>> us>> this is "market makers" with eric schatz current stephanie role. >> surprise at citibank. millions of us aside from bad loans. taxing america. it is one of our shared tax breaks. some lawmakers are saying it is time to scale it back. keep a kosher. it is passed over time. an will tell you how they pl to expand. welcome to a very special edition of "market makers."

eric is out. [indiscernible] we are lucky. the seven sins of wall street. the next financial crisis, thank you so much for being with us. nobody loves seven deadly sins more than me. this citibank news is huge for me. in the last year have, they cannot get out of their own way. add news follows it. regulators hate them. are you surprised? got was not surprised they bit by taking money out of reserve. that is something we can ask some of our guests. it is nice to have written about wall street in the middle of the earnings. can take a look at how the banks are doing, whether the

market is making them smaller. before this i think they were too big. that is what i say in my book here. >> i had an amazing week because five the great -- the weather was great in new york city. or overfull. it is time for the news feed. posted an increase. money it hasuped set aside to pay for loan losses. they have been struggling to boost revenue on asked income business. .etirement account it is expanding in the mutual fund is this. the have agreed to by investment. the price? $6.2 billion. the valuations are high. this is headed by madison

dearborn. you yet -- european ministers are looking on whether they should impose tougher sanctions on russia. they ignored a deadline to advance in government buildings. the u.s. accuses russia of trying to destabilize. we have got to turn to the markets. we seem to be in rally mode. shopping hedges fund managers heads off. half a percent. last year it fell 2.6%. the nasdaq fell by more than 3%. is it over? i want to bring in adam parker. is the chief u.s. strategist. is your phone ringing off the hook right now? at how managers are getting chopped up over the last three months, does anyone know

what direction we're going in. >> you have to take a longer-term perspective. our view is that earnings are going to grow but 6%. cap these are buying back a couple are sent of their stocks. rotationhis has been a than has been the overall market going down. we're are only seeing about 3% or so for the all-time s&p high. >> we have a report on bloomberg.com and the terminal that tries to explain why tech stocks have taken such a beating. them to that short sold failure recently have abandoned the tech sector. there is no more short sellers. when the stocks start going down, there's nobody there to cover the shorts and the stocks keep continuing down. what do you think of that? will we have people intending to

sell the short sector? >> i do not agree with that. if you look that short interest, it is not particularly low. a lot was catalyzed by yellen's comments. over, andentum rolled in biotechive names and health care made all the stocks and growth and momentum baskets rollover. as people lost money they started to short the names against their long positions. there is volume on both sides. people are still going to short stocks. >> as far as earnings season being upon this, it to you in the bar is set so low it will not be hard to exceed it? >> we do. at the bottom numbers, you have almost zero percent year over year growth in the numbers.

4.5 companies issued negative guidance for everyone that issue positive. i think the bar is set loan up that you will see upside to earnings. that should calm people down a little bit. as usual, they chain the second half will improve. in termsdo you stand of rotation? even though people have been down on fixed income, if you look at how high yields are done, they have a good start to the year. house has beena too overweight equities and overweight cash relative to bonds. that over a year ago. it really depends on so many things when you make the asset allocation call. uration,'re d what you're willing to take. i still felt productive about

u.s. equities. the fed will not move the front end for a while. good economics news will probably be rewarded by the market. >> let's talk geopolitics. have this big story about crimea and ukraine. how will this affect stocks going forward? >> it is hard to forecast. it is bad for market multiples. you can see it trading. not typically do impact corporate earnings very much. what i focus on day-to-day is what could introduce volatility into the estimates? the overall exposure is probably not high enough to really make people afraid it will collapse. off trade.ate a risk

it is not something we try to forecast with any consistency. we focus on what can make them go lower. inventory, they are very light. it is very hard to make the top of the market call. i think right now we think earnings are going to improve. take for those who want to advantage of the volatility, what sectors do you like? >> we have three main trade on right now. ,e like health care, pharma distribution. staples might be a consensus. we got word it was too low. maybe we should add a little. they lag. i like chemicals more than industrial spirit i am not a big believer in the capital spending rebound.

stock we talked about. i like software. i see companies not investing a lot of people. they are investing in productivity. they really want to cut out costs. to see themg produce pretty good numbers relative to expectations. that may cut a bit of a floor. >> thank you for giving an update. equityrker is a chief strategist at morgan stanley. when we come back, herbalife feeling the heat. it is not from bill ackerman. the fbi is investigating marketing practices. some that millions of americans would hate to lose. what you get for mortgage interest. tomorrow is tax day.

now you can get us on apple tv. we are streaming live on amazon fire tv because we are that cool. stay with us. ♪

>> welcome back to "market makers." , you know who he is. he may be able to take up a big win against herbalife. they are probing the company's marketing practices. herbalife says it has no knowledge of a probe. how is this likely to play out? begin, i want you to see a clip of an interview i did a few months ago with bill ackman when he is just so convinced of this trade. not withe focus on is

the stock prices on any one day or year. but our business progress. the business rye grass is touring a -- telling a story with regulators. assuming they could issue bonds and we were forced out of the trade, we would replace the position swaps. we're going to take this to the end of the earth. >> he has been waiting for a year and a half for regulators to get involved. now they have. does this mean he has won the game? >> i don't think so. the government is looking for three things. they will be looking for evidence of lies, cheating, and stealing. what the government will likely focus on is whether or not the selling or not selling its products to real salespeople giving the product

to distributors in exchange for a fee and claiming the fees as real sales revenue. has beens what ackman calling for months. how real is it that we are going to get an outcome that ackman wants to hear? if you are the fbi, how does it look it at the end you say there is nothing there? >> i do not think the justice department will be concerned about how it looks at the end of this. is they are probably treading carefully. they do not want to be seen as doing the ending of an activist investor. it is quite possible this investigation has been going on for some time and they have been quiet. >> whether you have firsthand knowledge or not, do you buy that herbalife said they had no idea that the government was looking into them? >> it is hard to know whether they had no idea.

it may be true that they were never contacted directly by the at the eye or the justice or the justicebi department. there have been other regulators looking into this already. it is possible the government has been getting information from them and said of reaching out directly to herbalife. >> what about bill ackman's rol e? without him, would they be looking into it? -- it seemsunlikely unlikely. this is front and center to regulators. it has reportedly gotten the attention of the justice department. >> from the justice department, what would you guess the timing is? the we hear about announcement on friday, it has recovered a little bit today. how long do these things play out? if you are the company. it takes a long time to play out. the justicepossible

department and fbi have been looking into this for some time. they are going to look into this until they are satisfied that they found evidence of the lying and cheating and stealing. >> what is the next step? we know the investigation is going on. what shall we be looking for next? >> we will look for a potential contact for the company. that is one thing. another thing we can be looking for our witnesses being called in to get interviews or to give testimony to a grand jury. those sorts of things could signal that this investigation has gone to a higher level. volume, just to give us a sense, many say bill ackman was crazy to begin with. based on what the government is going to do is a tough that. how many investigations do they do in a year? what this into context. -- put this into context.

lot ofgovernment does a investigations a somewhat as reported in the press are what they may hear on television shows like this. or based on the word of an anonymous tip. they have the responsibility to look into serious allegations. the concern here maybe the government is somewhat concerned about doing the bidding for somebody who has such a strong economic interest in the outcome. >> the loudest tip ever, though ackman screaming from the top of the empire state building. the former senior counsel at the department of justice. the seven sins of wall street. i just wrote about them in a new book. we will see which ones your bank is guilty of a. >> hopefully none. we will be back. you're watching "market makers" on bloomberg television. ♪

to "marketckkers makers." i want to talk about your book. no one loves the seven deadly sins more than me. about to a party that was the seven deadly sins. you have written a book. help us walk through it. >> the first one and probably your favorite is less. -- lust. >> it is my favorite.

not gluttony? >> that is my favorite. everybody loves excessive right. lust connect with wall street? know, this is turning into the howard stern show. the seveneer aged sins was something i thought that wall street has been doing since the financial crisis that imperiled the system. lust was iwith took the love of commodities. street bankswall oughtn't be involved in the buying and selling of the manufacturer and storage of commodities. it could both the commodity markets and the financial system in peril. to anething bad happened

oil well that was owned by goldman sachs, maybe goldman sachs goes down the tubes and takes all the counterparties with it. >> you are saying the commodity business in general which banks have been in for decades. hold on. getting involved in commodities a few say they broke the law from the get go? >> i do not know if they broke it but they would against the spirit of the law. in the book, i talk about jpmorgan asking the federal wellse in 2005 2 own oil and coal mines and get involved in the electricity market in california. fedw years later -- the said fine --a couple of years later but a storage company. to say the fed continued

ok because they always underestimate how much things can exploit every situation that they are in? >> your reason sounds good to me. i do think they underestimate the craftiness. tanks, and jpmorgan just a couple of weeks ago sold their commodities. the press said the federal reserve is finally cracking down on the banks. really what it was was just too much of a pain in the neck for jpmorgan and the profitability was not as good as it was. >> too much of a pain in the neck from a regular tory standpoint? --regulatory standpoint? >> give us lots. -- sloth. i'm going to dog on him if he is not here. he's probably lying on a beach somewhere. it is more ofth,

washington than wall street. sins ofis the seven wall street. i do talk about washington as slothful. >> give me an example. elizabeth warren is not a washington lackey? >> she is a minority. there are so many others, take for instance something that you will remember very well. after the london whale when j.p. morgan lost billions of dollars in trade out of london, the senate and congress both brought jamie dimon and to talk to them here and what did they talk about? do they hammer him about losses at the bank? it was not until carl levin said i need to put you through the meat grinder when they testify. it was sort of a jamie dimon

celebration. in the end, yet you pay in a pretty big way. -- he had to pay in a pretty big way. we will be back with more. stay with us. ♪

>> live from bloomberg headquarters, this is "market makers." >> welcome to "market makers." eric is out this week on ring break. licking me, bob is here. he is a bloomberg news editor -- bob is here. he is a bloomberg news editor. families take advantage. it is costing congress against and lost revenue. is it worth the than that? welcome david.

what is the chance they're actually going to do away with this mortgage deduction? topic ofk this whole tax reform is something that needs to be ultimately addressed by congress. as you said, 38 million americans take part in mortgage insurers reduction. the vast majority are at the lower end of the range. 91% of all is below 200,000. two thirds are below 100,000. we are really talking about a benefit that is appreciated by those who foul tax returns who are more at the -- file tax returns who are more at the user end. those under the age of 35 make up the largest majority of those. >> what is the rationale behind doing away with this?

so many have people said the mortgage deduction just helps rich people. that is the opposite of what you are saying. >> that is one of the misnomers. those that call up to lower the maximum cap for mortgage deductions may make americans feel good but it will not do much for the tax revenues for the treasury department. smack in the middle class americans to make it happen. they just did a supply -- a study in 2000 love and an estimated that were to happen you will have a fairly immediate and estimated11 if that were to happen you would have an immediate one-time. >> that is not sound like a little bit of money. >> it would be a big amount of money but it would also affect housing. it would affect housing demand which is 20% of the gross demand product. it is not an easy solution. you're talking about a core provider for tax and revenues.

the tax relief is creating jobs improving tax revenues and for every home that is sold or built in this country. >> has the mortgage bankers ,ssociation run those numbers that the $70 billion saved? what would be the offset? not believe that the legislative solution will terminate the mortgage deduction in its entirety. all of the proposals call for scaling back the level to some income earners above a certain level. we do not think that will come anywhere near to chipping away at the $80 billion. if we're really talking about dealing with this deficits and tax policy, we need a much broader tax policy solution in mortgage interest of action should be included here it in isolation you are talking about

something that is 1/5 of this economy. >> where are we as far as horse trading? tradinge we as far as this out was something else? matter of howis a we ultimately construct tax policy. it is a very complicated subject. we need to be talking about broad income taxes and what the ultimate effect is. over a smallng amount of dollars by scaling be athe cap for what would broader impact for housing, charitable contributions and other variables that come along with that elastic nature? >> hold on a second. job tohe government's encourage homeownership? it seem i barney frank was telling americans it was part of the american dream to buy a home. for many of us, it is how we got

into the subprime problem. >> so it has been done to scale back that incentive. we have a whole plethora of new rules. your point is right. many countries do not have a mortgage interest deduction. the only variable is because it is built into the economics of housing, and because for every new home built you create three and $89,000 with a revenue are community, these considerations. we're not talking about a small percentage of americans. we're not talking about the wealthy that get impacted. we are talking about the middle-class family veterans a couple of incomes implies that first home. if they did away with this deduction, what would it do to property valuations in america? many people specifically put a huge value on my home is worth x

or y. if we did away with the deduction, what would it do to the prices? >> let's look at what brookings and urban put together. the estimate of the drug would be between 6.9% and 11% in home price declines. it would be a one-time event but it would hit a more expensive market the hardest. the ones most impacted by a one-time event of home price decline. we just saw what home price declined to did to this economy based on this great recession we went through. it would be that kind of event again. it would affect mobility. netware.s it needs to be considered and tax reform, brought tax reform, policy. all the data that shows the taxes are being deferred under collective. >> we're going to have to leave

it there. thank you for coming on. this is the ceo of the mortgage bankers association. much more of our taxing america series all-day long on bloomberg. coming up, how do the superrich keep their tax rates so low? we will run you through a few of their best strategies. >> it is how they got really rich. strategic.per people do not live in geneva by accident. up, a national security agency, the nsa knew all about the internet security flaw. heartbleed exploited it. ♪

>> >> welcome back.

top teche now for some and media headlines. let's go with twitter trying to defuse a big problem in turkey. the turkish government has accused twitter of abating taxes -- evading taxes. they have asked a court to reinstate a ban on twitter. totter sent a top executive meet with turkish authorities today. he is the million dollar man. that is how much the network is paying less move is -- les m oonves. shares rose almost 70% last year. and who trails ellis made a whopping $78 million. staples is going to try out 3-d printing services into stores in new york city as well as l.a.. it is super cool.

the pilot program is aimed at consumers and small businesses. it is used to make items ranging from jet airplane parts to football cleats. >> to the national security agency know about the heartbleed computer bug and failed to warn the public? the nsa says no. peter cook has more. welcome. story onbloomberg friday that started this debate, correct? >> it absolutely was. it was mike riley's story. it cause a firestorm when he reported that the national security agency knew about the heartbleed but for at least two years and use it to gather article intelligence. that was according to two people familiar with the matter. leftans that the nsa

consumers being exposed to one to ever hit bugs the internet. after initially declining to comment, the administration issuing an emphatic denial. reports that we were aware of the heartbleed -- went on to explain for the first time ever how the administration is handling these kinds of situations. the policy marked a first for the administration. it suggested for the first time how they responded to recommendations from a presidential panel and suggested if the government learns of a

security flaw it will disclose it but there is a big exception there for national security. that is what is really sparking this debate. >> what is the top brass in silicon valley saying? they are very concerned about this. if the government is not warning them about potential flaws that could undermine the business, that is a big concern. so many of the company say they are being hurt in terms of their overseas business. they have competitors saying our stuff is secure compared to what the americans are selling. it is helping to reaffirm that storyline that is being played out. >> do we have any idea please -- if we are to change our passwords to protect ourselves? there are a lot of companies that had given direct advice that they should be changing their passwords. that is certainly the safest thing to do. we're hearing it is taking longer, that the patches that

the companies are trying to apply themselves are taking longer than first top. this will be an issue for some kind -- time to come. whether the government will use them to exploit national security concerns, that debate is beginning. >> thanks for coming on. i know we will have more reporting from mike riley on this exact subject. i look forward to talking to you and mike in the future. talkingk forward to about it but i am uncomfortable. i cannot even remember the passwords i have. it is time to break out the matzoh balls. it is passover. a new investor wants to broaden its appeal. we do not just need passover we should be eating manischewitz all year long. ♪

>> welcome back. begins tonight at sundown. it is high season from manischewitz, the king of kosher food, the most popular brand of matzoh. is doing a big investment. i want to bring in julie hyman. is it really possible to take kosher food to the big leagues? >> it seems to be happening a little bit. they made the investment in the company. i just spoke to the ceo a little while ago. he talked about some specific products that may be able to broaden the appeal. he talked about chicken broth, example. are another why when you have them all year long? they are pretty good.

this is still a kosher brand. the do not want to alienate audience by any means. by the same token, not only are they trying to broaden the appeal beyond people who keep kosher but also year-round. they're such a spike in sales around passover. we are trying to emphasize more things you can buy. >> is there an increased amount of people who are keeping kosher? --there is a pricing surprisingly little data. a company did a survey back in 2008 and found that the kosher food market was about $12.5 billion in 2008. they also found there have been an increase in the number of kosher products available, in part because brands were getting kosher certification. it is not that there were new kosher brand being introduced but saying your package soon is

now certified kosher. >> don't people want that? in this world of when it house show, isn't the idea to use kosher products better than your typical campbell soup? >> that is what they're going for. said you could potentially see a situation where this is likely freak. only 3% of the population has some sort of rome medical condition associated with gluten. everyone wants gluten-free even though it does not have any health benefits. if we had some way to make a [indiscernible] better. >> you think it taste good? >> it depends on where you get it from. >> it is this. it tastes grow. mine fromt buy

manischewitz. i buy mine on the lower east side. that is for like all jewish hipsters. at the tanko look and pick the fish you want. the one thing that i learned this year about passover food is quinoa. have that on passover. as far as i know, manischewitz does not have a quinoa line. celebrate a lot to this week. thank you for the update. what do we need to take about -- talk about next? the masters. it makes many of us want to swing like a pro. manhattan's body club is a fitness center that has everything you need to train for the course. it attracts members from the pga tour and even celebrities.

matt miller to get an inside look. check it out. is a tough choice new yorkers have had to deal with for years. the golf club at chelsea piers is closed but it is an overpriced driving range. only cost $65se to play but good luck getting there by public transit or tatian. transportation. regular golf to a course on the range. they can work on you. to treat yourow body. we get so deep into it here, we all come together and we work on your golf swing together. >> golf and body will hit you back in shape and ready to heat

-- hit the links on accounts. it is a 25,000 square-foot facility one block from penn station. he gave us an inside look at what it offers. state-of-the-art fitness equipment, world-class trainers that work with top golfers, a private liver and to entertain, a fully stocked cafe and seven high-tech hd golf simulators. equipped with the leading golf radar that cost the000 and gives data on angle of attack in 3-d imaging of the ball flight. in to trainas been and jimmy fallon is a member but is it a winning formula? the manager at deutsche bank started training last year. subsequently he won the reddish amateur open. enjoys sure everyone playing golf. it is even more refined and that everybody wants to get better

here at playing golf. this is a toolkit to get better. >> it is a proposition hard to resist. for high rollers with no time but money to spend and a drive to play better. we would not be surprised if he opens more of these one-stop shops in the near future. bloomberg news. not heard that name in a few years. it is approaching the six past the hour. it is time for "on the market. so let's look at u.s. markets. green across the board. investors are in a panic, getting chewed up and spit out. now they are long and strong. look at this. up almost 1%. this is the time to be a good stock ticker. if you have the companies fundamentally right but this has no confidence. think it is due to six

under $73 million for loan loss reserves. >> they rose. it is amazing. they came out with good earnings. they are looking under the hood to see why city members were so good. one of the best investors out there love citibank. we will talk about citigroup later and they will see the truth. be backet makers" will in just a few. stay with us. we will talk about this year's bus trade. incomeook argues inequality may get a lot worse. we will speak to the author of capital in the 21st century. it was a big topic in davos and it continues on. stay with us. ♪

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>> live from bloomberg world headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> from refunds to retail, sales rose by the most in the year and a half. stores may be reaping the benefits of higher tax refunds. the seven sins of wall street -- only seven -- how the nation's biggest banks fall victim to gluttony and pride. it is bad and guess what? it may get worse. a new best seller about income may getty since the 1% an even bigger piece of the pie.

to "market makers." i'm stephanie ruhle. eric schatzker is out this week. be speaking about the post-financial crisis world -- it's the seven deadly sins of wall street. big banks, washington like east and the next big crisis. hopefully we are not facing the next financial crisis anytime soon. but i am thrilled you are here. >> if we do have the next financial crisis, i would like to be sitting in this chair next to you. >> i like that. are, bob ise you here to fill in. we talked about bank earnings earlier. i want to bring in our friend michael moore. a better-than-expected quarter for citigroup which is amazing, if you take about the beat down they've been taking with the stress tests and in mexico, we hear they are firing 300 people in global markets. if you think about the amount of people who have been fired out

of banks since 2008, who is left? the guys making coffee? >> it would seem like they have cut to the bone but i guess there is more room to cut. first-quarter earnings looked pretty good for them. on the media call, you some of a lot of questions about the earnings which were pretty good but you did see a lot of questions about the stress tests and mexico. they said they found a second fraud in mexico, much smaller, -- under $30illion million. there was loans that there -- loans they had made based on --udulent receivables, 400 400 million dollars, a supplier to mexico, one of the bigger companies. they found another one, much smaller but they are continuing to look through all of these of theand this is one fears people have of dealing in these emerging markets.

>> stephanie and i seem to be a he said, she said today. i keep harping on the 673 million dollars of loan loss reserves rot back as a driver for citigroup's earnings today. how much do these banks have left and what will we see going forward? will they be losing money because they can't bring the money back? >> big question is legitimate versus repeatable. these are legitimate. credit is improving. is itestion is repeatable? it seems like we are running up to the end of that. jpmorgan this quarter said we are basically out of reserves in credit cards to release. mortgage is winding down. citigroup is in the same boat all stop you're getting toward the tail end of the story. in 2000 ninedrag and 2010 as they build up these reserves, and it's been a big boost of earnings but we are running out of that story. we all going toward this

end zone of banks being utilities? takingon't want to be risk, we talked about jpmorgan getting out of the commodities business and whether it is jpmorgan or citibank, fixed income revenues are down and fixed income is where they make the fat p&l. end does this mean at the of the day? where are they going to make the big fat dollars? >> i think they are treading into utilities. if you look at the banking sector, it's incredibly highly capitalized right now. ton of capital and are exceeding their minimums by a good margin but the big question is revenue growth will stop they just haven't shown it. you had analysts on jpmorgan's call last week saying you keep saying that it's not secular but it is starting to feel like it and feelsor years secular in terms of the downturn in trading. you have had structural changes

whether it's proper clearing being gone or -- these big volatility swings are leaving the business and i think you will have a more stable but not as sexy business. ceos of wall street have read the seven sins of wall street and they have decided that yes, we are too big. we're too big to manage, too big to jail. too big to prosecute, too big to manage. that is what is going on. wall street was way too big for .he crisis, it has to shrink the whole financial sector. >> i asked this all the time but now more than ever, those who said this is cyclical and they will find their way out of it, how are you going to pay guys a ton of money when the job they perform no longer produces the revenue? >> you won't. pay has come down and we have seen some of the top performers

go to the buy side where it is more evenly you kill and not based on the value of the seat. of it is a lot of bank executives have talked about a mid-levelation, the guy, the medium performer is not the top get 80% of performer. he will get 50%. >> i want to go back to the seven deadly sins because -- >> because you love them. >> i want to get back to gluttony. if you think about who are the people who have a come most successful on wall street, it has not been those who have an extra dairy management background and know how to lead people. they are huge p&l guys. when they don't have huge p&l anymore, what are they leading? >> if we can go beyond the seven sins of wall street -- >> do we really have 107 sins? >> that is mysql.

you have to take a look at the shadow banking system now the guys people of the are talking about, and a lot of them are guys unfortunately, are not going to be making as much money on wall street. >> so now they go to carlisle and blackstone. your sequel is the financial crisis as it relates to asset managers. >> it could be migrating to that. part of the seven sins of wall street is not just about money. it is about influence, political influence. you have undue political influence by wall street on washington right now. you talked about it on your show, i've talked about it on your show before. jb diamond goes to washington to get rolled by congress and senate and ends up -- >> hang on. on that andorting jb diamond did testify many people felt like they gave him a pass. fast forward a year and half

later what he has to deal with carl levin and eric holder and the massive fights -- massive find jpmorgan has paid. is a breeze?lion >> i don't think it's a breeze, i think it's a heck of a lot of money. i think 23 million dollars is a lot of money and that's what his salary was this year or last year. runs one of the biggest banks in the world, why shouldn't he get hate that much? $80man does got nearly billion. nearly $80z got billion. >> i don't know how anybody earns that much money. you get about that much money, but you earn it. been on that has job. >> i have to sit next to shatter every day. -- sit next to erik schatzker every day. you are stuck here with me all

day, but we have to move to a different story. the standoff in the ukraine seems to be entering a dangerous new phase. russia is showing signs it may rest -- may march into eastern ukraine with pro-russian government taking over eastern ukraine buildings in that eastern province. my guest is a former ambassador to ukraine. what is the endgame for putin here because this is getting scarier? >> this is getting increasingly worrisome. what mr. putin wants is he wants ukraine hinder, prevent from drawing closer to the european union and the acting government says it wants to go forward with the association agreement with the european union. so you have seen russia even after the annexation of crimea ratchet up pressure, raising gas prices 10 days ago, and now you see these takeover of buildings in eastern ukraine which have all the hallmarks of a russian

special services operation. >> what can russian authorities do to put pressure on putin? the west isto me taken some financial steps in the european union has applied visa and financial sanctions on individual russians. at has had some impact. the russian central bank over the last four or six weeks has had to spend $25 billion to support the ruble will stop -- support the ruble. you see large amount of capital flight coming out of russia. a given the fact they have not moved to defuse the crisis but has piled on more pressure and is doing these provocations in eastern ukraine, it is probably time for the united states and additionalion to ply sanctions. >> how close are we to an actual war here not only between ukraine and russia but a larger conflict? >> i think there are a couple of points here. my guess is the russian military

does not want to go into eastern ukraine. in part because they understand ukrainian army, in contrast to crimea, the ukrainian army would fight and there would be partisan action. a city to someone from 25 miles from the russian border and she had a conversation with her family and said people were stockpiling guns in anticipation that the russian army might come. i don't think the russian army wants to do this, but you cannot exclude it. what has happened over the last 10 days are these armed seizures -- ittting the government faces a dilemma. doesn't act and try to take back these buildings and run the risk provokeshed and perhaps a russian military response or does it sit back and do nothing and watch these sorts of takeovers continue and perhaps expand. >> are there penalties the u.s. and eu could be considering that you think they should not adopt?

>> i think it is time to look at additional financial and economic sanctions. three weeks ago, president obama talk about an executive order that would allow the u.s. government to move not just against individuals but certain sectors like the financial sector of the russian economy. i think it is important in the west began to signal to mr. putin that there will be additional consequences. it is pretty clear that nato is not going to go to war with russia over ukraine, but there are things the united states and europe can do that can cause a lot of discomfort and russia. doin your heart of hearts, you actually think vladimir putin cares? does he feel threatened in any way? >> he is a different kind of guy, but this is some of you pays very close attention to his approval ratings. for years, we've talked about this implicit deal putin has with the russian people where he asks them to accept the fact that they have very little political voice, but in return

for which he will give them economic stability and growing living standards. he delivered on that from 2003 2008. there were signs the russians were nervous last year at the projected economy was going to below the standards of eight or nine years ago. right now, you have everybody to 1%.ding russia growth i think that bothers mr. putin and to the extent we can push that along, we may be able to urge him toward a different course. >> tank you for giving us the update on this very important topic. a former u.s. ambassador to ukraine and the arms control and forroliferation director the brookings institution. when we come back, it seems like taxpayers are taking a refund checks and running to the shopping mall. hot the jewelhow video is -- two of hollywood buzz biggest names are in a

billion-dollar bidding war over a company that makes short form videos. this is "market makers" on bloomberg tv, streaming on your and now,blet, apple tv amazon's fire tv. ♪

>> welcome back. there's a hot story in hollywood today. relativity media is starting a bidding war for maker studios. this blows my mind. 950 milliondy did dollars for maker, the digital field producer that makes popular short films for youtube. today, relativity made its own offer. jon erlichman is following the story from los angeles. there's a battle and i'm confused -- i thought this makers deal was wrapped up and done with disney over two weeks ago. >> it definitely seemed that way and i suspect although disney is

not commenting, it is the staff feels the same way. what has been coming out over the last 24 hours is that there will be some kind of stakeholder vote on tuesday. the folks at relativity are coming in at the last minute with this offer which they have changed a little bit. we will get too specific on the numbers but you are talking about a billion-dollar deal when you put in all the parameters of what they might be be willing to pay for. positioning itself as a new studio. make film and television and represent people in sports and fashion and have talked about their interest in being a digitally savvy player. is like maker with disgruntled former employees, including a ceo who has started a court while tied to the disney deal. sound like it relativity is a cooler brand that disney, but what are they offer maker that's any better?

offer, theyivity would potentially see put little more cash on the table potential he for some other players at relativity. there are a lot of stakeholders in the business, so as the deal comes together, maybe some people feel as though they won't get what they deserve or who knows how that will play out? from a formereet maker employee today hoosick suggestedhaps -- who they would be better under a relativity deal. disney did put $500 million in cash on the table and said there's another 450 million dollars in incentives if the company performs well. whereas in the relativity case, they are putting about $525 million in cash and stock up front -- >> at a time when content is king, given relativity's brand and the artists they represent code the argument be relativity

could offer more in terms of original programming? if you take what they have done and who they work with, could you say we're going to create content on maker that disney can't? it'sat's a tough call and an excellent point because relativity is in the position to say we can put you in our movies and tv shows. they've done that with the sports players they represent. there's an opportunity to do other stuff and we know through maker there's a lot of talent that has come up through the youtube world and they are looking for the next chapter. but there is nobody bigger than disney and disney is doing this deal in part so it can look for new talent and find a great way to market some of its big brands , the next star wars movie coming out. i think it will be an interesting one. week, youtube sensation logan paul was here and that kid rock my world doing the russian splits in my escalator.

try to do that, chewbacca. back, turning refunds into retail sales. tax day is giving stores something to cheer about all thought we will have that and more. stay here. ♪

>> welcome back. as march warmed, americans dug out from under the snow drifts and went back to shopping malls. it is the american way. don't forget the auto dealer. and they went out to eat. the change in season is the big reason the government reported a big rise in retail sales this morning. we want to bring in our economics editor, michael mckee. you think tax refund time, getting that check is the reason

people are going to their orange julius? >> it is one reason. >> i don't need a motivator. >> thank you for doing your patriotic duty. a 1.1% rise in march, far better than people had forecast. not only that, february numbers were better than expected. they were up .7%, originally reported as a .3% rise. we all knew that there was a weather issue. we are making a little more money and is tax refunds are coming in. with the advent of electronic filing, people file earlier now and you see more refunds knowing out. there is also the end of the withholding. last year depressed number -- >> say that again. >> when the tax rate went away and the average refund was not as big last year. this year, tax refunds are going up. we're getting paid more back from the government, those who

have a refund coming. that's about $40 more than last year and not only that, more people filing early means they sent more tax returns out. we are approaching 2012 levels. that was one of the longest retail sales rebound we had seen. this moneyke some of is going straight from uncle sam's coffers and it is going straight to the retailers. >> i feel like we have been asking the same question for five years now. is this the turnaround in the economy we have been looking for? >> economists are hoping we're finally there. we have a big rise in sales and we are also seeing people making more money. that's the key. the people who get paid by the hour have seen their pay almost double over the past year. so we are seeing more money in people's pockets and that gives

them the wherewithal to spend. we also see delayed demand with cars and houses. people who have pent-up demand are finally starting to spend. >> americans don't believe in saving. coming up, we are talking the wealth gap. ♪

>> live from bloomberg world headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> welcome back to "market makers." i'm stephanie ruhle. erik schatzker is out all week. michael mckee is still with us because he needs to help us rate this down -- you can call it the incredible shrinking deficit. new numbers out from congress show the fiscal gap falling even more than forecast. washingtoning in our correspondent, peter cook. how surprising are these numbers? >> who we knew the numbers were

coming down and this is a rosier picture than estimated. some of it has to do with the health care law and some savings there. numbers not as big as first rejected him about let me talk about the budget deficit. now projected by the congressional budget office to be $492 billion. that is down from where it was previously. the health care law. it has been a huge debate. the president has gotten better numbers in terms of enrollment and he's getting more numbers here on the budget for that also should leave the white house. it's going to cost 36 oem dollars in 2014, $5 billion less than the cbo previously projected. basically the subsidy numbers for people who need health care coverage will stop the longer-term nubbers, the ten-year finger -- 10 year $1.38 trillion. comedy people are going to be

covered? they are not measuring apples to apples. at cbo still puts the number 6 million. why do they have it that way? they are looking at the average number of people who have health care through the entire year. there are some discrepancies in terms of how they are measuring that, so we don't want to be too confused with that number. how many people are going to be covered as a result of the health care law? the nonelderly insured, the projection for 2014 is 84% of those americans, up from 80% if the law was not in place and up --umber by 1986 goes by 2016 goes up to 86%. these are the numbers will stop the percentage of americans covered who would otherwise not be covered. numbers for the obama

administration. not necessarily to crow about, but to feel better about. >> we're not surprised because a couple of things have happened. all of the stimulus spent touring the recession has gone away by now and the economy is picking up a little bit. you have the effects of obamacare and you have the sequester taking effect. all the spending cuts are having a fact -- having an effect for good or for ill. the implication for the bond market is very strong because it means the government will have to borrow less. it has been the to get buyer treasuries? the federal reserve. they have cut it back but they are buying $45 billion a month. take that over the course of the year and you have more than the treasury department will be issuing this year, which is another reason the fed needs to get out. >> so we should have a sequester every year? the sequester is good for now, but what about going forward? thing? one-time

>> it's an issue of whether you are eating your seed corn. when you cut across the board, you do have a problem. if you are targeting your cuts, you can make more educated cuts in terms of what the long-term effect on the economy is just why congress should revisit this to get out from under the sequester, which they say they will not do until 2015. cut things that could be cut, don't cut investments in futures. >> are the deficit fights going to go away in washington? are people toasting down there? >> not anything of the sort. they are running for reelection right now and the deficit is not like the issue it was a couple of years ago. big issue because there's no effort on the part of either party in congress to deal with long-term issues like entitlement programs. that picture has not changed even though the short-term picture is improving. >> if obamacare is chipping away

at the federal deficit, that seems like a huge issue for the democrats. do we expect the democrats to bring it up between now and november? >> you've got a big debate in the democratic party as to whether or not to play offense with obamacare or defense. a lot of those highly contested senate races like arkansas and north carolina, obamacare is still not a political winner. socratic leaning states and districts, but in tight races, it's more of a liability. numbers like these could get them as to change their tune and play offense, but right now, it is not happening. >> thank you for giving us the latest. deficitg to call it jubilation. a little john boehner barbecue? i want to that. when we come back, we are talking about the seven sins of -- thereet will stop

sins of wall street. any of oured interviews, you can watch it on amazon's fire tv and apple tv. watch us on demand or streaming live. who would not want to binge watch "market makers?" ♪

>> bloomberg is wherever you are and it's right here, right now. "market makers" is back.

myk schatzker is out but colleague is helping us out today. we have been talking about your book "seven deadly sins" all show. let's get to envy. >> it regulatory capture. >> what? >> regulatory capture is when the government overseers identified more with the industry they are supposed to oversee than the people they are supposed to protect from the industry. >> why? because they worship them? lex because they worship them. >> if i am a regulator and on the white knight and i love what i do, over time, could i start to say what gives? why do these wall street others make 20 times what i make? i'm going to go to bed with them. >> going to bed with them would be lost. that's a different deadly sin. >> envy is manifesting itself how? the facthe fad -- with

that fab torre at goldman sachs -- i sympathize -- he's the only wall street executive to be punished rectally for what happened in 2008. that is what we would call regulatory capture and that's how it manifests itself. >> you are saying regulators were too afraid to go after goldman partners and too afraid to go after hedge fund that made hundreds of millions of dollars in subprime and instead will go for the vp at goldman sachs? >> i'm not saying that. that's exactly what happened. i can only tell you that's what happened. regulatory capture means if i work at the sec or the department of justice, i am interested in sometime in the future working for the people i'm supposed to be policing because they are going to treat me really nicely. they're going to pay me more and give me a nice expense account. so i can go back to the

regulatory agencies i used to work for and take those people out for dinner and tell them about how great my bank is and the whole thing is a big cycle that keeps on perpetuating. >> then we have to think about wrath. i had a chance to sit down with those regulators who could see the bad in fab torre but not in his superiors, they would not have to deal with me. >> what i did is i use wrath as a way of saying the federal reserve had one of the biggest secrets for the longest time and that was how much money they actually lent to the banks during the crisis. secret untils a bloomberg -- >> hold on a second. >> sued them. >> werther backs not up against the wall? banks not up against the wall? wings could not have been worse. do you remember the night lehman

filed that sunday night? >> i'm not here to say whether it was right or wrong to do. what i am here to say is that it was wrong to keep it a secret what they did. >> don't they need to manage expectations and keep things called? what would sharing that information real-time had done? caused real panic and hysteria. >> you put the whole real-time thing in there. now, because a great deal of what bloomberg did and the case went all the way to the supreme court and the supreme court ruled the public's right to know is more important than the secrecy. but because of that, we have a two-year lag time. but for the first time ever we will know how much the banks borrow from the federal reserve will stop there will be a two-year lag time so there's not a stigma and a chance of a run. was so much concerned about how much the banks were borrowing, how come the automakers are not in there? >> they did not get bailed out by the federal reserve.

the federal reserve on one day in december 2000 8, 1 point $2 trillion. >> you are right. up $700 billion -- $1.2 trillion from the fed on one day. >> it was all paid back. >> not all of it. why are the ceos from the largest banks coming out in march of 2009 saying my bank is fine, my bank is healthy? at the same time to maneuver by they were borrowing $65 million from the federal reserve. >> hate the game, not the player. they were not breaking any laws. >> i think they were breaking laws. lying. anybody --see >> we don't see anybody going to jail. >> we didn't. when we come back. "market makers was quoted has more. maybe we will talk about pride. max access of pride.

rex stay with us. ♪

>> welcome back. the gap in wealth between the rich and poor continues to get wider. look at this chart. it shows the rise of income inequality in the u.s. over the past 20 years. zero means wealth is distributed equally and one means only one person has all the wealth. theu.s. is pointing towards middle right now and here's the big question -- what happens as their portion of the pie just keeps growing? my guest tries to answer that question in his controversial best-selling book -- "n the 21st century." he joins us from our washington bureau. and i'm joined by bob every and michael mckee. what is your general thesis here? what we do in the book is to put together data on the

income and equality. primary post is not to draw a political conclusion but for people to make their own mind. often, we are trying in incomeok to put distribution into a perspective so we can better assess current trends in the current situation. >> basically what you are suggesting is capitalism eventually leads to a situation where very few have all the wealth and most people have very little. it is sort of inevitable. this has been a historical certainty. why and how does it happen? don't claim this is the only possible outcome but right

, there is a push in the direction of rising inequality. wealth isf return to tied to the growth rate. was the case until the 19th century and during the 20th century, it was different but for a particular reason. reconstruction growth large population of the 20th century. if we look at the evolution of growth rates for the 21st century, it seems quite likely that the population is going to start stagnating again as it did in the 19th century. if we keep adding productivity that isf 1.5% a year,

enough to counteract the fact that the rate of return to for -- 4% orto be 5%. go in the the economy direction of large compression of wealth. the top of the wealth distribution has been rising three times as fast as the size of the u.s. economy in the past 30 years, which is problematic. >> thank you for coming on the show. you are one of the experts on income inequality in the world. what about some of the remedies we have in the government now we are considering, a national them -- national minimum wage and more progressive income tax. what do you think of those? wagethink the minimum needs to keep up with growth and

also proper education system that allows people to access universities and access skills. is also an taxation important part of the institution we need in order to make sure everyone who benefits from urbanization. what we have had in the 1980's since -- in the u.s. is a huge rice and top managerial compensation but a growth performance for the u.s. economy that does not give so good. growthend, the remaining for the middle class and lower has beenoups relatively small. i think progressive taxation at the top and can be a way to keep the top managerial compensation under control. thatther important thing progressive taxation can do regarding wealth mobility is relations.e to enter

we should reduce property tax for people who are starting to accumulate wealth and large that. i propose -- i think we should transfer traditional property tax system we have in the u.s. or europe into a progressive tax and net well. >> how celestica population in the united states that seems to dislike taxes more than they dislike the wealthy? >> that is the point. the way to sell it is to reduce the property tax on all these people. if you take the bottom half of the u.s. population, they own only 2% of the national wealth. increase that to 2%. it's a small number. the way to increase it is to reduce the tax on people who are

trained to accumulate wealth. you have a house worth $500,000, your net wealth is only $10,000. in this system, you pay as much tax as someone with no mortgage. what i would propose in this case is to reduce the property tax on the bottom two thirds of the population and increase on billionaires who have a lot of assets that is not taken into the property tax computation. >> what do you mean when you say there is a black box of inequality? what is in that box? >> you have two broad set of forces. one is the inequality of labor earnings. oft deepens the inequality

skills, our education system, access to university, and the minimum wage. the other part is the inequality of wealth and property. inequality of property harley derives from the inequality of it also follows its own logic. the top of the wealth distribution tends to grow faster than the size of the economy, and this is what we have had in recent decades, not only in the united states but european countries. according to global billionaire rankings, the top of the at six oron rises seven persons are here.

this is quite different from the inequality of earnings. in itself is not going to be enough to keep this under control. that is where more financial transparency and a progressive tax on wealth can be useful. >> thank you so much for joining us and congratulations on the success of your book. "new york times" bestseller. that is going to be it for "market makers errico haeckel mckee breaking down all the big headlines for us and my guest host for the day, thank you so much for being here. outrrow, i'm still with erik schatzker. i will be talking with the father of the index fund. you know who we are speaking bogle, founder of vanguard 500. my guest anchor for the day is

none other than the one and only ms.der of a qr, cliff as dish -- cliff azimuth. thegoing to send you out to newsroom were alex deal has more. >> stocks are rising in the s&p is up i 1% following its worst week since 2012. the nasdaq, the worst performer last week is the best performer today. the vix is falling, is it a sign the selling is actually over? options inside for a look at where options may be heading is my guest. he of us a broad look at what the options market is doing. >> we think this risk event is about halfway over. that suggests the pullback is very similar. as far as the options market goes come a week see a mixed response. if you look at the spiders, one of the most active hedging

products, it has lifted suggesting people are looking for protection. but if you look at the nasdaq, where a lot of the damage has taken place, the put call ratio is your multiroom year lows. one of the biggest trade today 180someone buying early may nine strike calls. they break even right around the recent highs. that's about $500 million on the line. pullback to be over. what isa look intact -- working? what are the stocks were easy to link -- you see bullish options calls? rex workday, for example, we saw someone come in and sell put to open. they are expressing the view that downside is limited. we see a little bit of that. wider macro view of volatility, we recommend people not selling naked put.

toprefer a call spread suggest an upside environment. implied volatility in general is higher. if you are just buying calls, that can work against you. rex we are looking at salesforce. >> our enterprise software cautions salesforce as when he likes. earnings out in may. that's exactly what we are talking about. >> thank you so much. we are on the market again in 30 minutes. "lunch money" is up next.

>> welcome to "lunch money." we tie together the best stories, news, and interviews. we have a special tax a pregame here, including how not to pay uncle sam. in sports, make that two green jackets. bubba watson is up there with arnold palmer. an herbalife is getting another follower. and the starbucks ceo talks about minimum wage and their partnership with oprah. and william shots