but right now the main purpose is for people to up date the fix, naked electronic and as fair as possible. hoffman joining us from bloomberg industries. "market makers" with stephanie ruhle and erik schatzker is coming up next. ♪ >> live from bloomberg headquarters in new york is "market makers." >> microsoft goes on a crash diet. the ceo is cutting as many as 18,000 jobs, the most in company history. >> treasury secretary jack lew calls on corporate america to quit moving overseas in search of lower taxes. we will talk about it with president bush's former chief economist. to ease thea tries pain of a record drought by imposing fines on water wasters. you are watching "market makers

." it is a thursday in new york city. i'm erik schatzker. >> i'm stephanie ruhle. let's talk about wall street. times it be the best of and the worst of times at the same time? that is the question for wall second-quarter earnings season winds down. quantitative easing is still crimping profits, new revenue is still scarce, but most of the big banks are lending more and cutting costs. our contribute in editor with us andskype says it is a -- paul miller is with us from greater dcaa paul, i suspect you are not so inclined to agree with bill. do you see positive signs? >> we do see positive signs. i went into the second quarter thinking more pessimistic than i

should have been, that there are some signs of lending going on. the margins are still very skinny, you have some liquidity out there. jpmorgan said utilizations are up two percentage points from the first. wanted to dou skype only because you know i disagree with you on this golden age. but let's talk about fixed income. fixed income numbers are still low. they are lower than they were last quarter, lower than they were a year ago, and the leveraged financed state used to be where you would sit inside a bank. stephanie, fixed income except for people like you,ho are knowledgeable about it, is basically a black box. we will never really know how they make money in fixed income. but i look at it more on a macro basis. me, all the macro factors are

here. i have been saying this for a while now. between the fact that there is a post amount of competition 2008 -- we only have a few major banks now -- the economy is improving. --ir cognitive soul is zero they did not get their money for free and blended out at great margins. look at the credit card business alone. --y get money for people from people at 0% and led to customers at whatever -- 15 percent, 20%. that is a huge return on investment. >> paul, is bill wright? is the banking industry set for a powerful rebound? so. don't think the credit card industry is smaller than it used to be. is growing very rapidly. outside that, home lending his the lowest -- home lending is the lowest it has been in years.

2000 ando fast between 2007, and now we are going through that deleveraging phase. it is not a golden age for banking at all. we have a couple of years for deleveraging before we get through it all. you cannot really grow that fast. >> are analysts just sort of gaming the market when we say morgan stanley beat estimates that have already been lowered? so the numbers are not that good? >> the same thing with jp morgan. everybody lower their numbers throughout the quarter because the commentary was fixed income trading and equity trading will be poor. then they came in and beat the estimates. and heu look at it year-over-year basis, and a lot of bearings were flat to down. that is where you will get the multiples going forward. you cannot just beat estimates you can talk down. >> can i just jump in there? goldman's earnings were --

goldman's earnings estimates were lowered, and then they blew them out. they beat the consensus estimate before they were lowered. sachs, nobodydman else is competing with you. the money will do for its clients with goldman will do for the moment. morgan stanley is not in that kind of business anymore. >> expect private equities firms are now doing middle-market lending. people are doing direct to investor business. goldman sachs does not even need to be a player anymore. >> goldman sachs is a player, stephanie, you know that well, and they will find out a way to make money. with the lack of competition, what otherroving, firm or business on the face of the earth does not have to pay for its good soul? this is about to be a golden age. you may not see it yet that you are going to see it. it is already happening. look at the second quarter at

these firms. >> paul, you mentioned loan growth. morgan stanley does a little bit but it is not elemental to their business. there is a bit of a mistake here. b of a's loan- growth was half a percent. almost all of it seems to be coming from corporate and commercial lending. is stillmer deleveraging, but what does it say about the process for these banks that corporate america is stepping up and borrowing more? >> bank of america's loan growth was small because they have a lot of big runoff word folios. there core growth was up because -- their core growth was up a percentage point. to absorbbig enough all those deposits or that liquidity out there. and therefore the interest markets on the spread are still

a pressure point. we have always had great loan growth.out we are starting to see it in the numbers but it cannot it in you. it has to go on for the third, fourth, and into 2016 for the banks to start earning expectations. >> how much is left in banks to cut heads? when they talk about cutting expenses and jobs, what jobs are left? >> i think the banks are still too fat relative to their revenue base. you will still see cuts across the board not just in the big banks but through the regionals. it is the only way they can get earnings growth, and they have to become more efficient. the only way they can do that is to continue to cut heads. years,e next couple of not just this year. >> bill, does it give you any concern when we look at where jobs have been created over the

last couple of years? it is compliant and tech -- compliance and tech. just announced they were going to hire more levels?es at junior >> yes, but they have cut 24,000 jobs in the past year. junior level, those are people grinding it out, not necessarily people bringing in dollars. >> the other option banks could do is cut compensation rather than cutting heads. they like to cut heads so that otheron't lose jobs in competitive situations. they have huge leverage on their compensation structure. they could definitely cut compensation. instead, they cut heads. with the economy rebounding, demand for corporate loans is going to be up, the man for personal loans will be up. demand for mortgages is high.

i'm telling you, we are about to see a huge leverage effect on wall street. >> you know i hate talking about cutting conversation at bank, -- at banks, so that means we do not have any time left. >> thank you. with us via skype, contributing editor phil:. >> i like paul, two. of our other favorites has big news out of redmond, washington. microsoft is cutting up to 18,000 jobs. bloomberg west editor at large and one of our favorites, cory jo, has more. if they are cutting 18,000 jobs, how much do they have total? this in some ways was in the

cards. microsoft is painting this as a change in direction. usingla -- not dela is this to cut all these jobs. to discuss the focus of the company and where it is going forward with its offerings. a lot of emphasis on the notion of software to service. software on the cloud. office 365. i have been meeting with microsoft salespeople, and they are having some success in the corporate arena marketing of the .ew upgraded office thin and a lot of them are about this acquisition of nokia, downsizing nokia where they said they would have $600 million they could take out of the business and continue to have a growth in the mobile

phone market. more fundamentally, it is about redirecting microsoft toward software on the cloud and a different kind of offering from reduced staff of microsoft. wehow much information do have on which areas the job cuts are focused in? >> we don't have a lot of detail. thise will find out about difficult thing today. also in europe where -- we expect as much as half of this will be at nokia. those jobs just came into microsoft recently with an acquisition. when you look at this business, one of the things you have to think about is the different competitive sets we are talking about with microsoft. their competition now includes google and companies like eachook, whose revenue for employee is so much higher because you talk about a jobless recovery. we are seeing that in a

complicated case. >> i want to make a point. of course you are right, revenue per employee at companies like google is higher. but microsoft has higher margins . ebitda because it gives a higher apples to apples comparison. facebook by quite a lot, but facebook is the outlier in this chart that we have put together on ebit the -- margins. >> if you think about where they are going forward, who will they be competing against and what they are trying to do? microsoft will be facing more facebook and less oracle in the future. --n you think about microsoft is the kind of place -- i spend a lot of time up there, and it is the kind of place where people have worked for a very long time, carved out

their places in the world and they often have careers that run -- 15 or 20 years, unlike a lot of other high-tech companies. there are probably people who have worked there a long time that do not have the same kind of function that they used to. >> but they are hiding out and living well? .co until today. thank you so much for giving up the latest on the news that microsoft. >> california talks tough about the drought. >> plus, corporate tax runaways. the treasury secretary says it to drop those comp -- to abc'shose companies and -- on those companies overseas. we are streaming on your apple tv and amazon fire.

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>> the treasury secretary, jack lew thomas says it is a matter says it is aw, matter of patriotism. cracking down on companies that move overseas trade it is called tax and version it has become increasingly popular, a way to avoid paying u.s. corporate taxes. most republicans say the way to stop it is to cut the corporate tax rate. let's talk with ed lazear, who served as president george w. bush's chief economist. good to see you. the irony is that jack lew also things that we should cut the corporate tax rate. he says so in his letter to house ways and means and a chairman david cap. he says congress needs to take action first to stop the inversion problem. there is an inversion problem.

actually, let's open up the question to you. is there an inversion problem? >> yes. there is no doubt that tax avoidance is not a good thing. avoidswhen one entity paying taxes, it means the rest of us have to make up for the lost revenue, so you have to get the taxes somewhere else, and that can be distortionary. the second point is more important. you want corporations to be basing their location decisions not on taxes but on economic efficiency and on where it makes sense from a production point of view, not from a tax point of view. if companies are relocating overseas to avoid taxes, that is not a good thing. i am sympathetic to the president and the treasury secretary's point of view. there is a problem here and something that needs to be solved. my difficulty with it is that i think the solution they propose will cause more harm than it does good. that really is the problem.

>> how would it cause more harm than good? >> the big problem is that if you look at the administration's numbers on this, what they are talking about is getting something like $2 billion of revenue per year, something like $20 billion over a decade. while that is not chump change, of $3 billion on a budget trillion is less than .1% of revenue. we are talking about appearance rather than substance. the other side of that is you have to ask what will be the effect of this legislation on the location of capital in the united states. to give you an analogy, here is how i think about it. suppose you're watching a baseball game and you notice there are two bank many home runs being -- there are too many home runs to being hit. bunt. tell them to

>> that is such a good analogy. so should we be criticizing these companies who are playing by the rules? well, i don't think criticism is going to be very effective. first of all, the companies are doing the right thing in terms of fiduciary responsibility. obligation to maximize shareholder value. if they do not do that, they are in trouble because they are not doing the right thing. we all believe in patriotism. oferved with a number patriotic americans, and i do not dispute we should be doing the right thing for our country. the question is, how do we get there? as you mentioned right at the beginning, the tax code is something we need to focus on. we have a tax code that rather than encouraging capital to move to the united states, it discourages it.

the only reason we have capital is because we are a pretty good place to invest, particularly with respect to the rest of the world. we could attract more and have a lot more investment with steeper recovery, more job growth, more wage growth, if we were to be more investment friendly. >> so again, the problem is that congress -- both sides of the aisle, democrats and republicans, and for that matter the treasury and the secretary agreed -- that tax reform is necessary, but nobody is doing anything about it other than document it. you can understand why the treasury secretary says something needs to be dumb in the interim because tech perform is a big challenge. , even if we have a reagan-tip o'neill type of agreement that paves the way for tax reform, it

will take a while. >> i certainly understand the chair jury secretary's frustration. what i don't understand -- understand the treasury secretary's frustration. what i don't understand is the solution. enacting legislation of the kind he has in mind would actually, i amount ofuce the investment and capital and perhaps the amount of tax revenues we get in the united states. there are a number of examples in this. if you think about another sector of economics where you look at europe and what they did with their labor markets a couple of decades ago, they were worried about having too little employment. they passed legislation that said you cannot lay off workers. penalize that, we will you and you have to pay severance pay. that worked in terms of reducing layoffs, but what it did was that employers did not want to hire them in the first place because they would enact

penalties they would incur penalties in laying them off. companies inome the united states, but new capital will not want to come here because they are going to see that you get locked in once you come, and that will be counterproductive. moving in that direction is the wrong thing to do, even in the short room. ash in the short run. >> we have to end it there. >> next time we want you in new york for the hour. >> and we want to keep going. ed lazear is an economics professor, former chief economist at george w. bush. >> the obama administration is cracking down with more sanctions on russia over the crisis in you came ukraine. ♪

>> coming up, one of my favorite

topics -- credit market mania. stay with us. you are watching "market makers ." ♪

live from bloomberg headquarters in new york, this witharket makers here co. erik schatzker and stephanie ruhle. >> good morning once again. you are watching "market makers ." i'm erik schatzker. >> i'm stephanie ruhle. >> it is credit line insanity. the riskiest investors are the ones winning the biggest. how long until their luck runs out. -- heargulies is with runs a $31 million portfolio of tradable credit. in the bestt it

possible terms -- the stupidest guys look at the smartest. how long can that continue? >> we have certainly been in a bull market for a while now. the question is how long does this go for and where do rates go. that is what drives credit markets more than anything else. that itef right now is has some legs to go. we are toward the end of the cycle, but we -- i know you're looking at me -- the reason we companies,r 1000 invest in over 1000 companies. >> and none of them are defaulting? >> we have unbelievably low default rates. more important, most of the companies are beating topline estimates. >> the notions that the dumbest are winning the most makes me feel like we are in the bubble. is we flip side to that

are beginning to see flashing yellow signs in the marketplace. >> where? proceeds.seeing it in more deals are getting down to shareholders,ng to recap shareholders. that is a dangerous sign. companies that you do see are being watered down. leverage levels are back up to where they were in the last week. leverage is trickling back into the system again. these are all things pointing to setting ourselves up for a credit cycle change. it is not today, but it is setting ourselves up area >> is it time to sound the alarm? >> it does not mean we are moving up the credit curve, but we are definitely getting more selective. >> why don't you take a moment to describe what you invest in. >> at areas within -- we run to $8 billionon

in assets. high yield loans on a global basis, mostly from northern and western europe. today we are in a $3 trillion market. >> is there enough liquidity in that right now? where are you getting it from? it has gone up 50%. trillion to $3 trillion. wall street is no longer the risk taker, they are market makers. which is fine. >> i got it, i got it. >> there is enough liquidity on the buy side. we have had dozens of influence to high-yield funds and loan funds over the course of the year. it is on negative loans recently but there is still a lot of liquidity out there.

>> going back to the stupidest guy looking the smartest, how do you -- "stupidest" isk a word. do you think it is? >> i'm not going to argue with the guy interviewing may. i have probably used it before. -- youdo you generate are concerned, you see warning signs. how do you stay competitive? notur pitch to investors is that we are going to be the highest return in every market because if you are doing that, you are to reaching for yields. that is asymmetric risk. not reaching from the high yields to the decimal turn, it adjustbest risk to return. us andritical for

critical for investors. so that investors understand that you have to adjust your expectations for the risks you are taking. >> do you have new investors at a time when everyone is searching for yields? are there potential investors knocking on your door saying spend your money? is interesting. everyone is basically saying how can i get a 7% yield in a 3% environment. it is retail. we are looking to build retirement accounts. insurance companies are optimizing their portfolios. we have a lot of flow coming in. 6% to 8% yield -- >> where is it coming from? >> it is across the board for its sovereign wealth funds -- >> but are they taking money out of other asset classes? >> a lot of folks are reallocating out of the investment grade. and we see aght

big rally over the last six or seven months. people are worried again, and you see it out there. the bill are getting nervous and saying how do i adjust. can you help me manage both credit risk and duration risk at the same time? >> if we know interest rates are going up and they are going to go up, why would anybody in his debt mind buy a fixed rate ? treasury department is selling hand over fist. >> we agree. fund called the dynamic credit fund. it dynamically allocates between loans, bonds, structured assets. you can, or your investor can? >> the investor gives us money to allocate for them. 20 years ago, 10 years ago,

investment issues lasted a while. today the cycles are so short. they cannot allocate money fast enough to read >> why are cycles so short? >> there is so much more liquidity in the variability in terms of the types of capital. information flow is so much faster. you looked at a quote and you said -- >> you are talking old school. >> today they are asking to do that allocation. that is really important. they are coming out of assay great and asking us to manage. >> what are you leveraging that into? -- loans andw structured assets, 40%. that is 1.4 years, so it is very

short duration and we have about 5% yield.ix point >> what don't you like right now ? >> everything else. we are not buyers of the market, if that makes any sense. a lot of new issues are coming that are levered past where we think value is. you're not getting paid for high-yield spreads. we are buying high-yield. we are believers in -- >> you mean to tell me that these deals that are hot, hot, hot, that you will get a decent allocation, the market will go up, and you can flip them the next day -- you are saying we are not going to play, we will sit on the sidelines. >> we are finding our lowest percentage of deals since 2007. , that's impressive.

>> so our investors are expecting us to make money for them but also not to lose money for them. >> you know how warren buffett likes to say when the tide goes out you will find out who is not wearing any shorts? that is about to happen. ?hat happens to the markets how will they be affected when that moment arrives? >> you will finally have volatility, which we do not have any in our markets. >> is it ok that we do not have volatility? we have had one economist saying, from ubs, that you can pick up pennies and do pretty well. way,e reality is, in a more volatility in the market, it is easier to create alpha in the market. it becomes a more beta-driven market when there is volatility. you can avoid mistakes because your opportunity to make outsize given the limited

lack of liquidity in the market. >> can we talk about when you think it will happen? >> if i knew that, it would be fantastic. we don't know. >> but it is not necessarily going to be the first interest rate hike by the fed or the anticipation of the first interest rate hike. it feels to us we have some legs to this. we still believe there is a decent value in some credits but not all. we do think we are grinding away toward it. fund, we are a 60% floating-rate. >> so many people said we are waiting for a dip, waiting for this to pull back. >> i will not quote an exact number, we are at our largest cash position available to invest than we have ever been. >> is that one of the reasons hear that investors like

you are not trading as much as you were a year ago? >> we are still trading a lot, partially because we see a lot of influx coming in, so we are raising capital, putting up capital that we think makes sense. reach where we want them to, we are trading out of them. there are opportunities in terms of funds-flows, trading around funds-flows any given day. the volatility is not there but you can still trade. there is still trading, but the spreads or not terribly wide, and they earn outsize returns so that volatility is more challenging. when you are a debt investor, reaching for that yield -- you want to be a little more selective. >> greg, thank you so much. nice to see you again.

margulies, the head of -- >> coming up, another round of sanctions imposed on russia. he will see who stands to lose the most. stay with us. you are watching bloomberg television. ♪

>> we live in a compex world at a challenging time. none of these challenges lend themselves to quick and easy solutions, but all of them require american leadership. as commander in chief, i am confident that if we stay patient and determined, we will in fact meet these challenges. obama after speaking to reporters about the range of foreign-policy crises his administration is facing this summer -- syria, iraq, israel, and it goes on and on. a new round of sanctions announced on russia.

our chief washington correspondent peter cook has more from the capital. the sanctions already have their intended effect, don't they echo >> we have seen the russian stock index falling, the ruble dropping as well, so it is having an immediate reaction in russia. these are the toughest actions today in the united states. companies are big names in russia, bread names -- novacek, the biggest independent gas producer in russia. russian's third-biggest lender. these are big companies and that means these sanctions could be the kind that for the first time will have a broader impact on the russian economy, maybe even pushing into recession. but the goal according to u.s. officials is to get president putin to scale things back in ukraine.

i spoke with treasury undersecretary david cohen today. daily market moves are not -- >> dale at mark -- daily market moves are not what we are focused on. choice between increased cost and pressure and the escalating in ukraine. >> president putin shrugging things off, saying it will have a boomerang effect and will hurt the united states and u.s. businesses more than it will russia. the prime minister called the sanctions evil, but we got a saying -- we got a sense from ane that this will have isolating effect on russian businesses. there is a risk that the u.s.-russian advances in terms of the global economy will be set back i this. there is a risk in russia. >> the u.s.-imposed sanctions and so did the ee you. set -- how european

did the u.s. sanctions differ from the european sanctions? u.s. treat european businesses that do business with russia? >> there is a gap between what the u.s. did yesterday and what the europeans are talking about. they have not talk or did the second -- they have not targeted the same companies. very different. the message in the united states is, listen, we do not have to be on the same page to have an intended effect. it is not essential for the sanctions to have mirror images. but the message between the two size is the same -- russia needs to change its behavior. >> the president is facing a long list of foreign-policy changes right now. is the administration up for it?

by vladimirng asked putin. he suggests that all the instability in the world is largely due to u.s. foreign policy. the president mentioned not just russia but so many of these other issues -- the middle east, iraq, syria, what is going on in afghanistan. this is a challenge for the president, who would much rather be talking about domestic issues . it is not those things that is really at the top of the agenda. is foreign-policy, and it is a test for this president in his second term, a president who has seen his popularity dropping. >> vladimir putin should probably not be asking if the president can handle all these challenges. he has a future handle on his own. peter cook thanks. >> coming up, california tries to ee's the effects -- te's the effects of a drought. no more watering your sidewalk, angelenos.

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>> california is running out of water. this week the state imposed its first ever fines for water wasting, part of a desperate effort to keep the historic drought from hurting the nation's biggest economy. i was there in february, took a look at the drought all the way from the high sierra to the pacific ocean. back then that people would not care until california started cutting off their water supplies. they have not turned the taps off, but they are saying if you wastewater, caught by your neighbor, who snitches on you, doing any number of things -- over watering your lawn, watering your driveway, washing your car without a nozzle, using drinking water for the ornamental fountains in your garden -- you will have to p ay 500 bucks.

>> help us understand how often we see these rules put in place. >> the first time ever on a statewide basis in california. there have been restricted levels of use on a much narrower level, but there is a reason for it. this is the third year of drought, yet california uses more water than it did the previous year. >> why? >> lots of california's are listening to governor jerry brown, who back in january when emergency,a state of said cut your water usage by 20%. cutof these areas have their usage down 10% in the san joaquin valley. look at what is happening to los angeles, san diego, and orange county. increase.-- 8% those people are not paying attention to governor brown. >> why, because they don't care? yourself hownk to

much water comes out of my tap every year and you increase it -- % >> are those areas the wealthiest parts of california? i am guessing they are. >> they are among the wealthiest. san francisco, were clear across the bay. oakland. and large the wealthiest parts of california. here is the problem with a $500 fine. if you can afford to drive a aboute, you do not worry speeding tickets. the people in beverly hills, hollywood, santa monica, and manhattan beach, who are well-to-do and live in big homes with expansive lawns -- >> just throwing $500 out the window. i don't know if they are willing to pay $500 a day, but they are willing to pay a fine. the state of drought. >> it is 56 past the hour.

bloomberg is taking you "on the markets." olivia sterns, back from london, is in the newsroom with more. would like to start out with the price of water but i don't know how to traffic -- to track it. a little bit lower after we had disappointing retail housing numbers. housing starts coming in at a nine-month low. pushing up the dow is microsoft, it a day after cutting 18,000 jobs. that is the largest round of job cuts in its history. most of all it is part of integrating nokia. we also have shares of intel that we are watching today. lower today. this comes after news that intel yesterday surged 9% because earnings came in well ahead of estimates.

more market makers coming up on bloomberg after the break. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> a brave new world. it means forat industries and consumers if rupert murdoch is able to take over time warner. >> congress takes aim at mary barra again. tough questions about the delayed recall. blue-chip celebrities. secrete woman who reigns high stake poker games for hollywood's a-list. are going to begin this

hour with the newsfeed. top business stories from around the world. the largest round of job cuts ever at microsoft -- the ceo was illuminating as many as 18,000 jobs. two thirds are coming from nokia. streaming microsoft soaking can be better in cloud computing. shares of morgan stanley are on the rise today. second-quarter profits beat estimates. the ceo was steering the ship direction -- in the right direction. the ceo hopes those relationships survive. that rocked the media

industry yesterday. it is still rocking on. would rupert murdoch surprise with a $75 billion bid? it could be the biggest deal yet in the new era of great media consolidation. but have a conversation about it with the managing director at rbc capital markets. and george cook, the partner at the law firm. he served as the chief counsel at hbo. and jon erlichman live from l.a. you thought you would be enjoying a nice relaxing summer break. what do you make of this? >> neither company has to do this deal. rupert murdoch is looking at reshaping the way content is enormousre an

revolution happens globally in the way content is bob. -- the way content is bob. more important globally, he is making a land grab for as much content as humanly possible to position himself for that. ught.e way content is bo >> none of those shareholders that he currently has or may have are going to be satisfied with nothing. >> right. >> steady as she goes. we love our strategy. it will pay off for shareholders in the long run. >> i don't know. rupert murdoch may have done an enormous favor for investors. time warner's issue with this bid -- they could have a number of issues. the first is, not a great time for an option. it feels like an auction of one. you have comcast tied up and at&t tied up. verizon tied up.

you are counting on and outside the traditional media industry player coming in. is that the best time to be chopping the company? -- shopping the company? the best time for murdoch to make the approach. big step in the negotiations coming over the next year. that part of the content cycle -- shows are not working on tnt. maybe the company is worth a lot more. if fox really wanted, they will have to come back with a much higher number. >> what is your response to all this? >> it's definitely a content play. a well oflooking for content. look at the time warner library. it's exceptional. a tremendous amount of depth there. the mgm library from the 1950's. a couple of real stars at time warner.

among them, hbo, which has excelled. the sportsrength on side. if you look at an ott environment with on-demand -- >> over the top. >> correct. the on-demand availability, sports is a key player here. as are the unique premieres of the actual motion pictures and so forth. and original content. that is something time warner and hbo and the turner networks bring to the table. >> this deal makes a much sense on paper. a will and time warner made sense on paper, too. what are the potential pitfalls? this is an opportunistic move by murdoch. that is correct. fox is going to try to position this as the deal they want to do

, not that they want to do any deal. david talked about price. certainly the fox camp is going to suggest that they don't have to jump back in and pay anything to get this done right now. maybe that is in part because of the landscape and a couple of other potential bidders being tied up. as for what fox really thinks it can do with these assets, i have gotten a sense that the cable networks, the once we talk less about under turner broadcasting, are the ones where they think they can be better operators going forward. comeis the one place where on paper, this will make even more sense for fox. if they can be better operators of these cable networks and grow them overseas, this will make a lot of financial sense for them. not to say that hbo was not important. the value and those is obvious. better management of a cable

network is on paper where they think they can get big bang for the buck. >> could this possible deal rock espn in any way? will rock think it espn. it has the potential to make fox a more powerful player by bringing turner sports over to .s1 they have quality college football and basketball and nascar. it's not in the elite get. if you put the nba on it -- >> did david not see my nascar coverage? a maybe not in a global league. espn with the football contracts at the end of the decade is going to be tough to rock. >> i would agree.

you can grow the sport high. -- we think fs one is the bogey over the next three years. nba, there ishe room for that number to go up. inif you get involved negotiations between the distributors and the cable companies and the satellite companies and the content providers, you realize that sports is the key. licenses on espn as opposed to the regular channel is quite considerable. you can get two or three times is aple on the fox sports real improvement. i would like to pick up on the issue of international side of things. -- of the areas in which >> a lot of advisers to fox say is critical here. >> it is. if you look at what fox has done internationally in terms of its channel distribution and its own , skied which land and

sky tally up, it is a strong network. land and skyhe italia. they can be a multiplier against the warner bros. content. >> are they going to sell cnn? what is the timing on this type of deal? just moving too quickly here? >> i think this is a moment in time that murdoch sees he has a better chance of winning at a an in the not so distant future. said thatpublicly they are willing to part with cnn to avoid antitrust issues. thoseon't know how strong trust issues would be.

it's a great offense as a great defense. >> is it a trust issue? you look at fox from a news perspective and cnn, those are two different houses. >> you can counter program channels. it's infotainment. jeff raised a concern about cnn. what are you going to do with cnn? when chase countered with a , he said,t he wrote we are committed to selling cnn to make sure that there are no antitrust issues. >> financially. we can talk about these different news programs as having morphed into infotainment . from an editorial perspective. ,rom a financial perspective cnn, the potential for synergy

as with any other network. you think of cbs or nbc and your is five hours of news a day. if you take the newsgathering asset of cnn and you merge that with a network news department, the potential cost savings are massive. >> people have talked for a long mismanaged.nn being lots of criticisms. to bettertand recover its lost value with a an abc?nbc or i >> you have cost saving advantages. at this point, cnn is in trouble

in terms of viewership. it is rudderless in terms of what it is trying to present to the viewer. perfecteased to be a conveyor of news that you can use. in addition to the network news departments, cnn would be help ful to it. it's a surprise asset to time warner. they have been trying to make it work. thrives is in a heavy news cycle. a war, and election. election.an there has not been as heavy a new cycle since the financial crisis. the last peak extended moment for them. i thinklection is where

of fox or and the msnbc. >> does anybody in l.a. care about cnn? we talk about it here because new york is the center of america's news industry. does l.a. care? >> do they watch the news in los angeles? do they go to the beach and watch the news? >> they do watch the news. they are watching this story closely. what gets lost -- because these media companies are so large, there is a massive question about what happens to the studios. the complication that you could have with fox and warner bros.. warner bros. under fox would raise all sorts of questions. do they stay independent?

that's another leg up this story. how big these two businesses are. why one of the potential responses by time warner, a logical partner historically for time warner has been cbs. what they are missing, time warner studios, one of the most electric users of television content on the planet -- they lack a broadcast network. a lot of us thought cbs with the natural partner. there are some who might speculate that maybe a response that time warner has. >> going on the offense of. -- offensive. great to have you here. we have some breaking news. let's go to olivia sterns. have all beeno we waiting for. what could be the biggest ipo in u.s. history.

saying they will delay their ipo. it will start the roadshow after labor day. it will push it back to september. there was a lot of speculation that they would try to launch on august 8. alibaba now announcing it will delay its ipo and will start the roadshow after labor day. the company could be worth $154 billion. we know yahoo! owns a 24% stake. lower nowres trading on this news that they will delay their ipo until after labor day. >> so much for august 8. they wanted that auspicious date. to waity be better until september. everybody is back in the market and has their game on.

in august, they are on vacation. >> congress still is not satisfied with the answers it's getting from general motors. the fourth time in four months that the ceo has been summoned to testify. >> snack attack. -- hummus maker is trying to you have to get disruptive innovation, even into hummus. a new ad campaign. you can see our stories and interviews on bloomberg.com. bloomberg tv plus, on your tablet and streaming on apple tv and amazon fire. ♪

>> this is "market makers." lawmakers in washington are not done growing general motors about its delay in recalling cars with ignition switch defects. gm's ceo is back on capitol hill

again today. was thehe senate panel head of gm's victim compensation fund. -- autont otto esper expert has been monitoring this. the most fascinating thing is that ken feinberg and mary barra and everyone testifying in front of congress on behalf of general motors goes through great pains to say that they are willing to compensate victims of these car crashes with a limitless amount of funds. there is no cap on compensation. however, ken feinberg did say that he is restricted by gm. he said he is lived it -- he is limited in regards to the victims he is allowed to compensate. he has a list of cars, including

the chevy cobalt, saturn ion, pontiac g4 and g5. he is limited to a list of 2.6 million cars. if your accident occurred in any cars, 17her 26 million million of them for the same reason, you are out of luck as far as ken feinberg compensations fund. allow him to compensate victims of similar accidents if they were in different cars. even though the cause could have been the ignition switch. >> when gm asks me to create a , they made it very clear that gavenly models rise to this special compensation -- as with 9/11 and bp, i must abide by that

delegation of authority. >> in the second panel with mary , the senators are going to definitely questioned them about enlarging the compensation fund. is this the first time somebody from delphi is testifying before congress on this issue? >> it is the first time. i was speaking with senator before the hearing started and he said he is concerned about delphi. rub the o'neill has not fully cooperated with anton's report. he wants to know why that is and how much delphi new. when you do that and why did not .ct sooner eare recalls.

more than that, coming up. ♪

>> breaking news. interfax is reporting that a 777 has crashed near the russian ukrainian border. there is a possibility this plane was shot down at an altitude of 10 kilometers. there are very few details available at the moment and we have not been able to confirm this report. as soon as we do, we will let you know. you do need to know that interfax is reporting that a fromsian 777 on its way orterdam to glotta what a lump

was shot down. stocks have turned steeply lower in the past few minutes. we will be back when w with mor. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> welcome back. time for one of my favorite segments. -- spreading it on thick with its new ad campaign. will it help spice up sales for the number two hummus brand? here's the ceo. clearly in the last six years, hamas has gotten massive here in the u.s. why do you need a new ad campaign? >> as the challenger brand and

category, tribe was looking to do something different. we needed to stand out and increase our awareness. we came out with this campaign to really make a splash and get noticed. to help tell consumers who we is the key for us to continue to grow. for consumers to try our product and come back and keep eating our product. >> what kind of rebranding investment you have to make? it's working. what is wrong with being number two? we want to become a strong number two. for us and it's important to the industry. it is important for the consumer and our customer to have a strong number two player in the category.

our campaign is really to help get noticed and become an even stronger number two as we are on our journey up to the top. >> are the gains that you make and market share coming at the expense of sabra? >> we are benefiting from the category continuing to grow. hummusople are eating more regularly. instead of buying it once every two months, we're seeing more consumers shift from light users and medium users to have users. therefore buying more and more hummus. the category keeps growing. it has been growing over the past four years at a compounded rate of 19%. part of it is from new entrances into the category. part of it has to take share from our competitors. one of the things about being in a really attractive categories everybody wants to be there.

if you look at categories in the grocery store today, if you exclude categories that are less than 100 million, hummus is the number one fastest growing category in grocery today. last we saw you on tv, you said you wanted to make him miss the next salsa. >> we are on our way. would look at household penetration. the measure of how many people put hummus in their shopping cart in the course of a year. household penetration is at 25% right now. we still have a little ways to go relative to salsa. a penetration of 60%. that speaks to the opportunities ahead of us as the hummus category still relatively immature. >> one of the things people do with salsa is buy in quantity before a big event. what kind of increase due notice and sales ahead of the super bowl? is the busiest time for

hummus. the summertime. people are out barbecuing and picnicking. hummus is growing. this is our busy time. we see spikes in sales ahead of july 4, more today -- memorial day, labor day. it looks like pringles, which are delicious. it seems like a huge amount of packaging. there is so much waste. have you thought about that at all? balancing act a of making sure that you stand out on shelf and making tree noticed. one integrated package that adds value. you are proud to put one of these on your worktable.

package that really stands out on shelf. it's a mix of pita chips and are wonderful hummus and is a great snack. >> thank you so much for joining us. good luck. what better season to celebrate hummus? take you back to that important story. more details are coming out about the apparent plane crash near the russia-ukraine border. olivia sterns has breaking news 4s. >> according to the interior minister of ukraine, rebel attempts shot down the malaysian air triple seven. this is ukrainian interior saying there were 288 passengers on board. down neart was shot

where the ukrainian troops are fighting rebels. the interior minister saying that rebels have shot down the .alaysian air flight we will continue to monitor the situation and keep you updated. it does appear to be moving the markets. thank you, olivia. i want to take you to washington where peter cook is also following the story. detailsa has more coming out of ukraine specifically. i want to add a bit of perspective. something that has been part of the ukraine story the past couple of days. the shootdown of a ukrainian military transport plane a few days ago. the ukrainians see the russians putting -- playing a part in that. was flying atlane 20,000 feet, only sophisticated

weapons could reach that altitude. would have been in that range of 30,000 feet. we want to put that in perspective. the kind of weapon that would used to target a plane flying at that altitude. the united states has not gone as far as to suggest the russians played a role specifically in the downing of that ukrainian military transport. that ave made the case sophisticated weapon was needed to target that aircraft. the question will be, what kind of weapon brought this down? who fired the weapon? >> a couple of details to adhere. the 777 has a remarkable safety record. --y 3777's have ever crashed only three 77 710 ever crashed.

crashed.have ever that is a point worth emphasizing. appearsysian airlines to be the victim of two disasters in fairly short order. the plane has to let be found over the southern indian ocean. now, a plane that appears to .ave been shot down if that is the case, a tragedy of unspeakable gravity that this could happen in the midst of the dispute over the future of ukraine. >> i want to take a look at the markets. as soon as we saw the headlights cross, we saw a big let down. both took a serious debt.

took a serious dip. it has a negative effect on the markets. down 43is the dow points. we have more on the crash and the parent shooting down of a malaysian -- apparent shooting out of a boeing 777. ♪

777nd malaysian airlines has crashed near the ukrainian -russian border. the interior ministry said ukrainian rebels shot the plane down. plane0 passengers on this and 15 crew members are dead.

it is a tragedy. we need to do about the implications. the president of the eurasia group is with us. >> léger airlines has confirmed this -- malaysia airlines has confirmed this. they have lost contact with ma 17 from amsterdam. more details to follow. to try to put this in geopolitical terms. ministryian and is correct and rebel forces shot down a boeing 777, what does it mean? a it is certainly making likelihood of military escalation between the two sides much greater. we have already been on a negative trajectory.

the russians have denied shooting down the ukrainian jet. there is no denying that 300 civilians dead in a plane -- has maintained his own deniability of influence and control over the separatist forces, this forces his hand in being much more aggressive in rousting the separatists. utin is going to deny any culpability and point the finger back. possible --makes it impossible for the president to not take action to try to move to get rid of forces. how could he not given what just happened against the airliner? >> what do you mean

specifically? >> direct military action to remove the separatists from these two large cities. it certainly makes it more likely that the russians would respond to that. can not believe that putin allow the ukrainian government to simply remove the separatists. and overturn the referendum that he himself has said he respects. this has gotten much more dangerous. >> why would the ukrainian rebels have shot down a foreign jetliner? is it a mistake? >> it's very likely to have been a mistake. you are talking about some folks were well-trained. some were not.

some of these are russian forces that are volunteering. some of them are very much local ukrainians. many of them are operating with armaments that they have never used before. they have shot down a couple of ukrainian planes. a couple of transports already, one of which led to 90 ukrainian military dead. it is inconceivable to me that they would be targeting a civilian aircraft. that theyeasible would have seen a plane going and hit one by mistake. unfortunately, it seems far too quintessential desk coincidence -- planes are getting shot down. the most likely outcome here is indeed that the local separatists shot it down.

it is certainly the most likely outcome. if that is the case, it's almost certainly by mistake. the ability of the ukrainian government -- they cannot stand by and allow that to happen without decisive retaliation. who speaks for malaysia right now? confirmed and we do find out that the rebels shot down a malaysia boeing 777, they will protest. what can the international do to help malaysia make that case? there are a couple of questions. one would be a market you to make sure the territory is secure and that nothing like this could ever happen again. a lot of europeans would support

that. the russians would be tell it -- would veto it. ofs might get members congress to support more active military engagement from the u.s. to help ulster the ukrainian military. -- bolster the ukrainian military. the united states just yesterday put significant additional sanctions on the russia, effectively unilaterally. the europeans were facing the greatest security challenge the have said we don't want any part of additional sanctions. we will support you only in spirit. the european union are not trying to get themselves in front of escalating. this episode drives a bigger gap between americans and europeans because the willingness to

respond in a way that can be economically painful for the europeans. >> please stay with us. i would like to bring in ryan chilcote. he joins us now via phone in london. what is going through vladimir putin's head? >> this is a very competent at situation. -- complicated situation. he would be concerned about this. his idea that this was an accident is entirely plausible. week ago thate you had a very large ukrainian thatary transport plane normally has 40 soldiers on shot down with what would appear to be similar technology

at the same altitude. up to atechnology that week ago was not present in the east of the country. the ukrainians have been pointing the finger at the russians. some sang the russians actually .ired a missile then others sing the russians provided technology. saying the russians provided technology. details are sketchy. there are always mistakes in the first reporting. theddition to that, we have fog of war clouding this story. militaryrussian technology in the hands of the insurgents that has brought down this malaysian jet, it is an extraordinary problem for vladimir putin.

ans is supposed to be internal ukrainian conflict federal government, the central government of ukraine and russian speaking insurgents in the east. narrative is that they have nothing to do with it. they are simply looking after the interests of ethnic russians in the east of the country. all of a sudden, if you have 300 civilians that were transiting through this airspace in a commercial aircraft shot down and killed, it's a totally different story. one thing i immediately wonder is, the area where this aircraft the federal government controls the east of the country. there are at least 10,000

insurgents running around in this very area. we need to take a quick break. our expert on russia, ryan chilcote with us from london. the president of the eurasia group also with us. or news in a moment. -- more news in a moment. ♪

>> if you've been watching for the past few minutes, you know we have been telling you about a malaysia airlines boeing 777

that has crashed in ukraine. 280 people are dead. at least 15 crew members as well. this is a tragedy. >> it has officially been confirmed at this point by malaysian air. confirmed that the plane is missing. they lost contact. the ukrainian interior ministry confirmed that the plane crashed and has supplied us with figures on the casualties. ares possible -- they accusing ukrainian rebels of shooting this plane down. it's a human tragedy. a human story. a political story, a diplomatic story. it's also a financial story. let's take you to olivia sterns. the minister saying on

his facebook page am accusing rebels of shooting down this malaysian air flight. malaysian airlines has said they have lost contact of this flight . interfax reports that they have found wreckage burning on the ground in ukraine. this is moving markets immediately. we saw a spike in the traditional safe haven assets. cold, oil, gas and britain spiked. for more on how this is shaking the markets, let's bring in the chief options strategist at bar chart.com. describe what you are seeing in terms of market reaction on this news from the interior minister of ukraine. let's hope this is an

isolated event that does not have a catastrophic effect on the markets and the big picture. this may be the latest crisis. the big reaction has been in the vix. it was up 4% before this happened. now up 11% on the day. fearve had this overhanging the market even though stocks continue to make new highs. not been low. has -- has not remained low. this unique situation has increased it today. has come outent saying that he wants anernational commission -- international commission to investigate what happened to the plane that went missing. this is a reaction to this tragic news that has come out today.

i was saying earlier this morning, the s&p has gone 33 straight months without a loss of 10%. >> there have been people looking for a reason for this market to come down. everybody has been looking for to cause it to pull back some. things are still positive overall. up to 2015 for the spx is the next target. on the upside, things are still a very strong. people are looking for excuses for the markets to pull back. this can be that in the short term. it was important to see that the markets reacted very positively to the sanctions from russia this morning. we have given up the games so far. it's important to see how things react here over the next day or two.

highs in pick up those the s&p 500. >> you're looking for the s&p to go to 2000. how much worse can this get? where is it headed? >> we have been trading at a long-term rate between 14-12. we are back inside that range for the year. much.nk you so ♪

>> you are watching "market makers" on bloomberg television. a malaysia airlines boeing 777 has crashed in ukraine needed a russian border. malaysia airlines has last contact with the plane. the ukrainian government says the plane has crashed, 280 passengers on board and 15 or 16 crewmembers are dead. that ukrainian rebels in eastern ukraine near the russian border are responsible for having shot this plane down from an altitude of about 10,000 feet. as you can see from this map, malaysia airlines flight mh 17 was en