>> live from bloomberg headquarters in new york, this is market makers. >> cyber spying followed, china urges domestic angst to dump their ibm servers and use chinese computers instead. how do you say fed up in germany? ? deutsche bank investors want to know when this will end.

good morning, everybody. you're watching market makers. i am erik schatzker. >> and i am stephanie ruhle live at deutsche bank. it seems like bloomberg does not want to you and i to reunite. you were on location all last week. i am on location today. i promise it is worth it. earlier i sat down with the ceo who gave me his recipe of having happy bakers -- happy bankers. how do you have a happy banker in a country with a socialist president? he claims he knows a way to do it. remember they just had a massive capital raise. unlike barclays this retrenching is getting away from those capital intensive businesses like fixed income. that $8 billion. we will find out exactly where. >> i can't wait to see you talk to your former boss. >> i can't wait to see you.

i think i brought some of my former 360 reviews. i am a forger -- amy -- i am a --mer which the alumni former deutsche bank alumni. >> as you know it is time for the newsfeed. these are the top is in the stores around the world. -- top business stories around the world. he'll should brands agreed to buy pinnacle foods. he'll sure is the maker of gdb sausage -- hill scheier -- hillshire brands is the maker of gdb sausage. one more sign manufacturing may help the u.s. economy strengthen. orders for durable goods unexpectedly rose 8/10 of one percent last month. that was the third monthly increase in a row. the housing market is cooling on

the year ended march. 12.4%.ices rose that is according to the sj key -- to the home schiller price and cut -- price index. rising tensions between the united states and china over cyber spying. we learned the chinese government is pushing to remove ibm servers from banks and replace them with a local brands. my question to begin, or is there something specific -- is there something specific to ibm or is it part of a broader retaliation story yet :00's see this as part of a broader story. this is a clear escalation on the part of the chinese after the u.s. justice department indicted five military officers from allegedly hacking into u.s. computers of companies and stealing secrets. for people familiar with the china is reviewing

whether the use of idm servers for financial services such as banks compromises security. they're pushing banks to remove the ibm servers and replace them with local chinese brands. latest escalation comes as a big blow to ice -- to ibm. their sales fell 20% in the first quarter. they still see good opportunity in china over the long term. that outlook is likely taking a hit. ibm was reached for comment. no response yet. although this is part of the broader cyber security story ibm is likely taking a hit. >> what about the winners and losers here you go ibm would be -- losers here? ibm would clearly be the loser here. who stands to gain that market share? >> definitely some winners and losers in this one. should the review show a threat

-- and the thought of courses it well. analysts believe china will use any excuse to promote its mastic brands -- its domestic brands. a company who servers are the china postal companies -- this comes as forrester researchers estimate purchase of i.t. products will rise 11% to $125 billion this year. that is an opportunity u.s. companies may not get to play in. thes this similar to situation affecting cisco, the maker of networking cut -- networking equipment. they have faced accusations that they cooperate with american security apparatus treated in that case the clinton --

apparatus. in that case the clear winter would be yahweh. are seeing parallel storylines. the chinese government paying back for the u.s. taking action against its own military officials. this is all from the snowden fallout. you are seeing u.s. companies taking the hit here. this, toof all of $30t estimates range from billion to as much as $180 billion. add is an estimate from forrester research group. -- that is an estimate from forrester research group. although we have not seen the economic fallout quite yet some companies do have contracts that are still ongoing. -- thisest august the latest story is just the tip of the iceberg. >> we are going to continue with this story.

will bring in the founding director of china market research. he is now live via skype from shanghai. thank you for taking time out for us this morning. heard about the action that appears to be affecting ibm as the tip of the iceberg. would you agree with that and that this is just the beginning? >> it's great to see you read -- see you. statesnce the united indicted five chinese nationals for cyber security attacks, we see every day an attack on american business interests. the government is trying to push an intention us -- push an a policy us -- push that will hit us. there have been rumors that the government told all state enterprises they cannot use mackenzie or bct consulting services anymore because they're

worried they're going to be ceiling that's going to be stealing state secrets -- worried they are going to be stealing state secrets. the chinese government is trying to push back against what it sees as fairly aggressive behavior by the obama administration. it, theu describe indictment of those five individuals on hacking charges was the trigger or the spark, if you will. i have to imagine that some of this was anticipated. the tensions between the united states and china are long-standing. in the background are the revelations of edward snowden. >> that is a great point. we have president xi jinping concerned about snowden and is looking for an excuse to retaliate and push back against the americans. i think these five indictments give him a great excuse to do that. second, i think it is clear china is having increased

political tension with its neighbors, whether it be vietnam, japan, or the united states. at this stage -- >> is all a bit about pushing back and flexing its muscles and showing its economic might or are the disputes with america over cyber security and spying and the disputes with the vietnamese and the japanese over territory and excuse or at least a diversion from the domestic concerns the chinese people have. is much moreis about flexing against the united states. a large part about the push into the south china sea and the disputes with vietnam came triggered when obama went to asia a few weeks ago and and besides america's pivot towards asia. we are going to see a lot more

maritime disputes in the coming years. i don't think it is about diverting problem's. i think the chinese problem -- the chinese still support that the central government is helping the country. there are concerns the economy is slowing. middle-class chinese are frustrated because their wages are not increasing as fast as their home prices. frustration.t of >> let's go back to the companies affected by the technology concerns. worst powerand the you might find in mackenzie or bcg. how much further does this go and who might also be embroiled in the conflict? luxe i think a lot of the american tech companies are

going to have an issue. ibm, cisco, they are going to have serious issues. need toto saying we replace american technology companies with chinese firms -- -- there technology are those saying we need to replace american technology companies with chinese firms. government already said that officials cannot use windows eight. i think you are going to see hit against both of the technology players. the ones that are going to benefit may be the european players. the chinese feel more comfortable with europeans when many of those countries, even though they have some of their own issues with the united states, are probably speaking -- are close allies with america. always buyll airplanes from boeing but by a

little bit more from airbus. they want to be sure they have europe close to china even if china if-- close to there is a big issue. i think a lot of the american people don't look with as much .oncern in europe people are quite nervous. this is a great opportunity for china to exploit the server -- exploit the concerns. >> thank you for spending time with us on bloomberg television. he's the founding director and with us from shanghai. coming up, a bloomberg exclusive. scenes of takeover talks between pfizer and astrazeneca. we will talk about what caused that deal to fall apart. bloomberg television streaming on your smart phone, tablet, and

bloomberg.com. ♪

>> you're watching market makers on bloomberg television. stephanieave noticed is not here. she is live at the deutsche bank conference. with the bank's chairman, anshu jain. >> barclays seems to be retrenching and getting out of business while you are leaning in. >> i would like to think of this in a broader context. which bank has a broader business model. we are a very strong acid wealth manager. we have terrific retail operations, especially in germany and beyond germany. across thosence businesses in 74 locations. the european banking landscape is changing. >> i guess my surprise is in

fixed income. this is a time or you see morgan stanley get out of those businesses, push more into wealth management. you just announced the hiring of a big global head of your rates business. why are you pushing into those businesses when it seems like you are struggling to make money? 30%e have balance sheets at -- at 20%. we saw a lot of the issues fixed income was facing, both structural and cyclical. we positioned the bank and went for it. this is part of the natural cycle of the business. we have done very well in certain areas. we would like to target incrementally. places.ation of the core business in europe is where the tectonic plate is really moving. we remain committed to our core european franchise.

but also here in the u.s. where we see growth as being strong. we are making if you selected targeted moves. >> deutsche bank is very well known for being the best in complicated businesses. derivatives, structured products, in a time where bank is streamlining due to regulation. where is your edge going to be if that is not even your expertise. financing, you think repo, you think capital markets, prime brokerage. it has been a very balanced strategy. and that continues to be the case. opportunities will lakhs and wayne. but the opportunity -- will wax and wane. bringingre a risk in in external hires to run businesses? you are a culture guy. you built deutsche bank to be in

your likeness. you bring in big time hires from the outside. talking abouts creating the importance of happy bakers. -- happy bankers. >> we work closely together to make sure we have the right balance of culture and valid -- and values. we have done that in a for i.t. of cases. as long as you get the right mix of talent things work well. what i am most excited about, i still go on campus and talk to the youngsters. deutsche bank is a perfect blend -- terrific brand globally. how much of your enthusiasm is tempered because you have to devote so much time to litigation? >> it is one of the three headlands we talked about.

unfortunately it is when it will be with us for a little while longer. it has to do with the instances that took place years ago. our focus is to ensure that the true cultural change -- they posed a challenge. >> how much longer do shareholders have to wait and hold their breath to get to these litigation issues? clock sadist challenging and something we have acknowledged challenging and something we have acknowledged for 2014. it is very hard to predict. >> for those who say your capital raise is not enough to get the bank flying, what do you say to that? >> look at our ratio, i don't have to say much more. >> are there areas you want to take that money and invest? fixed income, for example. >> the capital raise is being ane in order to create

capital buffer. we have gone from 9.5% to 11.8%. we do recognize that there will for -- headwinds bit we want to make sure there is a very adequate buffer. we are digitizing our german retail business. we are hiring wealth managers on in accelerated global basis. we will be going to corporations and signing off products. and then there is a targeted investment in a few places. >> how about emerging markets? ,hen i spoke to stockton's ceo it makes many investors uncomfortable way are talking about russia and afghan -- russia and africa. how do you feel about russia and emerging markets? -- >> emerging markets

bring political stability, rule of law, the deep institutions you can count on in western markets that don't always exists. you need to balance these opportunities with the right level of prudence. is worth braving those considerations. >> you do spend your life traveling the world. you spent a lot of time in germany. does it seem like there is great opportunities in europe? those that say european banks do not have a tremendous amount of the levering, is that true? >> people were calling from the demise of the euro zone. let's really acknowledge what you have accomplished. two institutions have been built. asked --am is highly is highly successful.

are right in saying gdp growth. it is still slow to come and i think that really will be the challenge over the next few years. think there will be cross-border consolidation? do we need a ups, a deutsche see, or can we consolidation? >> the preconceptions of qualification really exists when the first didn't go through. without that it was very challenging. happen forneeds to that to really become a trend. >> how challenging is it for you to be an investment bank way had investment banker? bank's numberhe

one strength? right now while you are competing for human capital and summary talent people want to go to the buy side, what is deutsche bank's number one offering? a tremendous global diversity. flex those who are considering this investment -- is cut are starting to be the investment of last resorts? clock's am not sure -- >> i'm not sure they're talking about lending, they're talking about an equity stake. have donemething they in a variety of successful companies across a variety of industries. >> will be the challenge of this new capital? clock's obtaining a bigger equity base. bigger equityg a base. you need higher earnings to make sure you can provide. are at your financial institution's conference. what message do you want to get

are at your here we financial institutions conference. what message do you want to get out there? >> it is a successful conference. it has just begun. i would imagine the changing and evolving landscape -- i think we are entering the post-crisis phase of the banking industry. you will see more change in the next five years than you have seen in the last five. uppermostthat will be in the minds. >> think you so much. i am so sad we are out of time. we were about to go over my old 360 reviews. i will send it back to you. >> great to see your career doing as well as it is. >> i'm going to send it back to you. meantime it is just 26 minutes past the hour.

we will begin with the broad markets because we ended last week at a record and it looks like u.s. stocks are marching to a new high. stocks right now are above half 1910.67. to durable goods orders unexpectedly rose in the month of april. they were expected to decline zero part seven percent. -- to decline 0.7%. it does appear there is manufacturing strength. takeover activity is at foot. you may call it a food fight. uplshire brands is trading at 20%. earlier this month they agreed to buy pinnacle foods in its own deal.

that deal would presumably collapse if the offer for hillshire by pilgrims goes through. the market is making its own decisions. we will be back in a couple of minutes. stick around. ♪

>> live from bloomberg headquarters in new york, this is market makers with erik schatzker and stephanie ruhle. >> you are watching market makers on bloomberg television. seen,nie, as you may have is at the deutsche bank global services conference. you'll hear from her again in the next hour. , a billionaire is celebrating his victory in the presidential elections. he was elected with 55% of the vote. ryan is an kiev with the details. this is a gentleman not well known.

tell me about mr. poroshenko mr. poroshenko. >> he is a successful businessman. sellinghis money chocolate. he is one of the most popular chocolate brands here in the ukraine. he is also a very successful politician, who has shown an ability to work with everybody. he was the former minister under the former president, going back several years. and that he was the economy minister under former president viktor yanukovych. he was one of the first lien airs, one of the first oligarchs demand to the street and that president yanukovych stepped down. -- firstown billionaires, one of the first oligarchs to take to the street and demand that president yanukovych stepped down.

step down. definitely turning very chaotic in ukraine. be abletoo sure he will to spend too much time partying today. describe it, mr. poroshenko is a very capable individual. how successful does anyone expect he is going to be in calming detentions that have led to new unrest in the east? i understand dozens of people are dead after a battle between the pro-russian separatist and ukrainian military. it is not like things have calmed down since the election. >> that is right. he is really upping the ante in the conflict. he said he wants to unite all of ukraine. militaryes the operation that the ukrainians have been conducting east of the country can be more effective.

he says it should not go on for a few months, it should go on for a few hours. we have seen a ratcheting of their commitment to it. back a regional airport in the middle east and they are also claiming to have killed dozens of ukrainian rebels. there is a hardening of wills on the separatist side as well, if we can put it that way. the head of the rebels has written a formal letter to president clinton asking for support. we have seen in the last 24 hours -- to president putin asking for support. these are guys who describe themselves as chechen volunteers, not part of the russian military. are definitely contribute into the escalation of this conflict. just within the last hour the

body for observing conflict in europe, has reported they lost contact with four members of their delegation that was operating in the region. president poroshenko started yesterday celebrating the fact he had become the president elected of this country but already he has to be commander-in-chief in a situation spiraling out of control. >> we thank you very much. that is ryan chilcote with us from kiev this morning. in the meantime, pfizer has officially abandoned its did to buy astrazeneca in this $117 billion deal. it would've been the biggest ever in the drug industry. for some of the fallout let's take you to london where mac capital -- where matt campbell has been following the story. this seems like a cautionary tale of how not to do a megadeal. not go asrtainly did

smoothly as ian reid, chief executive of pfizer, was probably hoping. life of its own. politicala big debate in the ukp at astrazeneca clearly did not want to be bought and that affected the atmosphere. i'm sure pfizer would have preferred this to be a lot cleaner and quicker, we are essentially back to square one. >> how does a company as big and powerful of pfizer lose control over the negotiations and, more importantly, the public perception of negotiations as quickly as it did? >> at the end of the date they did not have a willing dance partner. astrazeneca fought back very hard. that was to the surprise of a lot of people around astrazeneca. given that we were talking about offer numbers well above where their shares were trading -- you did have astrazeneca try to make this deal sound like a bad deal

not only for its shareholders but for the u.k. in general. the economy here could be a lot better than it is. there is huge sensitivity around jobs. all additions don't want to be seen as dismissive for -- politicians don't want to be seen as dismissive for concerns of employment. up in terms ofem sales and it worked. >> it was this so-called inversion structure by where pfizer would have been able to move its corporate domicile to london and reduce tax liability. is the sense now that the collapse of this deal brings new life into options or has all the political scrutiny it attracted mean inversions are dead? >> i think inversions are going to continue until such time as

the u.s. moves to make them more difficult to happen or change the tax treatment of offshore profits. that is what is driving this. initially the u.k. government, george osborne the chancellor of -- isn't that a great inverse of our tax policy? there have been noises made about closing this loophole whereby american companies can .e-domicile as we know in washington right now it is not the easiest thing to do. inhave seen a number of them the pharmaceutical space in particular and i expect that to continue. >> where it is business leave pfizer and astrazeneca? >> this is not dead forever. wiser has to walk a way for a. of upto -- for a period

to six months. these are very strict and complex rules around takeovers of u.k. companies that were brought in as a way that brought in as the wake of kraft cadbury. that cannot happen anymore. while is dead for the next few months it can certainly come back. they are trying to show investors that they have a plan b in effect. >> where does this leave the ceo of astrazeneca? an offer down significantly higher than where his share prices trading. training --rice is where his share price is trading. >> he made some very aggressive targets, very aggressive commitments as he was trying to resist this offer.

expecting great performance from d after zeneca drug pipeline down the road. the other thing he may try to do is make asked -- make acquisitions of its own, showing is willing to set the agenda and eight: -- and by growth. owth.d buy gr >> matt campbell with us from london. the deal is dead but perhaps not for good. coming up, amazon but publishers know who is the boss. a fight over how much it should get paid for e-books. we will be back in a couple of minutes. ♪

>> the plot is thickening between amazon and one of the

world's leading publishers. amazon is slowing deliveries over a contract dispute. caught in the crossfire are authors jk rolling and james patterson. and jamesing patterson. we speak with a former magazine publisher. also with us is the president of the authors guild. is this what happens when jeff bezos decides to flex his muscles? >> this is what happened when jeff bezos looks at an and can'tan industry figure out what to do in the digital age. agree that the book publishing industry is an he suggests?hat >> i would not call it antediluvian but i do have some catching up to do.

amazon is difficult to negotiate, it is like trying to negotiate with tony soprano. >> amazon decides to pick up on book publishing because it is -- >> this is all about e-books. of the are the savior book publishing industry because the margin is 75% on an e-book versus 45% on a paperbound, hardcover book. when amazon is looking at what apple is going to be doing, competing with them, and when they are looking at what investors say is wrong with amazon, they raise the price on .mazon prime now they are going to raise the price on e-books. they need to generate some profit. >> are e-books really that profitable? my sense of the publishing it is inis that turmoil, if not in crisis, over

a lack of profitability? >> it is a complicated issue. they do have that profit margin but you cannot take that as a given because you still have to start out with putting man-hours into editing, copyediting, and publishing the hardcover. that is all it fixed cause and unless we give up hardcovers altogether that is built into the cost of the e-book. >> how did the industry respond? is there any way to do battle with amazon? are hashof our members hachette authors. >> 55 books written by one person? extremely prolific. >> we support them and we resist what amazon is doing.

tacticse thuggish designed to intimidate. .hey are in punitive >> is their solidarity between the authors and the publishers? as io authority but understand that the relationship between the publishing houses and the authors is not always great. the book publishers are not losing money, authors are. especially independent authors and new authors are finding it very difficult to get into print , whether it is electronic digital print or hardcover print. >> they are caught in the crossfire and they can do nothing here. powerless,uthors are the book publishers seem weak. it is like david up of goliath in amazon. like david against goliath, with goliath in amazon.

>> one of the problems is they are mirroring what is going on right now, which roxanne can talk about the doj's resolution with the same publishers. barnes & noble gets a display margin to putra the books on display and in the windows. amazon wants to give advance notice or book orders before the publishing date. we should get a little better premium in the margin. there is no consistent see in the book publishing business. in the booktency publishing business. it is a huge corporation with a

lot of leverage. why aren't they in the e-book business themselves and raking in all those margin profits? >> it is a good question because amazon has taken over distribution and marketing and trying to get into the publishing business it self. it would make sense for publishers to offer it directly. hachette is standing up to this, they have not caved in. what we understand is other publishing houses will be in the same position shortly. they stand up to amazon as well one by one and amazon removes thereby button, amazon buy be -- removes their button, amazon will be-- >> many people are on amazon because it is convenient. are they going to another

bookseller? kluck's they are doing it. there are a lot of other sites you can get books. -- >> they are doing it. there are a lot of other sites you can get books. books are not commodities. you will never be able to substitute a cheaper book for war and peace. war and peace you want. if amazon does not give it to you you do not go somewhere else. stop amazon from doing it with golf clubs? >> they are a tough negotiator but they are just like any other retailer. they want their competitive margins. cooks up until now they haven't had one of their competitive margins. their margin is one percent. >> is focused on apple, which is not mentioned. apple is cutting its own deal

with the publishers. amazon probably knows with those deals are. they are not going to give up until they get it. >> in a word, yes. thank you very much. roxanne robinson of the authors guild and porter -- from media capital partners. jeff bezos is flexing his muscles, caught in the front -- caught in the crossfire. the fields oft the world fest soccer team. nothing like your local pitch. ♪

>> it is just 16 days away.

a world cup will kick off in san paolo. agohat very stadium a week -- still some work to be done. here is a look at where the teams will be playing on. it is not that wrasse or artificial turf. that iscyborg-like -- not grass or artificial turf. it is a cyborg-like accommodation. -- cyborg-like combination.

>> we are approaching 56 minutes past the hour. it is time for bloomberg on the markets. let's show you how stocks are doing in the united states as we marched toward a new closing high.

it s&p 500 pretty much where is when we checked in on its last. factor, durable goods orders coming in way ahead of the economist estimates. an increase of 0.8% for the month of april. looking for ae drop of 0.7%. previous month was revived by a full percentage point. whether it is signs of an economy coming back to life, durable goods orders certainly encouraging to investors. we will be back in a couple of minutes here on market makers. down at the deutsche bank financial services investors conference. she will be with the head of willtment banking and we have much more the next hour. stick around. ♪

>> this is "market makers." we will hear from bank of america's christian meissner. aneral motors is heading for recall for cars. our automakers just the more careful? for frozen desserts is going down. ."u're watching "market makers

we will hear from stephanie in just a moment. bank of america is speaking from people. bank of america said to be retained by the sterling family to sell the los angeles clippers. and his wife are under a great deal of pressure what he know he said and the way the nba responded. in part a banks were process. they have retained tank of america to sell the nba clippers and there is talk to the franchise could sell for more than a billion dollars. the lasting to sell in los angeles was the dodgers and they went for more than anybody thought was possible. was empty deutsche

bank financial services conference. timely,so happens, so that she is with christian meissner at bank of america. clearly, don sterling must've known that bank of america was number one investment bank in 2013. in what are you doing with sterling and the clippers us to mark --? >> we can't comment on it. the sport franchise is very important to us. a lot of participants are interested. whether it is wealthy individuals or media companies looking for content and other demographics. it is an important business for us. >> have you seen that shift in general? it was considered a vanity investment years ago. when the guggenheim bought the dodgers, people thought they were crazy for spending $2.5 billion until the median he'll

cleared and now they look like the smartest guys in the room. >> it used to be a rich person's plaything, whether it was russian oligarchs or other sports teams. it has changed. streams.tiple revenue there are real estate opportunities. there are long-term tv deals. it is something that has become very mainstream at this point. >> you had a banner 2013. m&a is booming right now. >> m&a is booming. quarterooking at second being the busiest quarter since quarter of 2007. activity is very high. cross-border deals are back in a very significant way. complicated deals are

driving. it is not just the bread and butter smaller transactions. it is cross-border and competition. >> you have your bankers in the classic 100 20 hour workweek again. are you in position to bank -- pay those bankers what they want? do you have the opportunity to pay them that way? >> we have a few months ago before we start worrying about that again. equity is high. i think in general people are feeling pretty good. >> corporate advisory is so important. what are corporations most worried about today? what conversations are you having more than any other? >> there is an element of macro risk. selloffhink about the in the emerging markets earlier

this year or some the concerns about rising rates, those things are driving people. with that comes some degree of urgency. if you look at low rates and high levels of liquidity, people are thinking they are getting their transactions done sooner than later. >> does it seem like we're going to see a lot of new emerging markets? >> that goes hand-in-hand with strategic activity. they are, metairie. -- complementary. this is not for other types of rationalization. we think this is going to be very busy. >> if we compare that to 2006, ,e had a huge ipo business there was also massive secondary business. that is lagging now. why is that? >> it is a combination of

changing market structure. a sense that investors are looking for the primary product. the new issue is to find new investment opportunities. from that perspective, it is very attractive. the two go hand-in-hand. you can't have one without the other. >> are there some sectors that you see more, sin? some people are very excited about tech. >> we've seen the most activity in health care and tnt roughly speaking. tech itself has been very much on the back burner compared to more traditional areas like meteor telecom. careld say cmt and health are the two majors. it is across the board. it is the general industrial space.

slidingindustry that is is financial services for obvious reasons. >> what obvious reasons? people are still unenthused? people don't want us he can -- want- consolidation to see consolidation? is a pendulum that has not shifted back. >> could we see m&a activity in european banks? could we start to see some cross-border transactions? >> potentially. i think that is a ways in the future. many european banks are focused andapital raising management and so on and so forth. this is not front of mind. >> wouldn't that make sense when you have all of these banks fighting the same battle? join forcestime to

with the amount of litigation costs and increase of the client seen? it might make sense to move together. >> there is a logic that. the nearee that in term to be honest. >> when you talk about health , how much concern do you have for regulation? when you look at these companies, are they worried they will get through the regulatory process? yes, fortain sectors sure. marketshare share is a very real concern. in other areas, not so much. it depends on if you are a someess that is mature or of the growth areas. that is not a factor at now. >> you spend your life on an airplane. how much time are you spending in emergent markets -- emerging

markets question mark --? ? affectedlloff has things negatively. multinationals are looking for growth. they continues to be very attractive and very important to us. >> what is the biggest challenge you face? you said you are going to step up your m&a business. how do you see your top bankers when they are being lured away? >> fundamentally, they have to enjoy what they are doing and enjoy the transactions they are doing. i think they are. likenk they have to feel the culture is supportive of them and that they have the tools at their disposal. >> do you believe that? populist opinion is so anti-by financial services industry, our

bankers getting on that plane and slugging it out and working over 100 hours a week and feeling great about it? >> in some ways, that is a good thing. we have been very focused on making sure that our junior bankers have better position to deal with these types of issues. bankers, absolutely. they are still at it. i can only imagine that they are enjoying it. junioryou letting the bankers take saturdays off? > >> that is a policy that we put in place and that is working. that has been very important to us. >> thank you so much for joining us. i'm going to set it back to eric. >> stephanie is that at the deutsche bank financial services convention. she will be back in 30 minutes time. you will see it right here.

right now it is time for the news feed. china has taken another shot in its dispute over ciber and spit us. they are asking banks to remove the ibm servers and replace them with computers made in china. this is according to people familiar with the matter. the biggest meat producer wants to get even bigger. offered $5.6 billion for hill shire brands. they make jimmy dean sausage, ballpark hotdogs, and state fair corndogs. the offer is contingent on hill shire not buying pinnacle foods. more budget problems for the governor of new jersey. he was counting on a online gambling to bolster atlantic city. tax revenues for the state, he predicted they would take in

$180 million. at the current rate of collection, the state will bring in only $12 million. up, a new proposal is being proposed about the future of the los angeles clippers. they have just hired bank of america to sell the team. general motors will tell us what cars aren't being recalled. they are on their way to a most dubious record this year. you are watching "market makers ." ♪

>> live from bloomberg headquarters in new york, this is "market makers." >> you are watching "market makers." i am erik schatzker. there is a new turn in the los angeles clippers saga.

bank of america has been hired i s to sell their nba franchise. the league is trying to force the sale because of racist remarks made by donald sterling. for more on this breaking news, let's bring andrew klein. here with me in new york city is cristina alesci. let's begin with andrew. you were among those people saying this would be better if bankers were involved. what does this say to you? >> they are a tremendous group. if they are handling this sale, the process will be run well. not only will the team and league see action of value. it will be run white -- right. be all the bidding

competitive one? >> every bank of the street was fighting to get a piece of this action. goldman was very aggressive. bank of america beat goldman out , that is a testament to the relationship that bank of america as with the sterling's and there might have been another angle. what is interesting is they are going to be so many bidders on the buy side for this. it is going to be such a hot auction. about two and $3 billion. now it could go higher than that. >> are you hearing the same thing? that this team could go for a premium of what the dodgers sold for? >> i have heard numbers in the $1.5 billion range. with the dodgers and look where it ended up. i think christina has a great point.

never have i seen more billionaires and people with incredible wealth line up to look at a team than with this one. you never know what fair market value produces. >> why? we know the sorry saga of the clippers. they had a great year this year, but they were cellar dwellers for years. what is it that all of a sudden makes the clippers such a hot property? >> if you look at a couple of clippers cable deal ends in 2016. you can imagine they will bid that one up like we have seen here in l.a. recently. arenational tv contracts also up in 2015 and 16. tv will get much more local dollars, but a national perspective with the league as hot as the nba is right now, you will see a bump in business.

locally, the clippers of never been hotter and the lakers have never been more in the pit. people now realize that this team can not only have a local presence, a national perspective they can sit on the national stage. perspective,iness it did not do anything but help show that the clippers can sit on a national stage. >> one of the reasons that the valuations for these teams are going up is because there is potential to extend the brand into china. that is a real growth area for the nba. they have not done much in terms , aturning a profit in china least to a degree that we can see visibly. a lot of these valuations are moving on the idea of international expansion. we talked about this.

they don't own their own stadium. you have to take a look at that. there, but they don't have access to that revenue stream. there is a second team in the market. you are splitting an audience and ticket sales. those are the points that a keepsbuyer would argue the pressure on the evaluation a little bit muted. >> you have never seen more billionaires looking at a team. i am sure there are some names you cannot mention. tell us what you can. who is interested? publicly andt look who is stated that they are interested in the team, these are people who are worth $600 million. these are people who are worth double-digit billions. they can pay an extra $500

million just because. >> they could write a check by themselves. >> when you see people with this kind of wealth in a well-run auction, bidding on something ever come along in their life again, they will pay up. the franchise mean more to in l.a. better than it would to a group of people outside the city bus to mark --? >> i don't know that i have an answer for that. angeles,p here in los there are lakers fans and there are clippers fans. the clippers fans are like the bad news bears who of the -- have endured all these years of losing. deepe clippers fan is a

hum a deep fan. deep, deep fan. the names that have emerged like steve ballmer are just nba fans. they believe in this market. there is probably three markets that can compete. to ownuld be so much fun a team like the clippers in los angeles. but only is it business driving this, when you have that kind of thish to buy a club like and buy into a lifestyle like the clippers would provide, that is what people are bidding on. >> they seem to be on the upswing for the moment. thank you very much, andrew klein. he is joining us from los angeles. news, bank of america has been retained to sell the los angeles clippers. a bumpy road is coming up for general motors.

consumers could be having second thoughts after all of those recalls. gm is not alone. ♪

>> we are approaching 26 minutes past the hour. it is time for "on the markets." wilshire brands is putting up 22%. pilgrim's pride has come in with an offer of about $45 a share for this company. it is all cash. orthreatens to disrupt destroy phil scheier's bid for 'snnacle foods. -- hillshire

bid for pinnacle foods. pinnacle is trading down. s is trying to come bigger. you can see what is happening to pinnacle. coming up, warren buffett's favorite ice cream. ♪

>> live from bloomberg headquarters in new york, this is "market makers." bloomberg television. i am erik schatzker. stephanie ruhle is at the deutsche bank global services convention. ar from her coming up. this is a development. brands is responding. expect, they

believe in the value of creation of their own a bit of for pinnacle foods. hillshire is not rejecting this unsolicited bid from the drums pride out of hand. -- pilgrim's pride out of hand. they will study the bid and retained a financial advisor. that is important. considerably, about 25% higher than their recent trading price. it would be hard for the board to reject the bid out of hand. they would have to go through the motions and have an independent evaluation put on the firm with respect to its combination with pinnacle. is theyrtant part here are not rejecting that approach from pilgrim's pride. let's move to the new story.

it has to do with automakers. general motors has not recalled any vehicles today. it is not noon yet. they still have lots of time. i am making light of the situation, but it is very serious. they have had 30 recalls in 2014. toyota announced three recalls last week. the auto industry will set a record for recalls this year. with us is jim press. he is the former president of both toyota and chrysler. the --are wondering, are is the quality of the american automobile that bad? >> not at all. i think quality has never been higher. people can attest to that from their own experience. i think what has happened is a couple of things. cars have become more complex.

especially with technical advances and innovations. understanding of responsibility have been shifting as well. that has led to more transparency. that is good. it will lead to uncovering more problems that could become safety issues. hopefully, the winner will be the consumer and that is what we all want to have at the end. >> 30 recalls for one company alone can't say anything good about that company, can it? lead-in was they have a bumpy road and you are right. it is a very bumpy road. the question is how you handle it. i think they have done a good job so far. they have been an admiral job of trying to get through this. the answer is, of course not. the reality is there are all

kinds of recalls going on. gm --ot here to gm bm -- defend gm. there are 50 recalls by 20 manufacturers that have artie been announced. -- already been announced. they are trying to get to a zero level of death. >> the irony is that consumers should want auto manufacturers to recall defective cars. we want those problems to be fixed so the key does not turn the ignition off and we wind up in the median or worse. terribleme time, it is for the new ceo of general motors to see headline after headline, day after day a saline gm for the quality of its cars? >> absolutely. this is not just

quality. they are finding problems that could have been uncovered over time. one of the things that has happened that has advanced our industry and reduced our cost is we are using a more the same components across many car lines. if you have a bad ignition carsh, it is 2 million instead of what used to be a much smaller population. the quest for improved hasciency and cost is -- allowed us to have more computer stimulation. there is less a prototype evaluation. -- led toast increased levels. -- responsibility along's to her and itongs must be really tough. there will

be a lot of good lessons learned. the future gm and the future all auto companies are watching this. each one has to recall some models of its own. are they not the loser here? people see all kinds of cars being recalled here? are they not going to be less hesitant to buy a general motors car? >> that has not shown in the stock market or the sales figures. long-term, it is going to have an impact. they have to get their integrity back. the things that went on in engineering and development, that is what is going to have to improve. i know all car companies are

focusing on that as well. >> jim, thank you very much. he was formerly with toyota and chrysler. coming up, the real winner may be anybody with a sweet tooth. dairy queen is going head to have -- head with the yogurt shops that are so popular. ♪

>> dairy queen is opening its first store in manhattan this week. successful, it is a warren buffett backed chain. can it succeed in new york? cristina alesci was just here talking about bank of america. she is back, talking about dairy queen. >> it will take not too much. it is an iconic american brand. not many new yorkers are

familiar with it. in there only 36 stores entire state of new york. if you go to minnesota, there are 200 and 50 dairy queen's. -- 250 dairy queen's. this will resonate a lot with tourists. it is a big market for the company itself. they have not had a lot of domestic expansion. it is not exactly going up against frozen yogurt chains. it is a fast food restaurant. it has burgers and hotdogs. handles came of 16 in and said this is a little bit of a competitor. going to have to post what goes into the food. some of you might be shocked. a large oreo blizzard, has more in it, calories, saturated fat,

sugar, then two big macs. >> this could hinder the popularity of dairy queen in new york. people are oh so conscientious. desert places have come under pressure. there is competition from the green juice place. they are not going to go out and get a 1200 calorie blizzard. although i think you and i should do a road trip. i have never had one either. if we do that in the morning and juice in the afternoon, that is what we should do. >> this is cristina alesci on it dairy queen. we will be back talking about the next big thing in hedge funds. we will be talking to the head of global prime finance, barry bausano. ♪

>> i am erik schatzker.

stephanie is not here today. you have seen her because she is live from the deutsche bank financial services conference here in new york city. she is with barry bausano. he is the president of deutsche bank securities. the first person i reported to when i was at deutsche bank. this guy has all the right answers. we have to talk about the hedge are giving when they back nine percent, why is anybody giving you money? with the big shifts we have seen are moving away from the , toallocation, equity, cash looking at the risk factors,

look at the return stream. they see what bucket that fits in. it has led to what we saw last year. 40% of the managers were looking at that perspective. if you look at that nine percent return, it looks attractive. they are not looking for the pure equity data. they are looking for a steady return and that has been replacing that. that what they want? the grand slam knocked out 40% question mark --? to the is essential hedge fund industry since the crisis. they never wanted that to happen again. they yanked out there college finance expo and added bonds. was an enormous allocation to fixed income.

in the hedge fund space, people said i want to gather more institutional assets by having a lower and more stable return rather than a higher return. that is beginning to switch over. some are saying they would rather give 18 with lumpy ball then ate with smooth ball. the big allocators are saying if i am getting a high single-digit return, that is not moving my tracking index. i need a better return to make that happening. >> howard neville are the allocators? we saw -- how nimble are the allocators? strategies that have crushed us. nimble in thet way that we would think about it. allocation inut quarters and years. what happened at the end of last

the irony this year is they looked at the structured credit and said these are the best-performing sectors. they have been for a while. allocate in the top allocations. the first five months of this year the leaders are structured credit converts. the industry average is only 5.1% year to date. are pushedvestors into equities. april was a tall -- terrible month. their option to move on that bad month to a different strategy by june or by the third quarter is pretty limited. that late march to mid april.

you broke out social media, it was pretty rocky. the investors are going to stay put. the big question is whether the managers do. the machine did not have a ceiling. there was no emotional investment. it was just making its investments. they have been burned here pretty badly. they had five selloffs during the tech bubble. they will be slow to return to it. they were wooded so badly. >> can they get into the strategies that they care about most?

guys like john griffin are never looking for outside money. >> this is an essential story of the fund industry. the desire for capacity exceeds the talent to absorb. there has been a trend recently for big managers, whether it is sources or other guys going to office format. the desire for the pension fund industry to double its allocation is pretty big. think they can handle it from a performance perspective and also from a business management perspective. how well can they safely control it? >> do they have a fighting chance of winning? they have to offer monthly liquidity. >> it is a tale of two cities. of substance ups

have great pedigrees and great performance and a history of charismatic and intellectual leaders. you have the guy who can't clear a hundred. they can overcome. >> we have to leave it there.

>> that is going to do it for us today. tomorrow, stephanie and i are reunited. one of our favorite tests will be here.

right now, it is 56 minutes past the hour. we are on the markets once again. scarlet fu is here. >> the s&p 500 has made another new high. a.m.came out at 8:30 ix is bouncing off the five-year-old -- five-year low. >> how much should we read into this bounce in the vix. >> i wouldn't read too much into it. the low hot topics is level of implied volatility. out, it closed at its lowest level on friday since march of 2013. on a broader scale, you need to

toback to before the crisis see these sorts of levels. if you scan back to the arginning of this, the soq is around 10. if you look at other assets, currencies, you toe volatility going back data began. >> how do you interpret this? are the central banks keeping monetary policy loose? >> that seems to be the broad consensus. i am a big believer in it being cyclical. cycles and they are well correlated. as much as we believe we are 18 months into a.

everything isity, cap the 25, we will see moves up from this extraordinary low-level. people should take this into account. >> you know how low these levels are. before -- below 14 for how many days not? >> about 26 days. it moved below the 14 level since january 13. relativityce is the is mean reverted. there can be debate out there about what could be the catalyst to move it higher. perhaps the market wakes up one day and cares about the ukraine. it could draw focus to the fact that you have divergent monetary policy. things could tighten.

will leave that when volatility is this low, we think it will remain suppressed for a little bit longer, but not much longer. we like coming in here and starting to hedge a little bit. this is not a one for the hills kind of event we are looking for. these are long lines of what we have seen since january 2000 feet -- 2013. is awe are showing here spider print spread. at 188 or 178. this is a very good position. with a pullback along the lines of seven percent or eight percent, you would capture that 10 points of spread and pay one dollar for it. >> the possibility of profit is

--mendous but the policy possibility of loss is small. is this tie to emanate? -- tied to antennae? this is a big trade back story. it is speculated to be what controls sprint. they are putting together a bid for a big mobile company. >> thank you so much. . .

>> welcome to "money clip," where we tie together the best stories, interviews, and video and business news. i am adam johnson. rundown, a big deal falls through. pfizer dropped its bid for astrazeneca for now. thesche bank exclusive, co-ceo talks about his bank's capital infusion, and the future of investment making. around the world, it's not just insurgents. turns out ukraine has a gas problem too, that goes back to the soviet era. off these of legislation is the table, and finally, and sports, we will talkwi