>> from bloomberg world headquarters in new york, i am mark crumpton and this is bottom ane, the intersection with mainstream perspective. after successfully getting ebay and paypal to split, carl icahn is renewing his focus on apple. in an open level -- letter to the apple ceo tim cook, apple is trading at half value and that the company should celebrate shared buybacks. and david,his son,

join my colleagues trish regan. i thank you. we will talk a lot about apple. karo, you first, given the huge selloff we now underway stocks lunging almost 300 points right now, what do you think is really behind the selloff? >> i have said for the last year stocks might be a bit high and that there is a lot of risk. i do not think there is one specific thing. the international situation is obviously pretty bad. oil prices, of course, have fallen off a cliff. have, profits in this country are somewhat questionable.

based on low interest rates. you had a harm -- a high market for a number of years. you have to expect these things. you could ask the other way, what caused the market to go up? 80, 90%. >> so you think this is the start of a correction? >> i do not know. it is like asking me if i think the farmer's life will shoot another seven in vegas. there are too many variables. i just think, on a macro level, you can predict the trend, and that trend, shall we say, there is a lot of risk. >> a lot of risk comes from europe and obviously germany not looking so good with the data we have seen there. there are fears of inflation. do you think we could do anything in the u.s. to shield ourselves if you're really in fact struggles? >> a lot of international companies are in the s&p. exporting, it will be

somewhat stale because of the dollar. you have a lot of companies that depend on it. companies that are no there in some different currency. they report that and converted to dollars. fromngs will be earned both sides. there are a lot of things. it does not mean is the end of the world. but everybody is so surprised, but, you know, it is almost sort of funny. you hear everybody start to get real bullish, would have -- which happened in the next month or two. you know that might be the end of it for a while. >> it has been quite a run. what do you think we can contribute to all of that as well? easy money and the federal reserve has had interest rates and record lows for six years? >> yes. i think that is a lot of it

there you have these low rates that made it possible for these companies to borrow at three or 4%, especially the high-yield market is in a bubble in my opinion. you have companies you would never have given money to. i think it was almost a no-brainer. it was obvious the high-yield interest rates had to go up eventually. you have the credit spread. level, when you look at it from the point of how it came about from the federal reserve lowing these rates. there are summative or things you could argue. >> you're looking in good companies for all of this. let's get to that letter. you reaffirm your approval of tim cook. it sounded a little bit like valentine's day there to me with

that letter. but, you know, your concern is that the stock price, in your view, is far less than what it should be valued at. you would like to see it at double what it is. valuation is so much higher than the overall market? why is there this is connect between what you see in the company and what investors see? >> i will say two words and then let brett speak. brought appleve to us. i loved it after looking at it. that i think it is change that people do not realize in apple. is a sea change in the greatest it is renowned the world. mobile phone. in that apple is not a hardware manufacturer as people would like to have you think. is really an ecosystem, a way of life, if you will.

every time they sell a phone, it is an annuity. this concerns certainly a better multiple in the s&p rather than a worse one. mean, that is really simple. i like to look at things simply. you ask about the market a look at a couple of things that are simple about the dollar. to me, you try to reduce the simplicity. say,lot of people would this company is so product depended. if it does not come out with something that really wows everyone, that puts it in jeopardy and that is why it trades at a discount. we expect the new ipad out next week. with that change anything for the company? >> in combination with the iphone and the other new platforms the company came out with such as payments, health, home. i think with some are beginning to understand and some do not is

this company is, as my father put it, it is not just a hardware company. has a whole ecosystem of routes designed by really talented people over at apple to work together to, you know, change the way that people interact with all their apple and mobile devices. and how they share information and asia between them that continues to improve and gain traction, there is a growing need between apple and the competition. i think that is where we get very excited about seeing the iphone 6 take a lot of share. from the competition. because of not just the hardware piece of it itself and dominant product, but the whole ecosystem

starting to really come together and gel and make a difference for all the users. click yes. one of the concerns is that apple is expensive and it has been challenged in emerging markets because of that because he broken by an android phone for so much cheaper. how does it capture the big emerging market share? >> you are bringing up a good point, that apple is a premium brand. they will not compete in low and junk. for phones below $400, apple will not compete there or come out with a product. the premium market, even in those emerging-market companies, is going rapidly for apple, especially, we are excited to see the chinese rollout, which on october 17, now that they're rolling out four g networks in the company. we think that will be a big

opportunity for apple to shine. what we see is that the existing iphone customers are similar to annuity in that at the end of two years when a contract comes up, pretty much, most of them renew and now that apple has a larger screen iphone, samsung going for the same price, we expect them to take a lot of share. ourcannot even get it to offices here. >> getting even bigger, you have got to wonder at what point these two markets start to merge. you get the iphone 6 plus and in the many ipad. might they cannibalize each other? mini, there could be cannibalization. at the same time, there are rumors and we expect apple to introduce a larger screen ipad, which will help support average .rices

as tim cook alluded to, they are now going after enterprise with ibm, where they are low penetration today. when you look at the size of his missed that apple is doing today, with the ipads, the enterprise and innovation, they will be able to read night growth in the category. a big mistake everyone is making here is, for instance, the watch previously, until apple said they would do a lot, none of the analysts wanted to include a forecast for the watching their numbers. if you look at apple over history, that would be a very -- a very ignorant thing to do to say, before recover out of an iphone, apple will not include cell phone, or they will not do and ipad in the numbers. to look at the company given the history and the premium brand they have and account for that in your forecast earnings, which is, how do you value your company? >> is obviously different than what we see a lot of annulus --

analysts doing now. talking money are they about doing? they have artie got 30 billion. you consider that a success. -- much more question mark how much more? think the company is so cheap, i spoke to tim cook. i sent a letter. spoke to him the other night. he believes it is very undervalued, just as i do. i mentioned the buyback obviously, he could not anything, noncommittal. think they will do a major buyback. that is my guess. is -- it makes sense. company is really

on a new paradigm. you think i have to keep introducing. i do not think it is factual that i have to keep doing that. one day come you own a buick. the next day, you buy a cadillac. annuity wherean you own an ecosystem. the ipad, but also the watch in the iphone 6, and you have all your collection of photographs and music on it. you do not go away from that when you are used to it and really involved in it. but you do go away and you do get market share as well from samsung. isn't it on the same level?

samsung, they are making the hardware and google is making the software. it is a big difference when you have one company doing the whole thing. analogy, i am not a big racing fan, but i love to look at the winners. out i was younger, i went to that and it ran away with the race. i think that is what apple is doing. so this is a way of life. >> let's break this down. you are talking about potentially $100 billion. how would you structure something like that? >> i would love them to call me but i doubt they will. i think we proved, as we say in the letter, that we are strong in this area. they have a 31% annualized , you know, over the last

four years. >> i know. hits like netflix. >> it is 36, actually. >> i'm sorry. [laughter] they have got a lot of cash overseas. if they brought it back, they would get hit with taxes. >> hold up. first of all, they can bring easilyme, but you so could go and have a lot of cashier. secondly, they could go borrow money at 3.5%. have have to be a genius if you fit the company will double by 100 points, you know, you could go borrow three. i think they're happy they did this and i like to feel that we were an influence on upping the buyback. right now is a perfect time.

there is another little area here, which we see probably more than others. we think a lot of bonds compete with index bonds, so you have a lot of other funds around, which is a lot different. they get paid one and a quarter 33%.nt as opposed to in other words, .33% and an index fund. meaning, they have to outperform the index is. what the funds is due -- do is overweight or underweight on different stocks. >> this is an interesting theory. how does that affect apple's stock price? are you saying fund managers are not as incentivize? >> no. let me say it and then you will get it. fund,'m saying is if your you want to do better than the indexes, and not worse.

if you are underweight, meaning, you have less apple than the index fund does as a percentage of your fund, that will lay down on your return to your investor. if you look like you're making less than the indexes, less than the s&p, people will sell your fun and that is what has been going on. so it used to be, you love whatever. you just kept it. you do not keep it. so you say, why should i pay 1% or one and a quarter percent of my money to the fun when i could buy the index fund and only pay .33%. we think right now, you will have a short squeeze taking place. a lot of these fund managers did not like apple, using what you're saying, they used that logic.

it is a hardware company, a variable margin will narrow. and therefore, it is really not that good. now, suddenly, they will realize, we think, that what we say is correct. i think they are realizing it and therefore, apple will gain market share. and earnings will increase at the ratios. they better hurry up and buy that stock. think it is sort of taking place a little bit now and will continue to take waste. , that we think the stock is very cheap. >> you mentioned borrowing money. it seems like what we were talking about as we began this discussion. what you say to critics? >> i do not think it is financial engineering to say, if a company was sitting with 133 billion dollars in cash to borrow against that cash, so to

speak, and by something they think is 100% cheaper than it should be, i think that is just common sense. call it what you want. people just say financial engineering and i think most people do not know what that means. >> you know how to restructure companies and dubai box -- do i fax -- do buy backs. why is that? >> i was laughing a little bit. i think tim respect me and i think you'd call to say, what do you think? i think he would. but i think apple and the board will not say, carl, why don't you come to a meeting and give us your advice. think -- io not think we intentionally did not want to make it about a specific

number or a specific structure. then we figured more of the publiclyuld be, both and potentially with the company, would end up being about this or that specific way to do it. they know their balance sheet english -- intricacies. there may be more efficient ways to use the cash overseas to do buyback without having to borrow they seem to think they definitely could have structures like that. it is really more up to them to spend the time to figure out how to source the funds for the buyback and decide how big the buyback should be. given the massive disconnect in takingon, they should be a serious look at how to do more faster. >> i would like to say one thing. conclusion,e to a logic. you take certain facts. it is a fact that tim thinks this thing is undervalued. stock in by

undervalued company, you do a great thing for shareholders. those are the facts. we hope they do it. i want to make clear, this is not based on that and we think this company is going up anyway, whether they do it or not. >> i know. there are a lot of reasons you like this and you outline it in your letter raised on apple, is he receptive to you? and talk tohim him him? ago spoke to him two nights . we're both busy and he is very busy. it is not like we talk every we are oldike drinking buddies, but i think he respects me and i greatly respect him. really do not feel i should go into anything he says.

i want to put that out. i want to take that out of the equation. >> but he listens to you and you have conversations. >> absolutely. very good relationship. he obvious he cannot tell me things he can tell other shareholders, but we have good conversations. yes, i think he is a great listener. and look here and i just, you many i have criticized ceo's is and i criticize many boards and i do believe one of the problems of this country is the system is dysfunctional. but you also have very good ceo's is and he is one of them. i am happy to say that. i do not know the people on the board but i think they acted responsibly in keeping him. there was pressure and criticism. we cannot and said, we really like the guy. i think they acted responsibly here. they acted responsibly because, i think, they do not micromanage like i do not micromanage a company.

>> you have made a career out of going after them. way withgetting your ebay and paypal. mark is on the board there and he has had pretty negative things to say about you recently. there has been name calling. what is your response to the swing first and ask questions later? >> if you really want to get me going. he is the quintessential guy that is much more corporate america. i put them on last time when i heard he said something about me. it is hard to hear him, because he talks about it with a squeaky voice and only a dog can understand exactly what he says. the gist of what he is saying. you know, i guess he has made some points. outrage, certain

things. corny,risk of sounding one of the things that really upsets and outrages me is guys like this. they get on their high horse and they are arrogant. >> he called you evil. what is your superlative for him? >> i do not care what he called me. i will not go dignify a bunch of ranting he did on a tv show. if you let to say, me just come if you're asking me my opinion of him, he's the kind of guy i get outraged at because he preaches a duty. he is given a duty and he reaches to the sky. bought thatand stock any new microsoft wanted it. he paid the equivalent of 1/8,

he has a fun there. not his fund. they sold for $8 billion. that money belongs to the shareholders. i called him out on it and i am not afraid to. >> he would counter you and he would say, i took myself from the situation i did not go near that. he did not involve me in any way. i did not make all this money being born -- do you really believe that? if you believe it, great. i respect you a great deal. you are a commentator here. but i do not believe it. i know what it means to be recused on a board. he influenced that board. he did it. we had a non-disparagement agreement and we both signed it. he chose yesterday to breach the agreement, which he does. he preaches agreements. he chose to breach it by saying all this stuff about me. i feel free to say this stuff

about him. in a way, i think he is really mad at me because i was a force to help get the company split. you know what, i do not believe he wanted it split. i think he was planning to buy skype.cheaply, as he did i feel good about that because he probably knows a couple of guys want to buy paypal like he knew guys wanted to buy -- i will say it again. more people than casanova. that is all i will say. i will say more if you want to ask you more about it. should bethink he kicked off the ebay board? >> absolutely. he should not be on it. you know, he should not be on that board. it is a sin he is on that port, in my opinion.

we agreed not to disparage. i signed it and i lived by it. he violated it. and now i am free. i really feel good about that. i am sure he will hear from you again and i'm sure i will hear from him. .e will say more hateful stuff but, you know i am not the kind of guy who keeps quiet. >> you have gotten into a few fights. but are you looking at mark now as symbolizing your frustration with silicon valley? >> i'm not really frustrated with silicon valley. you have got other really good guys there. but there are real bad guys. there are a bunch of bad guys. all over corporate america. i am sure a lot of them, i have gone after a lot of them here at i am sure they unanimously hate

me. borrow what roosevelt said in one of his great speeches, i am sure they all hate me and i welcome the hatred. but, you know, it is not that he personally gets me mad. it is the system. if you get me going on that, i could talk for five hours. has reported he recused himself. chris and i will say again, first of all, he influenced and went and bought that stock, and he knew microsoft wanted it, and yet he bought it on the cheap. he literally stole it. so you know, as far as i am absolutely not is excuse. i think it should really be looked into.

we sort of made a deal we would not do that at this point. but you know, he can argue and say, maybe it is, coming out and doing all this and being but millions of shareholders across america with the stocks i bought. it is certainly an enhanced value for all of them. i will stay doing it as long as i can. >> and the gloves are off. let's talk a little m&a. can you envision a situation where apple might buy netflix, a company that come i believe you guys still have a stake in? >> yes. the substantial majority of our position in the portfolio we manage, including derivative. is, as i'velix always thought, a highly strategic asset for many of the

big players. however, the company's standalone process remained so bright that i think it would be for ardinarily difficult larger guide to russia get the company. the -- a larger guy to get the company. >> i want to make that clear, because i know some people are i will maybe netflix, say that is never coming. >> as far as spinning off itunes into a standalone music company? chris we do not advocate anything in the current business strategy the company has. we think apple is well run and tim cook is a great leader.

our only criticism is we would like to see more considering this great asset considering their melting on their balance sheet. >> let me go to herbalife. you're not involved in it. >> i have not shoulder any -- sold any shares. we are on the board there. i think we can leave it at that. >> there were big accusations made against you this may. in insider trading probe that was set. our member utah and yet the time that you did not know of any investigation and that you have never given out insider

information. what ever happened on that? did the fed ever approach you? that.ant to just answer i spoke about this a while back. done, i said i have never that were never been involved with -- in it. i think i sent it all then. i will not keep dignifying this. i said then that i do not know phil mickelson i never met him. i'm trying to remember what i said. i have never been involved in any of this type of thing. >> were they just looking for a good case? >> i am surprised you brought it up. i said once that i will not talk about it again. >> ok. >> i said completely and totally

that we were never involved in insider trading. i have an unblemished record for 50 years. i will not keep dignifying this. and by the way, nobody has brought it up for quite a while. i wanted to see if anything actually materialized. >> why don't you ask instead of doing it on tv. >> all right. here we are. any advice from investors right now? on the markets? general advice on the market. >> the market has gone down for quite a bit. i've been saying for your two, it hurts me as well. we have not hedged. you never had enough. everybody is involved here. i am glad i have these on. it is never enough when you have

energy stocks falling apart. that being said, i think you still have got to be worried. i am not making money on the stuff, but i think you have to be concerned. last month, to be sort of bullish and everything has to be great, that is the time you have to start worrying. >> ok. -- you are going to stay cautious. thank you to all of you. i will send it back. >> thank you very much. this thursday, the modern markets initiative, the high-frequency jay gruden introduced a proposal.

bart chilton has been announced it of some high-frequency emphasis. welcome back. it is good to see you again. >> it will be accepted and endorsed as essential to today's modern markets. >> was that your position before you left the cftc? >> it was. i have raise alarms as well. high-frequency traders have raised register. really thankful the modern market initiative guys are the white in this space and they're actually calling for aspiration. can speed, etc..

responsible regulation. those are things i called for as a commissioner. >> you're quoted as -- in a press release today as saying that traders need, in your words, a greater sense of confidence about today's trading environment. that is part of the principal for modern markets, which the firm outlines today. does the trading environment have a living -- level playing field right now? the criticism most expressed the high-frequency trading is that it creates an unfair advantage. >> that is exactly what they're calling for, transparent markets so everyone knows what is going on will breed investor confidence. it is not an on level playing field. more and more of the trading is moving to electronics. that is a good thing, by the way. old days at the trading floors for nostalgia. but 90% of the trading done

electronically, high-frequency traders make up a significant portion, anywhere from 30 to 50% in the equity markets. 30-50% in the futures markets. i used to regulate. they're all part of modern markets in all part of what is going forward. the question is, what are the parameters for that? that is why i think it is gutsy for the modern market guys and i am pleased to advise them given what i said in the past, that there really stepping up to the plate and they want to be part of the dialogue and part of the debate, about market structure and etc. me of the sprint competition in the limbic spirit everyone has to leave the starting blocks at the same time or risk being disqualified. on high-frequency trading's leaving the box a fraction of a second before anyone else? >> they leave at the same time and that is one of their pillars

, that there should be equal access. no special backroom access because you may be traded , that you do get a trade. equal access. if they start off at the same time and somebody has chosen to have a faster computer, that is a different matter. they should all start at the same place and should all get information at the same time and it should be transparent. that is why i'm pleased the guys have come forward. as we go forward into the global inter-connected markets, a high-frequency trading will be part of it. i am pleased these guys will go out and speak with market participants and legislators and potentially what needs to be done to be sure we have honest and efficient and effective markets.

agencies, whyany do they have ongoing investigations into the practice? >> primarily because there is so much volume in the volume is traded electronically. there is nothing i think suspect about high-frequency trading. all the trading is there. and certainly, i will never change my position on this. there have been cases recently reported yourself. when somebody violates the law, they should not just been defined. when it is a criminal offense, they should do the time. modern market guys are all down with ensuring we have fire integrity with markets, that it is open and transparent. that is why i am pleased to work with them.

sir, always a pleasure to have you on the broadcast. thank you for your time. time for today's latin america report. 6.3% to $2 billion. pepsi is among beverage makers struggling to keep consumers from abandoning soft drinks because of high calories and health risks. a kohler uses in natural sweetener to cut the calories by more than a third. it will be sold exclusively on amazon.com winner this month and has $60 per can. in 2015.gin that is your latin america report for this thursday. coming up, the cofounder and ceo of 23 and me. we continue in just a moment.

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>> be sure to check out the latest addition of bloomberg is this week. you can read it on the go with our new business we cap. tonight on our new bloomberg politics broadcast, with all due the.ct, tonight's guest is go -- arizona republican senator john mccain. that is tonight at 5:00 and 8:00 p.m. new york time. check out the new bloomberg politics for articles and videos every day.

withemember, taking stock pimm fox is now at 5:30 p.m. new -- new york time. the tel aviv stock exchange has there was annce upgrade back in 2010. the move sparked an outflow of foreign capital from stocks. its new chairman sat down with him -- with the bloomberg tv news editor and they discussed efforts to attract more companies to enlist on the exchange. >> increase the number of companies trading in the stock exchange or increase the number of shares. will affect the volume of trade. many companiesw in the next three

years. >> largely should but it to israel upgrading, so they are not being incorporated into the european benchmark. we had a story on the news a week or so ago. they do not consider israel to be a part. that seems to be the main lock.ing how far are you too convincing them otherwise? >> i do not know. we're working hard to find the right challenge to really join in europe. because all of our economy, philosophy, and trade export is in the european market. why it is reason important for us to be part of this market. trade are also looking to monday through friday as opposed

to monday and thursday. i think the ceo will meet with them in new york in a couple of weeks. >> correct. this is there to show we are part of the world and the reason moree try to create derivatives and products that we can bring to the market, today, the markets are open and there are not any more close markets. it is not only israel. we see companies coming to israel. cane have to do the best we to be part of this world. isif they say no again, what plan b. >> we do not have a plan b, honestly. we have to do the best we can -- we can to convince them. >> an extra level of screening at five major u.s. airports to try to catch any travelers from ebola ravished countries that

may be carrying a disease. about 150 a day will have temperatures checked using no touch thermometers. alarms are due to malaria. >> the message is this. have a business continuity plan and be prepared in case there is a public panic or your employees start becoming nervous about your work. this could be the ebola virus or anything that causes people to stay home. is this continuity is critical for planning. >> unemployment benefits last week pushed the average to an eight-year low. aekly applications fell to 287 thousand, the fourth

straight week applications have been below 300,000. a sign some economist indicate the job market -- to possiblew link attacks on at least 13 other financial companies according to a person familiar with the investigation. the group reportedly set its sights on companies including citigroup, e*trade financial, b. a sign some economist indicate the job market -- regions national, and automatic data processing. found in the computers were logged by protective technology that effectively stopped the hackers. is one of the big names attending in san francisco. in an exclusive interview, he es pn.ed the value of >> we sought overtime to not only produce, but to license a wide array of high-quality words for espn. the offer is not only

strong, but only getting stronger. we expanded the deal we had with the nba and so on. the value, we believe, is increasing. >> and he said disney would name a chief operating officer early enough as the planning continues. that is a look at top stories we're following at this hour. cocktail culture is going through a renaissance. the high cost goes from prep work to popularity. exactly how much are you paying for the ingredients? we spoke to three to find out. ♪ >> i am the managing partner of

pet, our signature cocktail is a simple drink. guangzhou bits of bourbon. by a washed with a bacon farmer in tennessee. i will serve it over ice cubes harvested by long island. the environment in which you are drinking affects the cost of the cocktail. >> my name is julio. --are today looking at --

you only get a teaspoon of jews. you can imagine how much you would need to make a whole bottle. and a touch of sparkling lemon soda as well. this also adds to the cost of what you're drinking. >> my name is chris marshall. ,he drink we will make today the first thing i will do is muddle of a few cucumber rounds. after that, i will add a mix. we will use a pineapple and smoke it this hickory wood. that has to happen several hours for. i will add an ounce of tequila. a dash.ed it with

you sort of, if you purchase a painting, you're not just buying the painting and the campus. >> stay with us. another check at another side of the break. ♪

>> get the latest headlines at the top of the hour. that does it for this edition. thank you so much for joining us. on the markets is next and i will see you tomorrow. >> it is 56 past the hour.

bloomberg television is on the markets. i am scarlet fu. let's get you caught up. the dow off by 323 points. a 1.9% drop. 2.2%. day of aow, a third move. almost at 19, still shy, up 21. of the index members are down in a -- and all industry groups are lower. let's take a look at where crude sales are. see 85 dollars off the barrel. crude below 988935.

today's second -- report. entering a bear market. >> what we have here is different. we have seen a resurgence production. we will add another million barrels per day in 14 as well. overall, if you think about the returns, breaking in thresholds are a lot lower than what we see in crude. you could see production continue even if crude comes below $80 per barrel. >> a lot of people are concerned about demand to ensure especially after the imf downloaded its global economic forecast.

>> when you think about the global production picture, you have a demand and supply in balance. you have a capacity coming back. you have production overall stabilizing in iraq. there were concerns about iraq production, issues there with geopolitical security challenges as well. that capacity is still there. you mentioned demand in certain countries and also in developing -- developing countries. supply and balance being more pronounced. chris wright. we tend to look at oil as a global indicator. it can also be a regional indicator as well very >> exactly. with a out of the winter storage.w we saw injections quite high above the five-year average.

so natural gas prices are somewhere in the four dollar range. we need a cold snap it to the winter season to boost those so natural gasprices. of 2014, but also 2015 as well. >> what you do is synthesize all these factors and look at valuations of everything. what does it show you? >> you look at below the historic average. both, the crude oil index, somewhere around five times. >> all right. we're are seeing it today. thank you for joining us here at we are back in two 30 minutes. street smart is next. ♪

>> all right. we're watching a big selloff underway here. i am trish regan and this is