>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> too expensive and too complex. that is why the biggest pension plan is pulling its money out of hedge funds. we have an exclusive must-see interview with the investing chief of calpers who made the decision. .> declaring war on ebola president obama is ramping up attacks. he is sending 3000 troops to west africa. grocery shopping has become a manly pursuit and the big chains are catering to the crowd. good morning, everybody.

i am erik schatzker. >> i'm stephanie ruhle. wait until we get to the grocery store. what is a manly grocery store? >> peanut butter. >> orange juice. >> they can. >> that is crazy to me. any good man no such ago to a grocery store. >> in the meantime, everybody, let's talk about hedge funds. underperforming and complex. according to americas biggest pension plan, not worth the trouble. itsers plans to liquidate $4 billion of hedge fund holdings. we will be speaking with the chief investment officer ted eliopoulos. that is an interview you do not want to miss. friendow, we welcome our who teaches a course in hedge fund investing and who is a former hedge fund firms manager. there are so many ways to read this decision by calpers. i can't wait to hear what ted

eliopoulos has to say. at the very least, it calls into question the orthodoxy established over the past two decades of institutional asset management. >> think it does. there has been a newly evolving orthodoxy and it is one that led to a lot of money for alpha and pay very little for beta. people were tired of paying a lot of money for that blend. that is what so many hedge funds offered. it is a lot of foot closet indexers were also offering. i will pay 0.001 basis points for beta. >> doesn't it seem overarching or a stretch to say i am not going to be investing in that asset class at all?

there are hedge funds that do crush it. >> until they don't. shift goingis the to be? to private equity? areate equity returns closely linked to equities markets. you are not getting diversification. i don't know why everyone thinks get out of hedge funds and get into pe. right hedge funds, is your ultimate point, i think. whether it is in ackman. in the case of calpers, it is different. the world is a different place at $300 billion. you have a one point something percent position. it is sucking up a lot of your internal control. at some point, fish or cut bait.

>> but then should we categorize what we call hedge funds? maybe they overallocated to cpa or macro. >> maybe they did. returns onthree hedge funds and the midyear around 3.6%. the three-year return on equities was around 11%. the three-year returns on wasties -- private equity's around 11%. look atsee how people this and say, why is this worth so much of my time and so much of my public relations risk? that is something these guys always have to deal with. >> butts go back to this revenue equity conversation. private go back to this equity conversation. >> you have this false sense of security. >> that is the beauty of being a long-term investor. withan match assets

liabilities. a public pension plan in theory can afford to do that. maybe the liquidity offered by a hedge fund is not quite as attractive as somebody who does not have to start paying retirement benefits for 10-15 years. >> you should get paid for risk and liquidity. how much should you be getting aid for being locked up for decade? how much should you be getting paid for taking the kinds of leverage levels that these guys are taking? >> that is not true. >> depending on which ones you have got. >> in the case of calpers, over the past 10 years, average annual return in equity in excess of 13%. point 1%.funds, seven >> maybe they were invested in the wrong hedge funds. had they been invested in different types of funds, they may have had a different outcome. >> then you get back to the

large numbers problem. if you run a $300 billion fund, number ofed to find a hedge funds that crush it year in and year out to invest $30 billion? >> you don't have to be fully invested in hedge funds. you can add them to your portfolio area or it's a plausible argument to be made. >> there is a tremendously plausible one to be made. private equities may work better for a truly massive fund like that that is also highly politically involved. there is an element. why when he makes a key point? no, sorry. far be oh, yes. firefighters and policemen who wonder to the last fiscal year and management fees to hedge funds, to whom? some guy who was phoning it in. >> they should not have been investing at there.

with those same firefighters and teachers be saying that if they had been invested in ackman and king street and millennium? maybe they would be fat and happy. >> that is exactly right. >> yes! [laughter] before,year was a year but what about the year when david tepper blows up and all those other guys blow up and calpers has to go back to the california and say, you know what, we are under a regulatory [inaudible] and we need to take more -- what happens when tepper returns 40% or pine river returns 40%? it gives them a bit of cushion if they suck at the next year. >> get it and forget it. -- bet it and forget it. [laughter] private equities can do that kind of stuff. what do you think the actual look with asian values were of these genius private equity

funds at the end of 2000 and -- 2008. they were gone as. it would have been a really tough situation to do anything with any of those funds. stephanie is on about the funds that are more beta exposed or individual stock exposed. there are immensely talented funds that are doing market neutral activity, where you have a correlation of 0.0% to any markets. that has tremendous value. let's look forward. >> there is a different correlation to plain-vanilla equity investing and private equity investing. >> absolutely. articularly and make small-cap investing. >> you are also not playing for liquidity. if you are a pension fund, you don't have to. >> that has certainly been the yale argument. if you have an infinite

investment horizon, why not take advantage of it? what we are seeing the pension fund doing, what we are seeing looking forward is that they are trying to get out of the one and only investment, one of the darn few investments that you have that actually might protect you in a rising interest rate environment it does let's look forwards. not just backwards to a screaming bull market. let's allocate more to what made money in the last 10 years, let's not worry too much about the last -- next 10 years because those are good. >> i think those are excellent questions for ted eliopoulos. he will be with us in about 20 minutes. an exclusive interview. let's continue talking hedge fund guys. hedge fund billionaire and sears ceo eddie lampert has struggled to turn around-- sears. now he is lending the ailing retailer $400 million.

i want to bring in julie hyman. another $400 million? is this a sign that he had no choice here were the place going down? >> there have been a lot of signs. this is not the telltale sign. just recently, we had such a downgrade of sears to one credit above junk and saying the thing is going to run out of cash and 2016. it is not as though this is a surprise. deep he hasin so got to give more money because he cannot get out at this point? >> that is unclear. he is very tied up with this. one thing that is important to note about this particular loan, $400 million, the rate looks reasonably favorable. 5% interest. -- fees an up front free of 1.75%. it is a secured loan. -- against a lien on 25

stores. they don't specify in the file which stores it is. he can swap them if he feels that it is appropriate to do so. in other words, it sounds as though he potentially has the pick of real estate to back up this loan in the event that there would be a default on the loan. >> i think it raises questions as to whether you want to be a minority investor in the stock. >> meaning, if you want to be behind eddie. the capitalther up structure. if anything goes wrong, he gets paid first. >> of course. that has been the question for years now. people got into sears because they wanted a little piece of eddie lampert. they were thinking he is going to turn it into something. isat the end of the day, it still a retailer. it is not an investment vehicle,

as initially people had hoped somehow. it is a retailer, a dying retailer. the only question is how long is it going to take? this choicep with real estate and shareholders are left with not a. bupkis inss -- technical terms. >> there you go. [laughter] >> sears is not quite there yet. there is an element there. eddie lampert stands to gain the most. he has the most upside if sears is to bounce back. >> kind of a downside at this point. >> he is lending money on a secured basis. what kind of vote of confidence is that? it's not. >> grade-point. we grew up with sears. it was important part of our history. there is nothing to purchase and sears.

>> this comes back to radioshack. zone -- gerona the own -- drone zone. going to create this retailer today, would it have a reason to exist? would you create sears today? it does not have a reason to exist, is the bottom line. >> jules, thank you very much. , presidentcome back obama launches a new overseas offensive, this one against ebola. ♪

>> welcome back to "market makers." the ebola outbreak in west africa is getting worse. today, president obama will

announce a major u.s. aid package which will include sending 3000 troops to build new hospitals and train health care workers. is it too little too late? lewis, like to ask brian a researcher at virginia tech and an expert on the thread of diseases like ebola. president obama is sending 3000 troops over, it takes years to build a hospital. is it going to be too late? >> i certainly hope not. i think this is the kind of response we have been looking for. get as many people over there and resources as possible. i think ebola is a slow-moving disease. the situation has to cheerier rated greatly in the last couple of weeks. is going toresponse head off something that would be much worse later on down the road. >> where would you fault a response to ebola that's far?

what is the weak link in the chain? >> i don't know if i would fault anyone. i think the situation on the ground is very challenging to work in. i have been following this for almost two months now. we are all very hopeful that the increased international attention, many of the resources that have been sent over there would be able to make a dent. unfortunately, we have not seen them. i think that stepping it up is the appropriate thing to do at this point. do you feel that this is significant enough? not been ableave to see the full details, but i think indeed a military scale operation is called for in this type of situation. the cornerstones of good infection control require excessive amounts of manpower and resources.

military isee, the the appropriate way to deliver that. the said, a lot of situation on the ground has to do with public distrust. involveda lot of fear with authority figures. how that is dealt with has to be dealt with carefully. >> what is responsible for the scale of the outbreak so far? select of manpower and resources to combat the threat were some of the cultural aspects unique to this part of africa, the burial traditions for example and the mistrust of authority? >> i think it is multifactorial. this is an outbreak of unprecedented size. we have seen many ebola outbreaks of the past. generally they peter out after about this time. in this part of the world, the population is a little bit more mobile. it is also located in very highly populated areas, which is something that is unique for

this outbreak as well. given the way that this spreads and the excessive time that has it get out of let control. the folks on the ground have been doing a fantastic job. the resources that they have had available. the speed at which the epidemic has been taking off has been hard to keep up with. >> right now, ebola is still spreading or at least to this outbreak is spreading via bodily fluids. as an expert in infectious diseases, what do you give the chances, what chance would you give to this virus evolving to such a degree that it could spread through the air? ebola is a disease that is very difficult to study. unfortunately, we don't know what great deal about it. as a virus, it is not

particularly well set up for rapid evolution. like all pathogens, the longer it is able to stay inside of the human host, the longer it has to adapt to that host, every time he gets transmitted from one person to another. you are rolling the dice that a mutation may occur that could be particularly difficult for people down the line. it might cause the disease to get worse. that said, we do know how to control these outbreaks. we need to just isolate patients. we need to follow their contacts . we need to increase our ability to dispose of the deceased. those are the cornerstones of good public health response. the disease requires intimate contact with bodily fluids. it is not highly transmissible. the prospects for controller good. we need to just treat the problem very seriously right now. >> couch it for us. many of us who are not haunted by the new york times article,

who are saying this is not a problem in my backyard, what is the percentage chance that this could become airborne? ourt does, then it is problem. >> i'm very hesitant to put any percentage on it. the quicker we respond to this and get it under control, the lower the chances are. i think that ebola in the united states is very different than ebola and western africa. and theo health care levels of sanitation we have here makes the probability of transmission very, very low. >> is there a precedent that we should look to? a disease that was spreading through contact of bodily fluid before that evolved to such a point that there was aerosol transmission? for a disease like ebola with such a high fatality rate, i don't think there is. to isesident i can point that many of the theories with 1918 influenza were related to

many people being transmitted for elong period of time in the trench warfare. >> thank you so much for giving us your insights. brian lewis from virginia tech. his perspective on the ebola outbreak. >> one calpers speaks, other pension funds listen up. that may be bad news for the hedge fund industry. we will talk to the chief investment officer. ♪

>> coming up, the country's biggest pension fund says hedge funds are not worth the hassle. we will hear from the chief investment officer of calpers. >> it is not just clearing brush. mowing the yard and fixing toilets, nowadays even grocery

shopping is considered a manly pursuit you read what he will tell you how stores are responding. ♪

with erik makers," schatzker and stephanie ruhle. >> good morning, once again. you are watching "market makers." i'm erik schatzker. >> i'm stephanie ruhle. calpers spent paying management fees to hedge funds. over the past decade, they have returned in a -- average of just 4.8% or less. appears to justify the expense and complexity. calpers is getting out.

billion.ting the $4.8 with us is ted eliopoulos. ted, good morning. thank you for spending time with us from sacramento. can you explain to us the tipping point here? we know that calpers has been scrutinizing its hedge fund investments for several years. what prompted you and the board to make the decision to exit hedge funds? >> thank you so much for having me on your program. as you alluded to in your segment, calpers is a very large institutional investor with approximately $300 billion of assets under management. our hedge fund program was quite small in comparison to our total portfolio at approximately $4 billion.

a little over 1% of our total portfolio. at the beginning of the year, we our process and in february, our board decided to not adapt the hedge fund program to be a traditional asset class within our asset allocation. as a result, the hedge fund program is an active strategy within our program. , the board directed the investment staff and asked me as the interim chief investment officer to conduct a very thorough and detailed review of our hedge fund program and come back with a recommendation to the board as to its continued efficacy within our program. that is what we did. just yesterday, we announced that we had concluded that review. we announced publicly that our conclusion was to wind down our hedge fund program and

eventually eliminated from our overall portfolio. that you run the risk that is too brought an action step to take? maybe you are invested in the wrong strategies, like macro or maybe it was the wrong managers. >> it is a great question. the premise of our decision really had nothing to do with the performance of the program, with the conduct of the program over the years. based onion was really three things. one, at the current size of the program, the small size given the large scale of the calpers portfolio, it could come of the performance of the hedge fund program or its diversification benefits at that size just couldn't be a meaningful role within the portfolio. in addition to that, the cost of the program is quite costly and the program itself is quite complex. this has been with their fee

structure has been for quite some time. what was the turning point? washe turning point for us to really make the decision whether or not we felt we could grow this hedge fund program to scale that would be meaningful for calpers. the conclusion or tipping point for us in the analysis is that we have made the decision that 'e do not believe for calpers scale that we could grow the hedge fund program to a scale that would be meaningful to the program. >> the objective in the is to maintain -- you have a 7.5% targeted return, as i understand it. the money out, you will be reallocating the risk elsewhere. when i looked at the last asset allocation, the increase was in fixed income and real estate, which in this point in interest-rate cycle strikes me as perhaps courageous.

one would ask oneself, on a risk-adjusted basis, you are tying to make that 7.5% return and you have these rules that say, do not invest in things that do not pay us back, how do you hope to get there in the absence of a more sophisticated strategy that allows you to go along -- go long and short? by getting out of hedge funds, you are out of shorts. very long-term investor. our asset allocation is premised on owning our asset classes and investing for very long period's of time. the traditional asset classes are the ones that you mentioned. our fixed income program, are real assets program, including real estate, infrastructure, forest land. over the long term, the purpose of those asset classes, which we are able to invest at scale and quite efficiently, we think our better option for calpers than

the hedge fund program, which is operating correctly for calpers at a much smaller scale than this other alternative asset class that is a traditional part of our portfolio. >> did optics play a role here? over time, the calpers hedge fund portfolio has generated an average and you will return a four .8%. you told us it is not about performance. which i take to mean that perhaps if you had kept those investments, you might see that performance improve over time. about theking earlier unseemly mess of $135 million in fees going to hedge fund managers "phoning and" from east hampton of new york city in the hamptons or from a yacht in the bahamas. is that the kind of thing that you worry about when you think , the your beneficiaries firefighters, the police officers, the teenagers -- the

teachers, looking at those feeds and asking questions? >> are fiduciary obligations are to our beneficiaries. in everyevery day moment thinking about those beneficiaries. this is a set of investment beliefs that are investment staff adopted late last year. one of the principal components of that investment beliefs structure is cross matter. -- costs matter. they do matter. we look through the portfolio and try to assess those strategies that are expensive for us to buy compared to those asset classes that we are able to quite efficiently and quite cheaply invest internally here at calpers. to give you an example, in the calpers portfolio internally, we are able to invest in our staff point, a at a basis little less than a basis point, to access the global equity

capital markets. we have a very substantial fixed income roque ram -- program that we are able to invest at seven into points to have access the fixed income markets. we think that is where our strengths lie as investors. the strengths for the scale of calpers. you givedvice would smaller pension plans? get a bigou could not enough program to satisfy calpers. what if you are a smaller plan? would you have come up with the same conclusion? >> perhaps not. smaller pension plans and other investment plans have unique and individual investment objectives. hedge fund investments might well make sense for another investor. we made this decision for calpers, especially given the scale of our size. >> what if those hedge funds were willing to accept reduced fees?

would that be attractive? >> we have been very successful over the years in negotiating discounted fees with not just our hedge fund programs, but other active managers within the program. but we have to respect the marketplace. is very muchce looking for alternative means to find returns. certainly, the hedge fund industry is an industry that is receiving substantial amounts of capital. this decision did not come down to access to the managers or the ability to negotiate smaller fees. , it is too expensive of a program and we did not see the ability to reduce the fees to a level that would make sense for us. >> one of the things we have seen is that calpers was very active on an activist basis at the jp morgan trade come on the jpmorgan board, a couple of

energy companies, etc. using calpers will try to not spend the money on activist hedge funds and instead work alongside flash coattail other activist hedge funds and continue to obtain that sort of performance through that method? ande will be winding down eliminating our hedge fund program. but we are very active investors and advocates in the corporate governance arena. calpers has a long and storied tradition and history of being active in monitoring and engaging the companies that we invest with. we will continue that activism and the strength of our position in the marketplace to engage companies that we own and try to effect positive performance. >> does that mean you are going to increase the amount of investment professionals that will invest in calpers? could you be building out your own investment team? >> no. , it does not mean we

will be increasing staffing requirements. i amam i and -- underscoring is that we have a large investment staff and we abilityfidence in our to access and engage in the marketplace on topical issues from time to time. someat does this mean for of your investment professionals? ishi hasshe -- curtis been reviewing hedge funds and the guy responsible for the absolute return strategies, much of your hedge fund investment, what happens to him? >> they are terrific. was tapped by me and the entire investment office to conduct this review. we appreciated his work and have confidence in it. ed is a terrific professional. we have every bit of confidence and respect in the work that he did. this is a difficult decision for

hedge fund professional. he understands our rationale. ed willmuch hope that be a vital art of our investment office going forward. we have reassignments within our portfolio. ofi mentioned a number times, we have a very large portfolio and we will be re-assigning these professionals to other parts of our portfolio and look forward to working with into thetrategies well future. >> can we talk about other parts of your portfolio for a moment? it seems that everybody has private equity fever. private equity investing, does it give us a false sense of security? there are lots of interesting questions within the private asset classes. private equities, it is certainly a challenge. the valuation and timing of the valuation of the private equity portfolio. we are long-term investors.

we have had exposures to private equity for many, many years and decades and well into the future. valuation certainly is a challenge. it offers the ability to invest in a very sizable marketplace. in companies that have the ability to benefit from the global growth of the marketplace and provide us with excess returns that we are seeking to meet our investment objectives. reached 12% -- 20% in june under voelker. that is a very long term cycle effectively down to zero now. nobody is thinking they're going to back up to 20%. ever the less, the cycle in the interest rate world has turned and the largest risk that calpers has his interest rate and duration risk. in removing the hedge funds and

removing absolute return strategies, i know you said you have a long horizon, but are they looking beyond the entire interest-rate cycles to the other side when rates come back down again? how are you going to protect in a rising rate environment, which is tough for stocks and bonds, when you're increasing allocation? >> as i said, the hedge fund allocation was quite small. it was 1%. it did not offer us the ability or the promise to effectively diversify or hedge any meaningful portion of our total portfolio. the low interest rate environment is a challenge. comes fromfication the asset classes within our portfolio. stocks, bonds, real estate, infrastructure. term, theer the long strategic allocation is to those asset classes. some ability within our allocation to try to immunize or protect these portfolios from

the risk you just mentioned. no investor can protect themselves completely from the risk in the marketplace. something you well know. >> thank you very much. this is a decision being closely watched not just in the pension fund world, but also among investors worldwide. congratulations. it is a courageous decision. thank you for sharing with us on bloomberg television. ted eliopoulos, the chief investment officer at calpers. back, grocerye stores are calling it man-fluence. they are catering to a different sort of shopper. we will fill you win when we come back. you are watching "market makers." ♪

>> welcome back to "market makers." i got a question for you.

how much grocery shopping do you do in your family? >> a lot. >> more than 50%? >> on a dollar basis probably. [laughter] >> eric likes buying groceries. >> i do a lot of shopping at the green markets. i like going to shop for fresh veggies. forke going to shop organically raised meats, small farms in the hudson valley. >> of course he does, fancy pants. more men than ever are walking down the aisle and have very different buying habits than the women in their lives. high-end's meats, cheeses, vegetables. my husband has been go to the grocery store. he did not make a lot of independent decisions. tell us what is happening. >> we are seeing more and more men grocery shopping. they are very different from female consumers. no surprise, they are attracted to different qualities. labels,for darker

bigger words. >> powerful. then a man should buy it. >> says plus, proteins, they were like words like ultimate. >> light and fit, not really a thing. they do venture off the list more than women. they are also willing to spend a little more. they are really influencing the grocery industry. i stopped at a few grocery stores last night. products are actually very manly. it is not something you notice walking through the stores. >> hamburger helper has not changed its package. it has gotten redder. if you google the pictures. it looks more manly. >> eric is not buying hamburger helper. red. >> doesn't trigger the bull like

instinct? a you see these two guys from band. >> it makes men somewhat filthy animals, doesn't it? >> they also like really simple instructions. i hate to generalize. in oneys, ready-to-eat minute. this requires two ingredients. peanut butter boy. it is full of protein, you don't have to prepare it. groceryalk through the store, you can see that stores are definitely trying to reach men. doing itey also through product placement? >> they are. another interesting point, i talked to walgreens. well, grab are doing and go fresh offerings attract men. if you put a subway sandwich next to a sixpack of beer next to a sports illustrated, a man is going to go for the triple threat. >> they might. good luck with that.

>> thank you so much. we will be back with more. i'm lying! >> we are sticking with the food thing. americans are turning away from sugary drinks. that means an opportunity for some companies trying to make a healthier soda, if such a thing could exist. one of those companies is dry soda. a craft soda with all-natural ingredients to compete with coke and pepsi. the company ceo was with us from san francisco. thanks for spending time with us. tell us about dry soda. i haven't tried it yet. >> you sound like my exact customers. go to the green markets. with aa was to come up soda that was more innovative. i wanted to create better flavors. almost better for you. that was not my main goal. i created it in my own kitchen because i was looking for something to pair with food when i kept getting pregnant and i

could not drink my wine with my food. i want to create a soda. i created these unique flavors. lavender, lemon grass, rhubarb, kumquat. sugar ofquarter of the regular soda. they are better tasting and better for you. >> who is your customer? what is your price point? >> we have bottles and cans. five dollars 99 cents is competitive with other premium sodas. our consumers food forward, foodie friendly. a little bit like erik. the customer looking for quality and flavor, which is such a big trend right now. ingredients.four it is a clean ingredient panel, which a lot of consumers are looking for. 99 cents.llars how big is that? >> that is a four pack of bottles. it is $4.99 for a four pack of cans. people see

opportunity in taking market share from coke and pepsi and other established beverage makers. the competition is fierce. how does dry soda stand up from all the other craft soda makers? i can think of boy lends. there is jones. the list goes on and on. if i were to go to whole foods, which i often do, there are refrigerators full of craft sodas. >> you are right. there are starting to be a lot more craft sodas. dry soda is the fastest growing of any of the sodas, any soda in the united states right now in all retail channels. wet we see is that because have more unique flavors and we are answering a real problem for people. sodas are too sweet. you cannot taste the flavors. sugarre going to get a flavored soda. dry is about tasting the true flavors. that is what we are all about. that is why we are growing significantly. we were around for eight years

and in the last 12 months, we have doubled our doors. continuous triple digit growth. we are up 136%. the next biggest competitor is 30% growth. >> is there an opportunity to partner with soda stream? >> i will get innovation right on that. [laughter] we are absolutely looking at that. i thought soda streams were going to be a trend and then i bought one and i thought, wow, these are really cool. there needs to be something like a drive for the soda stream user. if you see that next year, you can take credit for it. >> thank you. >> let's go back to the price for a moment. four dollars 99%, five dollars and 99th. your product is out of reach for a lot of people. out of reach for people who buy a two quart plastic jug of pepsi or coca-cola. are offering sounds great. better taste, better for you. is there a product you could develop to appeal to a lower

income customer? >> who is a big soda drinker? >> let's be honest. i'm not sure anybody should be drinking a two liter thing of coke everyday. we are a bit higher quality. i will give you that. we definitely did launch the cans in july to be a lower price point. our promoter pricing is $10 for 10 cans. doht now, the cans really with our promotions allow for a little bit lower of a price. i'm not sure, we are going to continue to be an up premium products. for the time being. i think there is a lot of innovation >> what is your favorite one? i'm guessing cucumber. >> cucumber is. splashlly with a little for later. >> stole my line from may. thank you for sharing your story. is the ceo of dry soda.

i'm looking forward to trying it. >> especially with a splash of june. i agree. ♪

♪ >> marissa mayer's nightmare. withoutyahoo! worth alibaba? their stake in the tiny company is worth war than three quarters of their total market value. >> why wait in line to buy the new iphone? pay someone to do it for you. you will hear from the founder and ceo of task rabbit. -- thethose fitness does dirty secret of fitness devices, we only wear them for little while. what does that say for the apple

watch? welcome back to "market makers." >> right now it is time for the news feed. the top is missed stories from around the world. sell offim wants to $17 billion in assets to mexico according to people familiar with the matter they have contacted at&t and softbank about making a bid. the chief spokesman of walmart is quitting because of a falsehood in their business resume according to another person familiar with the matter. the vice president of communications claimed that he received a degree from the university of delaware, but it was discovered that that was not the case. he knighted airlines is offering flight attendants buyouts, hoping that as many as 10% of their 23,000 flight attendants take the offer. some senior flight attendants have reportedly requested these buyouts. >> the irony of a communications

guy miss communicating. >> more than a miscommunication. >> i would think you would know how important honest messaging is. we have a great guest host for the hour, jonathan oringer, the founder and ceo of shutter stock . get this, shares are up more than 300%. guess what, he still owns nearly half the company. this guy is crushing it. welcome, john. let's start with the ipo process. for you overnight change the landscape of what you and your company were able to do. what does this mean for alibaba? >> it is on the map. alibaba is a much bigger company that is already on the map. a lot of people did not know about us before. we were under the radar and concentrating on building the business. we built our enterprise sales business over the past 2.5 years and now it is one of the biggest

agencies in the world. >> that is what is different about being public as opposed to being private? flex there are a few differences, but we -- i am kind of all or nothing with funding. we didn't do any venture capital. to deciding the next step and how we would get the flexibility for the acquisitions we wanted, i decided that doing rounds of private equity from their didn't make sense. it was a clean balance sheet and i wanted anyone to be able to buy and sell the company the way that they wanted to. because you did not want to lose any control? >> it is. it is much cleaner, going public the way we were structured. there are no super voting shares. we went public very clean. the voting rights. i think that is the best way to do it. >> if you are you.

[laughter] banks have a lot of pricing power for the comes the public offerings. much with alibaba, there is a lot of reverse pricing there. was it worth it for you? if you look back on the fees that the investment banks charged you, morgan stanley, jeffries, deutsche bank charged you to go public, was it worth it? >> did you have a choice? >> that's why i want to know. unless you are really big, you don't have a choice. >> you don't have a choice and the system is rigged. it is a template. you pay these fees. certain other people split them up. there are other dynamics when you are trying to balance that dynamic with actually managing the people who are buying the stocks. there is a lot going on at that point, but the system is set up in a certain way where it is very hard to change that.

>> how did you make the choice to go with morgan stanley over someone else? >> you had no interaction with bankers, did you? >> there were some involved, yes, but we hired people for the venture process. he knew a lot of the investors today. that helped a lot. we met with the banks and had a process where we decided who we wanted to work with. there was one interesting thing that happened. if certain banks are working with your competitors, it doesn't always work out that you would be able to work with them to. >> potentially a conflict of interest. >> after the fact to jew feel like you or -- you were getting

hosed? >> it felt like there was not much competition in the process, that it was a template that you through your company into a fee structure that was offset. there are not many banks out there willing to take you public. many company founders and ceos have wanted to change this for so long and it persists. >> it is a cheat, i am about become a billionaire tomorrow, who cares about leave a few million dollars on the table. >> but it is also about risk, right? if you look back at these success stories, they have all done it the same way. you will be running a business after you go public. we said the structure would get us where we wanted to get to. is the morgan stanley

kool-aid, i will let you drink that and we will introduce our next guest. >> the largest beneficiary when shutter stock went public, yahoo! will be one of the biggest beneficiaries when alibaba goes public. that stake today is worth in excess of $35 billion. midpoint, the skied yahoo! afloat in some pretty lean years. what is yahoo! really worth? that question to brian wheezer, a research analyst to covers yahoo! for portland. always great to see you, brian. what do you think that alibaba is worth? if we do the simple math, it's not that hard, you suck out the value of alibaba, sub -- suck out the japan value, suck out

the cash, add back the debt, you get a -3.8 ilion dollar valuation for sub yahoo!. i know that there is more to it than that, but let's start the conversation. is it possible that yahoo! is actually less than zero? >> i don't think so. first of all, you have to see the taxes. that is the difference in the gap du jour pointing out. it is unrealistic to assume that they get away without paying any taxes. last night i was reviewing all the things i said over the past two years. it is mostly about talking about how their plan is coming or they will tell us some point in the future about the tax strategy. on the two occasions where they have sold stock they have paid 40% taxes. they will pay a reasonably hefty percentage. forget about what the bankers are making. think about the government. >> doesn't it depend on where they decide -- what is your

jurisdiction in which they decide to book the proceeds? a lot of their stock and alibaba is held by hong kong, where there is no capital gains tax. seen at least one opinion suggesting -- i am not a tax lawyer -- >> nor am i. >> i thought you were. >> it is possible that they could, in fact, still have to pay capital gains taxes. to be clear, you pay it at the income tax rate. so, when you have federal and state taxes, the telling thing is that in two years of questions being posed, going through the transcripts yahoo! has reframed in this regard. wouldn't we have heard about it by now? arguments sake, what value should we ascribe to the not $35stake? if it is

billion on attacks adjusted basis, what make sense to you? >> below 20. >> we have got about $12 billion that we can add back. that's negative four. now positive eight. is that although they are worth? >> that is about right, about where i cam out. and frankly, these will have to be adjusted, it will impact their finances. i think it is a reasonable valuation on yahoo! and it will be in the mid to high billion-dollar kind of range. i get to about six or seven dollars of value. remember, despite the lack of growth it does produce cash. i don't have any problems with continuing to do that. >> it produces cash, but what happens of marissa mayer is

flush with cash and doesn't come up with a big strategy or acquisition plan. what does that mean for the future management of the company? >> absolutely. i am assuming that in four years they spent $1 billion per year to give 4% growth, which may not be the most efficient use of capital. but that doesn't mean that's not what will happen. >> john was thinking that he might ask? >> i was also wondering what they might do with all the cash. this is not what they will acquire next, right? >> it may be the case. to the extent that they have been very much able to buy the time -- >> brian, there is no argument that they could reinvent themselves. they may have the cash to do it. do you believe that marissa mayer has the chops to do it?

>> as you recall, they were somewhat tepid towards the choices they've made so far. i think they have made progress in conveying that they understand the challenges ahead of them. in their case it is about looking at aol. they are based in the same position from two years ago. they have invested in the right places, though the top line is profitable. will yahoo! figure it out? it's possible. everyone knows marissa mayer and think she is incredibly smart and capable. given enough time one might expect that they would figure it out. >> how much time is enough time? >> growing at 2%, they are spending one billion in capital to get there. not exactly an optimistic

assessment. that therestrange is is no clear communication after alibaba. they are not making it clear what the plan is. >> if they had a plan, they are keeping a close to the vest. i don't think they have a particular plan at the time. >> isn't technology the problem here? we can count on one hand the number of technology companies around, therned superhighway is littered with burned-out wrecks that spend too much money. it is different in technology than basic industry, isn't it? >> i don't know. yahoo! in my view is little more than the evolution of the magazine or newspaper.

it faces similar issues. it used to be the most efficient way for advertisers to accomplish certain goals. in my view they made one key mistake, they focused too much on the consumer. about theail to think customer, the advertisers. >> brian, always great to see you. of course, john or injuries are -- jonathan oringer is our guest host for the hour. sticking around. forurn the chore of waiting a new iphone over to task rabbit. >> speaking of apple, we have more of the tim cook interview from charlie rose. ♪

kind of problem. i am stephanie ruhle in here is our 1% problem for you. you want to be the first friend with an iphone, but you can't be

bothered to wait in line? the answer.as hire someone to do it for you. they let you hire anyone to basically do anything. you offer the price and someone else decides to take the offer. we are here with the ceo and founder of task rabbit. jonathan oringer is still with us as well, our guest host for the hour. walk me through this. so, i want the new iphone 6. >> $200, or for the six plus it is 300 dollars. >> if i want to find a rabbit to wait in line for me, what will my total cost be? >> we are seeing pay -- people paying about 24 -- $25 per hour on average. anotherprobably be $200. >> how many people want to do that? it seems egregious. >> i know. listen, we have been doing this

since the iphone 4 launch. that's 2010. over the last four years we have seen the demand not only for the wait in line campaign growing, but also the demand for iphone growing as well. had 350 people signed up across the country to get a task rabbit to wait in line for them. >> give us a data point, who is this customer, how old are they, what do they do for living, is it in cities like san francisco? seeingre definitely demand spiking in cities like new york, san francisco, and london. they are already in line in london. it is sort of that young, high-tech professional that loves to be part of the excitement. the excitement that apple creates around the launch. high-techng, professional that wants to be part of the excitement.

spending hundreds of dollars more to get your iphone? >> actually, i have one question. at shutter stock over the last on both sides of the marketplace without contributors on one side you frustrate the buyers. we do a lot of work to balance that. is a complex problem. we launched a new suite of prop -- products in july that we have been testing in london for about nine months. it is based around a complex out a rhythm that we have to do the matching. we have been watching it closely, it is the supply demand index of suppliers across the country down to the zip code and category level. we are always making sure that

we have the right amount of supply in that location to meet the demand. >> is there a relationship between the pricing power of your task rabbit's, affectively the amount that they can charge someone like me to wait in line for the iphone 6 and the underemployment rate that the labor department reports? if that goes down, as people become less underemployed, can they charge more? >> we are seeing some interesting things there. intarted task rabbit september of 2008, when the economy was in a rough spot and a lot of people were underemployed or being flat-out laid off. we were looking for intermediary work. improved, wey has have seen this trend of freelancing, of micro-entrepreneurship becoming something that is really at the forefront of this space. we have seen the community

growing over time, even as the economy has improved. the other thing i will say is that they are all able to set their own hourly rates per category. as they sort of learn what the clearing price is for a , area, or market category, we see them adjusting their rates. for instance there is this amazing tasker in the palo alto area making up to $90 per delivery. which sounds insane. like 1999 is what it sounds like. >> he is making a living on task rabbit. he is doing a couple of jobs per day and people are paying for his services. >> what is he delivering? >> all kinds of stuff. he actually has a truck, which is very important, he can move runsr items, couches, make the ikea, those kinds of things.

so much, going to ikea there's not a number i wouldn't pay. you, is this of business model for people in your position where if the market turns you could simply say i will have less tasker's? positive for you. >> go ahead. >> it is a flexible model and it is a marketplace is this that is tied to impact and massive upscale. >> thank you so much. sticking with us, the founder of shutter stock, jonathan oringer. we will be back in two minutes. ♪

>> coming up here, the devices that tell you everything that you want to know, as long as you

keep wearing these things. that, it turns out, is the problem. although i keep wearing them. following in the of a legend, tim cook talks about what motivates him. ♪

>> welcome back to "market makers." i am stephanie ruhle. chester.am erik where is your wearable? mine's right here. but most people are like stephanie, wearables collecting dust in a drawer. that, it turns out, is the conclusion of dan. he found that over half the consumers that purchased an activity tracker no longer used the devices. he is here to talk about it from

boston. if the wearables available today , jawbone, like the one that i wear, and the fit it in stephanie's drawer don't make it or don't stay on people's wrists, what will it take to get those to stay? >> a great question, question that a lot of people are asking these days. we will take that into parts. first of all, a lot of the activity trackers today are designed to solve a certain kind of problem for certain kind of people. they are not really a product that everyone stands to benefit from. it is like taking aspirin when you don't have a headache. >> i would go so far as to say that they don't solve a problem at all. it is a luxury. no one needs to know how many steps they took in a day, do you? not a problem, it's a solution in search of a problem. know if i do like to

reach a fitness goal. >> what do you think? >> these are not about counting your steps. these are have a changing devices. tools where so many people make slow changes in their life for the healthier lifestyle. i have heard from countless people who get one of these things and say -- this is the useless novelty, too much to in myin, i am putting drawer. but i have spoken to people who have worn these for two years and who have just by wearing it have opened up a lot of other healthy habits in their lives and it has been a keystone to a much healthier lifestyle. >> what do you think? >> i don't wear one. i have tried them all on. like we talked about, i am interested in the sleep stuff. i can sleep less and get more done. >> as you know, the problem is,

what do you do with the information. is that enough for you to change? less whining, less coffee? less early in the day? talking about the wine, of course. what do you do? >> these trackers are examples of tools that give you a lot of information without much advice. this is one of the big problems the industry is working on. a lot of technology and design related to how we take this information and make it accessible to an audience and actionable. >> we have all of this great data all the time, but no idea what to do with it. .> right

it is a very difficult problem. imagine a device on your wrist gathering data 24/7. it is helping you manage your sleep, becoming a health companion, leading you to a much healthier lifestyle. the challenge is the technology underpinning that experience is not quite ready. in some cases we are years away from that panacea experience. >> years away, not months away. i take it that apple is not >> they areck this? going to elevate the space. it is not going to be a product for everyone.

it is going to be expensive and a niche product. have that is they extremely compelling is this massive ecosystem. unlike other products in the market that have a fixed function, apple is saying -- look, we have a platform near with sensors and integration with the phone and other apple products. go for it ecosystem. developers are going to draw up a lot of compelling implications down the road. but it certainly is not going to be the one to watch that everyone winds up hiring. it does not mean the end of fit bit or jawbone. they will fill a lot of different niche is overtime time because of the different problems. >> do you think that the apple watch is going to be stickier? whining up on people's wrists instead of drawers? >> one reflection that i have is a pebble watch, another one that

supports apps. the nice thing about that is they keep the product novel after the initial excitement has worn off. >> besides this is cool and fresh we are talking about a revolutionary product that millions will want. take away the novelty and what do people really need? >> right. this is where the developer ecosystem comes in. think back to when this -- the first smartphone came out. most of what you use for your smart phone today was not conceptualized by apple. we will find a lot of interesting benefits. >> i must say that i often

forget to charge it. get much need to better. we need to be able to ignore it. to wearwant to be able a watch, but if i can ignore the tracking device? dan is you seen what describing happening? and then they create the apps that change the game? >> once it has gotten easier and easier with technology creating images, we get images from people that normally would not have been able to create them. >> like you. >> like me. but there is actually a camera built-in to the watch, which is pretty cool. >> are you taking any great pictures? >> it doesn't work like that yet. >> we are going to end it there, dan. thank you so much.

the principal from endeavor partners who has found those wearables so confusing. >> you do. taking apple to the next level, what he talks about gets going every morning, thinking about new innovations. more on that when we return. stay with us. ♪

back to "market

makers." tim cook does not do a lot of interviews, but last week he sat down for an extended conversation with charlie rose. part two airs this evening. he talked about what drives him and his employees to come into work each day. >> we are not just making products to sell. that does not get me up in the morning. i get up in the morning, many other people get up in the morning to change things. that is who we are as a company. has not changed. we may change other things, we may become more open or participate in things we haven't done before, but what drives us is making great products to enrich the lives of people. the same thing that has driven apple forever. >> you can watch more of the interview tonight on bloomberg television. what is your take on apple,

jonathan? >> i think that a lot of the phones in this generation, android, htc, have already worked out. we are now on iterations of these devices a few years later that some of the features that they are reporting on having on these iphone 6's have been in use for a few years, including some of the keyboard prediction stuff. better camera. >> being a technology insider, how much power does apple have? do they always win? do you want to do business with apple or not really? >> there are a lot of devices that they sell in this country outside new york. >> i am hoping for a little bit of new york cynicism. say thathear tim cook

they want to improve peoples lives with their products, do you buy that? making products that people want to buy. >> exactly. at shutter stock we think about how to sell more images every day. honest mission statement. >> yes. people want to buy these images, and then we have done something right. we measure success. i don't want to reinvent how people buy these images. >> even though you have, kind of? >> online? the online stock agency? >> which one? >> tech stock. so, between the model.

i want to change what people do with these images. we created a different model that we greatly simplified the mechanism for in terms of being creative. >> pictures of kittens with spaghetti other heads? .> we really appreciate it >> we will be back in a moment with some final thoughts. stay with us. ♪

>> jonathan oringer has been our guest post for the hour. we have time for some final thoughts. we started this conversation about alibaba and how investors

are clamoring for shares that jacked up their ipo target price yesterday. told us, yes, you you didn't have any venture capital funding, one round of equity funding and then he went public. is there too much money, too much private equity money and ultimately too much public money chasing these rare opportunities? >> i think so. when i started shutter stock i didn't really know completely what i was doing. i could have gone out and raise money and i would have been in an equal position where i was with the money i had. i used every dollar i had to bring the money back. >> do you see that as a problem today? >> there is a lot of money out

there right now. there is a lot of it chasing lots of ideas that may be more successful if they were more disciplined about how they were spending. say that the venture capital model is kind of broken? >> not necessarily, it's just not enough people are asking themselves if that is the right model for them. >> not enough entrepreneurs? >> not enough are asking themselves if they should bootstrap or not. >> is not a hard question? starting a company out of your living room, someone says here's some candy, isn't that hard to give up? >> yes. >> were you offered this money? >> i knew that if i was to go for it, i would be more limited in my options. i knew that if i took something to give it up, there is no free lunch. everyone knows that when they start a business.

>> there is nobody like you having this conversation, the founder, the 26-year-old stanford graduate who has a startup, bc's are knocking at his door. kleiner perkins is knocking on the door, saying we will give you millions. with thehould start sea. but we ask ourselves in the we could bew profitable from the beginning. by asking ourselves more, it turns it more into what i wanted to be. >> is this just a free option for these guys?

>> today you can do so much with so little. i was able to get a bit of a transaction going on where i could spend more money. >> a billionaire says that you can do so much more. thank you, john. ♪

>> that is going to be at for ."arket makers

>> great way to start the week. >> the master seller himself as a slew of bestsellers. his books have sold more than 130 copies. he mated to the world without end. attorney, kim will be here to tell us about the business of being an author. is 56 minutes past the hour, meaning the bloomberg television is taking you on the markets. olivia has much more. >> stocks are rising right now and the vix is falling as the fed begins its policy meeting. with a look at where the markets might be headed from here, mark sebastian, the chief operating pass.com. option thank you for joining us. the vix is quiet today. even though we have two potential wildcard events this week. how are you playing volatility

into the week? >> i tell you, whether it is slow or not today, it is still way overpriced. if you look at how the market has been moving over the last 10 to 20 days, the vix is really overpriced. there is a really big cushion for one or two big moves this week. ability to come in. i think that that is the way that things are lining up. i think the fed meeting is going to be a bit of a waste of time and much ado about nothing. if you look at where the u.s. dollar is right now, there is talk that it could pair with the euro. it is doing well against all of these world currencies. i think that that meeting could be a kind of non-event. they might hold up more over the scottish election. they are probably not going to say let's go for independence,

but if they do i think the s&p is going to take a bath. and that is where there is actually some risk on the week. >> if we do get through these the s&p taking a bath, you are seeing options traders betting that we could go up further from here on the referendum. >> absolutely. traders are coming in and upside callshasing on the options behind me. they have it is because they think the market is going to go higher. i think that when we get through this that will be the catalyst that lets it popped to the 2000 level. chance that we have a short-term possibility for 2025 or beyond that this week. >> one name that everyone has their eyes on this week, yahoo!, coming off a multiyear high as investors look for ways to get , about 23%.ali baba

what kind of activity are we seeing? like the volatility is through the roof. traders are making calls across the board. right now it really is all about the alibaba ipo. i look at that thing and it reeks of facebook ipo. i think that they will buy this thing as it goes public, but they are really going to get burned. it does have some supply issues. there are a lot of people getting in. when you hear about random people on the streets saying they will buy into alibaba, that is almost always a bad sign. likely to fall off with the alibaba ipo afterwards. >> you would be a buyer at 60? >> somewhere below 60.

it is an ipo. it starts to get interesting. >> doing everything they can to avoid the fate of the facebook ipo. you have been trading up for ebay, facing competition with apple, what's the strategy? >> apple comes out with something and people immediately say -- oh, no. ebay gets immediately slammed. i think that that is a bit overdone. anywhere above 50 or below 50. >> we will have more on the markets again. ♪ .

to "money clip." i am adam johnson. today's rundown, the largest engine in the united states pulls its money out of hedge funds. intech, apple ceo tim cook is passionate about the new iphone offense will gets start talking about digital privacy. oil. renewable energy in scotland. turns out it is even bigger. trying to revolutionize the way you shop, the ceo of hsm shares her grand plan. the