i would be selling treasuries. it shows how fragile the equity markets are. intow a much lower move the hills on the 10-year than i would have expected. >> thank you. we will be " on the markets" in 30. >> live from bloomberg world headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. -- presidentaq obama says force may be needed to prevent genocide. >> holding back the economy -- a surprising new report says income inequality is slowing down growth. on chicken ban imports might not be such a bad thing for u.s. consumers. it is friday.

good morning. i am erik schatzker. this is "market makers." >> i am alix steel, in for stephanie ruhle. happy friday, but it will be a busy weekend. >> not a happy friday for many around the world. u.s. has carried out its first airstrike in iraq. it is where a team of american diplomats is based. this is after president obama said he was authorizing potential strikes and a humanitarian mission to save thousands of iraqis stuck on top of a mountain. white house correspondent phil mattingly has the latest from washington. the distinction between offensive and defensive strategy from the white house. >> this is offensive, it really is, alix. what you saw last night, what the president authorized, the humanitarian aid to those

stranded on the mountain. this is an escalation. we note here leo fighters dropped 500 pound bombs on an artillery piece. in a sense, basically, alix, it was defensive, defending the kurdish fighters on the ground, but it is the u.s. clearly going on offense to stem the tide of an advance that has caught most u.s. officials off guard. >> what is the u.s. actually up against? you could argue that the kurdish forces are a formidable foe when it comes to these extreme militants. what is the u.s. up against? >> u.s. officials have strong faith that the kurdish forces will be able to regroup and fight. what they believe right now is they need help and help from the air. what was surprising last night and through the morning talking to u.s. officials about the

advance, they were surprised about their position strategically and ability to advance. this is not a ragtag group. this is a very, you could say, talented, group, and officials were caught off guard. what has brought the response is we have usss and the way they have been moving has severely threatened the assets. >> what will we see over the weekend? it would seem to me the public at large would be concerned about those on the ground scenarios. >> boots on the ground is not a scenario, and the president made that clear last night, but i was just talking to a senior official who made the point that the military has a green point -- greenlight -- if they see action threatening the mountain

where the refugees are, the military will take action. i think it is safe to say not only whether the new humanitarian aid drops, but likely future airstrikes. this is an operation right now that will likely continue to expand and continue for a long time. >> what is the response of congress? >> they are out of town. the administration has made it clear that they have tried to stay in touch over the last couple of days. we have not seen negative response, even from democrats wary of another entrance into iraq. we have seen criticism from republicans who wished the plan would also include syria. we are told this will not include syria, turkey, or jordan, this is a rack only -- iraq the only. >> so really an offense against what is happening in iraq, not islamic militants as a whole.

thank you, phil mattingly. gazaease-fire has ended in . israel withdrew its troops earlier this week after a four-week campaign. israel said the goal was to have the rocket fire and destroy tunnels militants used to launch attacks. negotiators in cairo could not come up with a permanent truce. >> whether it is gaza, ukraine, egypt, the markets have proved resilient, but david that what iserned happening in iraq could be the straw that breaks the camels back. david, good morning. i knew we needed your perspective on "market makers," the moment i read a note from you last night saying military

strikes on iraq could be bearish for markets worldwide. we have learned since then, the initial suggestion it was a strike on a large scale has been dialed back. we now know this is very targeted. does that change your perspective? >> well, it might alter it slightly, erik, thank you. the issue is -- -- we are -- this -- we are engaged, this is not the last event. we are in the evolution of what in a classic languages the fog of war -- a 200-year-old raise -- phrase and it evolves. uncertainty rises in the fog of war, whether it is a cold or sanction exchange between the russian federation, the european union and the united states, or whether it is a hot war in the rack that is limited. we also know that the enemy is

vicious and murderous. right now they control a dam. we do not know what will happen with that dam. we are now engaged in precision bombing, attempting to save people who are innocent from genocide. it is a fair policy, but it comes very late into this fog of war. so, my view is uncertainty, risk premium rising, therefore investors need defensive postures, and i am one of them. >> ok, a defensive posture should look like what? phil mattingly told us a couple of minutes ago that the operation in iraq is likely to expand and likely to go on for a long time. if that is what you're getting ready for, what do you do? x-unit cash reserve. you cannot be fully invested. we have it on our account. on the bond side it is harder

with interest rates so low. we have had the big rally in sovereign debts, tragedies, german -- treasuries, german sovereign debt, and so forth. it is too late to be getting in in preparation for the next round of central-bank activity. some cash reserve, defensive shropshire, this will slow growth, alter global pricing. you referred to chicken prices. they will change in other places and a lot of other things as well. curious, why have we not seen that kind of reaction? stocks are up today. it seems very contrary to what you are saying. >> if you have a strategic view, and i track something called the , whichich we are -- vix we are familiar with, and the skew, which we are less familiar them they measure

talent risk events outside of beingrm, and the vix something that is very familiar -- what did we see? we saw the spread rising. that means market agents are worried about big shocks, big volatility moves and they are paying up for the insurance, a scaled set of market agents, and i think he needs to be respected. we will find out in the next month or two, or the next week or two, volatilities are rising, alix, and they will continue to do so. >> david, you said it is hard to predict what happens in the bond market. treasuries have already defined predictions -- defied predictions. treasuries have not traded this strong for more than a year. we are at 2.38% on the 10-year yield. are we going to test 2%-level again?

>> well, we might test the it, but again, i doubt we may do so. if you think about it for a long period of time, it is roughly the yield of nominal gdp growth. nominal gdp growth is higher than 2.3%. .t is likely closer to 4% we are way under by all sorts of has been under. will probably be under as long as there is a flight to sovereign debt. germany, you have the two-year government bond trading at a negative yield. that makes no sense, but it is there. >> uncertainty, then, takes over for quantitative easing as the driver of the bond market? >> well, it does, and what is .iewed as riskless debt a different story when you get to junk bonds. credits runs there have been -- credit spreads there have been

widening. risk premium is elevated, and it is not elevated in the treasury market. it is elevated in other sectors. it has not reached the stock market yet, although the 5% correction in the last 5, 6 weeks, has alarmed people. settling --ot panic selling. we are not there yet. >> david, does it feel to you that we have made the turn in the credit market? the selloffs in high yield, and we will look at this more deeply in the next hour, which is happening at record pace, might signal that we have seen the top? >> it sure looks like it. we have had this extraordinary rated of a zero interest policy that suppressed and introduce complacency. suddenly things are changing. my guess is the inflection point

is this summer with the federal reserve. us to neutral by october, and all of a sudden the suppressed volatility zero interest rate no longer is a salve for markets. markets will have to confront realities without the benefit of the salve. it looks that way to me. theavid, this is exactly conversation i hoped we would have when i saw your e-mail last night. david kotok, cumberland advisors, have yourself a good weekend. we will all be busy paying attention to what is happening. >> one thing for certain -- when there is violence in the middle east, oil prices to rise. we look at what the markets are doing right now. it has been unusual. fads -- how grocery chains stay on top of the latest trends, hoping to keep you coming back. ♪

>> first. bloomberg. >> islamic militants take ground in iraq, and in the process sees

several oilfields with 30duction capacity of thousand oil barrels a day. london.oined from richard, great to have you -- you guys have such great perspective on the global energy markets. where is the geopolitical risk? why is brent not at $125? >> we have seen a lot of developments from iraq and we just heard the u.s. has launched its first airstrike, but for the oil markets the key point is we that wereost supplies available to international markets, so from a fundamental point of view, we are facing a well supplied crude market and events in north and -- northern rock do not directly impact that. chevronve reports of trimming back production staff. multinationals are in the country. at some point, they have to pull out, and that will affect

production. >> yes, northern production has been affected, but because pipelines were blown up earlier in the year, and kurds, who were trying to export oil into international markets were blocked by maneuvers and the medic pressure, we are not talking about field in the north that are available to international markets. the big center is in the south, and that is a long way away from the fighting, and there is no signs yet that the operating staff at the southern fields are near pulling out. >> richard mallinson, you mentioned we have not seen a disruption in supply. of course, financial markets most often treated in anticipation of the event, so is that to say that brent $125 does not anticipate disruptions in supply in iraq or elsewhere? >> yes, they are reflecting some minor losses of supplies in the anticipation that

we will not see a bigger loss from the south. what we see further out of the bread curve is pricing -- brent curve is rises have moved up a lot, and the reason for that is iraq's future production growth would be critical to keeping the market balanced later in this decade as we get into the 2020's , and that is much more in doubt. the way the crisis impacts the oil market is mike morgan long-term future prices than near-term prices. >> when we think about these crisis, we think about long-term, but there is demand strife ining and russia and ukraine -- what does all of that due to the demand picture? >> i think that is true. if you look at russia, its economy was already slowing. tightening sanctions are creating more of a drag on the economy and i think we will see less in terms of oil demand growth from russia.

we can also see some really in other parts of the world, if we have a lot of economic slowdown, high oil prices, high commodity prices, and a drag on growth from some of these geopolitical events, it could feed through into slightly lower demand. >> richard, what about nigeria? the world health organization has just declared ebola an international emergency. now, the declaration in and of itself, is not needed anymore people are contracting the disease, but we know that it is spreading and we know a larger number of people in nigeria have become infected, and the chances are that more will die. begin to growou concerned that that will have an impact on nigerian oil production? >> i think at the moment, that is not the biggest threat to nigerian oil reduction in terms of ebola. the fields and facilities are relatively remote, and i expect quite tight arrangements will be put in place to try to keep them

safe and free from that infection. but, of course, nigeria is facing a long-term problem of oil theft and sabotage, and that has cap its output, and we have seen that come and go in a lot of ways and that has had an effect on nigeria producing at its full capacity. >> in terms of global oil supply and demand, is that a bad thing, because at the end of the day the u.s. will not be importing crude from nigeria. asia is there, but they will not be as rapid buyers. will this actually helped to improve dynamics in the oil market? >> i think we have seen geopolitical disruptions, libya, nigeria andons in seeia, have been enough to the backing out of u.s. imports that you just mentioned. that has helped to keep the balance where in the last few years we have seen rapid demand

growth -- rampant demand growth. ande see growth pickup, russia under sanctions struggling with his huge production numbers, then i think balance is could tighten and we might -- balances could tighten and we might be looking to get that from nigeria and other countries back into the market. >> richard, where is demand growth most likely to surprise? non-ocdnk if we look at -- >> i think if we look at countries,non-oecd the nature of that growth is changing as china tries to shift to a more consumption-let economy. there are also smaller countries that are not tracked closely by oil market analysts, but together camille actively add quite -- to militarily add quite a bit of growth if the regions pick up.

>> quickly, last question, how much geopolitical risk is in the price right now? number not like to put a and say it every problem was resolved. i think we have serious supply disruptions from iran and libya, and we have concerns about iraq that are not necessarily feeding through much into the price, but the combination has kept brent prices up above $100 a barrel. >> still range-bound, nevertheless. thank you, richard mallinson, analyst at energy aspect. ," coming up on "market makers sound the alarm on inequality -- this time it is coming from an unlikely source. ♪

>> we are approaching 26 past

the hour. time for bloomberg television on the markets. u.s. regulators said at this pharmaceutical company could get its experimental ebola drug to people infected with the disease. the fda had previously put tests of the drug on hold, but now the company saying yesterday that the agency has authored the therapy status to allow it to be used, however we do not know how much of the drug is actually available if or when these tests would begin, and i should point out this has nothing to do with what was given to the aid workers in atlanta. >> let's also point out that it is 16.75, roughly where tekmira is trading right now, still well under its recent high of almost $31 back in march. so, there was more optimism for this company. >> more optimism before, but still rallying a little bit. >> indeed. a damper on the economy -- and

he reports as income inequality is what is slowing us down. wings.cold war over hot russia has stopped by an american chicken, and that could turn out to be good for the american consumer. ♪

>> live from bloomberg world headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. good friday morning once again. i am erik schatzker. this is "market makers," here on bloomberg television. in fori am alix steel, stephanie ruhle. asked what does the bond market -- >> what is the bond market have to do with inequality -- everything, according to a report from standard & poor's. ann, thank you for

being here. your comments report for months. >> i did in deed. -- you worked on this report for months. >> i did indeed. we looked at economic conditions facing the u.s. and the world and one of the drivers that will make it continue. i'm a u.s. economist, so i focus on the states. the u.s. went through the worst recession in worth recovery in 50 years and one of the reasons -- one reason i found was a income inequality, and i want to be clear that that is a natural part of the economy, it is what we need as an encouragement to invest in ourselves to get the economy chugging along, however income inequality can get too strong into too high, and i could do more harm than good. >> how do you know when it crosses that threshold? >> there are a couple of ways to look at it. not to get too technical, but one, where zero is

everyone is the same, and with one, everyone has all of the money. you can reach some points where actually, that income inequality, according to them, , and it ends up doing more damage. the way it does more damage is first you have in an economy like ourselves, you want the majority of people participating -- consuming or investing, or basically investing in businesses. while we end up having money goes too far is the majority, many people, they are squeezed out, and that means we have slow growth. growth, because people rely on debt, it becomes extreme. >> what has been the impact on current gdp? what we are looking at 42014, we're looking at growth around 2%, but the issue long run, i was looking for growth to be closer to 3%, 2.8%, and

brought it down to 2.5%, and one of the factors is this income inequality. >> you examine using the coefficient and through a lot of other lenses as well. >> sure. if you do a breakdown of what -- of what the measures are, you look at labor, capital goods -- i'm sorry, yeah, basically capital gains, capital investment, all of these factors that go into play. what we have seen is one thing. labor income becoming more concentrated at the higher end. a couple of reasons to explain -- there is a superstar affect. winner takes all. some of it is also technology. people are not educated enough to be able to meet these needs. you see a squeeze between people who are college-educated, the college premium, versus those who are high school or less. >> which, sort of, brings up the

next logical question, which is what is the solution question mark you have many people from either sides -- solution? you have many people from either sides of the aisle. as an economist, what are the solutions? >> i have a phd, so i love school. i focused a little bit on schooling. one of the things that came out in the inequality question was social mobility. if you take a look at people at the bottom 20%, children born into the lowest income earners, the bottom 20%, if they do not have a college degree, a chance that they remain at low income bracket is about 50%. if they have a college degree, it is only 15%. that is a real factor in getting them out into a much better position. there i would say we could see education as a big boom. >> this was part of a debate that we had yesterday. education should play a role in

creating opportunity for people, but that is a generational transformation, right? it takes a long time to reform the education system, and then to see the results of that reform. is there anything that you believe could be done sooner than educational reform to help, if you will, correct what you have identified as the inequality problem? >> you are right. it will take time. we are talking about college, but you have to started kindergarten. other options you have to have -- education i see as a pro-growth solution to reduce some of these imbalances. another solution could be focusing on infrastructure. infrastructure grows the economy and is good for bringing the private sector into the economy and adding more jobs for everyone. that is another solution. >> beth ann bovino, let me put it this way -- you have to look that thehe firestorm tey -- theomas pick

firestorm, how do you avoid being dragged into the moral debate? >> this is not just affecting the poor. it is affecting everyone. i believe income inequality is one of the reasons we had the financial crisis -- i'm sorry, the great recession that we did, and also one of the reasons we have such a slow recovery. >> when you take a look at a longer term view if you were to focus on education, what is the potential to add to gdp? >> in terms of education? >> yeah. >> i did a quick analysis, in terms of what if we added one year of education to everybody, the american workforce, what we would see in five years, and when i came across was in terms of growth, the productivity gains we would get from just one more year of education for the entire workforce, it would add a

little over -- about $525 billion to gdp growth by 2019, and that would be about 2.4% growth. >> wow. >> a pretty nice number. >> real dollars. thank you, beth ann bovino, of standard & poor's, who took a look at income inequality and found that it was holding back gdp growth. >> coming up, more food for thought -- how one grocery chain tries to stay a step ahead of the competition. ♪

>> trends in the food industry are changing all of the time, one day you are in, one day you are out, kind of like heidi klum.

-- e asrik pointed out, -- as erik pointed out, you're not scavenging for mushrooms. >> i am responsible for sourcing local products for our 30 stores in the northeast region. i work with bakeries, farmers, fishermen. to find newission products. >> exactly, and the best new products that are coming locally and being made in this area. >> part of that is looking for trends -- will be the next gluten-free or callow working a lot. or quinoa? >> radcom a we have research and hopefully find the products you >> you brought some goods.

some of them are strange. what is the next food trend that you are seeing right now? >> we have a couple, and we are seeing items in the minimally processed, cleaned-eating snack category. , any sort ofrs snack foods that have very few ingredients, minimal processing. you have heard a lot about the paleo diet that is recently emergent. it is totally taking on new heights recently. a lot of people are turning to this. are chocolate bars but they have no refined ingredients, sweetened with things like open its. you will love that. >> some things are a little strange, and i say strange because you have some pet food for humans. i have three cats. that tweaks me out a little bit.

--this is an amazing product it comes from a 100% traceable and it is marine stewardship council certified, which is pretty amazing. you can find on every single can of these tunas -- you can see the vote and the name of the fishermen that caught it, which is just amazing. we have a human equivalent product. have the parts of the fish you would not even go to the cap food. >> -- cap food. >> how responsive is a company like old foods need to be to fads question the paleo diet is now here, the atkins diet is now gone, and the list goes on. >> we have to be responsive, because you mentioned what will be the next kale. it has catapulted in our produce

department and in packaged goods all over the store. we really do need to be responsive to that while maintaining our quality standards, which are going to be consistent across the board. >> how do you wind up sourcing all of this food? if you are talking to local farmers on a mass scale for whole foods, i think it would be difficult for the farmer to do that. >> that is the amazing thing about the structure -- we have regional buying programs and national global buying programs. i work with smaller producers in new york that can only supply to two or three of our stores to begin, and i work on coaching them or guiding them on incremental growth. as those brands grow -- in a lot of cases, some of the products here, ion table right started in new york city and now they are national suppliers. >> i think most people know what they are getting when they go to whole foods, but it seems to me, and i'm curious to know if this is true, but most of the new products that i find it

overloads, and i shop at the store regularly, are almost always on the high-end. >> i think you want to be careful and really look at the whole store because we have done incredible amounts to become more competitively priced, especially with our 365, our private-label brand. the other thing to number is in a lot of cases you are not comparing apples to apples if you're comparing us to a conventional market. >> no, i am even comparing within old foods -- that the new stuff that i see is often at a higher price point. i don't know if that means it is higher-margin, or if you are buying stuff from small producers who simply do not have the economies of scale and as a result cannot put something on the shelf for less. >> that is part of the process in introducing an item to a single store. of course some economies of scale are not the best, and what we try to do is to continue to grow them so that they can scale up, so that their costs can come down, and we pass down that cost to the customer.

well,s part of my role as in-growing these suppliers as andy -- as they are ready, when we set up with one of our suppliers, we can pass on our costs to them. >> what has been your biggest mistake in eking out a food trend? a food trend? >> biggest mistake -- we have such a broad range of customers paleo, people, looking for low-glycemic -- i cannot say that has ever been this huge crash in identifying a food trend. someone always wanted, but you have to find the ones that the majority of people want. >> i assume when working with local farmers, you're putting a lot of money and resources into developing the stuff that is on your shelves. what is your return on investment like? how long does it take for you to get paid back? >> it eventually to think about. our producer loan program is a program we -- it is interesting to think about. our producer loan. web offers --

program offers fixed rate loans and it is very unique. no other retail offers it. when we get a loan to purely elizabeth, she offers us exclusivity on any line extensions before any other retailer. >> interesting. i'm going to try this crunchy banana chocolate bar. thank you so much. elly truesdell. >> thank you. click the faa is banning all u.s. commercial flights over obvious,ing the "potentially hazardous" situation there. faa already had banned flights from flying below 30,000 feet over the country. you are aware that the u.s. has resumed airstrikes in iraq on a very targeted base in the far north of the country. the president said yesterday, or warned yesterday, the u.s. may

strike, and it has since then, to prevent genocide. coming up, it must be food friday. it certainly was already withelly. americanys niet to chickens, and it could be a sanction that could turn out to be good for u.s. consumers. ♪

>> the russian retaliation against u.s. and european sanctions, perhaps it is no surprise, but the targets, exporters, could end up hurting the russians a lot more than it hurts us. economics editor michael mckee is here. mike, tell us more. why might we benefit from sanctions against us? >> that is what a lot of analysts are asking. when they announced the sanctions, they did not make sense -- they are putting sanctions on the european union, the united states, canada,

australia, and norway, countries that are sanctioning the russians, and it is basically across the board and agriculture. the problem is russia imports about 25% of its food, so if you start prohibiting those imports, you raise your own costs. >> just the laws of supply and demand. >> yeah, exactly. for the united states, it is limited and packed because we only send them about $1 billion other cultural outings, and the biggest one we send is chicken parts, mostly legs and thighs, and that is about $310 million worth, less than 1% of our total production, so it will not hurt us. alix, you were reporting earlier this year how beef prices were up and pork prices were up, and that was boosting -- pushing chicken rice is. >> -- prices. >> there have been concerns about chicken prices in the u.s. as is. but we also have things like -- >> we also have things like tree

nuts and cattle was exported. really limited impact on the united states. >> would the same applies to the european union, which is a much bigger exporter to russia? >> it is. we sell about $1 billion. they sell about it and dollars. it is not a huge part of their economy -- it is about $8 billion. it is not a huge part of their economy either. norway -- we were talking about this -- it is hurting the seven producers there, but it is overall not a good deal for the european union. heard about finland and poland calling for eu compensation because they can no longer sell goods to russia. i wonder if you have heard anything on those lines? >> you have not heard that indiana state. it is more of a tradition for

european governments to support agricultural producers. cases like this. >> because subsidies exist here, just as they do their. >> the real impact will be on the russian consumer. it will raise prices because of shortages. inflation rate right now is 7.5%. sayysts we have spoken to it could raise it by one or two percentage points, so you're looking at almost 10% inflation for russian consumers at a time when the economy is really slowing down. >> they could hardly afford it. >> and the flipside, exports from russia, in the short term commerce bank saying that could stay negative because they need to keep the grains in house, and there are less on the market, which raises prices for everyone. >> it does, but the feeling is we will not see such a big price rise that will be noticeable as we are down the food chain in the final finished product and there is some hope other countries could make it up. the big winners in this are

argentina and brazil that produce these tomatoes and they can sell them to russia because we cannot. >> and russia has taken steps to loosen research and sign imports from places like brazil. >> right, they need to replace these goods. it will also hurt the former satellite countries around russia that would also importing -- the importing some of these things. >> economics editor michael mckee, qs much, talking about chicken, which i love. >> we did not bring you any chicken wings. >> . -- next time. it is 26 minutes past the hour. bloomberg tv is on the markets. olivia sterns. >> i should make this about food prices, but it is about geopolitical concerns. overnight in asia we saw asian stocks broadly lower on the news that president obama has authorized airstrikes against militants in iraq that are fighting against the iraqi

government. in europe, stocks are fluctuating right now, but we are down for the week. this is the first time we've seen back-to-back losses in european stocks since march. the dax is down 11% since hitting a record high. in paris, down from a six-month high in june. russianct of the sanctions and also the fact that italy has slipped into recession , we learned this week. we got out of germany as well. in the u.s., stocks are a little higher. again, this looks like it is on geopolitical news. a russian news agency is reporting that russia is seeking a de-escalation over the crisis in the ukraine, some perhaps that is helping. afterp is down right now hitting its record high two weeks ago on july 24. alix, you like to talk about below the- it is 100-day average for the first time since april.

the dow is trading at its 200-day average. you will get more "market makers " coming up after the break on bloomberg tv. ♪

>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> the fight for your tds green. o goflicks and hb head-to-head with their streaming services. >> a successful digital strategy may be crucial to the financial health of some of these. >> text solutions. >> this is "market makers." >> it is time now for the

newsfeed, the top business stories from around the world. the u.s. has carried out airstrikes on islamic militants iraq.rthern the militants are threatening thousands of religious minority stranded on a mountain. the airline was losing money even before light 370 vanished back in march. a restriction player -- reconstruction plan may be unveiled. exxon mobil will start drooling tomorrow, exxon signed a before the sanctions would've moved -- were imposed. >> relief may be coming for argentina.

rallying investors to bail be country out of a court battle that has forced it into vault and mushroomed into something even worse. this is a confusing story, and there's a lot of misleading information out there. i think we be to remind everyone how this started. guy named paul singer, a hedge fund hai manager, and fonzie is to hold the country hostage. >> exactly. bonds.re old, defaulted these are bonds that were left was twoause there restructurings in 2005 and 2010. he did not go into those because the terms were very strict. pursued full repayment through the courts. banks including citigroup,

deutsche bank, and jpmorgan are now looking for a way to try and get those bonds out of the hands of paul singer and the other holdout creditors and into the hands of other investors were .illing to fulfill that risk something that is was he for anybody to do. so there t has to be a way money.hey do not lose w you cannot take anybody's word in this. you cannot take the argentine government's word that they will end up paying them at the end of the day. good you would've today, faith that at the end of the year they would end up paying, and we have no idea what they will end up paying them. right now the only terms they have offered is the same terms

from the retractor -- restructuring. >> this is a political issue in argentina as well. the argentine government has labeled the holdout creditors as a entre vultures. they are loathe to be seen to be even negotiating with these people let alone paying them the full value of this court judgment which is in the order $1.65 billion. if a deal could be struck that does not have the fingerprints of the government all over it and he ends up getting $.85 on the dollar then that is ok. the big question is whether the government will make good on the new creditors. that might build up by the bonds from elliott at $.85 on the dollar, but is the argentine government going to -- that might be able to put a floor under the meet the value of those bonds because of the terms of the old restructuring which

gets a little bit complicated. the argentine government would need to make up $.35 of value, and nobody knows if they could do it. >> why would be considered if it is so risky? >> there could be some gains. first of all, let's say you own argentine assets right now, the bonds that are now in the new default. then your bond will rally because there is a solution. and then secondly, who would not be the franco who brings the argentinian market back -- who would not want to be the rings the argentinian market back. >> they can act as many old men on this -- middlemen on this deal and work the spread. the could loan money to investors to buy the bonds from elliott and make some interest on the loan, and then thirdly have underwriting

comesrom when argentine thea back to the market. >> everyone i've spoken to has been negative about it because these talks keep stalling because it is who gets left with the hot potato? you need to be -- everyone wants to has the risk that argentine -- argentina knows that he has. the offer int put writing because it would constitute a better offer would violate the terms of the original restructuring which would require them to pay everyone the same amount which they do not want to do. >> it is a catch-22. you cannot get the deal done unless -- >> it seems like a lot of james

happening. >> thank you very much. you have a terrific story in this week's bloomberg businessweek. it is only newsstands and on your tablet today. >> there is a stampede out of a junk bond. of market investors are running for the exits in record numbers rally. questions about a >> they always have this happen and then they are bots again. >> that might happen here as well. we may be talking about this again in six months. there are $7.1 billion that was withdrawn in the last week. that compares to the second highest amount of $4.6 billion.

people are scratching their heads, they do not understand why. right now there is not the taper tantrum that you saw last year, that rapidly rising rates .ould have been pulled instead they're pulling money from junk bonds. >> even that these are mutual funds we're talking about, is it possible that it is just a bunch of skittish retail investors? they got into junk bonds because of the worldwide search for yield, but it was a very tentative step into that world to begin with and now that they see even small signs of trouble in his time to get out of stuff they got a? >> perhaps. there are institutional irons on the other side of this, but you're not seeing a tremendous

drop. it is not even as big as last year's. you would expect the selloff to be steeper, and there are buyers on the side because fundamentally nothing has changed. you have a u.s. economy that seems to be proving, but janet yellen did say the one spot she sees a soft is in the credit market. a cumberland advisor who manages more than $2 billion id just lost our that we may have seen the peak of the credit market and this is the is is headed down from here. >> perhaps. but there is not a strong consensus right now. on the other hand, yields are going lower.

you have negative yields in germany. your treasury yields litter plunging here. if you think about it it is andty dropping everywhere, trillions of dollars created because of the stimulus globally. that fundamental backdrop of qe infinity has not really changed, even if the fed does start hiking a little but marginally. there still is an incredible easy money kind of policy world. greg have you seen any signs of illiquidity? real issue here, are you going to be the last one out of the theater when there is a fire? what if there is a problem? how are you going to get out? that is what is driving a lot of these concerns right now because people are seeing geopolitical chaos, and feeling that things are coming unhinged. >> we will know that when we see what? prices start to gap down?

is the reason why people keep pulling money because they do not think they will be able to do that. we have heard from portfolio managers that when they get the feeling that that is happening they will just send the cell signal -- sell signal. >> thank you. fightn we come back, a for your streaming dollars. hbo wants to olga up to better complete with netflix. >> friday, time for the yearbook game. ♪

>> you are watching "market makers."

who wasversus hbo, winning the streaming more? you can say that each service is. to hbo and time warner to keep up. age the own need to take a page from the net licks playbook? >> it is a very difficult question. and they experimented with that idea in places where they did not have great penetration. it would be very difficult for them to do that here, given the strong relationship you have with cable. the other issue is that netflix is half the price. hbo only gets half that money because they split it with the cable company. you could almost have both of

them, if you love television a lot. notreality is that i do think they compete as people think they do. netflix loves to compare themselves to hbo because they have been so successful, and that is a great goal. but the reality is hbo has been more worried about angling amc giving them the heads that they have had with breaking bad. now they always wonder what is after game of thrones? netflix has a much router base of content because it is not just their own content they are selling because they are able to uns of content. we will see. both will continue to do well, but i do not think that hbo is going to grow at the same rate that netflix has because netflix is starting to go international, where hbo has been there for a

while. a what if hbo becomes more of content aggregator that comes from time warner? what would that change? >> i think it would change the game. the folks at time warner, this proposed transaction from fox really highlighted the value of hbo. it was one of the key issues that fox was looking at. the valuation, netflix is valued at about $27 billion in the marketplace, almost 40 times evebita. really highlights the value of services. you need to start thinking about site -- outside of the box. they certainly have a great model with their current distributees but they need to think about other ways to get their service to the 70 million u.s. households that do not get hbo.

they're doing some test with the smaller cable packages, but they need to think more over the top options. thet seems that one of reasons we are talking about what hbo might do is because of rupert murdoch and because of fox. because hbo was one of the prime assets that they identified as the rationale for buying time warner. bid, fox has dropped this ed towarner has start talk more about what they might do with hbo. >> there are a lot of option. it is a royal run business -- well run business and the reality is that they are there already. perspective, we look at it and say which is the better growth opportunity? netflix is certainly expensive because they are investing in broad -- abroad.

beingprofits at home are masked by all of these new investments, which are going to expand over the next year as they launch in france and germany later this year. goodnk they're both companies, but we think on a growth justification basis we would rather be in netflix even after the run that ait has had. says there are a lot of things that have to happen, but what needs to be thed is not hbo, but ratings of the property. the other point i would make is thisit is funny about rupert murdoch and time warner situation. time warner did everything they were supposed to do. they are the consolidating while

everyone else is consolidating. . nickave a company like netflix which is trying to differentiate on content and consumer and they do not have to worry about these legacy relationship issues and that is why they did so well. everyone the dvd was dead and invested in it, and everyone eadught streaming was drea and they invested in that. they've always been a very controversial name. over 10 years subscribers are up on a 40% company annual growth basis. is up over 30%. over a long time netflix has had tremendous execution. they have been undervalued at

points in time, but the reality is they have executed. dan is right, time warner does need to fix what is going on in the turner network, but that will take time. pressure toow under show he can be an $85 stock over the amount of money that murdoch went on the table. atht now it is only trading $72 50 cents. is focusing on hbo the right move? if the persuades people that hbo ,hould have the same valuation 100 50 times earnings, he is to $82 faster? >> yes. management has done great for shareholders, but there's much more work to be done there. they need to work on improving the ratings and investing in programming. worked a team that has

very hard for shareholders, they are very aggressively returning cash to shareholders in the form of buybacks and dividends. is anrelates to hbo, it value.rtunity to create ways to growrly that business outside of that. >> what is that way to grow outside of the existing distribution infrastructure? as they turned hbo go to something over the top, with a not be violating their agreements with the cable company? >> there are issues there. one of the things they have been experimenting with is kind of a very light cable package. comcast is testing $49 a month which has some of the basic cable channels, broadcast channels, and hbo.

as a package that is trying to target some of the 10 million households who do not pay for television, that is one way that hbo is trying to think outside the box because they step back and say 70 million u.s. households do not get hbo. where to reach them somehow, so there are lots of ways they have to think about it. >> great to speak with you this morning. thank you for being with us. have a great weekend. i watch it mostly on apple tv at the moment. we will be right back. ♪

>> coming up, back to school. , but in the bookstore more there is an alternative.

it is also friday, we have a look at a media executive who graduated from the boston latin school in 1940. eric says he already knows the answer. ♪

>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> it is your book friday here on market makers. >> that smile is because he totally knows who it is. onheby's stock is thinking news that it has lost its battle with dan loeb. is -- this comes at a high cost. is a cold comfort to him that he is getting some of the

changes to occur. he has got himself on the board with two people he wanted. the earnings this morning are soft because the proxy battle are turning more in terms of legal cost. margins are also shrinking. is not able to grow the bottom line. sales are coming in, but the margins are shrinking. why? >> there are more people the top 1% and you think they would spend more than ever. but they're really only about 100 two people around the world that are disputing in this above $20 million market. they fight very seriously over the bed with the end of having

to do is they have to reduce the buyer commission. a cellght give sotheby's that they will not make a lot money on the big-ticket items because it will cost them so much. >> do they have to make up for margins in terms of scale? >> this is really at the heart of the criticism of the company. he says that they are not running across different business, and their margins are shrinking even though sales are fine. of running ad him business where they are almost too much in their own ivory tower on 72nd. >> how much of a mass-market auction business is there to be had? the certain level ebay owns market and then after that estate sales? >> it is huge, actually.

and sotheby's is teaming up with ebay, they have tried it several times before but it did not work rate that was before the smartphone and the massive penetration of the internet and before we had people with fortunes in all corners of the earth are actually trying to participate. time, your question was what kenneth b -- to what extent can it be mass market? >> this is the tiny sliver of the top. there is a huge market between 500,000 in $20 million where they need to grow more. >> i mentioned china, but in my research it really had been a growth area. 25% of sales have been from new buyers come out and so that

is were all the focus is. uspects are being so fiercely thought for that you have to find new money to make better margins. quite interesting. the more he gets what he wants, the more the stock keeps falling. the website that will help you beat the high price of college textbooks. ♪

>> college textbooks carry a high price tag good $1200 a year. ofemember that kind financial pain. how can students of the books for less? we have some answers.

here to talk more about the the ceo.s it sounds like the utopia of the text book world. you have 500 textbooks right now. how do you do it without sacrificing quality? >> it starts with what you mentioned, the vast array of high-quality open license material on the internet. encyclopedia of earth which has high-quality resources for biology. , open educational resources which are created by academics build out for the public to build educational resources on top of that. we create online learning schools for students and teachers, and textbooks that the students can learn and get what they need and do it all on their smartphone, tablet, or laptop.

>> how do you guarantee the authenticity? but i do notedia necessarily believe it. >> we work with hundreds of domain experts over the 20 subjects that we cover. these are phd's and their active -- in their respective areas, and they validate the quality and accuracy of it. >> i just want to make sure that everybody understand how your business model works. these test roots are not books ares -- text textbookitutes for any required, you have to convince the professor to make your book work for the class? to studenta direct opportunity where they can use the book as a supplemental content. students are using the internet to get by in their class.

to study the material they need for class. in other cases, we work with educators and schools to get our content as the official content or their course. if you are mirroring a textbook that is being used in the class, what about copyright infringement? there were three publishers that did sue you back in 2012. i can see a lot more of this coming out to >> we defended , we settled out of court and admitted no wrongdoing. what the crux of it is that the way a particular subject is organized, all we're doing is digging high-quality content and helping students and teachers learn and teach from the content. there is no underlying copyright issue for the order of biology or economics. you need to understand supply and demand before you see how that affects tdp growth -- and gdp growth.

you replace all textbooks? >> that is our goal. >> how is this possible? i can cite several test books -- text books that are reviewers would be familiar with, the graham.ent investor by how does boundless replace that? >> we have actually opened up our platform. it is not just a content provider, it allows people to publish their own content. some of those authors could go to boundless and publish that content. next week we are releasing another 15 including some new content with interactive features published by boundless. the benefits are that our once you are on boundless you can reach students via google which is a powerful search tool. teacherbuild into our or student resources, and you can maintain your content in a collaborative way which is very

useful for educational and economic content. >> why would they want to do it that way? that you are right. they want to reach as many people as possible. books make the professor's money. his nobel prize, his profile, that has been going on for many years. there are lots of others who depend on that revenue. >> if you take a vast array of professors out there, a tiny percentage are actually making any money. or first core market in satisfying the students that are starving for dollars and spend too much money on textbooks and serving them with a better product. as we continue to expand we continue to serve the market. focused on the price-sensitive students, the high quality material that is already available, and to

observe high-quality needs over time. >> you need the high-quality content to get this through instant switchover, but you need to pay for it to get it on your site. >> we reach over 3 million students and teachers every month, coming to boundless use .ur study resources we expand our content offering and our content offering and are reached educators and students we can continue to grow. >> you are not trying to disinter mediate from your trying to put the pearsons and others out of business. in an market is interesting time of transition. emerge see new players in some of the old players evolve or not. >> it was great to talk to you.

ceo boundless, thank you for joining us. >> beating the odds, what are the chances you will get ebola? they are low, but what is greater than that? ♪

>> ebola continues to spread in west africa and we have found out that their two or people infected with the virus in nigeria. there are scarier threats for us to actually worry about here in the united states. we're not saying that ebola is not a big deal, but we are saying that statistically in the u.s. there are other dangers. atit is almost not a concern all. since 1976 when they first discovered ebola, only 2600

people have ever died from this disease. small.o for comparison, that is the same number of people that have been murdered in new york city in the last five years. >> i do not want people to get the idea that we are making light of anything. is that theal issue fear mongering headlines that we had this week. you oddly fluid interaction with someone with the disease it is not going to happen. the disease is so powerful that it kills people right away and so it is hard to his bread it -- to spread it. ever.eople ,> once the symptoms show up

but he can take several days. >> but this is a situation where you need to have this type of direct contact. unless you are traveling to africa or you have contact with someone from these three countries, it is not that high. braintional part of our gets taken over by the emotional part. arehat are risks that greater? >> everything. your self. there are more people that kill themselves then ebola. there are so many crazy things that are much worse but we do not talk about because they are so common. >> drunk driving? 35,000 a year?

>> we are not used to the huge scale. , or carrms of suicide accident, it is contained. there is no spread of contagion. it scarierwhat makes to our brains. that is what makes it more emotional because it is a scary thing and you do not have control. >> when we talk about ebola, their art tee time -- are two rates, contagion rate and mortality rate. the mortality rate is very high. spread, it just kills you. if you haven't, you are dead, and you do not spread it. that is why cora jean is the best-- quarantine is the illusion. solution.

when we see these news stories they are interesting from a news of, because it is different but it will go away. it has never been more than a thousand in any of the out ring since 1976. >> the world health organization just declared an international emergency which indicates the numbers will go up. >> but it will peak at some number. >> we definitely hope. thank you for bringing us a rational perspective. it is time to play the yearbook game. tweet us if you know the answer. we will be right back. ♪

>> it is friday on market makers. that is would we play the yearbook game. graduatea executive

from the boston latin school in 1940. he was a very young man then, and is an old man now. you know who we are talking about? my husband knew it and i did not. i cannot take credit. 1940, 74 years ago. he is going to be older than nine d. -- 90. who is a media executive who is than 90? it could not be anyone else then summer. give a shout out to adam, he nailed a 43 minutes

ago. he may be our biggest fan. the playwright got it, so i'm embarrassed at this point. on monday, how do you like your fish? >> i like it all. fried, poached, broil. >> this will be big for you because we're going to talk to the ceo of legal seafoods. >> i looking forward to it. it is 56 minutes past the hour. that means that bloomberg television is on the markets. have a good weekend. >> stocks are bouncing back this morning after the s&p came in with the -- within 60 points of wiping out of the now shrugging off escalating tensions in the middle east as russia says it is working to de-escalation the conflict in ukraine. 20 before today's options and insight is the chief market

strategist. good morning, al. talk about this little bit of correction that we have seen in the market this past week. do you think this is the beginning of a broader selloff or just a slight blip? >> i certainly think it is a slight blip. 4 percent down about from its all-time high. the s&p in the last 52 weeks have been as low as 1627, and we are fighting the battle of 1900 right now, trying to hold that century mark. it is not much of a pullback. the skew for the spx has flattened through this. i think this is a positive refreshes and i am maintaining my bullish stance. if we get down to the 1850 area, i will reconsider. until then, i am a bull here. >> we are also watching the price of oil as tensions flare in the middle east. you have trade on xop.

>> right, the e&p stocks and to be the more volatile. the most volatile segment really of the oil and gas in the street, so oil has pullback by about 9.25%. fromolatility in that went 21.6 all the way up to 30, it's 52-week high. so i have been looking for a little bit of a rise here. i think it is going to pausing comeback up a little bit, so i want to take advantage of that high volatility. so yesterday with the etf at callsi bought one of the for even money. what that does for me as xlp starts to rise back up, i start to make money. i can make three dollars at $78, and my break even is at $81. i have no risk of a downside. more important for me is as it

rises, i think implied volatility will fall, and i will get out of this trade fairly quickly, hopefully for a nice profit. >> another stock we have been watching is walgreen, the company announcing it has completed its acquisition of alliance food. how is the options market reacting to that news? the marketthink overall spoke loud and clear. i think it was a bit of a surprise on tuesday when walgreens announced that. the stock fell from -- >> al, i am sorry, we have to drop it right there. al sherbin, thank you so much for joining us. ♪

>> welcome to "money clip" where we tie together the best stories and video on business news. i am adam johnson. from ebola top 1000. paul singer -- how he plans to get argentina to pay up. in politics, turkeys prime minister wants to pull a vladimir putin. let's call that a grand plan for circus domination. meanwhile, he is one of the 1 percent, but early amazon investors says the pitchforks are coming. finally in pop,