>> live from bloomberg headquarters in new york, this is "market makers." for janetaiting yellen's next move. we may know a little bit more than four hours from now. >> pretty soon, the height will not matter at all.

alibaba gets ready for what may be a world record ipo. a look up to one of its earliest investors. >> a master storyteller. . conclusion of his trilogy he tells us about the business of being an author. it is wednesday in new york city. nextlot to cover in the few hours. let's take you to the top is in stores around the world. an activist investor wants to break up dupont. criticized dupont for .ailing to meet earnings it will meet with other shareholders to make its case. eric holder wants bigger rewards for wall street whistleblowers. in a schedule today, holder is also expected to say that the fbi needs more agents in forensic accounting.

the justice department has been criticized. of the nfl's biggest advertisers wants pro football to get its act together, thank you. it says it is not happy with the controversy.andled mcdonald's has made a similar statement. the nfl says it is taking action and there will be more to come. almost done.is the federal reserve is likely to reduce bond buying again. come it may stop expanding the balance sheet altogether. that is what we think we know. -- o not know our next two guests have it better than i do. the executive director of u.s. equities for ubs securities. welcome. let's begin with this. what is likely to be the most

today's fedtcome in meeting? ? it has been 100% focused on this term, considerable time. >> that seems bananas that markets are focused on a word choice, a phrase. >> yes. you read the research. they say, it was not exactly six months. the markets will get spooked because suddenly, rate hike expectations in march. to will see janet yellen explain why. we do not think the language gets pulled because we think they will wait for the end of asset purchases next month. and really allow the asset purchase program pulling apart the language. the fed does not want to be stuck with an idea of a six month timeline. they really want to message dated dependency in terms of their past. themarket exception with two word phrase is a bit overblown. we should listen more to what

yellen has to say. >> we agree with make that basically, we think the fed will lead the language relatively unchanged. what they could do is nuance the market more toward their view of where the plot exists right now. the markets have been consistently underestimating the fed wants the rate hike starts, which we think is either june or july. everybodyamiliarize with the language so they understand the context of our conversation. the committee continues to anticipate based on an assessment of the factors that it likely will be appropriate to remain the current target range for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the committee's 2% longer run goal. you do not think it will happen.

>> the inflation numbers we got this morning were a little bit weaker. >> what if they did replace considerable time with something like data dependence? step in thed be a direction of where the fed would like us all to be headed here it -- headed. of the assetnd purchases, let's make a clean break from asset urges his and then ultimately move toward changing language. >> as much as we would like to think the fed is local, there is a global element as well. you have got the scottish referendum tomorrow. you have got the whole idea that mario draghi is going to have to figure out a way to implement qe. the fed is likely to continue to stay toward the side of giving themselves maximum flexibility, but also toward the size of the -- the side of using. fedook at 60% saying the will essentially do nothing, 25%

that they will try to move the ,arket with nuanced language around 2.5% end of 2016, whereas the market is only looking for the fed funds rate to be around 180. then 15%, the considerable timeline which gets removed. we think the stocks will sell do your >> how concerned think the fed is? >> they message concern around asset bubbles in the past couple of months. it seems to have toned down lately, but when janet yellen talked about credit conditions, it sparked a big selloff in the high yield and loan markets. we are seeing ramifications from that. is that she has got a good reason to be concerned anytime the fed or central-bank keeps rates low, it produces risk-taking behavior incentivized by artificial low interest rates. they have a right to be concerned.

one of the things we are doing in for folios is be defensive in terms of credits we are buying. we are seeing lower quality credits be punished as people anticipate the liquidity going away. why should these assets selloff at times like that? then, nothing is happened. it is not like the fed has try to penalize investors for chasing yield. that eventually may happen when the fed starts rates and we will see how fast the rates rise and whether or not asset classes suffer as a result, but since then, it is status quo. trade asw the something currently in place. you do not just have u.s. investors. you have got the ecb, extremely accommodative. all of the investors will seek yields. that will help with credit markets. however, if we get to the seventh inning and the credit markets, you want to be careful about what credits you buy.

if you saw the sales numbers and those arex retailers, the credits that sold off. >> do you actually think investors are paying attention to that and getting cautious and realizing, maybe i am in the seventh inning? it does not seem that way. should not have to tell you you are in the seventh inning. >> i think this is why active management and this type of the credit cycle is important. .ust by beta everything will go up. credit supplies. as you start to get to the seventh inning, you do not want to leave your credit in the portfolio. >> i agree. from mark -- from our perspective, it is fascinating. you go back to when high yields started to weaken. our incoming call volume from equity investors to wanting to talk about credit was off the charts.

sense thatfinitely a credit is part of the tale that is wagging the dog right now. it is all the more so. they really tended toward the mutual funds being the buyer. >> the tail wagging the dog. it will be a horrible mixed metaphor. does that also mean high yield becomes the canary in the coal mine? sees the selloff before we the equity selloff? >> i do not think i could come back with another metaphor, but yes. >> we have seen it quite a bit. when we look back to the financial crisis, i remember sitting in my trading seat, and i was in the middle of watching the credit market selloff, and i was watching the dow hit highs and going, why do the investors not understand what is going on in the bond markets? equity investors are smart and they do watch the bond markets for signals of potential weakness in risk assets.

>> what is the most concerning thing to your business right now? >> i think over exuberance, at this point. from our point of view, the one thing we see, getting to the next few days, scotland is still an issue on our radar because the yes vote would definitely have market disruptive consequences. over exuberance, we have got the largest ipo and technology coming up. these are signs that may be proven -- prudence should rule the day. >> really, the exit strategy for the fed. few fednk over the next meetings, we will get a lot more clarity on the exit strategy and we will need to look at that closely. >> are you encouraged that we have gone this far into the taper without any market dislocation? >> yes. what is interesting about it is part of the reason rates have stayed so low and accommodative here is not because of foreign

buyers buying treasury. it is because of the housing market and created an accommodative situation. i do not see a reason -- we're seeing a lot more contribution in fixed income. but i think a disorderly selloff is always a risk when you have this much control by central governments. >> thank you both. great to see you. we will have live coverage of the fed's decision in economic forecasts coming to you at 2:00 p.m. washington time and then, janet yellen will hold a news conference and we will bring it to you live in its entirety. you can count on us for that and so many other things. the fed meeting, there is nothing more important. time, also known as new york time or eastern standard time. >> that is where it is happening. we're locating it.

to theng up, a countdown ipo everyone is talking about. alibaba preparing to price its public offering. >> plus, how td bank became one of the 10 largest in america. you will hear from him in a few minutes. ♪

>> will come back. tomorrow night, the weighting will be over. the most anticipated ipo in years, and then we will know whether i'd -- alibaba will be the biggest public offering in history. will the hike make alibaba shares to rich? 20 of questions. i want to bring in a set -- a very special guest who bought alibaba shares in private markets and also the ceo.

you put numerical ratings on ipos and you sound positive on alibaba. >> we are. we have a 100 point scale and alibaba a 71, very strong. it has got great fundamentals. >> 71. compare that to other big tech companies. >> sure. facebook is that a 70. they are quite comparable. amazon is at a 41. the difference tween those two is quite meaningful. when you look at them business models of alibaba versus amazon, you see this -- differences in the business models they hold. there are dramatic differences that really get to the bottom of it. >> give us visibility in the way you come up with the numbers so people understand what the variables are. >> we look at interest statements and bounce sheets and we rate about 30,000 global companies now public and private. we look at over 60 financial ratios that a deep into the efficiencies within the company. because it is an efficiency

score, it is hard. it happens to courtney -- correlate closely. 90% of companies over the last 20 years that have failed have been rated 40 and below on our scale. companies like amazon, while not a hyphal risk tom a certainly is a much lower health and companies that are at 71, much better. >> i totally agree. invested in alibaba for a number of years. you just look at the machine the organization is in terms of free cash flow. his rating might even be a little low. >> how does one become invested in alibaba pre-ipo? --well, >> short of buying who should -- yahoo! shares or softbank.

>> and a few other peripheral place. but we have been involved in private investing in the chinese internet market for many years. we are involved in i.t. shops and technologies, and a number of others. whenber of years ago, alibaba was looking for private capital, we got to know the business. we did not make the investment alongside yahoo! and softbank here they are smarter than we are. a couple of years later, there was a chance to buy some shares from the private equity firm that had given them capital way back when. some partners were taking the chips off the table. it seemed like a lot of money then but it does not seem like a high valuation at all now. >> you got rocked -- you got yahoo! rated. when they sell their stake, is the rating going down? >> it will not necessarily go

down. like many companies that get a new influx of cash, it is a question of what they do with the cash. sitting on your balance sheet for the long-term is not necessarily efficient. .ow you use it overall, yahoo! has had a tough time. they are having a difficult time proving out that they could transform the business model. the market is evaluating the non-alibaba assets of yahoo! at almost zero. the question is, what will they do with the money and what will happen to alibaba post-ipo. ? come a what do you think of yahoo!? >> we like it. we lyons a little bit of yahoo! here. we think it has got upside left as we think people are under him as -- underestimating just how well the ipo will go on friday. i do notwe think it has got upst that the rest of the assets to not appear to be being managed

very effectively right now. at least the market is saying that. it is the negative value through the rest of the business. if you think about what they own and the chance, the chance that they have figured out a tax efficient way to dispose of their shares, you could get a little more pop from yahoo!. >> i think you said a moment ago that your entry points at before alibaba was at a market evaluation of $41 billion. >> i think it is 33. or 33, rounding. >> timing is everything in investing. why not take some or all of the money off of the table in the post-ipo trade and reallocate it to the next alibaba? >> two reasons. >> mark has so much money, he

does not need to. >> that is not the reason but it is a good point. we would like to be in that position. but no, the reality is, one of the benefits of being able to invest early, particularly in the private market, is you get assets -- access to a lower evaluation. one of the cost is you agree to a lockup provision. we wanted to sell, which we do not, we would have to wait six months. the reason we do not want to wait is i think people are really underestimating the potential of the company. it is priced at 66-68 range. we think it comes out higher, maybe 69 or 70. that is still too low. we think it trades first trade upward of $85. the price targets of 100 are still conservative. we do not mind holding it and we want to

for the long-term. the thing that really has not baked in yet is the potential for alibaba to become a global e-commerce company. most e-commerce companies are local. you see yandex in russia or the one down in brazil. most companies are local. .libaba could truly be global they have become one of the franchise players, one of the global brands. every brands are created 14 years through the innovation cycle. you have yahoo! and google back in 1996-2000 branding cycle. alibaba has come out as one of the best brands in the world. we are in no hurry to sell. >> your numbers do not reflect potential. they have to be by their very nature backward looking. >> it is looking forward in the next two years. i agree you have got the potential for alibaba to do great things. if you look at the fact that

they have been stockpiling cash, $8 billion in cash, 50% more than amazon has, and it is 50% greater over the last two quarters, that is before the ipo. you add another 8 billion to 10 billion on top of that. i thank you. a big week for alibaba. >> coming up, you have read his thrillers for years. perhaps you have seen the movies made about them and miniseries based on. in a moment, you hear from a best-selling author. ♪

x stepping down, we will talk to him --

>> you are my hero in terms of canadian banking. what else do we have? the master of the historical thriller, a best-selling author, is out with another one. we will speak to him in a moment. ♪

>> good morning, once again. america's most convenient bank, what td calls itself, is actually canadian. in 2004, when the ceo established a beachhead in of all places main, he has been expanding southward. in just a decade, td's u.s. retail business has grown 40% the size of its canadian retail business. it is the end of an era. the ceo most closely associated with resilience of the banks in

the financial crisis is stepping down. he yesterday delivered his final public speech and is today back with us on bloomberg television. great to see you. we can see what td is up here -- up to here in new york city. i mentioned you continued to expand. could you envision a day when td, under your successful -- successor, or his successor, to generate more profit in the american business? >> out be a fun day of we sought. i do not know. so far, the story has always been, we keep thinking that is possible but then our canadian operations does so spectacularly well that the u.s. operation could never outgrow us that much. there is obviously that potential, but i do not think it is in the near future, for sure. >> why is it? that the retail banking and commercial consumer banking so much more costly and less profitable for you in america than in canada?

>> i think a couple of reasons. first off, we are new in the united states. when you are new, you do not have the established customer base. the united states is a big opportunity. we have a phenomenal presence. but we have not penetrated the customer base as much. the whole distribution system themes way more profitable more products you have with a customer. we are much more established in canada. we have very deep penetration of our customer base. that is one thing. secondly, the markets are different. the spreads are about the same on both sides. the more products you have with a customer. but i would say the biggest difference is on the mortgage mortgages are

dramatically less risky than american mortgages. that makes it quite different. >> a good segue into midas question. where are we in the credit cycle? >> both sides of the border -- i have been surprised how much the credit cycle has continued to improve. i think now we can see further improvement. the u.s. is clearly recovering. i think it has good growth potential. i would say canada is slowing down a bit. the key to canadian growth will be that it can ride out u.s. growth and have exports grow rapidly. but i think the basic consumer is not in bad shape and we continue to see improvements on the credit side. on the commercial side, we have had dramatic improvements.

in canada, we really did not have significant commercials at all. we went to the downturn with no losses. i was day we are still on the good side of the credit cycle. the next couple of years. >> do you share the view or perhaps even worry that globally, the pendulum of regulation has maybe swung too far, that the rules have become too restrictive on banks and as a result, there is not enough credit flow and economies are not growing as fast as they could or should? what i would say, it is the nature of the changes rather than the weight of the changes. the financial crisis came out wrote an article in the financial times saying, bring on reform, the faster, stronger, and the better. it was clear the time that a very large number of the world banks did not have enough capital or liquidity.

i think we solved those core problems. if i have a worry right now, it is that we are continuing to get more and more micro regulatory control, trying to grow models where the one of the problems for the financial crisis and now we're saying, let's believe in more models, more vigorous models. i'm not a big believer in that. i do worry about that. the other issue that i think is becoming more apparent, is that the regulatory stories around the world are uncomfortable with these very large international banks are at globally, systemically. there is a certain risk of that in trying to do with them, that they put too much heard in on traditional banks like ourselves or in the united states, a u.s. bank -- >> can you blame them? think what is going on here between the fed.

they are struggling with the idea of a rebel -- resolution mechanism, how you would let -- allow a big bang to glass without triggering a systemic crisis of some sort. if you look at the jpmorgan or bank of america or citigroup, they have got trillions of dollars in assets. many more joints of dollars in notional value of derivatives positions. anyway a bank like that could be wound down safely without major disruption to the economy or global finance? think if you come to that conclusion, you should deal with that conclusion, rather than just increasing the burden on everyone generally. >> the conclusion is, if they are too big to fail, you should break them up so you do not end up penalizing everybody else? >> yes. if you decide you do not want your banks to be that big, because that is the essence of the debate, that if they are too big, you cannot have them even , then youinto trouble

say, let's put a limit on the size of banks. commentd in the last that he is increasingly sensitive to that issue, that they ought to focus their energy on what they see as the problem and be careful they do not overload traditional banking. you think they are still too big to fail? >> i actually think they are in pretty good shape. right answer, where he is drifting, if you're worried you do not have enough cushion, just skipping the requirements of capital, you have to indeed have more capital and more liquidity. liquidity continues to be the most important thing. banks fail because the markets abandoned liquidity. it is the funding banks that causes problems. theys with a huge deposit

screwed roll through a crisis because we do not lose those deposits. they stay with you. it is banks that are highly dependent on the capital markets , those are the ones you have to worry about. we build a relationship with your successor. good luck. >> thank you very much and thank you for having me on. >> the outgoing ceo. if there is a hero in canadian banking, he might be it. it is hard to call thinkers heroes. so many people have issues with bankers. but he has run a tight ship. a lot of capital. little risk. profitable. not a lot to complain about. >> coming up, risky business. the industry where uncertainty is the greatest. bloomberg will give you off the charts. ♪

>> welcome back. whether it is inconsistent demand or technology changes, scarlet fu is here with today's -- the charts it feels like tech industries, there is no uncertainty. there is just winning. will they to differ.

putmanagement school together a matrix. the first time is demand uncertainty. the other one is technological, or technology could create something better and new. with that in mind, they trotted out everything. the horizontal axis tracks uncertainties. axisie axis, the vertical -- axis, revenue volatility, firm turnover in the past decade. ,recious metals and utilities generally, the man does not fluctuate so wildly over the short term. king, right,ottle left, or center, no matter what. what you face is technological uncertainty. you have got big data and analytics investment driving in

a way it did not before. the us -- the upper left-hand quadrant, high demand uncertainty. plays a big factor on whether customers show up or not. generally speaking, the technology used to offer these services has not changed dramatically over the years. computers, software, which we did not put on here, it is very uncertain. eat or betaine. your management needs to have greater management skills and other companies. you will be taken over. auto, trucks, computers, all in that area. >> i am surprised to see here and liquid that far over. >> i think that has to do in and howwith scale distribution might have played into that. i will have to look at it more. rumors,o to craft they're going back to old times the way they do things. >> i would have liked to have seen that better in approval

ratings. >> yes. >> yes. we will work on that. >> we would have had boring or atman guard. >> eat or be eaten. that is pretty much what it is, especially if you're in the upper right-hand quadrant. entertainment is right in the middle. on the whole, even with all the changes going on, people like going out to see movies or stay home and watch television shows. that demand, although it fluctuates, is fairly consistent over the long-term. more than you realize. >> you're on tv so you watch it all the time. right, scarlet. thank you very today's off the charts. >> tom keene does not watch the news, -- does not watch tv, is that right? life he claims he doesn't. it. truth teller, love

coming up, the business of bestsellers. we will talk to somebody who knows it well. ♪

>> ken follett's latest book just hit store shelves. edge of eternity is the third installment and follows a journey spanning the history of the 20th century. he is among the world's most successful authors.

he is with us now. good morning. business is very healthy. the publishing history is very much in turmoil. do you worry about the future of publishing? >> no. as long as we have great stories, we will do well. we have to get used to some changes. on a device read by an actor on audio book. there are many different ways for people to read my stories. i'm happy about that. . think it is positive we have to adjust, but that is life. ask how have you had to adjust your business question mark >> we have many more complicated clauses in our publishing withacts dealing

technology. to tell you the truth, i do not do with that, personally. >> publishing do you haveure out a view on the debate? >> i do not have intimate knowledge of the debate. >> put it this way. who are you inclined to side with? do you think it is important for amazon to sell books chiefly or to generate enough revenue to compensate or to be able to pay advances and such to authors like yourself? notirst of all, i am complaining about how much money i get.

we get that. >> i am incredibly well rewarded for what i do. intimatesufficiently to make a comment on it. pages. 1000 it seems everyone is interested in short form, short term -- short form video, a blurb here. how is it you have grown your audience to appreciate a book that takes days, weeks, and for some people, months, to get to. at a time when everyone is interested in 100 and 40 characters or less? >> i agree with you. the truth of the matter is, if you get into a novel and you are enjoying it, you want it to go on for a long time and do not want it to come to an end. he only books you wish were shorter are books you are not enjoying. when people get into a story, they identify with the characters, they share the emotions of the characters, they have hopes and fears.

they are anxious about what will happen. when they get into that and when the magic of literature casts its spell, they want a book to be long. that is why my long books, i have been writing much longer books, and they sell much better than my early thrillers did. >> if you are breaking into the publishing industry today, do you think you would have as easy a a time or a harder time making it as well as you have? >> what you have to remember is young people in the publishing industry are all looking for the next ken follett. somewhere out there, the next ken follett is 25 years old. they're looking for him. if you write something good, it is not difficult to find a publisher. they're looking for you. that is how you make your

reputation as a youngster in the editor.ld, as a young you find somebody nobody has ever heard of and you bring the book to your boss and you say, this guy or this woman is going to be the greatest. ofn you are always thought as the editor who discovered that writer and your career is off to a great start. actually, if you write something good, it is not difficult to get published. >> who is your audience? >> i'm happy to say that almost everybody seems to be my audience. the only people who do not read my books are people who cannot read. teenagers, men and women, and all over the world. my books are translated into many languages and sell very well in other languages. all the timeink about the reader, all the time i ask myself, is the reader enjoying this, will he or she believes that this could happen,

and will he or she wants know it happens next, i think all the time about the reader. i do not have a particular reader in mind. i think they have so much in common. everybody is interested in certain things. everybody is interested in danger and courage, everybody is interested in romance and love and sex, everybody is interested in marriage and children, war and battles. we have all of this in common. i do not think there are that many people interested in marriage. the whole list of exciting things, marriage is probably your bottom one. dramatic. marriage can be really dramatic. life that is true. >> divorce can be even more dramatic. we might see that in great britain tomorrow. >> a segway. andou were born in wales raised in britain. do you believe in the principle so,elf-determination and if do the scots deserve to be an independent nation?

>> i am welsh. the idea of wales becoming an independent country horrifies me. of course, we have our individuality. we have the language and songs and our poetry, but economically, it would be a catastrophe for us if we were separated from england. we are much better off in wales as part of the united kingdom. i suspect the same is true of scotland. scots people have got to do what they want to do. it is democracy. but i think if they separate from the union, they will make a mistake and they will be poorer for it. the sad thing is, you could have everything you want. they can have everything scottish. they can wear kilts and eat haggis to their hearts content. my biggest disappointment is that you're not here in studio. i want to kiss you on the lips. i love your conversation. .> ken follett

market makers will be back to you in a couple of minutes. >> our songs and poetry. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> should they stay or should they go? whether of tomorrow on they should break away from the united kingdom. thehanging its tune, biggest operative radio station in the united states has a new name. does digital have the upper hand at i heart radio? >> arming rebels -- the house votes whether [indiscernible] welcome back to "market makers."

i'm stephanie ruhle. >> i am erik schatzker. the storied author talking to us about everything from the drama of marriage to the mystique that he believes it would be if scotland votes to become independent. >> it's time for the news. >> investors waiting to hear from fed chair janet yellen. policymakers are wrapping up a two-day meeting. to reduce thected fed bond buying program even more. we make it a better sense of when interest rates will be raised. is going inral bank the other direction. it is adding stimulus to the economy. china is injecting 81 billion

dollars into its largest bank. there is growing concern about a slowdown in china. chinese imports have dropped two months in a row. there was a 40% drop in new credit last month. new allegations of computer hacking in american companies. chinese backed hackers breaking into computer networks of her buddies doing business with the u.s. military. among them, airlines, shipping, and information technology companies. the senate report does not identify. that part of it is still classified. >> tomorrow could be the biggest day for the united kingdom in three years. the outcome is too close to call. 52% of scots said they plan to vote against independence. that cap has been closing quickly. -- gap has been closing quickly. we have had another poll out

in the last few minutes or so that shows exactly the same trend you were referring to. fouro camp ahead by percentage points. lady talk to a business who knows something about doing business in scotland, what this will mean for the country. lingerielaundry and -- and beauty products brand. you have spoken out, wanting to hold the u.k. together, not wanting scotland to go its own way. why have you come to that conclusion? [indiscernible] their blueprints paper for independence, only one page is on the finances. for me, if i was buying a diligence.do due if i don't like the answers, i would not buy the company.

than 15 hours to go for the future of our children, the future of the country. [indiscernible] he says it is all up to be negotiated. andverything is might, everything is about his party wanting to get over the line. for me, voting for the unknown is too risky. scotland really does need change. we have issues. now the parties have done is better together. it's a bit like a company. the employees go on strike and say, we want more power. we want more -- >> benefits. >> and we have got it now.

as far as i'm concerned, the strike is over and now we can just work together and get the things we need. say,her business leaders this is a chance to have much more control of the country cost estimate. do you find that? >> i do think that we will have more control. the scottish parliament will have more control. we want to get the best for the people of scotland. that is without doubt my ambition as well. the facts are very flawed. if you look at the white paper [indiscernible] 113 pounds dollars. we need every single penny to find -- fund -- it's very volatile. >> what do you think of the tone of the campaign, the atmosphere

in scotland today, one day ahead of this historic referendum? >> scotland is on the world stage. people are excited. people are exceptionally worried. i think people will know that we will get change. we will get change going forward. twitter andon almost 800,000 twitter followers. it is sad, but i have been getting a tax -- attacked to saying i'll vote no. it does not mean i'm any less passionate than anyone else. too riskyit's far , it's a sad world when you say you're opinion and you are [indiscernible] down for it. everyone is entitled to their own opinion. let's keep calm, get on, and work together. >> will scotland be able to work together?

this, there will be a large part of the population that feels disappointed because it won't be what they voted for. can scotland pull it together for friday? >> i think so. if you look at norway, 99% of the population voted yes for independence. we have half the country split. haslieve this referendum split the country and it doesn't feel the same at the moment. but we need to do is bring people together and work together. we have got issues. i did not realize how bad that situation was and i don't think a lot of other people knew as well, the poverty. we have to solve that are it is not acceptable. to speakinesses need out on this or stay quiet? we spoke to a scottish billionaire earlier today and he said he's keeping quiet because

he does not think that this is people should tell individuals how to vote. that gentleman is a friend of mine in a very successful business guy, and i tend to disagree. im quite vocal about it right don't want to wake up in the morning essay, i did not speak out and give my feelings. us, thes for joining founder and ceo of the ultimo brand. timeg starts at 7:00 local here in scotland. we will have coverage throughout the day, and of course, the results into friday morning. stephanie, back to you. "> coming up on "market makers -- saying goodbye to hedge funds, the sequel. we will see if there is a wave of pension funds pulling money out. we will talk about the future

of a.m. and fm stations. ons is "market makers" bloomberg tv. see our stories and interviews on bloomberg.com/tv and on bloomberg tv plus on your tablet . we are streaming on apple tv and amazon fire. ♪

let's talk to the other ahead of california's big state workers find, the chief investment officer at the california state teachers retirement system. it has got $187 billion under management. what is your stance on this? >> can you ask erik to turn that tie down a little bit?

it's hard to see it. >> he's wearing one of my favorite looks today, so i will not do that. >> all right, man. >> -- ma'am. >> what are you going to do about this hedge fund frenzy? >> calstrs went to the hedge funds in 2004. they build up a massive portfolio with a lot of funds which is expensive in their structure, a lot of complexity in their program, which was unique for them. i totally respect the decision they made. adon't think you are seeing followthrough in other pension plans. everybody has used hedge funds a different way. in our case, we have a small allocation of hedge funds, just a global macro is one style. going to continue to stay with it as we monitor it. it has been a raging bull

market. most hedge funds that had a hard time in this environment. >> why only global macro? macro in the last few years has struggled very why not broaden it out? >> as you talked about, the bulk of our portfolio is in u.s. equities and non-us equities. we made 18% last year. we are looking for products that are going to provide diversification away from that equity bias, maybe give us a little bit of a hedge. that is why we have a small allocation. we want to prepare for what could be rocky seas ahead. >> if that is the case, why less than 1%? isr allocation at calstrs even smaller than calpers allocation. ted told us the problem was twofold. it wasn't just fees and the complexity that comes from

investing in hedge funds. it's about scale. to provideunds calpers with real diversification, they would have to put [indiscernible] into that asset class. i take it you don't share that view. my question to you is why. how much of a hedge can you really have from mobile macro if it is less than 1% of your assets under management? >> right now we can't and we don't expect it courage we see the equity market, with the fed being so accommodative, we think the equity market will continue to run as it has the last couple of years. we are such a long-term investor. we are looking out to the future. we are looking at global macro puthe future as a way to diversify the portfolio. trying to timeot now. you're looking at global macro is something you can build up as a hedge against the equity market at some point in the future, which would -- i think

you are saying -- require more scale, is that right? >> exactly. our board will have that debate probably in the next year, what is the scalability, are we comfortable getting up to the numbers? it really would hedge, that large equity exposure. it is an open question. you have the denmark pension plan got out of hedge funds.. is its scalability, or is it fees? people love to say, it's that nobody wants to pay two and 20. paying two and 22 a top performer is not necessarily the problem. a top performer is one that you cannot necessarily invest a whole lot of money in all the time. >> the two and 20 is broken. that model is old and arcane and for investors of size, you can get different types of fee structures. we have got to get off that old mantra.

fees are a definite challenge, but it's always net for performance. if you're getting the return you costs, it'sthose acceptable. i'm amazed at the media pushback. spherelarly in the blog on the west coast i'm seeing the hatred for hedge funds. >> do they care? i'm a guy flying in my g6. the world hates me. what do i care? does the hedge fund industry care about the pr problem? are they saying to you, i making too much dough? >> -- i'm making too much dough? >> i don't think people really care. people say, where the customer's yachts? we have had some honest discussions with people, and they recognize that that model has changed and they are willing to work and negotiate on different fee structures. it's all about alignment of

interest. in terms of an industry, it is such a loose collection. more hedge5,000 or funds out there. i don't know how they can assimilate to become an industry. they are a broad swath of different strategies and different styles. crisis, it seems that some of the biggest hedge funds out there that have lackluster returns continue to have more and more money poured into them, where new start up guys are struggling. why is that? >> because people think there is a persistence of track record. we have seen that in private equity. it is less so in real estate and even less so in hedge funds space. there is some comfort in some herd mentality the goes on there. i guess the 300 largest funds, they are getting more of the capital because they have an established platform. they can make an institutional investor more comfortable. the reason there is money flowing into that area is

because it provides diversification away from the bulk of the portfolio. you already have a huge equity bias, you have a huge fixed income exposure. what can diversify you away from that beyond private equity and real estate? >> what appeals to you then, chris? part of the problem with hedge funds is if you ask most hedge fund managers, they will describe their opportunity in limited terms. only be soay, we can large before the opportunities totinue to -- begin compress. these large funds continue to take in more and more money and will ultimately have trouble finding the opportunities that will generate something other than beta. how do you behave as an investor deciding whether or not to allocate capital to those funds? >> that's exactly the question. if you look at the general hedge about 2005, asce

money has flown into that area, the excess returns had been arbitrage to wait. the hedge fund industry got a name for itself with harvard, yale, david swenson investing early in the late 1990's and how well they did in the 2001 br market. -- bear market. the trading opportunities are arbitrage away -- arbitraged away. style looking at it as a the diverse eyes away from what we already have. we were late to the game. adopter of an early hedge funds like others. some of the people really believe we will add value in their portfolio. everybody has lowered their expectations for what they think they can get out of a hedge fund strategy. >> do you see something happening that could make you change your tune and go the way of calpers? >> without question. markets, we are

monitoring -- we have not had one since 2009. we are looking at individual months where we have choppy markets. if our global macro manages to not help diversify us away return-wise in those down markets, we would step out of that area. everybody is going to continue to look for opportunities. we have such an exposure to global gdp. we want to be able to hedge that in periods when there will be global recessions. >> i hope you won't mind if i ask you a question about one of your holdings, dupont. is dupont is still a calstrs holding? >> yes, it is. we are an investor with try on. we consider them a long equity manager. we are an investor with them. we are backing them and their move and dupont. [indiscernible] if you would allow me a second to point out that try and is the firm run by the

self-styled activist-investor, nelson peltz, who is calling for a breakup of dupont, saying the board has failed shareholders and there is $4 billion of excess cost. what i understand is that you are fully behind nelson peltz and you would like to see what, dupont broken up or some changes at the board or a change in management that would make the company more efficient and deliver better returns for shareholders? >> you hit it right on the head. a good contrast. we have been in dupont for almost 30 years. we are going to stay in dupont for another 30 years. we are not a hedge fund. we are an activist share owner. what we are trying to say to dupont is they've gotten way too heavy at the top of the company. if you look at the holding company costs, they are exorbitant. i know in early trading, the stock was up on the news.

i think wall street is recognizing some of these long, established companies need to put a fit bit on and work out a little bit, lose some weight at the top and operate better in the middle of the company. >> chris aleman, chief investment officer at calstrs. thanks, chris. >> staying in hedge funds and siding with nelson peltz of dupont. coming up, doubling down on digital. that is what the biggest radio station operator in the u.s. is doing by changing their name. we will speak with iheartmedia ceo, bob pitman. ♪

>> coming up, he is trying to master the digital domain.

the company that has changed its name to iheartmedia. >> the attorney general thinks that offering bigger rewards will attract more of them. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> welcome to "market makers." guest, a for a special new name for a company trying to find its place in the digital world. clear channel communications owns more than 800 radio stations across the country, with more than 245 million listeners a month. this week, clear channel is changing the name of iheartradio to iheartmedia. bob, why the name change? .> it is who we have become

not that we are moving away from radio. when you talk about mobile, radio is mobile at scale, enormous scale. for us, when you start looking at radio stations, they have all banded together and been iheartradio. app created the iheartradio so they would have a digital platform to extend the listening beyond a.m.-fm. release parties, everything under this common name. for us it's very logical. it has turned out to be a very big trend name. we have 70% brand awareness. in the digital space, only pandora has a bigger brand awareness than we do. we are the biggest radio app, the second-biggest audio app. listing towards everything.

we continue to argue that that is really mobile at scale. >> is this a prelude to something else? >> i'm torturing him today. >> sorry. [indiscernible] i gave up the type. i need to go back to the tight. -- tie. you have clear channel outdoors. would you consider taking the digital business and turning it into a separate company so you then have one discrete company that is digital, one discrete company but his legacy radio, and another discrete company that is clear channel? >> part of the reason we are changing the name is that the lines between these get very blurry. if i'm on a phone and there is a chip on the phone and i'm listening to z100 new york, recall that fm radio. if they happen to be coming in on iheartradio and listening at the same moment as z100, calling that digital.

if you take all the digital radio innd put all the broadcast radio -- digital only accounts for only 10% of the listening today. be mostly to additive. where it is additive for us is if you are in the car, you're probably going to go to a.m. fm to get your radio stations. if you look at the old days, when i had a transistor radio, they no longer have the same ability. back the has given us hand-held transistor radio. when someone gets out of their car and go somewhere, they can go to the radio. we think it is absolutely tightly linked to broadcast radio. to the consumer, they could care less, just like you probably don't care if you are picking up cable, orroadcast, satellite.

it is the content you are absorbing. that is what we are really trying to recognize, that this is the world we are in, and it's getting very fuzzy. we are one of the biggest social players. iheartmedia has 50 million followers on facebook and twitter. >> how do you monetize that? i think it is the communication. is all within this word together package. -- blurred together package. for us, facebook has replaced the telephone in terms of talking to our listeners. it is not so important in the means, if the content the goes through it here in -- it. we have people talking about it. every year so far, they iheartradio music festival trended on twitter worldwide oath nice. >> -- both nights.

>> you get twitter and facebook noise for free, essentially? >> no, as part of how advertising works. the idea that i will run a 32nd commercial and that's it -- i'm trying to share the consumer relationship we have with our advertisers, and that consumer relations falls into many buckets, one of them being talking to the consumer to wait, which means our social. i'm thinking network tv. >> the real mtv. tv network.sic thinking about traditional broadcast networks and trying to draw an analogy or ask you about an analogy between the future of legacy radio -- a.m.-fm radio, and the future for broadcast television. are they the same? >> radio is not mini-tv.

it's not a mini version of tv. it is your companion. it is that person sitting in that empty seat next to you in the car, talking to you. --you love the radio station if it is a creepy person, you put it to another station. broadcast tv has been a delivery system for programs. today isre finding there are other ways to get the programs other than the network, which is why live programming on network tv has become so important. that is not something you delay. that is not something you get somewhere else, whether it is sports, award shows. i think we are in a different boat than they are in. what's interesting about broadcast radio is in 1970, about 93 percent of people listened to broadcast radio every week. 2014, about 92% of people

listened to broadcast radio every week. >> they don't think they listen to that much radio. >> i think people do. other than the small island we are on, everybody knows they listen to the radio. that is the companion. elvis durant in the morning, ryan seacrest in the morning, charlemagne in the morning -- these are all people they feel are the best friends, and they treat them like they're best friends. and we have the responsibility of a best friend. kids --tv -- i tell my i tell them, the show is on tonight. they go, what do you mean? the show is always on. they did not conceive of this appointment tv, which is probably more my generation. >> in the pandora world, there isn't that relationship with ryan seacrest. it is, what this song -- what is this song. are we going to see those big

name disc jockeys die out? >> no, you are comparing all audio streaming. have replacedfy the cd. the cd and the radio stations have been mirror images of each other. the music collections when you want to escape the world, that's your music. radio is when you want to find out what is going on in the world. withf people will agree the statement that i like both radio and my music collection, but i use them for different rings and at different times. and at different times. we are very synergistic. 70% of americans discover their new music on fm radio. pandora users, about 70% discover their new music on fm radio. 70% say iers, discovered my new music on fm. everyone uses fm radio to find out what is new and hot. >> do you think traditional radio has a bright future? >> nothing has happened to it.

it has been bigger than ever. is day radio is in trouble the day you don't want a friend. as long as you want a friend, you are going to love it. is sothe future for radio bright and everyone realizes the prospects for your digital business now that you have rebranded your company -- where is the exit? equity valuations in the public market are very robust. shortly after six and a half years, now is the right time, no? privateoing to let the equity owners decide when they want to exit and how they want to exit. is to take this company to the heights it can go. to me, what is most exciting about it -- what is exciting about this company and this industry is all the facts we just talked about are not known. if you look at the revenue, the only area that suffered in the radio business has been revenue. >> wouldn't it be easier as a

public company for those facts to be known? that is what happened when the sunlight shines in and people get a window into what your business is, they read your quarterly reports -- >> are you getting a commission from one of the exchanges? you are so good at this. you should pitch everybody. >> ryan seacrest. he's a radio guy. hardest working guy in entertainment. >> he is. he has done spectacular stuff with us. he has been a long time iheartmedia person, and really demonstrates that this world is very blurry. they are major on the radio. their major on digital. sometimes they are major players on tv, like ryan. in ryan's case, he is also a producer. the idea that what we are doing, the heart of it all, is that relationship with the consumer,

that we are writing with him in the car every day. more people are listening to pandora, but you are a little bit in every single place. >> pandora is a fraction of the size of the listeners we have at iheartmedia. they have done very well in digital. they have done well in terms of taking those people who before were eyeing albums, they now make a lists -- buying albums, they now make lists. it is still your music collection. that's why they don't have announcers and why they don't give you the weather and traffic. if they did, you would be upset. if you use to buy cds, nobody put the weather between them. the same is true when you are building your playlist. we do some of that on iheartradio. not only do we deliver broadcast radio stations, we let you build custom radio stations. we think our algorithm is

better. faux boyfriend making me a mix tape. >> that's a creepy movie. i don't want to go there. >> bob, thank you so much. the chairman and ceo --iheartmedia. thank you for being here. >> when we come back from a wall street whistleblowers -- eric holder once you folks. the attorney general is going to make it more worth your while to write out the bad guys. -- rat out the bad guys. ♪

>> u.s. attorney general eric holder says he needs new tools to prosecute wall street crimes. he wants more money to reward whistleblowers and more agents with expertise. phil, what is behind what the attorney general is saying and what we are going to hear from him this afternoon? >> frustration. excerpts of the speech the attorney general will

give today at nyu law school. have been hearing behind the scenes from justice department officials for the last two or three years, all the roadblocks they have run into as they have tried to figure out a way to prosecute individuals coming out of the financial crisis. it's a feeling that executives are to insulated, that lawyers are making sure that everything their top level people are doing at the bank will never get into the hands of law enforcement officials. what the attorney general will lay out today is the frustration and the roadblocks that have run into over the last five years, roadblocks that have drawn a ton of criticism from capitol hill, pretty much everywhere for not extracting the pound of flesh coming out of the financial crisis. but he will ask for is for lawmakers to go in and change what is now capped. it is currently capped at one

point $6 million. the attorney general will ask for a major increase in that. an increase in hiring on the fbi side for white-collar stuff. it has been a major turn down on that front. since terrorism became a big issue in 2001. >> you use the keyword, lawmakers. he has to go to congress to ask for them to change the language in this legislation. do you perceive that there is support for such a change given the inaction we have seen from congress that perhaps now the budget extension -- >> there is a bipartisan model in terms of whistleblower fees that they can follow here. there's another law called the false claims act. if you do fraud the government, the government is willing to pay a whistleblower one third of the amount of money recovered, if you're able to bring a successful case to the government. acte 2009, the false claims has brought in $22 billion.

wasfalse claims act as it written in that way was a bipartisan law. the issue itself, bipartisan at this point -- it's also not when you are going to get a lot of people standing in front of. we want to go after wall street. that plays pretty well in both parties right now. the key is, can they figure out a vehicle to get it done and will eric holder's involvement in it be a problem for republican lawmakers. that much has not been answered yet. there would be support for that, i think. >> do you get a sense that there could be more prosecutions ahead, something big happening with another bank? >> that is the other headline of this speech today. he's gorgeous to that off with what i have seen so far, basically saying that other prosecutions are coming and they are going to be targeting individuals. fxknow both on the libor and side of things that the government feels they have got pretty good cases.

are targeting individuals there. the attorney general will say today that he expects in the coming months there will be charges against individuals. >> thank you so much. we will be watching closely. phil mattingly joining us. toing up, we are waiting hear from president obama about the campaign against islamic state. he has been meeting with military commanders in florida. ♪

>> president obama spent the morning meeting with military commanders at u.s. central command in florida and will be

speaking about the campaign against the islamic state in a few minutes. the house is poised to approve the president's request. peter cook is in the nation's p are -- capitol. peter, what will the president be saying today? >> i do not think it will be all that different. the backdrop is what is different here. the president with some of the , meeting directly with some of those generals, including lloyd austin, commander of central command. he's going to be hearing about how they're going to execute it, what they will be doing on the ground. an important visual for the president to see these uniforms, the brass around him as he flexes his commander-in-chief muscles. >> they're going to have to coordinate the airstrikes that they plan to wage against isis or the islamic state in syria.

how much of a challenge is that going to be given the tentative response that washington has had from any other governments in the gulf? >> this is going to be difficult. there are a lot of moving pieces here. well we have successfully carried out airstrikes and iraq, syria is a different place. you have got to worry about the risk about american pilots being shot at and potentially shut down. we have not lost anyone in iraq so far in this latest move against the islamic state. there is always that risk. you have got to wonder about public opinion. peter, are there any surprises you think we could hear? >> i do not think you will hear too many surprises from this president. i would expect him to give some shout out to members of congress. do not be surprised if you see some defect in some the

democratic side. there are some real risks and concerns among house democrats that this strategy carries too much risk, that they don't trust the syrian rebels and at the end of the day there is the potential for u.s. boots on the ground, which is what they want to avoid most of all. >> thank you so much for giving us the latest. we will be watching. bloomberg television is taking you on the markets. our own market correspondent, olivia sterns, has more. the president, let's take a quick check of how stock markets are trading right now. stocks are modestly higher, after the dow hit the intraday record high earlier this morning. all of this ahead of the fed's policy announcement at 2:00 and press conference with janet yellen at 2:30. i want to bring in the equity derivatives strategist at baycrest partners. how the vix ist

trading going into this. >> vix settled this morning. i thought it would be higher. a lot of hedging activity that we saw earlier in the week and also subsided. it is telling the same story, the people are somewhat complacent going into this fomc. >> perhaps you have to make your money on individual names. you have a trade for us, specifically on costco. >> i like roscoe a lot. let's talk about the [indiscernible] right away. i'm going for the january 1 28 call spread -- 128 call spread. [indiscernible] a lot of things going for

costco. the stock is showing nice technical patterns. also, you have most stores that they are opening, they are seeing bigger traffic. each sales order is higher. they are at a higher income group. you for joining us. we will be on the markets again in 30. ♪ . .

welcome to "money clip" where we tie together the best stories, videos and interviews. i'm adam johnson. scotland gets to cast the vote that will have huge indications for the british parliament and scotland's most prized export. can you guess what that is question mark we got our hands on apple's newest iphones in the reviews are -- we will tell you. spacex to drive to infinity and beyond. in media, the roosevelts -- ken burns has tackled