>> this is "market makers," with erik schatzker and stephanie ruhle. >> citigroup pays the price. the bank will pay $7 billion to settle claims that misled investors about mortgage-backed bonds. >> israel strikes back. palestinian targets are counted taza,rockets fired from syria, and lebanon. >> big tobacco's not so secret weapon. menthol cigarettes make it easier to get hooked on the habit and harder to quit. so why won't the government banned them -- ban them? you're watching market makers. >> i am olivia sterns in for

stephanie ruhle. >> welcome back from london. >> i had a great time. a lot of news these past couple of months. i landed yesterday and made it in time for the world cup finals. what a goal. >> let's talk about citigroup everybody. here.now the action is eric holder is due to formally announce that $7 billion settlement with citigroup in the next few minutes. is all about city sales and mortgage backed securities in years before the financial crisis. that is washington. we will take you to that press conference as soon as holder takes the podium. citigroup's about second-quarter earnings. they beat analyst estimates if you exclude that $7 billion settlement cost. scarlet fu is here with more. you and i have been looking at these numbers all morning long. the stock is trading up because there is extensively a good -- a

extensively -- a extensively good news here. >> what it means in terms of finances is $3.8 billion of pretax charge. city actually ended up with a $180 million -- the doubt of profit just barely. they eat out of profit just barely. almost six years we finally have some movement there. the capital markets trading would be a pretty dismal quarter. it didn't end up being that bad. a combined drop of 15% in fixed income, currencies, commodities fell year over year. this is all a reflection of low

volatility and a lot of macro uncertainty. youhat is your stance -- said provisions are obviously $7 billion so far. are they going to afford this fine? a lot of analysts are looking at the neighborhood of seven billion dollars. this doesn't take too many people by surprise. it begs the question what is next in terms of returning cash to shareholders. he expects the bank to generate $50 billion in excess capital over the next three years. you can argue whether you agree or disagree with that. it's the idea that city has gotten over this big comp -- big comp. >> citigroup is doing what banks do. citigroup on an average basis, there are two ways of looking at it. up 4.4% year are over year. you can see the loan growth is

accelerating only four quarters a grope -- ago. the loan to deposit ratio is improving. is inall the action is corporate lending. business in asia, europe, and latin america. there was corporate loan growth across the board. it is not that the u.s. economy is recovering. there is demand for corporate loans around the world. >> if you show that chart again, four point 4% loan growth is impressive given that we're looking at gdp being down 2% in the first quarter, a rebound in the second quarter, and who knows where and the second half. that is better than gdp. >> a lot of people are looking for to continued accelerating. >> the stock is trading higher showing that relief. of >> getting closer to 55. now let's turn our attention to that $7 billion settlement.

was accused of deceiving investors about the quality of mortgage-backed bonds it sold during the financial crisis. phil mattingly is in washington and kerry geithner is here in new york city. with have been covering the settlement. the attorney general coming in any minute. , the story is not over for the justice department. citigroup is the third in what we anticipate to be a very long list of settlements. >> that is right. i think the justice department feels they have a model. they laid out a template with the jpmorgan settlement based on how these residential cangage-backed security's be used. they can use the specific part of the lot go after them. they have been successful in forcing big dollar settlements. we know that the bank of america has been in lengthy

negotiations. officials say those negotiations are not in a good place but there are a number of other banks. this type of high-level of a settlement number -- the justice department has a lot coming up in the pipeline. i think they feel very good about where they are. >> so, basically going back to this model hurts the banks. there is real money involved. we say this because citigroup's second-quarter earnings were down 96% and basically this fine wiped that out. if we take a step back, analysts are looking at does this model work? it is this money that goes and the u.s. treasury department for the justice department, you just write a check and it is in. you are having an actual impact on shareholder values. is this a way to claw back the loss we had at a financial crisis and two td -- and to

deter future behavior? is it worth it to go through all this? >> the department of justice has been under a lot of political pressure. the you think they are going to be satisfied with this seven phil -- 7 billion? >> bank of america is expected to pay significantly larger. this is really the last big bang the justice department has to punish banks. after this it will be going back to focusing on other regulatory infractions we have seen, whether it is tax evasion or sanctions violations. perhapse to say it and it has taken me too long, but my my perspective is

awfully cynical. the banks in general say the talks in citigroup were interrupted by the identification of one of the benghazi perpetrators in libya and had that not happened the justice department was going to hold a press conference and say it was being transgendered. over $7e to terms billion. it makes clear all the justice department is really after is publicist a. the justice department is after publicity it is not getting great publicity in the stock markets. >> there are two tracks you can look at on this. one that looks bad for the justice department. they were right on the line. that was pulled back on the last minute largely because of the arrests in benghazi. side of things, the

justice department feels like shaming's of public are very important to the deterrent strategy. i think what was said earlier, they were getting hammered on capitol hill. bringing any cases in the wake of the financial crisis. if we are going to bring a case double federal jpmorgan's time was -- jpmorgan's fine was. they are pleased with that number. >> to your point, it doesn't look good when the pr portion of -- they feel like this is a necessary evil if they want to guy -- go with the deterrent strategy and put some of the heat off they have been getting in the last four years. >> whether or not shares are up or down, clearly the justice department has to feel good about these huge amounts of money they are pulling in.

nearly $30 billion in total amount for bank settlements. where does this money actually >> on the tech -- go? today playedte out, it splits. this consumer relief portion is new print the justice department just outed implementing it on the jpmorgan settlement. it will immediately transferred to the treasury fund. then you have the state attorney general. it they will get $500 million combined. then you have the $2.5 billion consumer relief portion. they will be using this to help

distressed and homeowner areas. how that is tracked and whether or not it actually has a positive impact, i think that it's something we as reporters and the justice department in general need to keep a close eye on going forward. we are not talking about an insignificant amount of money. more than ang about third of the total value of this settlement going to consumer relief. in what form does it take place? who attracts it and what does it count for? is why these are a big point of confusion for a lot of analysts and people looking at how they are done. to the righty go place and does it make a difference to go through this ?rocess it hurts shareholder values to pull it back out. people who are actually hurt by the financial crisis and

have lost their homes and mortgages actually get money back from this? >> will actually act -- will anyone actually have to move out of their houses? goodthink it would be a idea for citigroup to show as the people that actually get relief from this so we can actually see with our own eyes. >> the settlement is over mortgage backed securities. it is not over the quality. .> it wouldn't even make sense >> it is the investors who have the issue here. not the homeowners. continually call consumer relief. with jpmorgan it was a similar type of settlement. funds went tohose consumer relief. where is the consumer getting paid back for this? it was basically a business model that was a big part of why the financial crisis happened.

>> when holder takes the podium, what kind of posture do you expect him to strike? what i understand, the person leading these negotiations is the number three official tony west. ultimately the buck stops of eric holder. >> i think he is going to have strong words. one of the interesting elements of these negotiations is citigroup's feeling is they would not have to pay as much as jpmorgan. what holder says is going to be important. >> i eric holder is about to start speaking. -- and inspector general for the finance agency michael stevens him as weak announce a significant step on our ongoing effort to hold accountable those markets threatened our

and undermine the stability of our economy. obtainedce department a landmark resolution with citigroup, totaling $7 billion in fines and consumer relief, to securitiesudulent that were backed by toxic loans. this includes a civil penalty of $4 billion. this is the largest penalty to date of its kind. it the penalty is appropriate, given the strength of evidence of wrongdoing committed by city. despite the fact that citigroup and widespreadus defect among increasingly risky loans that they were securitizing, the bank and its employees concealed defects. they misrepresented the facts, including the level of risk. toy sold defective loans countless investors, including federally insured financial institutions. and they made false statements to investors.

they led investors and the public to believe that these financial products had been originated in compliance with the law and key underwriting guidelines when this was often not the case. the bank's misconduct was egregious. under the terms of the settlement the bank has admitted to its misdeeds in great detail. they contributed to the financial crisis that devastated our economy in 2008. citigroup is not alone in its the lawess to disregard in order to defraud consumers and investors. this is a result that their insurances -- citigroup was able to expand its market share and also to increase its profits. they did so at the expense of millions of ordinary americans

and investors of all types, including other financial institutions, universities, tension funds, cities, towns, even hospitals and religious charities. ultimately investors suffered billions of dollars in losses in fraudulent claims. we hold them accountable for this wrongdoing, which had devastating ripple effects that cascaded through economies and financial institutions across the globe. it i want to thank u.s. attorney their dedicated staff for making this resolution possible. a succession of witnesses is that of witnesses gave terabytes of data and unveiled its of documents.

a $4 billion penalty has been assessed against citigroup and this also includes $2.5 billion in relief that will bring pride and that be provided to by the banksfected fraudulent activity. this is a must-have elements. it will remain so. in anyagreement does not way absolve citigroup or its individual employees from facing any possible criminal charges in the future. and scope ofe size this resolution goes beyond what could be considered the mere cost of doing business. it was not at all inevitable in the past few weeks that this case would be resolved out of court. this action is merely the latest in our active and ongoing

pursuit of those whose activities defrauded the american people. first financial institution to be held accountable by this justice department and it certainly will not be the last. the investigations that remain open will continue to move forward guided by the facts and guided by the law to achieve the -- to achieve justice for those affected by the crisis. these investigations are not only about holding those who violated the public trust accountable, it is also preventing this kind of conduct in the future. i would like to turn things over to tony west who provide additional details on today's announcement and has been a leader for the justice department. >> eric holder holding a news conference to announce the justice department's $7 billion settlement with citigroup over the sale of mortgage backed securities before the financial crisis.

phil mattingly is with us from washington. kerry geithner is here in washington. -- here in the studio. lastroup will not be the bank to be held accountable for what he described as agreed just misconduct. as it-- as agreed just -- misconduct. you do see a pretty predominant trend for the department of justice of extracting huge settlement out of banks for various criminal and regulatory infractions. we have a lot of outstanding investigations. we have the foreign exchange investigation or affects markets, we have a lot of angst that haven't settled over the libor interest rate. >> more settlement that come out

of this mortgage issue. i think we're going to be up here for the rest of the year. >> i think you heard it there from eric holder, it is the misconduct. it is not the level of funds that was misused. it was the misconduct of the bank. >> the quality of that goes to where are we going to get more individual cold ability? -- individual culpability? as we saw earlier we had a graph that shows $30 billion of tanks settlements recently. are we getting the true deterrent effect with the settlements? that is where wall street is grappling. this kerry's point, is working to the government's favor? do people look at eric holder and tony west and call them heroes? is the obama administration getting credit for it?

or is this dragging on for so long and so many years after the crisis that more and more people of coming around to the idea stop punishing these banks, stop punishing current shareholders for something that happened years ago, and ultimately thrown into question this idea that there is a deterrent effect. >> i think it is somewhere in the middle. i think that is why it is a negative. whoe is a group of people will never be satisfied until they see a wall street ceo walking in handcuffs into a courtroom. there is another side to this is major money, shareholder money that is coming out largely because the justice department came to the conclusion that we need to figure out someway to punish somebody for what happened in 2006, 2007, 2008. if you point to the fact that this is far more than just the cost of doing business, if you ever want to know how sensitive

the justice department and obama administration are, the criticism they have been getting, it is that line from people like elizabeth warren who believes that these fines are not a deterrent. and that this is just for a $1 billion institution. the attorney general's willingness to point that out and take it shows you that there is a lot of political issues in this. they are trying to figure out any way to push back. i don't think it will satisfy either side. >> no better way to underscore that point than perhaps by looking at stock price. let's not forget earnings are involved. they announced those this morning. investors are looking pass this cost of settlement. thank you very much. kerry geithner covers the intersection of justice and finance. >> still to come, israel

response to rocket fire from three sides. we will look at concerns of the violence -- concerns that violence in the region will only get worse. of ♪

>> we are approaching 26 past the hour. stocks are trading higher here on monday after the s&p 500 saw in threest weekly loss months. citigroup shares also on the rise after the bank agreed to pay $7 billion fine to settle a mortgage probe. investors are looking for to hearing from janet yellen tomorrow, the chairman of the federal reserve will be speaking in washington to the senate banking committee. it is her semiannual monetary policy committee. a lot of m&a activity. bestming up, what is the

-- what is the next big trend in food? the answer may surprise you. >> the war against smoking, activists pushing a ban against menthol cigarettes. ♪

>> this is market makers with erik schatzker and stephanie ruhle. >> you are watching market makers here on eric -- on bloomberg television. is stepping up its defense in the gaza strip. the death toll has been pushed to release 170 five. palestinian militants have launched 100,000 rockets at israel. there have been no fatalities. let's bring in daniel kurtzer, a former u.s. ambassador to israel in egypt. good morning, thank you for joining us on market makers. it looks at prime minister netanyahu is under growing

pressure from his cabinet to launch a ground invasion. of analysts saying this air assault is laying the groundwork for tanks to roll in. how likely is it we are going to see a ground war? >> i would be doubtful reis -- doubtful we will see an incursion of ground forces. we may see more of these limited incursions. that israelis are sensitive to casualties. i think the prime minister would be wary about doing that. is the thirds conflict of its type between israel and gaza since 2008. is there any reason to expect a different outcome this time to the previous two? see think we are going to the old rocky movies.

by each other of each other just keeps going on. there'll come a point when fatigue sets in. both sides will claim a victory -- of sorts.m hamas will herald the fact that it is still standing. underlyinge is some political settlement, we are likely to see this recur from time to time. >> what is egypt's rule under all of this? there were closer ties to hamas. what is the relationship like? we know kerry is trying to speak to the general to have some influence. will hamas listen? >> it is quite interesting. hamas announced it is not want egypt as a mediator. suggests that hamas-egyptian relations are in bad shape. a lot of that has to do with the

fact that there has been instability in the sinai peninsula. topt attributes it infiltration into sinai by terrorists and other activists. it is not clear egyptians are going to play the same role they played in 2012. hamas is looking to turkey and cutter. care -- secretary kerry has been in touch with oath of those country to find a coalition of mediators that may work. >> how important is that u.s. do they care who ultimately acts as the mediator, whether it is turkey or not? >> i don't think it will matter much. they of course do not have diplomatic relations with cutter. there may be -- with qatar.

the united states would come in. we could be the intermediary with the israelis while other parties you with hamas. 170uthorities are saying gazans have been killed. 70% of theng fatalities have been noncombatants. no fatalities in israel so far. what you say to people who say israel's response is lopsided or israel has a responsibility to act differently? >> all of us would argue the country has a right to defend itself when rockets are raining down on its citizens. the range of those rockets is much greater than in the past.

a the sirens went off and we had to go to a shelter. the israeli argument is exceedingly strong. hamas seems to be firing many of its rockets from civilian locations. surroundingds, themselves with civilian shields. this very difficult for the israeli military to engage in pinpoint responses. have adoes responsibility to avoid as much as possible those casualties. 175 is a serious number, which the israelis have to take into account as they go forward. of >> law secretary kerry is trying to figure out what role the united states may ultimately between hamasaker and israel should a cease-fire agreement begin to be negotiated, he has to worry

him, -- about iran, where the clock is ticking over agreements with nuclear weapons. >> he is in a tight bind right now. there are reports he is going to engage in some prolonged dialogue with his israeli and counterpart. a july 20 against deadline, which frankly nobody on the american side wants to see extended. that is really the big prize. also the big problem. the secretary is going to have to focus most of his attention on that. you also have isis and iraq and the continued stability in syria. the secretary doesn't have the luxury of only focusing on one problem. >> how can he juggle this with

so many other balls up in the air? the german foreign minister said that this is essentially the last chance to resolve the iranian nuclear issue. the ball is in iran's court. if we don't get a deal here, what next? how does john kerry handle all of these balls in the air? >> what he is trying to do is prioritize what needs to be done today and what we'll have to wait until tomorrow. the situation is certainly a today and tomorrow problem. therefore he has to focus his attention on these two. the other issues on -- other issues in the region will require his involvement but he will have to rely largely on deputies and on

american diplomats to keep the ball rolling while his own time are focused on the top priorities. >> that is daniel kurtzer. >> when we come back, anti-smoking activists call it an insidious agreement. a we will look at the fight to ban menthol cigarettes.

>> reynolds american say it is did --s to buy lorillard lorillard. here are the numbers behind the deal.

americans may be smoking less but one kind of cigarettes has remained stubbornly resistant to the trend. to be the in talks number one name -- its flagship brand in newport.

the largestegacy, public health foundation devoted to tobacco use prevention and sensation. congress instructed the fda to take a look at menthol back in 2009. a ruling from the fda on menthol was expected last year. any idea why? >> it is a tough issue but one that that the -- one that they need to address. menthol teaches young people how to smoke. it keeps those adolescent smokers progressing. ultimately it makes nicotine addict if so it is harder to quit. it is time to get menthol off the markets. >> what is it that is fueling the rise of menthol cigarettes?

only 18% of the adult population now smokes. menthol's are still on the rise. >> the tobacco industry spends a tremendous amount of money, a big portion of their $8 billion per year. they have targeted african-americans, low socio-an economic -- socioeconomic people. >> what is it about the marketing campaign that touches a nerve with the groups? >> it is pressure everywhere. if you go into certain neighborhoods you will see much more proportionally tobacco marketing material. we know that the thought makes nicotine more addict it. -- more addictive. 70% of people who smoke want to quit. 50% try each year.

it is really hard for these people to quit. if some 85% of menthol use is in the african-american community, depending on how you you can really see the efforts to increase menthol as among low income blacks very insidious issue. if that is the case, if you accept that logic, you have to ask why there hasn't been more attention on this issue. i know you have been looking at it. >> it has been a tremendous amount of work. addition to the panel that the fda commissioned and

reported in 2011, my organization legacy has done further research. it is a very difficult issue. certainly the tobacco industry is fighting hard against it. frankly i hope with this proposed merger it will be easier to bring about an effect. any merged company will be lower. >> here's a question. if you are running reynolds american and you knew that the something, would you go ahead with this merger? even with these merger talks knowing the answer to that question? >> i can't foresee all the business reasons they may have for acquiring or emerging -- or merging with lorillard.

one opportunity they see is lorillard has one of the number one e-cigarettes. growing at aare tremendous rate. they see that as an opportunity as well. >> newport still accounts for of the business lorillard does. if the fda were to come out tomorrow and say we are pinning menthol cigarettes or putting severe restrictions on their sale and marketing, the vast majority of their revenue and profit would go up in smoke, leaving the e-cigarettes brand as the only remaining prize. like aes not sound company worth $24 billion that they are worth. >> they have had plenty of time to plan for the impact of the menthol bham. bham -- menthol ban.

there is a market outside the united states. is the business would not go away immediately. we hope all those menthol smokers would quit. we know some of them will switch to other brands. banf you are going to try -- try to ban menthol cigarettes it is only going to create a black mark. i can choose to have a bud light, i can choose to have bacardi 150. >> when you choose to have a bud light, you are not addicted to a product created i don't know -- to a product. i don't know if this is truly free choice. menthol makes nicotine even more addict if. free choice.y

>> robin is the ceo of legacy, an organization dedicated to assist station -- to cessation of tobacco use. >> the big next thing in food. we will hear from a new york chef who will tell us why he thinks stocks are the next big thing in vegetables.

>> it is a business driven by trends. we are talking about food. we see it from cale to designer cupcakes. what is next on the menu? we asked one of new york's best well-known chefs. >> i have been cooking with my that cooking all my life. >> what is the next trending food? lots of cale.

things are flavorful. look at broccoli. can go back to traditional vegetables. i think there will be less pork belly for a while. i think we will see more vegetables, definitely with some protein. beautiful that staples. we don't have to pay the highest rent.

fish liver is one of the most expensive items. one of the things the japanese showed us how to really value it did you go to a restaurant and it costs you $22 apiece. part of it is hitting a narrative that works. also with a tone of fun and upbeat. they don't enjoy it. -- they want to enjoy it and have fun. that is something that should translate off of the menu. >> what do you think? , i'm into it. >> i'm a stock girl myself. not the kind of stocks you thought they were going to talk about. new groove in food. they need to be thinking about this stuff. so much of what makes a restaurant and a celebrity chefs

relevant is his ability to foresee trends. he talks about potentially the explosion of the fine dining scene in queens. it makes me wonder if that is where he is going next. amazing. >> is technically the border between east williamsburg and bush with. if you live here or coming to new york city -- >> it is approaching 56 minutes past the hour, which means it is time for bloomberg to go on the markets. we will go to julie hyman for more. >> we will talk about the kinds of stocks we often discuss. rally after last week's decline. citigroup not hurting matters.

we have a lot of deal activity going on. that seems to give lift to sentiment printed industrial stocks are leading the gains. let's take a look at treasuries. we do have the yield on the 10 year rising for the first time in six days. you can see the yield go a little bit higher. the yield at 2.54%. agreedup is up after it to pay $7 billion to settle in mortgage bond. i mentioned yield activities as well. company forming a new that will be incorporated into the netherlands. -- the, the check giant says tim cook has solidified apple's strategy and regain the confidence of shareholders.

more on the markets a bit later. makers" next. ♪

live from bloomberg headquarters in new york, this is "market makers." >> the dog fight resumes. boeing and airbus battle for aerial supremacy. >> another atlantic city casino may be shutting down. that is raising questions about the town's future as a gambling home. >> it is another tequila sunrise. one of the world's biggest liquor companies take a majority stake. this is murky makers bank." -- "market makers." >> i am in for stephanie ruhle.

eutschland. to pay $7agreeing billion to resolve that mortgage bond investigation. attorney general eric holder spoke at a news conference less than an hour ago. departmentice retained a landmark civil settlement with citigroup. >> pretty soon, you will be able to bid on sotheby's auctions online. they are teaming with ebay to do some auctions online. ebay is looking for different opportunities since its

traditional business as load -- slowed. for the first time, you will also be able to buy a 3-d printer in home depot. partsn use it to build like cupholders. if you feel like a sardine when you fly a cut-rate airline, that is because boeing is giving the customer what it wants. it is modifying its 730 72 seed tomany as 200 people -- 737 seat as many as 200 people. the ceo told bloomberg about balancing production with demand. >> in our mind, we are lagging demand, not exceeding demand. that is the way the game is usually played. , yet satisfycklog

customers as quickly as you can without getting over the front of your skis. >> yield is important for airlines and so are many other things. let's find out what the big themes are. anna, what are you hearing? good to see you. i have to say that we have had announcements from boeing, they have been talking about doing a deal with monaco airlines. that is one of the charter carriers in the u.k. not an enormous carrier. airbus seizing the early headlines. they have announced a new plan. you were talking about the low cost airlines. wars.s about wide-body if you want to carry people a little bit further, you might be looking for something with

single aisle and only two engines. that might being in answer to the dreamliner from airbus. they have announced the a3 30-neo. they are taking an older aircraft and putting new engines on it and try to see if that will appeal. it is certainly appearing -- appealing to some customers. a big order has been placed. the boss at atc saying the pricing was too compelling to it nor. -- ignore. air asia, all eyes are on them tomorrow. i recently spoke to the boss there and he has been talking about wanting this aircraft for a very long time. he called it a killer aircraft

when i talk to him last week. aircraft manufacturers are giving customers what they want, that is what airbus is trying to do here. cramming as many people into the aircraft is possible. generally, the scene here, it is a beautiful sunny day here, west of london. sharpne is out in their suits and aviators. it is a beautiful day for an air show. >> long-haul, low-cost. it sounds terribly uncomfortable. that is where the action is. we are hearing a lot of buzz about the a-350. what are we hearing about that on the ground? qatarter airways -- airways has three aircraft they

are displaying here. they have a big presence here. they have confirmed that they 0 ongoing to take the a-35 schedule. i just spoke to the ceo and he was saying that they are hoping they will not slip again and that they will receive it on time. they're also waiting for a-380. they're waiting for those deliveries there. they're tightlipped about what is wrong with the plan. they keep saying it is something to do with the interior and that is all the clues they are giving. airbus abouting to this. they believe it is airbus' fault. qatar is angry because they believe it is airbus' fault. i was talking about the relationship. are they getting on with anyone

any better at the moment? he was playing it calm and being the politician and suggesting they had pretty good relationships with both. you could see he was kind of angry with airbus management over the a-380. the 350, its with is understandable why airbus is extending the life of the a-330 with new engines. it is much easier to redesign the wing and slap new engines on and bring those points to market than it is to invest all of the r&d into a brand-new plane that could run into any number of different problems. neo has been the fastest selling jet in history. >> it is a redesigned model that dates back to the early 1980's. washe star attraction

missing in action. the lockheed fighter was supposed to make its international debut at the show, but it remains grounded back in the u.s. because of an engine fire. peter cook has more on the latest setback. how big of an issue is this for lockheed? >> this has been a pr disaster, the fact that it is not making it there to the beautiful skies over farnborough. there is still a chance that the plane could make the trip to farnborough by the end of the week. they are being extremely cautious about what has happened with the fire. top pentagon officials are saying that they have not figured out exactly what has happened with the fire. there are no indications that there are problems with the fleet. does not point to systemic difficulties.

they are not comfortable letting the plane back in the air at this point until they figure it all back out. that tells you how seriously they are taking it. it is a $400 billion investment for the united states. they want to be very careful. there is still a chance the planes could make it by the end of the week. the head of the program says the planes are purged and ready to fly if they do get the green light to make it over to england. >> peter, what about the timing ultimately for lockheed? this plane was supposed to be a real showcase. already. >> that's right. this was a really important moment for this aircraft. they were confident that the program was on track and they were reducing cost and that sort of thing. this is somewhat of a pr disaster. a lot of companies have committed to by this plan. they are not firm commitments.

the airshow would have allowed in front of any international audience and perhaps boost the number of firm commitments. makers," up on "market cashing in on its chips, another atlantic city casino closes. >> tequila sales in the u.s. are soaring. we will talk to the founder and chairman of avion. we are digital. plus on your tablet. streaming on your apple tv and amazon fire. ♪

>> this is "market makers." city's trump plaza casino is shuddering at stores. uttering it stores.

we have talked a number of times about atlantic city. pessimistic about prospects. you have repeatedly told us things are not as bad as we might be inclined to believe. then i see trump plaza closing. are they as bad or not? >> things are not as bad as you think. >> really? >> this is good for the market. it is still the second-biggest market in the united states outside of las vegas. >> it is shrinking. >> it is. three casinos have announced they are closing. this is the market moving. it is a supply and demand. >> they are falling like dominoes is what it looks like to me. what does atlantic city have to do to get people back?

do they have to get britney spears and residency to be a perennial moneymaker? -- in residency to be a perennial moneymaker? >> you do not have a big airport feeding people in and there is a model what to do -- not a lot to do besides be inside a casino. >> you have made a great case for atlantic city. people are going elsewhere. what is the case for ac? >> they have big resorts. area arethings in the no-frills locations. there is no club. there was no food and beverage. what needs to happen for atlantic city and for new jersey , they need to look to expand outside of atlantic city. they need to look at putting

casinos in the metal land. -- meadow land. that should be the endgame. --wise trump plaza closing why is trump plaza closing? none of the casinos the closed made money. you need to close those businesses. >> it hasn't stopped people from keeping unprofitable casinos open for years. >> this is the point when they are getting weeded out. did not work for new jersey. they are starting to close casinos. caesars believes they can close showboat and funnel that business into the other casinos in the market. >> what about online gambling? that should help offset some losses. growth. very slow it is still early. there are issues. it could one day become a

sizable business, maybe. certainly, the state, chris christie coming out, had very for onlinetions gaming. we are at a fraction of that. >> new jersey as a gaming state. not just because of online gambling in atlantic city, but in a very big way. obstacle to putting casinos in a part of new jersey that will attract, that will become a destination that is not far from an airport and much closer to new york city? >> the problem you have is vested interest. you have unions and politicians in south jersey that want to keep those jobs there. as those jobs are leaving the market, those politicians are saying, we have to do something. so now chris christie and ed sweeney are willing to look at new york. they need to move quickly because new york city is actually increasing the number of casinos they have. there is a big casino that was

not there five years ago. that is taking up business. is think,hing to do how quickly can we diversify the other parts of the state and how can we appease the vested interests that fought us to let us go there? >> of the potential space, is the meadowlands the best choice? >> i'm throwing that out. you could do new york, you could do anything of north. -- up north. you want to be as close as possible to a large population because gambling is a convenience thing at the end of the day. people go to what is closest. ac is not going under. it will continue to shrink him -- itit was some point will continue to shrink, but at one point it will level off. >> brian, thank you so much. >> i don't love going there. >> i've never been.

i might check it out. still to come, someone's timing is off when it comes to stocks. retail investors. julie hyman will explain what is going on. ♪

>> welcome back to "market makers." i am in for stephanie ruhle. strategists are singing a different tune. forecasters were banks like ubs say the stock market will be stagnant. julie hyman is here with more. typically, when the little guy gets in, that is the sign of the top. >> that is the conventional wisdom. all of these things depend on

who you talk to. if you do look at the average strategist surveyed on wall at the they are looking market to top out where it is today. the huge market rally we have seen ever since march of 2009, retail investors really have not participated to the same degree partyou would imagine, in burned by the financial crisis, burned by their past investments. it has taken them a long time to get back in. they have missed a lot over that. of time -- they have missed a lot over that period of time. seen $100 billion added to equity mutual funds and etf's. that is 10 times the prior months. it has not been consistent every month. cumulatively, over the past year , over the past 12 months. retails hard to look at money and decide whether it constitutes a market topping

process are not because strategists and analysts will say on a fundamental basis, but if the money is pouring in, everybody else has to make the decision, do i sell? and if i sell, where do i put the dough? it is crazy to put it in fixed income. they are kind of stuck in equities were some kind of alternative asset class. -- or some kind of alternative asset class. alternatives are not a viable alternative for many. what retailve investors are doing on one hand and on the other hand you have institutional strategist predicting things, you are not necessarily better off going with the strategists. they have not been that accurate. time, the s&p 500 ends the year more than 10% off of the average prediction. by what they are

predicting, that is not necessarily going to get you there either. >> going into 2014, what we kept hearing that this was going to be the year of stock pickers. that is not what retail investors are doing. the money is going into etf's. >> exactly. -- that strategy has its own issues of course. retail investors buying individual stocks, but you have the booming popularity of things like index funds and etf's that counterbalance that. >> what are we seeing happen with the strategists right now? as the year goes on and we begin to see signs of an economic rebound, are they beginning to reevaluate? >> i don't know if you guys have talked about it, but david goldman of goldman sachs -- david hoffman of goldman sachs

raised his forecast today. >> this is for the end of 2015, right? >> i thought it was for the end of this year. it is possible and missed that. >> i'm sorry. you're probably right. >> it is the end of this year. he is looking at a 4% gain. interesting that someone from goldman, well regarded, is raising it to that extent at this point in the game. he is pointing to the stuff that most of the bulls are pointing to. an accelerating economy, even if it is tepid, an accelerating economy. accelerating earnings. we could see some catalyst there. no fireworks. just continual, steady gains. >> just to clarify, it is by the end of this year. >> i'm glad i did not misquote

that. >> julie hyman, thank you so much. >> when we come back, the biggest private real estate development ever in the united states. the man who may have the most at stake. -- $150 forpay 150 a bottle of this stuff. top shelf tequila. ♪

bloombergom headquarters in new york, this is "market makers." with erik schatzker and stephanie ruhle. >> i'm erik schatzker. >> i'm olivia sterns, in today for stephanie ruhle. newark, i flying into noticed a massive transformation on the west side. unbelievable. it looks like a construction site, but it will be home to thousands of apartments, hundreds of shops, offices, and 14 acres of public space. betty liu had a chance to walk through the site with the man behind the project, jeff blau.

>> you see building right behind us. 1.7 million square feet. -- you see right behind us that building. 1.7 million square feet. we're are working on different tenants and leasing. we have been negotiating with neiman marcus for an anchor. >> big anchor tenants. do you take them to the site? >> when deals are getting done. investors, shareholders all want to come through. this will be one of their largest urban stores. they will not make that decision lightly. >> do you want to show them how big this place is? >> you cannot come here and look just at the construction and hear the whole story. what is going to happen here is creating the new center of new york city. >> you want everyone hanging out

by central park or downtown. >> the high line has become one of the biggest attractions in new york city. there was a park dividing 10th avenue and 11th avenue. the last dome will be the new entry to the number seven subway line. we are bringing everything necessary here for this to work. essentially, you want somebody to be able to live here, work year, shop here for mcgeady here, and -- shop here, theirre, and have entertainment here. >> it is bigger than most downtowns in the united states. 50% of the land will be open public space. there will be more green space

per square foot than anywhere else in the city. standing ande are then all the way to the north, this would be the next commercial office building. feet -- 60.7 million square feet. >> we already have that kind of space. >> no. 65% of the buildings in new york city are 50 years old. howou think about technology has changed and the way business has changed, our buildingsture -- the we are putting up today are unlike any others that exist in new york. new york city is growing. there are new neighborhoods. people are moving from out of town to downtown. that trend has started and has been going on for quite a few years. if you look at residential rents

, we get our highest rent in new york city and westchester -- in west chelsea. we get our lowest rent on the upper east side. if you told that to a new yorker 10 years ago, they would have said you're crazy. now for littleus bit more. first of all, you look great in a hard hat. i live in chelsea. unbelievable with the rent rise. >> a lot impressed me about walking through. as you mentioned, you live right in that area, so every day you are walking by the construction site and you can see how fast the progress is. one of the most interesting parts about this project was going underneath. essentially, what is deep inside the earth? there is a tunnel being built.

a tunnel for a track that has yet to be inked or developed. amtrak. that is what i am talking about. they believe there will be another tunnel to go from new jersey to new york. they are laying the foundation down. you cannot put that in once you have the building up. they are doing this with foresight. this is where the growth is going to be in new york and they will need that infrastructure to support it. are going topers be bullish. what is jeff blau's part? >> they are the greatest salesman for their own developments. larry silverstein was with us last week. he said everyone is moving down to the world trade center. you talk to jeff blau, everybody is moving. price and whato

that company needs. what the tenant needs. do they need more high-tech? if you are a bank, you need that big trading floor space. that is what jeff blau says he offers. he said he does not believe you can get that at the empire state building. much of it comes down to price. lower manhattan is going to be cheaper than over where you are, olivia. >> i may have to move, perhaps to brooklyn. erik schatzker representing the brooklyn side. >> coming up, his biggest opponents are in his own party. why republicans have been going after senator rand paul. ♪

>> senator rand paul wants to be the republican nominee. they are worried hillary clinton would demolish the tea party favorite. havenor rick perry may presidential ambitions and he became the latest to unload on rand paul. it is a fight for the soul of the gop. jonathan, we are not even close to a formal campaign for the white house in 2016, yet it is getting increasingly bitter inside the republican party. where does this go? >> it is starting to get crowded. rand paul has a populace in the republican party. there is a race on among other candidates to brand themselves as the anti-rand paul candidate.

rand paul is trying to reach out to the establishment. we saw that at the idaho sun valley conference over the weekend, meeting with facebook founder mark zuckerberg. rand paul is trying to occupy some of that space. are seeing the natural outgrowth of a wide-open republican party right now. the desire of the party to get the republican -- the white house back. democrats seem to be coalescing, at least for the moment, around hillary clinton as the candidate to be. -- beast. >> can you think of a potential republican candidate more mogulsy to meet media than rand paul? >> [laughter] not off the top of my head. maybe ted cruz of texas. you would not think of rand paul naturally wandering around with

the big establishment set that hangs out at that technology, business, media entertainment party up there and sun valley. -- in sun valley. i think it is a statement about where he is in this race. he has a lot of the activists in the party energized. he is trying to make inroads now. that is viewed with a wary eye by the people and the establishment -- in the establishment. most of the centrist groups did not approve of rand paul. the field is in fact wide-open. politics makes ted cruz see more mainstream? more in the middle of the spectrum? >> i think that would be very

hard to do. [laughter] i think it would be very hard to make ted cruz look more moderate. i do think cruz has been effective at making rand paul looks like he will go through establishment means. he has done a strong job of aligning himself with mitch mcconnell, the senate minority leader. he is working all of the angles. >> rick perry goes after rand paul over his stance on foreign policy and invokes ronald reagan. are we living in a different ?orld than reagan's 1980's americans are on a different level than they were when it was the west versus the soviet union. >> it is a very easy contrast to draw back then.

firstsus them, the u.s. is the russians. you remember the film "red dawn." i think of that is the cultural touchstone. the time right before the breakup of the soviet union. i think that what you've got here is a fight plain and simple, a political fight. rand paul answered back with his own article in "political." we will see what happens. >> it is going to continue. jonathan allen. thank you very much. >> still to come, the growing shelf liqueur. we will speak to the founder of avion. ♪

>> welcome back to "market makers." i'm olivia sterns in for stephanie ruhle. hit drink of choice on "entourage."

withd a $100 million deal the second-largest liquor company in the world. 'sre to talk about it is avion founder. obviously, huge growth in tequila consumption in the u.s. i used to be more of a white wine spritzer and i even -- kind of girl and i even drank tequila on the rocks. >> that is quite a graduation. >> and i'm not going back. [laughter] >> there was a huge boom in tequila popularity. when i grew up, tequila was not good. many people had bad tequila experiences. younger people did not live through what i lived through. brandgov a brand -- agave -- >> i lived through some bad tequila experiences in college. [laughter] >> it is the lowest glycemic

level in any spirit. if the doctor says, if you're vodka, youink, drink should drink tequila. we are seeing incredible growth within the higher-end market of tequila. >> it is such a seemingly apocryphal story that it has entered the annals of liquor lower. the idea for this product came from warren buffett? >> i was one of the guys who did marquis jet. we had a poker tournament every year when warren was at the table. i was telling him how much i loved tequila. there was no clear number 2/ . i ordered a tequila at the table before i decided to knock him out. i told him there was no clear

number 2. >> warren said that is really interesting. >> i said, i am going to do it now. why tequila and not a bourbon? not around? -- a rum? >> i loved tequila. i have looked at for a long time. -- loved it for a long time. i said, i want to make the best tequila in the world. pernod, we sold a minority stake in 2011. i needed a company with an incredible reach across the world, market distribution is the key as you know better than anyone. when i sold them the minority stake, they had the rights to purchase more down the road. they came to us and we felt this was a good time. our shareholders were very happy. i am looking forward to the next

chapter when they have more skin in the game. we will see the business evolve. >> you are well behind the number one, petrone. -- patron. are you trying to close the gap? >> i don't really worry about it. the goal is to be the clear numb er 2. i think we will get there. to number one. this is a passion for me. it is a passion for pernod. maybe a little less than me. but i think we're going to get there. the key is to be number two already. it is pretty special. >> what do you do next? are you thinking about expanding to other liquors? >> avion as a brand will continue to innovate. people are really chasing after it. for me, personally, i think you

will more from me down the road. i want avion to continue to grow. we also have avion espresso. >> quite a way to start a party. >> thanks for having me. >> ken austin is the founder of avion tequila. "market makers" is back in two minutes. ♪

>> that is going to do it for market makers. today is the first day of the week.

olivia, thank you for being here. >> iq. -- thank you. and. , without even tackling it, took the ball on his chest. >> that was yesterday. >> tomorrow, stephanie is back. join us for special coverage of janet yellen, she will be back on the hill for testimony before congress. it is a two day extravaganza. thet now, 56 minutes past hour. bloomberg television is on the markets. here is julie hyman with more. >> i think that world cup recap just made my day. it is time for today's options update. joining me is the derivatives strategist at mkm partners. we had a down week last week, even though the dow hit 17,000. we could not necessarily hold those gains. we are back up today.

how is the options market playing what is going to happen next? >> you did have a little blip of volatility last week. obviously, the market up strongly today. high volatility in those equities right back down. this market is one-sided in that regard. if you look at the major hedging funds, vix, spiders, the qs, all of those have call open interest that are a multi-year highs. >> people are hedging. >> but it is a different mindset. it is not the risk on, risk off mindset. it is the mindset where professional investors are saying, this is what it costs in the long run. >> the costs of being able -- a bull right now. i want to get more specific him we talk about hedging and central-bank strategies around the world. we have had a lot of central banks tsonga want to get involved in europe.

they think the ecb is going to be the back stop there. you are not necessarily as confident. we looked at trades involving the euro and oil. we do not want to take just a directional view, but also a volatility view. volatility is that near historical lows, speaking specifically of europe, there are very divergent policies teed up in europe versus the united states. industrial production in the euro zone is down more than 1%. below the 2% target. you have the imf out today essentially recommending europe engage in some degree of quantitative easing, as the u.s. has done. on the flipside, the u.s., we know qe3 is done in the final quarter of this year. fed tightening is going to beginning the next year. we have to believe that

potentially the u.s. dollar against the euro and high volatility on historic lows. u.s.roduct traded in the is most active. >> it is an etf to attract us to europe. >> and etp. exactly. it is below 5%, volatility. for investors who want macro backdrop and to be buying some incredibly low high volatility, this is the setup we are talking about. >> got you. the other etf i want to talk to you about is xls. in theancial etf here united states. given what we may hear from the big financial firms that are going to report numbers, how do you think you play that? sxe istrade we like in going all the way up to january.

we just want to buy some flips. financials, interesting sector. you're today, s&p financials have underperformed the s&p 500 by about 300 basis points. best-performing . of 10 s&p sectors. it has been a real lacquer. wells fargo has outperformed. we just want to go out to january again. >> that is a simple one. thank you so much. we will have more on the markets in 30 minutes. ♪

>> welcome to "money clip." in motors, big hearted for planes. one of the world's largest airshows takes off. in property building, the hudson yards. one of the top developers man met private real estate project. in company, lyft gets a flat. not exactly the car service into new york jet. g.m. on its mind. ken feinberg tells bloomberg how he is handling the