>> weinberg partners has a new ceo. bob steele,pointed who also has worked many years at goldman sachs.

steele was the ceo of walkover you. it is a whopper of a return for mcdonald's stockholders. they plan to return as much as $20 billion to shareholders by 2016. that will come in the form of buybacks and dividends. hasaliant pharmaceuticals raised its unsolicited takeover offer for allergan, boosting -- boosting the cash portion. in more on this, let's bring cristina alesci. it seems like bill ackman and valiant are pumped with new botox, breast implants, and prettying themselves up. >> it comes down to $10 more in cash. talking about a bid that is valued at 166 dollars a share.

they are talking about the value in some experimental drug and they're telling allergan shareholders you can have value and then drug these value rights are really tricky. you have to get to the fine print and understand what the contingencies are. it makes it tricky to value and determine how the shareholders and when the shareholders get them. >> i have one problem with this. cash is king.

there is still stock and valiant stock is down 10%. if they chart the more leverage on, equity holders will be nervous. if they put more stock in, equity holders will be unhappy. >> they need to back allergan into a corner. >> it will be up to the allergan shareholders. they will not back allergan into a corner. shareholders want to see more on the table. they will possibly see more on the table from ackman and valiant. between 180 and 190 is what the word on the street is. there is nothing that is going to afford them, other than the

shareholders putting pressure on the board. >> they have built their reputation as a disciplined acquire. >> the company has been that there could be tax benefit that will lead you to reevaluate the price because you will factor in those costs. >> they had a big sale. >> where is this cash coming

from? the sale was also because they wanted to remove one of the antitrust concerns that was around this deal. antitrustore of an thing. >> we have a presentation going on. thank you to cristina alesci. >> what happens if the market blows through your target? where is the s&p 500 right now? 1910. it is a high-class problem.

what do you think is going to happen? >> my forecast is that the s&p 500 will rise towards 2100 at the end of 2015. 2200 at the end of 2016. the trajectory is higher. is around 1900 and the market is trading around fair value. the market is trading around 17 times the medium stock. looking forward, the trajectory of the market ought to follow profit growth. it will be rising from $116 to $125 next year. >> is this not the year for long-short hedge funds?

>> it has been a difficult year. the reason is the dispersion of returns. about 25%, one out of every four dollars of the hedge fund community is invested in consumer discretionary stocks. day period, you expect a return for the stocks. it is only half that this year. the sandbox, a swimming pool is very small, to be choosing stock. that hurts in the long and on the short side. that has been a challenge for all managers. >> was the recommendation? >> look for themes in the market. opportunity sets, such as weaker balance sheets, have

gone particularly well. you can look at companies engaged in buyback activity. there are three opportunities to find of value and opportunity in the market. >> do you think the trade is going to continue to play out? it had confounded a lot of people and now there is this explanation that it is perhaps one of the unintended quantum -- consequences of quantitative easing. that raises questions. >> i believe that trade, owning comparedlance stocks, with stronger balance sheet stocks, that is a 50 percentage point out performance. it will persist. i think it will persist for a couple of reasons. if the economy is improving, as our forecasts suggest, as company management indicates, if the economy is getting better,

that works to the benefit of companies with weaker balance sheets. they are likely to benefit from that improvement. number two, if you have a strong balance sheet, it is important in a weak economic environment. the backdrop is, things are getting back -- better. >> google is one of the most widely held stocks. they are only returning 1%. what are your thoughts? >> when you think about the ownership of hedge fund portfolios, numbers that are time, ittly up, over is a successful strategy. they beat the market 65% of the time.

>> this year, it is underperforming. what does that say? the basket is what it is. does it say anything about hedge funds, the market, are the traits getting too crowded? google lags, no question about that. it has been a difficult year. some rotation in that portfolio. sales. the high some of the glamour stocks have dropped down. you have had new companies -- >> like what? >> walgreens. >> are hedge fund managers more of value? those companies have

underperformed significantly in the first part of the year. >> if we are no longer in a normal market, where are things likely to go? toit has risen modestly around 1900, five months of the year. there has been some important rotations inside of the market. high haslance, the done poorly. >> we have a lot more to talk about. let's take a commercial break. ♪ also, he is the guy who knows how to get the tickets for the big game or the great concert. i am not talking about in new york city ticket broker.

i am talking about stub hub. ♪ to west point. the academy is graduating its first cadets to specialize in a different sort of warfare. stick around for that. you're watching "market makers." ♪

>> we are back with david. before we were talking about hedge fund managers rotating out of the glamour stocks. how about the great rotation? equities.about are we making a move back to fixed income? >> i think the idea of money rotating from equities is overplayed. the idea --

>> going to tattoo this on my four head. >> it probably takes place over time. on the other hand coming of the pension community going in the other direction. their funding ratios have improved significantly. funded.75% it is closer to 95% funded now. the option to buy bonds resents itself. from a liability structure perspective, -- >> all that matters is that they pay out what they owe. >> the issue is how we think about that. seeing less money coming into the equity market then perhaps is the case some months ago. bonds have had good results.

the fundamentals in the equity market are strong. we go through all of the transcripts of the s&p 500 companies. sectors isacross all getting better. that is consistent with a market that is rising. it suggests that fundamentals are pretty good. whatis is a reflection of the portfolio managers are doing as opposed to a lack of a preference from myself. >> why do they not want in? -- this year it has been a great return. you are looking to get excess return. get managers are looking to -- on financials. that is where the dollars are

concentrated. you get rewarded for good stock selection in those sectors. >> given that you spend so much time going through corporate transcripts, in your experience, how accurate is management when it comes to predicting the economy? >> very cautious. they have been reluctant to step -- in terms of commenting on things. consistent seeing a commentary across all sectors. the answer to your question is management has been reluctant to be positive or negative. we are seeing signs of business activity and pricing power and the willingness to spend money.

corporate is a key issue. >> when you see durable good and orders -- durable good orders exceeding significantly and a big revision in the prior month -- >> that would be consistent with company management looking to spend more money. last year, you're looking around $600 billion of spending. that is capital spending by companies. roughly half of the companies have given explicit guidance to how much they want to spend this year. they are guiding up 7%. we have about 7% growth in your pocket. better,e economy gets it is an increase as we come to the third and fourth quarter. >> did it surprise you when

david tempered his goober bullishness? you want to be in. trading -- from a valuation perspective, the market is at a pretty high level. historically speaking, when you have a profitability of that level, it is priced to book. with a look in the market. >> it sound like we'll have a sunny summer. >> coming up, the new pricing

policy from the biggest ticket reseller. it may not be cheaper, but at least you will know what you are paying for. ♪

thes the president of united states, delivering a commencement address at west point in new york state. let's listen. anding have been outst stewards of this institution and mentors for the newest officers of the united states army. i would like to add the army's leadership. senator jack reed is here and a proud graduate of west point, himself. 2014 i congratulate you on taking your place. among you is the first all-female command team. you have a rhodes scholar.

extendsnt accuracy beyond the 3.0. the entire class, let me reassure you, in these final hours at west point, as and -- forn-chief, minor conduct offenses. [laughter] [applause] nobody ever did that for me when i was in school. i know you join me in extending a word of thanks to your families. joe, whose son, james, is graduating, spoke for a whole lot of parents when he wrote me a letter about the sacrifices you have made.

inside, he wrote, we want to explode with pride with what they are committing to do. james is a combat veteran. i would ask all of us to stand and pay tribute to the veterans among us, but to the more than 2.5 million americans who have served in iraq and afghanistan, as well as their families. [applause]

this is a useful time for america to reflect on those who sacrificed so much for our freedom. a few days after memorial day. class tohe first graduate since 9/11, who may not be sent into combat in iraq or afghanistan. [applause] at west point, we had more than 100,000 troops and arrived -- in iraq. is a good time to be reflecting on issues that

confront graduates at west point. >> you can watch the rest of the commencement address on bloomberg.com/live or you can stay with us. we have more to cover. we are talking stub hub, when we return. ♪

>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. you are watching "market makers." . i am erik schatzker. >> i am stephanie ruhle. the nba playoffs, tickets for did season's hottest events not lose their sizzle, but lost a few of their fees. all-in-onetroduced pricing, eliminating the pricey got choose -- got yous. chris, welcome. walk us through the new pricing

strategy and how maybe it is not working so well. working really well for customers. we have seen a 10 point increase on customer satisfaction. the price you see is the price you pay. when you get to the event page, the price of the ticket includes all of the fees, including delivery. when you checkout, it is the same price. if you went on our site and look for a ticket to their upcoming concert, you will find a ticket for about $269. stillou checkout, it is $269. if you go to a competitor site, the ticket is listed at two or $44, but when you checkout, once you pay $30 in fees, it is about $320. who has the cheapest price and i do not factor in all of the hidden

cost, sort of like when i go to a hotel. how does it affect who is buying tickets? i am not sure i would notice that. >> we heard a lot of complaints from customers about add-on fees. no one likes the convenience charges you get when you check out and buy tickets. our customers are coming to us, they may be spending less than they were before, but they are a lot happier. problem, happy customers, transparency, two thumbs up. why is the revenue dropping? will turn it around? >> our revenue is not dropping. .ur growth rates were lower we anticipated that because we know that once we switch to all-in-one pricing, once we rolled it out, the average revenue per visitor goes down a

little bit. we know that after a year, in major league baseball, we have had this on for a year, we have had tremendous growth. people come back. >> where are your growth opportunities? we launched in the u.k. two years ago. we are in canada. we are adding things like "the book of mormon." you can sell tickets directly from the box office. >> how much of that is your business? hi mary sales versus secondary market? >> primary is still small. we see a lot of growth, especially in areas like theater. the other area of growth is local event discovery, being better at recommending events to

people. yesterday, we launched stub hub music, it will read what is on your iphone, show you events related to those artists and will recommend other events based on those artists. that launched yesterday. mormon" -- book of are they missing out on the opportunity to sell the tickets themselves. >> it is an opportunity to have an additional distribution point. we have 18 million unique visitors every month. they are coming to us and they probably are not going directly to "the book of mormon." yankees are in a bit of a dispute -- is that right? >> it is not a dispute. we do not work together anymore. we were partners for five years,

starting last year, we no longer have a partnership. the yankees are in the top 5 -- >> hold on. just because you do not partner with the yankees, individuals can still sell the yankee tickets on stub hub. >> and they do. >> are they making it more difficult for your customers to get their tickets to go to the yankees games. >> they are trying things. they are trying to get an advantage because they have another partner and a marketplace they endorse. they're trying to make it harder to sell on stub hub. we do about five times the business as their official marketplace. >> what are your best cities? , then chicago, and then los angeles. the way we measure success is the value of tickets sold. >> what are the conditions?

>> part of this is population density. part of it is how well the teams have done. in a market like new york, where you have the rangers in the playoffs, in the past you had the yankees doing really well. newhat about the fact that york is the financial center of the world? do you see ticket prices higher in new york city than l.a.? >> absolutely. as an example, the rangers are playing tomorrow. the lowest priced ticket on stub hub, all fees included is $480. , theu want to see the lowest priced is $120. >> how much is it hurts you when an artist decides they're going to charge a grand a ticket.

the secondary market cannot go up that much. >> the misnomer of the secondary market is that all the tickets are above face value. that is not true. two years ago when the rolling stones toured, they priced tickets in the pit for $500. we were selling them for $300. >> i don't believe that. that never happens to me. >> you are looking at relative to face value. -- the markete value is the market value. , orhe face value is high higher than the market value, you will see a market value lower. faceve you started to see value on tickets changed since you have been in the game? artists who want to charge $500 are suddenly realizing if stub hub is selling them for $300 or $400, maybe we are pricing to

high? >> we have seen a lot of things change in the entertainment industry. i gave the example of the rolling stones. they had tickets of $500 or so for the pit. jay-z concert -- another example is some of our partners. we have 130 partners in different leagues. 28 partners in major league baseball. the giants started dynamic pricing in 2010. a look at the prices on stub hub to determine what the best prices are and they change their prices by the hour up until the time of the game. >> trying to beat you at your own game. >> they're trying to price at the market. the thing that benefits us most is when prices at face value are close to market value.

stub hub prices are at market value. our business with the giants has increased. so has there's. it has been a win-win. >> thank you for joining us. hot summer, hot tickets. he is the guy that is going to provide them. the president of stub hub. >> a discount you have never seen before. the solar energy industry and groupon. ♪

>> mrs. "market makers." i am erik schatzker. it is the first of its kind. ,olar city is going groupon

offering customers in a community a large discount. we are wondering what is behind the strategy. we welcome the ceo of solar city. it feels like strange bedfellows. on top of that, a lot of folks are saying growing -- going groupon is a sign of desperation. to our original roots. i am excited about the program. states.hed in 15 if you go back to our original --.s in 2006, we launched t is fairly extensive -- expensive. if 100 homes in a neighborhood, you can reduce your costs and bring the cost savings onto the customer. we launched group buying in 2006

that made us the largest solar company in the country. since this brings a similar concept onto the internet. it allows group buying. we are able to reduce and offer savings onto the customer. >> you are launching in 15 cities. do you think it will be most popular in california? >> it is about 84 locations. >> why groupon? >> it is the group buying effort. you ask somebody to get a discount by going solar. i ask about why groupon, stephanie likes to make cracks about discount sushi. people go there to look for discounts on a local restaurant

that they might like to try because it is cheaper. are those people looking for a cheap meal at a local restaurant shopping for solar panels? actually -- a majority of our business is not selling solar panels. we sell solar energy. the installation is free. equipment is free. the maintenance is free. what we charge is for the electricity. that electricity, we start at a lower rate than you can buy from the utility. it is cheaper, cleaner energy. far as targeting customers, are you going to find customers that want to make a giant move in changing the way their home is being powered? the people who are going online to find a cheap pedicure and a blow-out? on groupon,wner this will be a good program for.

changing oversimplistic. all of the we remove bearish -- the barriers. >> if it is so easy to switch to solar, we will take you at your word for that, especially if it comes to know upfront cost, why aren't more people doing it? >> it is a lack of education. most of the u.s. and the world thinks of solar as solar equipment. they do not think of it in terms of a payback. very few people think of it as buying energy. there is no investment, you just get cheaper, cleaner energy. this for sixdoing years and have less than 1% penetration. local homes do not know that. they do not understand that. it is hard to communicate that

over a tv ad. they get it want to explain it to them. once you explain that they are just paying for the energy, not the equipment, they like it. >> between solar city and groupon, i am sure you have time to answer the question as to where you're going to get the most uptake. rudy's think it is going to work the best? -- where do you think it is going to work the best? that wel of the states operate today, we have seen 100% plus growth. >> we are in new york. we are waiting to see it happen. thank you for joining us. ceo of solar city, and a partnership with groupon. >> a new generation of warriors graduate from west point.

they are more likely to click on a mouse than pull a trigger. and a whole this lot more when we return. you are watching "market makers." on bloomberg television. ♪

>> a milestone at a school that has seen plenty. today's graduation day at west point. they are graduating its first fightof officers who will cyber crime. all of this while the u.s. is accusing china military of going online and dealing american figures. >> shall we play a game? ," a young games hacker comes close to starting a nuclear war. days, we are looking for people to work for the u.s. military instead of against it. hackers and what they bring,

a can be a great strength. >> the approach we're taking is more on education. principles of teaching them how to solve problems. >> the pentagon established a special group to defend america online. head of theder, the nsa, was laced in charge of this cyber command. this year, for the first time, seniors will be allowed to join cyber command as newly graduated officers. >> i want to see what i can do as far as applying my expertise.

cadets can compete with the brightest computer sciences of their generation. >> i am more tech savvy than the average person my age. these skills may be applied on a battlefield. >> americans next generation of army officers will fight wars with machine guns, but some well use mouse clicks. " -- i love that. >> extraordinary timing. what have you learned them about doing this? >> there are a lot of kids who want to operate in this frontier.

they have signed up to serve the country and they figure they are best suited to serve it in this way. success is the military having in fighting this cyber war? >> they recognize it will be a challenge. and they realize they're going to have to be a little more open-minded and some of their recruiting. we have been with people like edward snowden, they're going to the private snow -- private sector to recruit these people. >> is that in part because the private sector is willing to allow certain people in when the military might not? >> the u.s. military is a straightlaced organization. west point is the most orthodox institution in that sense. it is an unorthodox kind of career. but they are trying to do is give these kids the tools and

rely on the fact that they have these broad minds that can do this work. >> i am going to ask that you stay. the next segment hits you close to home. a man about to be married -- did you have your bachelor party yet? >> i have. >> i bet you did not have this. let's face it, if someone is going to crash your bachelor party, wouldn't you wanted to be the one and only comic actor -- bill murray? date, say, let's make a let's land this and make a party and get married. oakill murray was in steakhouse where the bachelor party was going on. he took it upon himself to deliver some advice. not know how funerals are for the dead, they are for the living.

bachelor parties are not for the groom. they are for the uncommitted." rue.n't know if that is t >> this is where she goes every time. >> this is where i go every time? guess, at ao bachelor party, a jenna jamison character. >> when it came to a bachelor tweeted thatddy someone is getting married. bill murray, huge sighting. for wall street's eyes, who would not want that?

that is a winner. >> "market makers" will be back in a couple of minutes. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> investing in emerging markets. some have gotten so bad they may be looking good. we will talk with two executives from kkr. >> adding social to get a job. online shoe seller zappos changes the game for potential employees. they have zapped job postings. >> too many are giving up the game. welcome back to "market makers." i am stephanie ruhle.

>> i am erik schatzker. >> we have a lot to cover in the next hour. we talked about cyber security, zappos, golf, bill murray. it's time to get serious. the top business stories from around the world. the world's biggest fast food chain is trying to jumpstart its stock price. mcdonald's will use dividends and buybacks to return up to $20 billion in cash to shareholders by the year 2016. investors may have been hoping for a bit more. mcdonald's shares are trading lower today. general electric's ceo jeffrey immelt stepped up to the company's charm offensive in france, personally lobbying president francois hollande on ge's proposal to buy from a fre nch company. he promised to create thousands of jobs in france. shares of michael kors are rising today.

fourth-quarter profit and revenue beat estimates. same-store sales were up 26%. >> we were speaking moments ago about cyber espionage. become a supersized stumbling block, the relationship between the united states and china. the big question -- the value of that relationship and the stakes for american technology companies if china decides to freeze them out. how much is the u.s.-china relationship worth? today, china stands as the greatest global rival to the united states, but their economies are inextricably linked. american government has accused chinese military personnel of corporate espionage, the latest escalation in a rivalry between the world's two largest economies. it will be difficult to sever ties with either financial frienemy.

china sold $100 billion worth of goods. america's largest supplier by ofket value, apple, had 1/5 its total revenues in china. amazon --e, other big losers could be in the aerospace, aviation, and auto industries. thatcorporations may worry export and earnings will take a hit if the relationship between these nations break down, but according to government -- u.s. government, it is undeniably chinese tech that made these recent hits on corporate america. >> the rising tensions between corporate america and china. we asked the question from an investor's point of view. are emerging markets so bad they

are good? great to see you again. >what is so bad it is good? >> when you look around the -- china'sa has been growth has been disappointing. hooked theirle hopes to the strong growth china had. what we've been trying to do as a firm is focused on areas where we think there is going to be growth. one is clearly consumption in emerging markets. when you look around the world right now, if you look at india, where growth had gotten so slow. you had a changing of the government. if you look at mexico, they are implementing a lot of significant reforms. you had an election in indonesia. these are big economies with big consumer bases where growth has gone towards trough levels. now you are stunning to see a response to that and that is driving new politics. with that politics is coming some economic reform. mexico is probably the prime

example, where they brought in a new president and they are starting with energy reform. if you get that right, that should play into other parts of the economy. i think their electricity costs are 76% higher than in the u.s. if you think about productivity in mexico, it is 1/16 of china. there is some wiggle room there. >> there's no question in the case of mexico we have seen progress, but my limited experience with emerging markets -- >> he does speak spanish. >> i think you were just in brazil, right? >> i'm no investor. i lived in south america for a while. the point i'm trying to make is, on so many occasions, there has been so much hope invested in political progress in emerging markets that ultimately has only been frustrated. what leads you to believe that, effectively, this time is different? some of the stuff in mexico,

india, indonesia is going to work out to the investors' favor? >> a couple things. one is i think we've been pretty adamant as a firm that public equities are one of the worst ways to actually invest in emerging markets. >> why is that? >> you had big state-run companies -- china's indexes 71% state-run companies -- china's index is 71% state-run companies. as a firm, we do a lot more than just public equities. our privatep -- equity business in asia is very concentrated on the consumer side. look at emerging markets, avoiding the state-run enterprises is probably your first to-do. i absolutely agree that there is a difference between growth and returns. i think as a firm we are very focused on harnessing the global growth from emerging markets, but how you play it is the nuance you need.

on mexico in particular, and india, i would say those are two countries are you've had significant reform -- two countries where you have had significant reform. valuations hacvve come down. you had sentiment turn negative. some of the best way to play is through private credit and private equity. >> investing with kkr -- your average investor who is watching cannot do that. >> we don't do private credit in a lot of these areas. third thing, if you buy the high-quality public companies, which any investor can do, they actually perform very well. you see that in india, where some of the best companies have wildly outperformed the index. the same thing happened in china. we have a cautious optimism. i think how you play the growth is important. i do think there is a message, and i see it in emerging

markets, particularly in those countries, which is growth is starting to bottom. >> in mexico, where you said you feel good about the reform with the new president, are you seeing action steps taken? time and again, we see new elected officials, there is a sense of optimism, they make great promises, but as far as in fomenting them, having a true action plan -- as far as implementing them, having a true action plan, it doesn't happen. >> india had a majority for the first time in 30 years. in mexico, three different political parties united. i think you raise a great point, which is it is going to be a dogfight. there were protests in the street over education. long-term, you are starting to see some change. what is interesting about mexico, it is more linked to north america than just being linked to the china growth miracle, which i think most of

us would've knowledge is changing and starting to slow. >> are you more positive than mexico -- on mexico than india? >> it depends on the play and the company. as a bucket, the emerging markets that have high consumption as a percentage of gdp, indonesia, mexico, india, are all more interesting as a public investor standpoint than china. >> one of the things that frustrates people who live in many of these emerging markets is the lack of competition in some basic industries like telecommunications, for example. it exists in india, mexico, all kinds of places. governments are waking up to this. political parties on both sides of the aisle are getting to the point where they know the public dissatisfaction is so great they need to do something about it. would you short call it? >> there are a couple of things, when we talk about the state owned enterprises, a lot of those are financial services companies. they are coming under pressure. they made bad loans to that is

creating some change and some resentment. mexico is a little bit unique. after they had the tequila crisis in the 1990's, they happen to stabilize the situation. they created monopolistic type structures across many industries. those barriers are starting to be broken down. that would be an area where i would focus. are you seeing changing telecommunications? what does it allow in terms of new entrants? are they bringing energy reforms? pemex has been the dominant player. they haven't made a lot of money. that has been our thesis for quite some time. you are seeing some changes on the margin where, to some degree, it has gotten so bad, let's see how the reform plays out. as a public investor, can you make money? that is not our bread-and-butter. we don't do a ton of public equity investing. we do a lot of lending to small

and medium-sized businesses. what we're trying to do as a firm is highlight where we see change. one of the benefits of my job is i do move around and see a lot of different things in different countries. i would say -- i would ask you. you were in brazil. brazil is facing some pretty tough headwinds. i think the same thing in china. you are seeing other emerging markets get better. >> for sure. the thing about brazil, you are there, you feel the power of the economy, the enormous potential, but it doesn't take you very long to drive around the city and see the favelas that still appear to be going nowhere. >> rozelle has gdp growth just north of 1%, unemployment -- brazil has gdp growth just north of 1%, unemployment of 45%. >> you were saying one of the greatest risks were u.s. government bonds in january. do you still feel that way? >> i think the ability to make

money, if you believe the economic cycle is going to be longer -- we talked a lot about europe being a big opportunity. we still see the credit side of that, particularly private credit is a big opportunity. i think the high yield still remains robust. justovernment bonds -- i think there are better alternatives. if you have to make 7% per year and you are starting at 2.50%, it is a tough place to play. we are finding other things to do. >> henry, great to have you here. henry mcvey, kkr. seehen we come back, let's if it is any easier to get a tee time this time -- this weekend. the industry is hurting because so many players have called it quits. we are talking about golf. electronicand cigarettes, just one of the issues peter cook brought up when he spoke with the commissioner of the fda.

we will bring it to you here on "market makers." we are streaming on bloomberg tv and amazon fire tv. ♪

facinga and america are off on cyber espionage and corporate america is caught in the middle. as you may know by now, china's government says ibm's technology could be a threat to its national security. a chinese server maker is ready to step in. a similar thing is happening with cisco. let's talk about this now. we have a managing partner of a venture capital firm that focuses on u.s. and chinese technology companies. and here with me and stephanie in new york, a senior analyst at sanford bernstein to help round it out with some focus on larger cap companies. you are investing in both

america and china. how serious a situation do you see this? how much of a problem is it likely to be for american companies? how much of an opportunity for rivals in china? >> great to be here. in the short-term, we don't see this as a huge issue. in the long run, it is probably something that both u.s. government and the chinese government will be figuring out. but as your guest in one of your prior segments mentioned, you have economies like brazil and russia and india that have very modest growth. gdp growth7% to 10% is really important for u.s. technology companies. this is an issue, in the short run, that won't have a huge impact on u.s. technology. over the long run, it is something you will be reading a lot about. >> i read research you put out on the same subject. you seemed to draw a similar conclusion. in the short run, maybe not such a big deal, but in the longer term, it could impair some of the prospects american companies eril some of the

prospects american companies have in china. >> microsoft had 3.3% of revenue last year in china. oracle and other sap -- and sap and other players under that. it is much easier to replace a generic server than to replace a software that the whole technology stack is built on. that is much more difficult to pull out. so, look, the chinese want certain things from the americans, but there is a very tight relationship. e companies doing development in china. --. moneys moving cloud u.s. companies moving cloud services to china. if china were to get ugly on oracle or sap, they would have more difficulty if their companies ever wanted to go public in the u.s. because the u.s. markets expect that level

of software and technology. >> you're in with some of these companies in early-stage investing. there is no question that many of your portfolio companies do need to have an exit strategy, whether it is m&a or a public offering on an exchange somewhere. are they mindful of these issues that mark raises? >> they are. if you look at some of the most successful ipos in the last couple of years on u.s. exchanges, they have been chinese companies. the u.s. markets have been very cooperative for chinese companies looking to go public. over the long run, i think he makes a great point, which is there is this sort of frienemy concept where we have to play nice with each other. to chinais important and china is important to the u.s. shareholders of an ibm or microsoft -- i would be way more concerned with their ability to make waves in the new models of

cloud computing and mobile technology than i would about them selling their legacy products into a market like china. i think what you will see over the coming years is more the focus by those companies on software and technologies focused on cloud and mobile, which is where all of the market is in china. you have 700 million smartphone users, growing to one billion, the largest mobile market in the world. i think you will hear some sabr buting -- saber rattling, probably more focus by these companies on cloud and mobile. >> is this a case of keep your friends close and your enemies closer? >> i don't know that i would define it in friends and enemies, but there is very much a relationship here. there is this synergy. they need each other for lots of reasons. the chinese can't get rid of the technology. the americans need the market. developmented the that is going on in china and the cooperation that is going on in china. these companies

are moving aggressively to the cloud. most of the software companies have major cloud offerings. microsoft has built a data center in china that is built using cooperation with the ,hinese company -- is built using cooperation with the chinese company, to drive into the chinese market. they need each other. >> does the migration to the cloud mean they will need each other even more? if microsoft is providing you with a cloud-based service, -- >> that is the unstated opportunity within this whole game, the move to the cloud makes piracy massively more difficult, if not impossible. you will not replace windows with a cloud version of windows, but if you are not going to be able to get exchange e-mail, or the best way to get work, excell outlookt word, excel,

is through the cloud, it is much more difficult for piracy to go on. concept isfrienemy what underlies the relationship and is as intertwined as you and mark make it out to be, what are we misreading? the united states indicts five chinese hackers. the chinese retaliate. at the end of the day, does it add up to knock whole lot? >-- to not a whole lot? >> i think the bigger concern for american technology companies is the recent nsa issue. we saw john -- john chambers come out and publicly report that cisco's earnings were impacted in a major way by international growth, growth slowing in some of those markets by 10% to 20%. this is not just the china issue. it is an international issue. u.s. has typically been regarded

as the number one technology producer in the world, sort of a gold standard for ennis -- -- for security. that is one of the big issues american companies are trying to grapple with -- reaching out to president obama on that topic, something he is very focused on and aware of, but i think that ties into this conversation as well. it is not just the china issue. every major market around the world is somewhat at risk when we start to bring in our own security issues and how that may impact our technology companies. >> final thought? >> i think that is a great point. what we will have to see is the american companies becoming international. if you are a cog company, you cannot post or cloud offering that you're going to sell -- a cloud company, you cannot shost your cloud offering that you are going to sell to europe in the u.s. it means a major cloud footprint, especially in china. >> thank you so much. we are back in two. minutes.

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♪ >> alive from bloomberg headquarters in new york, this is "market makers " with their schatzker and stephanie ruhle. >> welcome back to "market makers." margaret hamburg oversees an agency that regulates 20% of every consumer dollar spent in the u.s.. this covers prescription drugs to cosmetics to the food that americans eat. the latest item on the agenda is whichonic cigarettes, they don't want smoked in new york city restaurants. peter cook had a chance to sit down with her for inclusive interview early this morning.

dr. peggy hamburg is a busy person. they face no u.s. regulation at all but in april, the fda proposes to change that. critics say that this was long overdue with a potential $3 billion business needed. dr. hamburg says the agency is working for more feedback before making a decision. we imposed a rule that would enable us to broaden our authority to regulate the full range of tobacco products including e-cigarettes. as is out for comment right now and a lot of interested stakeholders will move to the final ruling, and that will give us the foundation to regulate these other products that are in the marketplace, and be able to really assess what needs to be promote health and protect safety. >> i know you are still getting comments but what will change for this industry once the final

ruling is adopted? what happens overnight, because there is no regulation right now? >> a couple of things will happen with the completion of the final rule. there will likely be other steps taken over time, but most importantly they will no longer be able to sell the e-cigarettes to youth under age 18. they will have to report to us about the components in these products, what is actually in them, and how they are made and they will not be allowed to testify -- there'll not be allowed to give out free samples, advertising issues have been raised that could come later, so some things will happen straight away, although issues about flavorings have been raised, first we need the foundational step of the authority to regulate the product and we can address the other issues. >> some of those other issues have been questioned by those in

congress. i have you not gone further right away, and the law does not allow you to? >> we have to have the authority to regulate these products, and then we take additional actions, and frankly, we still need to know more. there are a lot of open shouldns about how they best be regulated, and the fda is supporting a lot of very important research that will give us greater insight into the public health impact, and the roles that these might be playing in terms of helping some people to quit smoking regular cigarettes. >> do we know for a fact that these are better than smoking normal cigarettes? >> these don't have many of the literally thousands of toxins that are in traditional combustible cigarettes. and that is good.

whathat we don't want -- we don't know is what is the role of the e-cigarettes in and the new addictions, use of a broad range of tobacco products including traditional cigarettes, particularly on a more attractive to young people, which is of concern since most people who end up smoking for young,gin when they are under the age of 18. >> this is an area of a lot of interest, with a lot of players out there. thehere a possibility that common fear could be extended because of this issue? >> we're getting a lot of interesting comments and are getting requests to extend it, forward, want to move in a timely way, because this is very important. we need to have this extended authority over tobacco products that are currently in the marketplace and be prepared for new products that will likely

come so we can best assess the public health issues, and provide the kind of regulatory oversight that american consumers expect. >> there are a lot of people watching this issue, so any extension of public comment would be a big deal. and the final rule may be steps away at this point. >> one of the key things about the e-cigarette industry is they have welcomed the idea of some presumably not too much regulation and in an fdarview, it seems that the is not coming out swinging hard. the tone of this is we need to know more, it is very important to have these comments, but how do you read that? >> i read that just as you have described it. the industry is positive about

what they have heard so far from fda is because the taking a science-based approach. you hear dr. hamburg talk about this issue, but that does not mean they will not face tough regulations down the road. what has to happen is the final rule has the commonplace first and then issues like flavorings, internet and online sales and more issues dealing with health concerns, those are all areas where the fda could go further. the fda may not be so happy in two years time. >> peter cook with dr. hamburg. talking about the e-cigarettes. >> coming up, if you want a job , you may want to chat up the employees for job postings. they are taking it to a new level. we will be back in a moment, you are watching "market makers." stay tuned. ♪

>> it is not easy making an impact in retail. zappos did it. the online shoe retailer with therapist -- interest in customer service change the way that we shop, and the very same company may be making their mark on the way that companies hire. carol massar is here with more. the jobappos zapping posting? >> it seems like they are. i gave them a call and talk to mike bailey. mike palin is the head of acquisitions and he says -- they will do all their hirings for the social network -- and they will have something called as zappos, and if you want to be part of the new have to join this social network. they will give you a lot of information about the company.

you can dig down even deeper. you can find the names of the members of those teams and they have a q and a. they will show you what you need to do to get a job. this hasis is this been called intelligent and silly. >> and this is what they want out of monster and other job sites? >> last year, they had 31,000 job applicants and only excepted 1.5% of those applicants and rejected 30,000 people who applied. who applied at the company. they said this is not a great way of doing it. what they are thinking by doing this through their method, they will have a better cool of candidates and if you say you want to work for them -- you want shoes and customer service. you start medicating with the

company, back-and-forth and when a job opens up they will have a pool of applicants ready and able to take the job. >> i think that if i was running zappos, do i want my employees spending time chatting up -- >> you spend a lot of time hiring someone, and this costs a lot of money. they were in vegas and moved their headquarters last year. it was a challenge to find workers and a better way to approach it. there are showgirls and service people -- >> what is cool is they will be pushing content for people. if you sign up as part of this network, you will get information about part of the company you are interested in. >> i am wondering if this is something more than a gimmick. >> i will not bet against as aptos. aen you have a year to return pair of shoes -- >> so true.

this man -- >> he is always very together. >> carol massar, with the very os changing the hiring game. >> next, paying to play. the high price of professional golf. we will talk to one of the players of the pga tour. you are watching "market makers" on bloomberg television. ♪

>> i am erik schatzker with stephanie ruhle. you are watching "market makers" on bloomberg television. swing and a miss. i will talk about the business of golf, it in excess of players from corporate america, and tv viewership. where have all the golfers gone? i put this story to the bloomberg sports reporter. what happened? >> everybody found something

else to do in the last couple of years, as you mentioned a lot of people are leaving the game, sales are down at sporting good stores and there are still plenty of people interested in golf but this has really not transferred to the next generation of golfers based on the numbers, and there's plenty of anecdotal evidence that the game itself is in a bit of a drought here, or should we say, in the rough if you pardon the pun. sport that is really struggling a little bit, to reach the next generation. so-calledit that the millenials have not turned on to golf? because they don't like the preppy clothing or the corporate image that surrounds the game? it is also expensive, playing a round at a good course is going to cost you a few bucks. and owning or renting the equipment is not cheap, either. >> it is a little bit of all those things. the next generation of millenials, you spoke to these people and we have anecdotal

evidence, this is a social media generation. is this something fun that i can do it my friends, but some people think four or five hours or sometimes six -- is time well spent being unplugged and on the peopleurse, but a lot of have trouble unplugging and golf is very restrictive when it comes to that. if you go to the pga tour, they allow you to bring your phone onto the golf course as a fan. there is a designated area where you can use this when there is a competition and pga player sometimes say as a joke, i wish that i could tweak this while i am playing. tweaked -- tweet this while i am playing. >> thank you for joining us. >> and now we talk to a professional golfer about making this sport a full-time job. this comes with a lot of perks, like flying on private airplanes

but what is it like to pro golfers who don't have the star power of phil mickelson or tiger woods? the financial barriers are high and more than 400,000 players left golf last year. , who bring in jason bond is 42nd in the fedex cup standings. 400,000ear the number professional players have dropped out, i can't believe that there are that many in the game to begin with. >> this is a staggering number for me to believe. i did not know that there are that many, but this is a difficult sport and a hard sport to play, and play competitively for a long time. >> jason, it is difficult to play and difficult to play for a long time. share with us the challenges that you have faced as a professional golfer who is clearly competitive and you have to be extremely talented to be ranked where you are, but you are not taking home multi-million-dollar purses.

>> the travel is very difficult. we book a lot of our own travel, we take -- take care of our payments and we have a caddy that we pay a weekly fee, plus a percentage based on how we perform. to be honest, every flight i have been on, 99% of the flights i have been on, have all had a seat number. we are not flying a lot of private. that is exactly right. we are responsible for all the expenses so we can dictate the level we travel and stay at, but i got some advice from an older player a long time ago that said, you have to stay well to play well and there is something to that, you have to play in a place it is comfortable for you and live your life in a way that is comfortable for you. --you are not living at of

out of a van. >> not at this level but some professional golfers do that, but i am not in the ritz-carlton every week. there is a fine line because this is a business. i am trying to earn a profit at the end of the year and provide for my family. >> what rank do you need to be to get not only significant but sponsorships? >> gertie much every guy on the pga tour has some sponsorships through equipment, it is your goal to go out with the management team and tell yourself -- sell yourself to the corporate side of golf. this is a big part of the financial ability to gain -- playing in the programs, golf is a unique sport in the fact that anybody can compete, and at the same time as a professional -- i can play with a bunch of people at the golf course and we can actually go out to see how we compete.

it is difficult to go shoot hoops with a professional bass ballplayer, but that is one of our advantages. we can sell that, and that turns more profit into our pockets. >> thank you so much for joining us this morning. we will be back with more bloomberg tv in a minute.

>> that will do it for "market makers."

>> it is good to be back. >> next, what makes people change, what kind of money makes us more productive, and what could really do us -- really make us eat healthy. behavioralk to a psychologist from duke. >> if you have not read his stuff yet, he is great. but now bloomberg television takes us on the markets. alix steel has more. >> stocks are little changed this morning, the s&p 500 is relatively flat, and a member the s&p closed at a record yesterday, gaining a little bit of flatlining today. trade a little bit high. let's look at where the markets will go from here. we have an equity derivatives strategist at baycrest partners. what do you think will happen? >> i think it will slowly march

higher. we believe the industry is still a little bit underinvested, and there is potential for the market to go up higher. >> a multiplier. how do you go up with the spiders? >> you want to play out of the money call option, what i have on here is a problem that is complicated if you're thinking about options strategies but i want to sell this, so i am going out to all of the options and the spiders and i want to sell the strikes, and by three times as many at the 198 call. i am wanting to buy three of them. this is a leveraged trade with an upside. you can get this right now for almost no money so if the market really does decide to back off and sell off all of the options expire. and you can regain anything that you want.

but the market does decide to go higher, and it starts to go higher in a quick fashion, out of the money calls -- which are very cheap around eight or nine can get thatu exposure to the upside a much more leveraged way. >> what was your time frame? >> this is august x -- expiration but if you look at how the numbers -- and how this traits before july, the real downside is on one dollar. but if you keep the expiration, the max loss -- >> don't we see a lot of summer, isn'tthe this the time to really bet -- >> yes, but never short on the market. >> they do want to get some kind of production. we see this is below 15 and historically this has rallied around 20% when it has been that low for that long.

how long do you see that? >> we saw a lot of volatility but technically you would expect low volatility to mean that there is even further lower volatility to come. and there is also the other part, that volatility means people will expect more volatility in the future. i think in the short term we don't expect any large moves. the market has moved past a lot of bodies over the last year and a half. i think that if this trend continues winding down -- i think we are really positioned so that they are not able to get the performance. specificms of this -- stocks, intel is seeing a flurry of activity today. >> low volatility means that any volatility to sell options does not really make sense. what we saw today was a buyer of the october call -- and this may

be a player that may have outside calls for the enhancement strategy to override the long-term position. at these levels it makes sense for that player to buy back those calls, because what you are getting does not really make sense. >> we have not seen them go above 30 for a long time. >> a very long time. >> thank you so much. we are on the markets again in 30 minutes. money clip is up next. ♪

♪ welcome to."p i'm adam johnson. charmer pitches his plans. nearly $1 million per square foot. around the world, ukraine may have a new president. the innovation story. google presses ignition on its driverless car. put a summer music festival on, bonner rue style. -- bonna