both are happening. i don't know about the stealing part but absolutely, the chinese government has been a key factor in keeping facebook out, keeping google out and twitter out so the services equivalent to those services have time to develop in china and boy have they developed. chat which isn't used by 400 million people a day is kind of up combined with facebook combined with paypal. people actually use it to pay for taxi rides in beijing and all over china. innovation is absolutely happening and the chinese are .mart and work extremely hard harder than most anything i've seen here in the states. >> then coming back from china, what is your advice to silicon valley?

get your act together, kids? >> i think we have our hands full competitively. company -- i don't know if you are familiar with this new smart phone company. they are styling themselves as the new apple based in china. their devices are really gorgeous and they have an inexpensive and beautiful smartphone that sells for a really cheap price, under $200, that sold 40 million units last year and i think they expect to sell 100 million units this year. theird the team and charismatic founder when it's going to come to the united states. through a translator he answered probably not anytime soon because we will have legal issues with google, apple and microsoft. >> how interesting. i want to ask a question about google and it has less to do with google and more to do with not justo encourage

innovation but to commercialize it and get people to use your stuff. zillow,about expedia or the companies you were involved in the cofounding of, they are both built for a purpose. expedia is an online travel website and application and zillow is in the real estate business. google does many of the things both of those companies to call but you would not know because they are buried inside google. i'm thinking about the announcement they made just yesterday licensing room 77 software so you can book hotel rooms on google. you can do on google what you do on kayak. but nobody knows it. this is a really interesting strategic question. in the old world, where google is a desktop search engine, their desire and ability to get deep into these verticals like travel or real estate or jobs or

online reservations at restaurants or food ordering, their desire to get into those verticals was pretty limited, so we did not see a lot of vertical integration. they were making a tremendous amount of money simply by redirecting people to the competing services and those verticals. basedmove to a smartphone world where google is far and away the dominant platform -- a 90% market share for android, they are losing a revenue stream . they make all their money in search by ad words have more people by keywords. in the smartphone world, there's not that opportunity, so they're trying to figure out how to go deeper up the stack and integrate these vertical services. it's a serious concern for me and my portfolio. we are watching it really carefully and we want to partner with them where appropriate but we also have to keep a keen eye on what our value proposition is to our consumers.

that's one of the reasons we are investing so much in those zillow brand right now. >> i want to ask you about your or folio. -- are invested in another in a number of startups. where is there the most promise? >> i'm lucky to have a fantastic group of portfolio companies i have helped it together. themell follow a common and i call it power to the people. i'm really intrigued by enabling people with smart phones and pcs to plug into a world of information -- >> what company is that? company are you betting the most on? barely, zillow is doing incredibly well. i have a really capable team running it. quite a bitspending

of time on right now is a company i cofounded called glass door. is trip advisor or yelp for employment. maybe you guys have used this site. it's a terrific site to use for journalists because it gives you an idea of what's really going on in companies. there are salaries and you can figure out what journalist or software makers make at google if you're working at face. sitea really interesting and we have about 18 million unique visitors a month. the business is getting quite large and it will expand globally very gracefully because like trip advisor, it is user generated content. the more content we get, the more audience we attract, the more audience we attract, the more content we get. it does sound like a good

reporting resource. we are going to check it out. i want to ask you about your appointment as ambassador for global entrepreneurship. a lot of cynics say this is nothing but a photo op. -- is it important >> it's a good photo op -- >> why is it important for you to be, did again with the government? line we well the consistently hear from people in arecon valley is that we changing the world. government is far too slow to do anything of value. lex i think we should all try not to forget the foundation upon which we build our companies here in silicon valley and in the whole valley, the good governance

and respecting property rights and a functioning judicial system. there are all kinds of issues we get caught up with in government but this country is the greatest country in the world to start a company and. honor to beed this the presidential ambassador for theal entrepreneurship is united states greatest export is our brand of startup capitalism, our entrepreneurial spirit will stop i have a really good time when i go overseas and talk to young entrepreneurs from around the world who are trying to make their lives better, make their mothers lives better, and lift their countries up. i think a key mechanism to doing that is through startups and capitalism. >> i like you, rich barton. >> thank you. up, everybody, when we

come back, we will be talking about right equity on the defensive. private equity firms are fighting capitol hill to preserve their cherished tax break. we will talk about the industry's top lobbyist. stay with us. ♪

>> welcome back to "market makers." it looks as though the u.s. economy will be driving global growth this year. next, the international monetary fund just came out with its semi-annual economic forecast and it says stronger economic growth will help offset weakness in markets like brazil and russia. let's bring in the man behind the report, olivier blanchard,

the imf's chief economist and michael mckee is still with us. when people talk about the u.s. economy, they often talk about the phrase is gabe velocity. the where you sit, is united states approaching escape velocity yet? >> i don't like the term. i think the u.s. economy is in very good shape. i think the recovery is very solid. good, it's going to continue. >> why don't you like the term? >> because i'd don't have the sense it takes some critical level of growth. we have all your engines aligned, it works and when they are not, it doesn't. you can't expect a miracle growth rate above which you can escape anything. >> with declining participation rates in the united states and the rise of technology, questions in the u.s. about whether or not potential growth is going to be lower from here on out, is it the same around

the world? are we seeing a world that will grow more slowly than it has not passed? >> the question in many countries is are we going to be able to grow at the same rate before? the financial crisis may have made things worse. lookcountry will have to very carefully at which way it can go. it's a very big issue for countries like japan and the eurozone. >> is japan country you're most concerned about in terms of growth? >> it is a country we are concerned about. beenr, the engine has fiscal stimulus and fight to continue, given fiscal stimulus cannot continue. it has to rely more on

consumption and investment. if it comes, the recovery will continue. with a dozen, there could be trouble ahead. 7.5% growth forecast for income and concerns over whether they can reach the income and net target and whether or not we can really believe their numbers, what does the imf say and what makes you think they can do it? they clearly have difficult issues to deal with. the intensity of growth and the , but wef shadow banking think they have the ability and financial means. the economy will have to slow down. the 7.5 is our best guest. -- our best guess.

talking sixves are or seven about looking at a few years. >> the imf cut its growth .orecast how much of that 1.3% reflects the risk russia faces over the crisis in crimea and eastern ukraine? >> actually, not too much. 1.3% was computed when crimea was not yet fully in play. happened, thisas is likely to lead to capital outflows from russia and maybe an increase in the policy rate. we may well revise the 1.3% down. >> when you say we could revise it down, everybody is wondering by how much.

what kind of ballpark are we talking about? remain the way they are, .5% would be a reasonable guess, but a larger adjustment might be needed. >> we could be looking at negative growth in russia is the bottom line? >> we do not think so. our baseline would still put it in growth, but probably below one percent. >> every year, we've gone into the new year feeling optimistic and every year been disappointed. if there is a worry for the imf, what would it be? what are we not thinking about that could take 2014 down? the thing is the things we don't know about -- the unknown unknowns, if you will.

things that japan has not discussed and deflation in the -- we are fairly optimistic we will see no dramatic decrease in growth. -- >> i know very little about the bike, so i will not make a statement about dubai, but they face the same issue -- very low interest rates lead to excessive risk-taking. if you look around the world, there are hotspots were prices seem a bit high. there are be one, others. we don't think it's a systemic issue but we will have to watch out. of hot money aware investment flows.

even if you are not willing to label them the fragile five, would you share the view that india, southl, africa and indonesia are the most vulnerable to skin this -- skittish investment flows? >> they may well be. not so much because of them, but because investors have become skittish and they tend to move out as soon as they see something they don't like. countries sawese large depreciation to last year. some have taken measures to ensure that works but if you don't have the macroeconomy, you know that. >> have you spoken to mario draghi about your recommendation that he do more? the ecb did not seem to take kindly to that suggestion. >> i think the ecb is very

conscious of the fact that inflation is lower than their target. they are thinking about taking measures and we hope they take them. and sooner is better than later. >> thank you very much for your time. also to our economics editor, michael mckee. >> coming up, private equity on the defensive. firms are fighting on capitol hill to preserve their cherished tax breaks. it isn't so. as the drought had an impact on champagne? ♪

>> you are watching "market makers." would you believe it -- even some republicans say it's time

to change the way private equity firms get tax. income they may comes the form of carried interest. their share of the profits made in the funds their firms manage. get -- they don't get taxed at the 39% they would get taxed if it were regular egg -- regular income. the industries top lobbying group had joined us. >> is your phone ringing off the hook question like how worried are these pe guys and women to star >> this issue has been discussed for seven years. carried interest has received a lot of attention. there's a new approach german camp has put out -- >> republican dave camp put carried interest in his most .ecent tax reform proposal a proposal a lot of people are taking very seriously. >> i don't think specifically of

a carried interest provision. andt, carried interest other mineral extraction. there is generally no support for that. carried interest is carried interest no matter what kind of partnership. the second proposal is it recharacterized as carried interest. it has long been treated as the ownership share of a capital asset. the capital asset receives capital gains treatment. it has been tradition for 100 years to treat it that way. saying people who are oversimplifying this -- steve millionan made 375 dollars in only 350 grand was .axed as ordinary income are we looking at it in the wrong way? >> i don't know his compensation but it's too easy to oversimplify this.

flow back andnds forth is very complicated. and fundsuity firms own shares of goods and when they make a profit home it's treated as a capital gains. i think it should continue that way. >> we have put this question rubenstein said we are willing to give up the preferential treatment as long as is heart of rotter tax reform. now it's part of broader tax reform, why is in the industry getting behind it? >> a lot of tax reform is moving this year. >> now you are hairsplitting. not hairsplitting. it's very important. if you're going to talk about an overall tax deal, there's a million overall pieces. -- accounts for

the entire economy. nobody says we want to carry it differently. >> break it down for us in a different way. if we were to say eric schmidt of google gets $100 million in steve schwarzman gets $100 million, is that income taxed in a different way? beginning, ithe should be treated the same. it's the initial investment in that company, same thing with all the investors in the fund. the argument much better than we do, but as i understand it -- i would disagree. it's not that there's nobody who says the tax treatment on carried interest shouldn't be different between real estate and private equity. there are lots of people who say

the tax treatment in the real estate industry or boiling gas industry should be different from venture capital or private equity. they say because the tax provisions around carried interest were developed or at least instituted in order to create a stimulus for risk capital. the argument made is private -- thererried interest are people who say it should be treated differently. >> i was speaking of the generally accepted precept in washington and the industry. i don't think there's any justification for treating mineral extraction and oil and gas differently from private equity. the structures are the same, the flow of funds are essentially the same stop each is little different, carried interest doesn't have a special provision and pe does not have a special provision. it is a capital gain.

>> you can't say to me that investing -- putting money at risk in drilling and oil well is the same thing as buying a steady cash flow company that you can flip seven years later. >> you don't know it's going to be a steady cash flow company. can callt know how you a seven-year holding time a flip. but you don't know that you can sell it in seven years. lacks the point i'm trying to make is there's a difference. >> it's a different thing you bought but not a different philosophy or fund structure. >> i agree. is the same philosophy. >> really western mark the risk you take in drilling and oil well where you could come up rise the same as making a private equity investment? increaseot be able to the value. the whole value proposition is the company they buy is worth far more when they sell it seven years later than when they bought it. assume --

>> it has to be far more to compete with other asset class should -- private equity classes. >> we are assuming these companies are going to turn into gold. maybe we are just looking at the good private equity firms making good investments. return $120equity billion its investors. $120 billion and they invested 400 lien dollars in united states companies. if the best-performing asset classes for pension funds -- we find out the sec is investigating maybe these private equity firms are misleading investors who are pension fund endowments. what do you make of this? >> i saw your report and its the best report i've seen on it. it is hard to comment but we can talk about fees in general. what is striking about private equity is the alignment between investors and the portfolio

ofpanies -- that alignment interests is -- >> your interest may be the same, just as the hedge fund manager wants investors to do well, but he still wants to take two and 20 out. >> but that's all laid out in the limited partnership agreement in private equity. the responsibilities, rights, obligations, flow of funds is all laid out, highly negotiated by very sophisticated investors by each side, armed by lawyers who go over this. that is all laid out there, so there should be no surprise as to what's in the limited partnership agreement and what funds can be charged and what fees can be charged. >> there should be no surprise so long as the funds have been wholly transparent and the implicit allegation and what we understand is that they haven't been. >> that is implied. we don't know that all stop them any sensesn't make why a business would want to

alienate its investors over time. if you can quietly take little bits of extra money, we've seen industries do that for centuries. >> you have a contract that lays out exactly what you can and cannot do and conflict resolution provisions and advisory boards from everyone who serves -- >> and you think nobody takes a little extra love out when they cap? >> i don't know of that happening and i haven't seen the report, and i don't think it makes any sense for a private thaty firm to do anything would anger or alienate its lps. >> it doesn't make sense to sell guys in düsseldorf triple lending cdo's five years ago, but they did it. >> i have a hard enough time defending right equity. we will wait until he see the results become public.

>> we love having you come on. >> he's the ceo of the private equity growth capital counsel. needed --me back, who it needs an excuse to break out the bubbly? stay with us. from moetwinemaker will be here. ♪

>> you are watching "market makers." >> this is serious stuff. >> the brand is known around the world for its commitment to quality, but we've seen a freezing winter and devastating route. what is the company doing to keep its youthful wind flowing to customers? he's the chief winemaker for moet and has brought along the companies newest bubbly for us to taste. looking forward to it.

you are not the businessman, but your company's house but depend highly on what you do and what you make. what do customers want of a champagne these days question were >> people are looking for pleasure, fun and elegance. >> tank goodness. ofthis is the champagne success and glamour. it's among the oldest and most successful companies in france. >> how responsive do you need to be to consumers changing tastes? change.ow much do they we know that they have changed in the world of red wine? >> people were drinking very sweet champagne. there was an extra dry champagne

introduced one because american consumers have evolved toward a drier style. but with a drier, more precise finish on our wine. conscious of what consumers expect, yet we have two preserve our quality. goal, to havet that style. >> china is one of the fastest going markets and they have a different palette than americans. >> surprisingly, when we were looking to introducing it to the u.s., due to a controversy in the u.s. and japan and china, we see this version with two years was suiting all the

taste worldwide will stop so we have been able to satisfy that. >> what is undeniable whether you believe in climate change or not, is that weather is getting more volatile. how do you, with the changing climatic conditions, how difficult is it to reduce consistently year after year the same flavor you seek in your nonvintage champagne? oir oft is the terr champagne. a long time ago, able realize that some years could be excellent, outstanding, and some years could be very poor. therefore they have come with the idea of keeping some wines from the very best years in order to blend with less good years and conceive a more consistent quality. mostis the reason why

champagne production is not vintage champagne. we make it in very limited quality -- very limited quantities. we want to make it very consistent and so we blend not only different varieties and grapes coming from different villages, but wines from different years. you can have three or four years involved in the blend and that will achieve consistency. >> are you making enough demand? >> we are in a french appellation meaning the grapes from champagne have to come from specific regions with specific rules in viticulture and winemaking. is in keeping with the quality of our champagne. >> is the limited supply worth at? >> limited supply, growing demand, what does that mean? i think we have to drink to that. we are only drinking to the

company because we are the ones paying those higher prices. it was worth it. for was the chief winemaker moet. a pleasure, sir. but if you are watching bloomberg television. stay with us. ♪

>> that is going to do it for today's "market makers." i don't know if i've had enough

bubbly yet. >> luckily, it's time for lunch. tomorrow, we are going on the future of the casino business. >> rolling the dice, if you will. >> we will speak to a couple of the biggest names, including the ceo of atlantic city's or got a hotel. >> but right now, it's 56 minutes past the hour, that means it's time for bloomberg's on the markets. morningstocks spent the trying to find their footing after a three-day selloff. looks like they have found a direction. all three indices are higher, which has allowed the vix to he's a little bit. the volatility gauge has moved during the weakness in stock prices. scott bauer, senior market strategist at trading advantages joins us from the cboe. in the vix?see we would usually expect to see it move up a lot more. >> the last two or three times we've seen him move up to the mid-15 or 16 level, sellers have

come in meaning there are call sellers and put buyers. maintain struggled to above the moving average. like you just said, it's very unusual. usually when you see market volatility and the selloffs like we have had, we would see the vix much higher. >> a lot of people talk about how every two months, the vix starts to get a little pop, but there's a lot of resistance to the vix staying higher will stop >> i think the complacency in the marketplace is backing a little bit. kind of off the table for right now and there's not a lot of economic news. we are starting earnings season, so we may see things pick up in a week or two. we've seen over the last couple of months that is off the table. >> in terms of a breakdown in terms of who is doing well, the

nasdaq 100 was one of the biggest decliners and is now snapping back. the three-day selloff is the worst since 2011. the exchange traded fund that tracks that, tell us your trade. >> there seemed to be some capitulation last friday. -80 71 by toy the 85 spread. i can do that and pay about $.40 or so. is limited tosk $.40 if the queues go below 85 again. if we rally, my upside break a major line of resistance and that's why i picked those specifically. i think we get the rebound in the queues that we've already seen a little bit. top, so i like this trade. >> the upside is much higher

than the downside to this. leveraged trade restocked substitution? this only costs me about $.40 to do this. it is a minimum investment and will not hit a retail traders account for very much money. it is a stock replacement. limited downside, so if things break down again, all i can loses $.40. the next stop is quite below that. i'm limiting my downside risk .ut playing for a quick upside >> we're also keeping an eye on alcoa. they will be reporting after the close today. since it has been kicked out of the dow industrials, it's on an absolute tear. what is the options market telling you? >> the options market is pricing in about a 5% move. downside, if it were to

go down, that move puts alcoa down at major resistance around that 1180 level. break to the upside, it could go another dollar or two. -- the move to the downside is more probable than a move to the upside. >> scott bauer, joining us for our options insight. we will we back on the markets in just 30 minutes. "lunch money" is next. ♪

>> welcome to "lunch money." we tie together the best stories, interviews, and video in news. jim's big fix turns out it hasn't even left the parking lot. in media, amazon on top. the e-commerce giant be too low and apple at their own game, sort of. in nation, equal pay under the law. president obama wants federal contractors to get on board. classroom, sprint is reimagining the reading process one word at a time. and the final