is like. we going in all directions at once. thank you so much. we will be on the markets in 30 minutes. "market makers" is next. ♪ ♪ a >> think that last week was cut from the stock market? you have not seen anything yet. dropbout another 50% before the end of november? the squeeze, energy companies, did they really get hurt when oil prices fell? we will be speaking with the former president of shell oil. >> cutting the cord, do they want to make it easier for you? what does this mean for cable and satellite? good morning, everyone.

you are watching "market makers." >> i am excited today. in just one hour i will be heading to the second annual robin hood investment conference. after one week of complete market turmoil we have the biggest investors in the industry. how was your weekend? >> stephanie went north of 59th street? ask for food i will travel. i will travel. we have the top business story of the morning. shares of ibm are falling, big news is that they will no longer reach their earnings forecast for 2015, they will come out with a new one in january. ibm is struggling as the industry shifts to the cloud computing. meanwhile the company has unloaded its money-losing chip making unit. they will pay global boundaries 1.5 ilya and dollars to take

their business off of its hands. the chipmaker has been a drag on earnings. venture capitalist mark andreessen has officially resigned from the order ebay. he says that their decision to spin off their paypal unit marks the right time for him to step down. he says he has complete confidence in ebay management to handle the split. they told emily chang that every willechnology company eventually split up. >> many of them will be forced to split up if they don't move voluntarily. in their case i think it is getting ahead of where they are. markets, there was a big rebound in japan today, saw rallying with top indices climbing the most in more than a year. japanese stocks have lost 12% in

the last three weeks. there is a report that their pension fund will double its holding in japanese stocks to about 25%. that is called a stabilizing factor. in the fightry against ebola, the world health organization says that nigeria is now free of ebola. seven people died from the disease in the african countries with the biggest populations, but meanwhile who protocols are being blamed for those texas health care workers coming down with ebola. the head of the u.s. government's infectious disease agency says that tougher guidelines are officially on the way. >> clearly when you go into a hospital, when you have to intubate someone with all of their bottling with, you. molly fluids, you have to be completely covered. with no skin showing whatsoever. >> absolutely no ebola in

nigeria, do you believe it? x yes. >> you do? >> why would they say it if it is not true? >> i don't know what to believe it comes to ebola right now. >> that's fair, but i'm fairly certain a fair amount of caution and care was taken in making that announcement. >> all right, those of the top headlines for the hour. correctionled it a back in september as the s&p 500 was hitting 2000, pulling back by 5% over the next two weeks to three weeks. they did, a little bit more than that. now he says they are confident that investors will be taking even more risk off of the -- off of the table. baer, with the front allocation strategy, bob, good morning to you. great to see you once again. the s&p 500, as you know, trading at 1890 right now. where is the next stop on the elevator?

>> i guess he for we go it is worth highlighting that we were up toto go from 1770 1950. >> just having fun with you. routine you earned, and it is worth highlighting only because you have a dim view of where the market is headed next. i am just having fun with you. but i am interested to know and where we are going. >> the first thing is, i have got a pivot level in the market that has been guiding me for some weeks. at 105.the weekly close after last week where we threatened to get there but fell off at the end, there is more comfort. pete to trough, assuming the 2020, myaround 2000, best case expectation is for something like 15%, 20% decline

before we are done, taking us through to late november, perhaps. it is again worth highlighting that when qe1 and to be too finished, the s&p is a proxy fell 20% in both cases in two months to three months before the fed came in. clearly we have qe ending potentially this month. i think that for a number of reasons over and above that, 20% peak to trough is not an unreasonable expectation. i think we will see most of that move from 2020 down to 1820 was the first. we were always do for a rebound. i put that out early on thursday, london time, suggesting that wednesday's price action looked and smelled like interim capitulation and that a rebound was due. it was suggested that one of the causes of the rebound would be the market rising in more qe or are these not the end of it this month. within 20 minutes of my note being published, mr. bullock was on the wires suggesting that qe

be kept open. >> i don't know about you, but i love the smell of capitulation in the morning. i guess what everyone is trying to figure out -- and it is important to know in order to gauge the direction of the market for the next several weeks, what precipitated the price action? what precipitated the sharp increase in volatility? not just in equities, but in bonds, where it was particularly breathtaking? >> first of all, pressure had been building for some time. earlier when we were talking about small caps outperforming big caps, when they were outperforming in the run-up to ignore that.eryone a few things along the way in no particular order, the press conference from a few weeks ago disappointed the market. he cannot dog that

what it takes. we have very strong numbers to numbers ago and the market reaction in particular was a surprise to many players. but really i think this has nothing to do with ebola or anything like that, i think that the global economy is being marked down in terms of growth and that the global economy through europe, japan, china, is being marked down in terms of deflation. i think that the the one for the market is whether the u.s. can stand on an island amongst this slowing growth environment. i don't think that it can. i think that if the u.s. is going to power us do this, by definition we need very strong growth and consumption founded by debt. i don't think we will see that in the u.s.. again, in the u.s. i think we will be seeing growth marked down to the two number as opposed to the three number. the other very big factor is this -- people talk about the lack of leverage in the system.

on one level there is less leverage in the banking system, potentially, depending on how it is measured, but clearly the size and position on balance sheets massively outweighs the level of the witty that the street can provide for any time they want to sto sell assets. >> are regulators aware of that? those who are so enthusiastic about dodd-frank and the volker rule did not sit through a market where we had a test, where things were down. do you think that they should change their tune when they look at the fact that the street cannot take on this risk? >> look, i think that regulators are fully aware -- certainly the ones that i he do who have been warning about this for some time -- i think that the issue is this -- the monetary policy side of the bank is saying that there is money, go into a -- don't do something with it. i think that the issue is this -- is the job of the regulator

to make sure that the banking system is risk free and not providing systemic risk going forward? or is it something else? i think the regulators who are really in control are still on an ongoing basis worried about the global economy and in particular absolutely clear that they want to avoid systemic risk coming from the banking system again. i think they are aware. i think that at some level they set this as the price to pay. it is what it is. but we cannot make everyone happy all the time. what we must avoid is another repeat of 2008 with the systemic explosion, controlling bank leverage is one sure way of doing that. >> let me ask you this question, bob. if it is what it is, if the lack of balance sheet likes ability on the part of big banks means that we are going to have a more volatile market, is there anything necessarily wrong with it?

it certainly test the appetite for risk, but mainly short-term investors. if you are thinking about the market or are an institutional investor, these kinds of episodes should not rattle your nerves that much. it is the hedge fund manager who theuch more vulnerable than institutional investor. yes? >> i kind of agree. i think that at some point mohamed el-erian has been on the show and he talked about the wedge between the real economy, the markets, and how the wedge has been made up for by qe. i would suggest that from 2008 through 10 now, the real economy has benefited far less than financial markets. i think that going forward a 15% correction probably does not do that much harm to the real economy. particularly if it means lower prices in the commodities spectrum. but it certainly puts the

markets straight. the real issue is that at some point the selloff we are seeing in the market, particularly in the bond market, can amount to a tightening of financial conditions for the real economy and i think that at that point i do think that central banks would get back involved. view, iterms of my think there is more weakness ahead with another 15% in global stocks over the next month or week or so, i think that at some point this year the ecb and potentially the bank of japan will come in and do more. the conditions are not right yet . i don't think we are anywhere near the fed coming in to do more help. do think that the central banks that i expect to respond and expect to respond this year are the ecb. >> right now when we see mario draghi not doing what it takes, if you look at the bombs and what they are, two years, what

incentive is there for anyone? >> not a whole feet, i think. deposit rates are negative. buying the funds from the bond market is trying to force a rebalancing of some way of trying to create something in europe. i'm not sure that it works. i think that mario draghi will be able to do whatever it takes, but only when he can demonstrate to mrs. merkel that the breakup risk is being priced into the market. we are not there yet. as i said on thursday, a precondition for ecb help is the example of the 10 year it would germany spread to be at least 200 and 50 basis points, 70 or 80 points away from their. we probably need to see it down closer to 100 rather than 105 before the bank of japan comes back in. the magnitude of the moves in the market today means it is critical to be

tactical. great to have you on the show this morning. we have been here before. big mortgage lenders talking about making it easier to borrow money. are you listening, john paulson? is subprime back in the game? >> plus, maybe it is a real-life game of thrones. hitting the big cable and satellite companies opposed to the network. it is all about cutting the cord. ♪

>> welcome back to "market makers." easier for get americans to get a mortgage. fannie mae and freddie mac are asked acted to relax some of the rules on lending this week for risky borrowers. can forgetone of us that loose lending standards are what helped to lead us into the financial rice is.

peter cook has all the details. this. i cannot believe are we really going here again? prettyre, but it seems clear from those familiar with what is happening here is that this is not a return to the no doc liar loans of the housing bubble. according to people who support the effort it is an attempt to loosen the rules that have frozen out people from owning a home, that the pendulum has swung too far and it is time to make modest adjustments. fannie mae, freddie mac, and most importantly the federal housing finance agency is close to clarifying with issuers which loans are so flawed, so bad, that the risk of having to buy them back from the finance giants if the borrowers default -- but the flipside is which ones protect them from buyback? from keeps them

considering anyone with a marginal credit record. theie and freddie with blessing of fha may allow borrowers to put down as little as 3% on the loans back to the gse, with 5% down payment required on most loans, meeting a whole list of other , the fha will be spelling out these changes at the mortgage conference association today in vegas. the hud secretary also said this week, again, that these moves are very limited, but as we have heard in the last little bit that they are triggering criticism of going too far. you having some level of deja vu? well, there they are, speaking in vegas and it did not start off bad. it didn't start up that last time. >> that's right, but there have been a lot of changes since then. there have been changes to the underlying of how those loans

are written in the first place. it is much harder to get a mortgage these days. these changes, again, are supposed to be modest on the margins. we will hear more from them, the details do matter. if they go further than people are suggesting, there will be blowback. people on capitol hill are saying that this is all the more reason to get the -- get them out of this business altogether. >> clearly not part of the discussion right now. michael mckee is in the conversation. michael, peter just made an excellent point, the concern from the level of the administration and in the white house as well is that current rules around the mortgage market have frozen too many americans out of owning a home. >> ben bernanke cannot get a refinance. >> this belief that there is a certain level of homeownership. gote got regulation, we

overregulation, maybe it went too far to curb the excesses of the past. the new york fed did a recent study of the people who did not buy homes and they asked why not . they found that the top three reasons were all related to getting bank credit. either they couldn't get it or did not think they would be able to, that they did not make enough money, it is keeping people out of the housing market. the biggest issue has been this putback issue. wrong with this picture, is there? rate, i don't want you to buy a house. works for me. don't buy a house. what we are seeing now is the average pico score on close loans this year has averaged 726, which has come down from the peak, as you can see, but it is still way above historically where it ever was. the average denied home loan,

690 five would have gotten you a home back then. in 86, maybe, but not 96, which was hardly peak housing. >> what it basically comes down to is you can see why we are not selling as many houses, not as many people are able to qualify as they could in the past. >> but when you show up with that argument, that is a good thing. >> that is part of the argument, that there was too much encouragement into buying houses. that we were pushing people into buying. the homeownership rate has come down. the question now is -- are those who are qualified to buy and could get loans able to get loans? ask both of your question, then, and this might get too fruity -- in the next generation, you know, generation y, sharing the economy standpoint, could it be that people are no longer interested

in buying homes? in the world of airbnb, huber, paying for experiences and not material goods, could less and less people feel like this? wax that is how people feel in their 20's, not their 30's. >> that's a hard one to buy into. people want to buy apartments more than houses now. >> that works out. >> thank you, michael. don't forget peter cook, who brought us the news from d.c.. >> i was not saying that that's how i felt. just awill be back in moment. stick around, we've got more to cover. ♪

>> when we come back, is the oil taking it on the chin? of crude priced

in? we will talk to the former head of shell oil. >> it could be the biggest fear of cable tv providers, a world where viewers just don't need them anymore. ♪

>> its "market makers" here on bloomberg television. >> five-year lows last night -- last week for oil prices, there are all sorts of indications that if prices stay at this level, for countries like saudi arabia and russia and companies like exxon and chevron, let's take a look at the issues in the industry. kevin brooks is the cofounder of clearview energy per -- energy partners.

is the formerr president of shell oil, now ceo of the advocacy group called citizens for affordable energy. john, let's start with you. the excess attribute supply to? >> a couple of things. there is a bit of deleveraging going on from financial institutions that have to get rid of their reserves of oil because they cannot trade under dodd-frank. in addition, the global economy is weak. europe is weak as a kitten, not demanding oil like they have. then there is the increase in u.s. production. the three, ion of think, has put us in the position of having too much supply for the current level of demand. >> kevin, let's bring you into the conversation. what john just described is happening, but it was happening six months ago as well when oil was trading at 105 dollars per barrel. so, what has changed?

is there less demand? or is something else going on? >> you don't want to discount the importance of demand. it has fallen far short of expectations. like any other forward-looking market, expectations can drive a lot in the short term. also, the saudi's have kept the spigots running, even after for their summer power generation. add those together and you have enough of a problem, but on top of that you have libya unexpectedly back online, with no one in charge. no one had that in their numbers. >> what is your view on why? >> well, i would love to believe in conspiracy theories, but you cannot organize around the world where you cannot control the production. athink that they are testing couple of things. the first is the resolve of opec partners.

the second is whether or not the u.s. really functions as synthetic function. it may be worth one quarterback numbers just to find that out. >> what do you make of these pain points? had what, three or four years of robust rises? they have had quite a financial reserve backing them. second, i think that they are sick and tired of the bad behavior going on at opec and they are going to teach a few of the renegades a lesson. they are tired of those arising venezuela, iran, and nigeria, who do not have their business under control and are operating almost lawlessly in some respects. i also agree with kevin, there is a bit of testing going on in the shale formation as to what point drillers in the u.s. will lay down their drills because of the price of oil. they need to find the bottom.

>> what is the answer to that? what point? >> well, that is the secret of the industry, you will never know until it happens. they won't tell you their cost structure and when they will lay down their drill sets, they are always competing with the next guy down the street, and that is a proprietary secret. what do you think, kevin? >> i think we will find out relatively soon. one thing that will happen is you won't shed production in north america, but he will stop drilling the next well. the high-cost producers are probably already doing the ane, but they are small minorities in production. what happens when even low cost producers have even less cash going back to the wells? it withinstart to see a calendar quarter. not the reduction in production, but perhaps a slowdown in growth . >> and that happens at what level?

$80? $85? into theou get down 70's, you are reaching the no invest decision point for some of the medium cost producers. if we hit 70? i think you will see a lot of the nation. >> what are the chances -- both of you -- let's start with you first, john -- that we do see oil prices on that handle? >> i would be surprised. i don't think the world is that we. i think that we will work off the glut and i think we will -- i think that spring hopes eternal and as we move towards spring we will see the practices strengthening in the global demand. it is not the demand is shrinking, it is that growth is not happening as fast as addicted. we will work this off for the next three months or four months. >> how much would you say is the threat of u.s. crude exports causing the saudi's and others

to possibly front run the supply affect? sorry, john. long as thehink as obama administration is an office there is any worry about exporting crude. that decision will not be made during this administration. >> i am perhaps a bit less pessimistic, but it appears that they will be moving in incremental steps and the wrist increment is still a long time coming. and if they do not actually look at this as an open it up to everything kind of decision, then the saudi's have nothing to worry about. >> can we go back? if that is not what is driving their behavior -- and john, you are right, saudi arabia wants to teach a lesson to nigeria and venezuela -- what does it mean for the future of solidarity? i'm not sure that it means as much as it once did, but if this is what they are prepared to do,

is there any solidarity left? was in saudi arabia one year ago and i gave a public speech suggesting exactly what they are doing. i am sure my speech had no impact on what they are doing, but i said it was time for saudi arabia to look at more unilateral relationship with trustworthy partners around the world because you are living in a bad neighborhood. you get a bad name -- bad reputation in that neighborhood. with the u.s. and china, like you have for many years, go on your own. this is an unsustainable formula where we set prices based on what countries need to support their entire state infrastructure, and that's not the real market. not with the u.s. producing more oil, with russia producing however much they want to do this. market forces will be overtaking saudi arabia if they don't change their output -- outlook. >> in june of 2011 you had a six

to 60 law, that's not usually how it goes. and it has been broken ever since. right broke in 2011. love that. >> thank you. citizens from affordable energy, thank you. up, a nightmare scenario for comcast and time watchingble, viewers their favorite shows without a cable tv subscription. more on that when we come back. ♪

>> it is time to cut the cord. hbo and cbs are making like netflix with an announcement that they will sell programming without a cable subscription. all you will need is a broadband connection. is this the beginning of the end for cable? here to answer that question we have brett harris and david bank

. let's begin with you, brett, the beginning of the end? a >> hopefully not. >> for whom? you are not speaking for consumers, are you? >> for the cable bundle. the hope is that this is not the last straw. it is marginally negative for the cable bundle, but we don't think that this is the last straw. there are 30 million hbo households today. even if a percent of them left. >> how many people do you figure that they have hbo just because they want to watch whatever they want? >> we think that is a small number. you will not pay $70 plus the premium for the subscription to get one channel, hbo. likely speaking, a cable package like that will bring new espn -- big households with multiple people watching different change -- channels. >> what do you think?

>> that was my big question after time warner had done some in-depth market research around hbo, identifying four is around 10 million to 15 million persuaders with more aggressive marketing who they think would be more linear subscribers. at the end of all of that, my question to management was -- you have got all of this fantastic data market research did not have before. how many people have it just for hbo? >> what was the answer? like not many. >> what about hbo envy espn? >> when you go to that place -- >> everybody -- >> everybody kind of watches about 15 channels. the issue is, your 15 are different than mine, different than stephanie's. everyone has their 15 channels. i don't think that this is the breaking of the bundle. i think it is the opposite.

we don't really think that that product was built to be a big standalone success. what? mean >> all access. the real point of that product, what we think it will do for the company is to highlight the value of cbs, right? -- will literally have literally have a market value established on a standalone basis. right now at best from a cable company you are getting below two dollars. so, if you add the out of home access to cbs, you can watch it anytime you want, you can get that through your cable service. isn't that really worth two dollars or three dollars per sub? it keeps the bundle together, you will do it through your cable service as opposed to blowing apart. >> let's pretend that espn

decided to cut the cord d offer you its own service? what happens then? >> that would be more concerning. larger, with much more popular programming. that would be more concerning. disney as their owner would probably be very cognizant of that fact and they would -- they are launching a personal subscription service with dish -- they will be very focused on making sure that whatever they want will not be cannibalistic. going back to hbo, wire they doing this? just like david was talking about, why was cbs doing it? differentlots of reasons to do it. 10 million to 15 million potential subscribers. of the biggeste supporters of tv everywhere and what has not happened is you have not seen cable companies coming out with beautiful user interfaces and on demand options, which is why netflix is better.

i think that time warner and what they are trying to do is poke the cable operators to say -- look, we have given you on demand rights, you are not using them, so we are going to go around you. much freedom do these companies -- cbs, time warner, abc in the case, how much freedom do they have to do this? to go over the top? >> there are legal constraints and then political marketing constrained. what we would call channel conflict. i think that legally, there is probably wiggle room to do all of these things. remember, abc not only has the cable distributor to deal with, but affiliates all over the country. broadcasters.

the answer is you are going to work with all the partners. they have not even announce what the business plan is. i would think that they are probably going to be working with the distributors in partnership, in terms of pricing. the easier it gets with broadband connection, i think they are not going to price it attractively settled that if you were a cable subscriber and were sent to you to turn it off, they will work with them. >> mabel the people that stand -- maybe the people that stand to lose the most are satellite companies? >> right. think that people will be going off --? >> that is the reason that they are selling out at&t, right? over the next 10 years they are going to realize that the connection is more important. >> that is just the melting ice

cube, then. >> what at&t hopes to do is take that directory me in the subscription model and put that online, they already have the infrastructure and they can pair it with broadband. >> is it because the next-generation buying homes and moving into apartments are simply not signing up for cable? pirating hbo go passwords? >> you have a millennial theme today and i think it is super interesting. >> maybe that's my generation. >> what are you, 30? like maybe i'm speaking for my people? no. they are laughing. do see different media consumption and subscription behavior occurring for these millennial's. i think that the question -- you kind of alluded to it before on the housing issue -- yes, when you are like 21 years old and moving into your new apartment, or maybe even living in your parents house, you will behave

one way, but when your first child was born, when the mattress is no longer on the floor, when it is an actual dead , are you more likely to spend -- think about it, only $75 per month for video service alone? >> when you talk to our young producers, none of them have cable. >> true, but that is a small sub segment of the market. as you become a family -- >> by the way, there is a danger in talking to the 21-year-old sitting in the cube next to you. the average american watches five hours of linear television. where do you get that time? no idea. but of linear. not just like hulu. five hours. >> five straight hours of lawn ordered? >> it's the best deal you will ever get, this cable cut subscription.

talkedlast time that we about this, hbo was not going over the top and did not seem like it was. cbs certainly did not seem like it was. >> showtime? >> for sure. rights of course, we know that there will be new personal subscription services out there. dish, espn. over-the-top,t there are just a number of them out there. >> gentlemen? >> i am with brad. >> absolutely. >> thank you so much. brett harris from rbc capital markets. >> we will be back in a couple of minutes. stick around. ♪

>> i hate to leave the show early, i would only do it for an extraordinary reason. for those of you who are desperate for some real market intelligence, i can take you there. i am heading across town to the second annual robin hood investment conference. if you follow the trade ideas that were recommended on that up 13.1 percent. if you purchased the s&p from last year to today, it is only up 5.8%. clearly, listening to the big lines makes a difference. >> it sounds to me like it is worth it. withwould certainly agree that. you can watch me this afternoon. i will be in dallas was only with the one and only ceo of j.crew. and i will be speaking with

mickey drexler. me, i will be leaving, but i will be over at robin hood for the rest of the day. >> before we go, we need to bring everyone up to speed. here is "on the market." ibm, plunging, abandoning its earnings forecast, which is major for 2014. the ceo says the company was hit by weaker than expected software sales. that they are still struggling to find out how to shift away and onto cloud computing. that was miller's idea. it is not an innovative company and it needs to be disruptive. current management all comes from within ibm. there are structural issues with the way the company is organized , and i think it is tough for

the people who come from the inside. a trust issue. ibm is the company that other big companies hire to sort out their tech issues. if you don't trust them to move at the speed of the indus read to get you into the cloud, you go shopping elsewhere. >> right next-door. >> we also need to mention what is happening with rail companies . csx in particular confirming today that they put an end to merger talks. hunter harris is the ceo still pounding the table. an effort to persuade the world as to why what america needs the big mergers. a lot of demand for big capacity coming from oil, for example, without enough capacity to meet the demand. he thinks that industry friendly how is -- how that -- that possible? >> harris needs to come back to talk to us. >> i think so, too.

>> market makers will be back in just a moment. coming up, apple versus square. ♪ . . .

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>> live from bloomberg world headquarters in new york, this is "market makers" with erik shatzker and stephanie ruhle. >> fear factor -- just the thought of able in america may have an impact on the economy. turn your iphone into a digital wallet -- apple pay is making its debut today and it has rivals such as square directly in its site. whole foods hopes shoppers are value voters. the upscale grocery chain is opening up a new campaign that has nothing to do with price. good morning. it is 11:00 in new york city.

come aegis one her way to the robin hood investor conference. she will have some big interviews worth later today, including mickey drexler. brendan greeley is here with us. i'mnlike stephanie, except not like stephanie at all. to begin this hour with the top business and finance stories this hour. down asf ibm trading much as 5%. the company abandoned its forecast for 2014 and plans to come out with a new one in january. between now and then, everybody is scratching his head trying to figure out where the floor is. ibm has been struggling with the shift to cloud computing and the drop has dragged down the dow jones industrial average. it has also turned to the value of the stake owned by the largest shareholder, warren buffett's berkshire hathaway.

the company has managed to unload its money-losing chip unit. ibm is paying global foundries $1.5 billion to take that business off its hands. a group of investors plans to make a $2.2 billion for reebok. reebok is currently owned by adidas, the world's second largest maker of sporting goods. a hong kong-based right equity firm and funds affiliated with abu dhabi are going to make the offer. in 2000ought reebok six. reebok as a brand has fallen on hard times since then and is trying to reposition itself as the leader in fitness gear. poll shows it's a dead heat with a week to go before the presidential runoff elections. bit two are statistically tied. the two are statistically

tied. news for people who came into contact with the first ebola patient here in the united states -- they have been cleared of the risk of getting the disease or will be clear today. there is the 21 day window. most were workers up hospital where thomas eric duncan was treated. on cdc blames the exposure inadequate safety protocols. dr. anthony fosse says new ones are on the way. >> very clearly when you go into the hospital and have to intubate somebody and have all of the body fluids, you have to be completely covered. the protocol will be finalized soon, but one thing will be complete coverage with no skin showing whatsoever. >> on the ebola front overseas, the world health organization says nigeria is free of the disease. seven people there had died of ebola. the human cost of this disease

is in countable. the financial cost is most definitely calculable. the world bank tags it as $30 million over the next few months. fact that has to be considered after the failed attempt to contain it in dallas. my guest has been studying this issue from the investors perspective and joins us from sarasota, florida. what have you concluded? >> you had an emotional response . it piled on a correction in the markets, so you saw it, you saw a violent riot in the stock market last week and now we have a news flow which looks to be containment, new protocols, mistakes were made, they have been admitted, we have corrected procedures. that may reduce sentiment. i know by my e-mail flow on the writings that there is a lot of pushback will stop i'm not going to fly on a plane, i'm not going

to touch anybody, we are being lied to by the government. all that kind of stuff. but it's a practical matter. larger economies deal with this issue, they get it right after a while and we think we're getting close to that now. >> i'm curious about what after a while means. in the 80's, it took years for people to understand how hiv was transmitted, with the dangers were and to understand how it works. we are nowhere near that with ebola and we don't seem to have years to spend. thehe government doing right things to communicate how ebola works? >> clearly not in the beginning. is at works to me it now and we have this rapidity of social media which takes a ,illisecond to advise ideas whether they are right or wrong, to billions of people.

that is the new world in which we live. there are some serious issues with ebola. it has been around for a while, there are poor countries in west africa with governments who have inadequate health systems, and with corruption network, so that someday can bribe somebody and have a burial in a cultural tradition rather than a cremation and infect somebody. that is going on even as we speak today. the risk is there, but in the western modern economies, we will change sentiment with a news flow that reports the corrections underway. >> one of the things it seems, seems -- i will emphasize -- that the cdc has been struggling with is how much alarm to raise among the general population. from your perspective, as an investor examining the impact on the economy, what makes the most sense?

do you tell people this is a serious threat to protect themselves, establish their own personal protocols to make sure they are doing the right thing in case they come into unwanted contact with ebola patient or do what the cdc was doing initially, to tamp down the fear factor and tell everyone there is a neck stream chance everyone's going to get infected only to find out they were not taking all the necessary steps and was contagion even though it seems limited? >> there is so much cynicism about government. america, we have huge numbers of a thoughtful population, people who read and get information online and they don't trust the government. the government can do is tell you the truth in block letter clarity and not try to soft-pedal it or massage it or spin it. unfortunately, our system doesn't work that way.

it worsens the impact. don't tell me everything is going to be alright. give me the facts, give me some responsibility, and let me decide for myself. i think americans want that. we will see, but it seems that way. >> when you are trying to figure out the economic impact of what fear can do, what do you use as a benchmark? or thelook back at sars you consider terrorism a kind of virus, d look at the consequences of september 11? >> september 11's terrorism is a different kind of category. conferenceved with a on sars at the time of the outbreak. we were trying to measure how behavioral changes take place. people decide not to go somewhere and defer purchase, they lock themselves in their homes and do all kinds of things.

changing psychology and sentiment is difficult to quantify and estimate. estimates and of that's about the closest we can get. is clearly behavioral change and we had a shock with ebola in the united states and we had behavioral change will stop how long it will last is another issue. they do it for a small time and they work. do they see the change is more permanent? with.s what we deal >> when i think about what scares me, it's not the drip of information, it's not the one or two or three patients in the u.s., it's a torrent of misery in west africa that may not be controllable at all. of onee simple existence

case in the u.s. drive fear in the u.s.? >> i think one case is enough to drive fear. we saw that with the duncan case. ande have another next week we are determined to came through an airport some way or contact came through an airport, we would ratchet up the whole protective mechanism at the airports. a lot of people in this country want to ban flights totally, close the country, and isolationist mindset. it gets fueled rapidly. a single case could turn that back on. >> you mentioned earlier -- i take it you believe it ebola was in part responsible for the market volatility we experienced last week, not just in stocks but in treasuries and the commodity market. is there any way to try to isolate the ebola factor?

there was lots of other stuff going on at the same time. people were talking about the slowdown in mobile -- mobile growth and what's happening in europe. anyway of zero wing in on -- zero wing in on ebola? >> i don't think you can isolate it. you can list half a dozen factors and you just did. into the bondd market knocking the treasury yield low to have a flight to capital, what is mario draghi going to do. all of those questions come together and we are long overdue for a serious collect -- serious correction in the stock market. deaths andthe ebola the second nurse and suddenly it piles right on. i believe that 400 point freefall drop in part was on the news flow of ebola highly non-e other things. >> great too -- highly on the

ther things will stop >> thanks for helping us answer the question what is the original cost of ebola. apple i'd pay its 220,000 point-of-sale today if you happen to have the upgrade on your phone. we will tell you about the debut of apple pay at what it's doing to the e payments markets. >> it's not your average grocery store commercial -- that's --cisely the point of stop that's precisely the point. tv plus anderg streaming on apple tv and amazon fire. ♪

>> apple payrolls out in the u.s. today -- about 200 20,000 shops and restaurants are set up to accept it, including bloomingdale's, macy's, thenald's, petsmart and beleaguered radioshack. how will this affect other digital payment companies like square? or a johnson joins us now from san francisco. is inmberg legal reporter washington. how scared his square right now? >> they are not really fearful people. i don't know. there's a lot of rumor and the payment arena. square is in a somewhat the front business. fundamentally what square is trying to do is give merchants better answers and apple pay is

not really a direct competitor. apple pay is going after the relationship a credit card might have with the actual business itself, whether it is a macy's or smaller merchant. reasons it's available in a lot of stores is because people have been trying to do this keyless filed payment system for years and years. there,rastructure is apple pay is piggybacking on top of it. bread and butter is this stamp size wipe the magnetic strip. as credit cards moved towards pin and chip and other mechanisms developed, how much is that threatened? focus --part of their they have stepped away from their square wallet system, providing consumers with a way to use their phone for for example, and they have gone forward more with trying to

provide small businesses with a better payment system on the it's and, whether different check out or lower-cost payment processing than they get from bigger -- biggerll stop him vendors. but the apple pay is an interesting development. we've seen a lot of credit card companies try to embrace it at its launch today and it shows what an impact it could have. >> square has been great for the small margin. you take the little square device and plug it into your ipad or iphone and you can do business. but there is no security. you swipe the magnetic stripe and apple pay addresses that problem. ofwe're sort of at the end life of the swiping credit card as the way we pay. target, home depot, dozens of other hacks have pushed us to that point. the thing apple paid as is it's

based on next generation technology which is far more secure. >> biometric security? parts.e are two there is biometric recognition on your phone but it does not give your credit card number to the retailer. instead, it gives you an encrypted number, a version of your credit card number that can be unpacked and read at the other end but the retailer never has your credit card number so if a hacker gets into the system like we saw at target or home depot, they will get a lot of meaningless, one time only numbers. this is a huge deal and square does not do that. what happens currently when you take your credit card to a merchant, your credit card number is copied as is the expiration date and passed on a couple of times. where the individual store sees it for a moment, the big merchant like target or home

depot >> the information and keeps it and so i can monitor who you are and how you shop. all that information is passed on to the bank which verifies it. be the information i can stolen is move in -- moving from place to place all stop apple is creating a false identity that goes all the way to the bank and back to the merchant for verification where no one knows it's actually you and the identity is created in that instant and goes away at the end of the transaction. the implications are not just better for the security of the user, but also the privacy. pickt is no longer able to out who the pregnant teen was buying all that stuff or understand home depot if this individual just on a new house and if they are in line for more furniture. it's a fundamental change that will affect businesses beyond levels of privacy to how they

can market more stuff to more people. that goes away with apple pay. no longer has anything of hours that they can lose, so praise be. but presumably somebody in baylor is right now is trying to figure out how to crack this. what are the points of failure with apple pay? >> one thing we know is the bad guys are always trying to figure out what the next innovation is. apple pay has a couple of them. one of the things we saw when they rolled out the initial biometric identification is that it did not take hackers long to show it to be cracked on older versions of the iphone 5. they have upgraded and supposedly it is harder to find vulnerabilities. if you actually got somebody's crack the you could biometric identification, you could use the phone like a credit card and spend it anywhere as long as you can get around the biometrics.

the most vulnerable part of the data when you use apple pay is when you load the data card number onto the phone, it takes a picture of the card number or you type in the card number. if there is malware on your phone, it can grab the data and give it to whoever controls the malware. that will prevent the huge, on somethingks like home depot and target where you have tens of millions of cards at a time and take it down to the user level. you can still leave the honorable points along the way. is a lot better than what you get out of your credit card and this is just the first generation. presumably some of those points of weakness will be fixed in the next iteration of wireless payments and biometrics. >> there's no question it's far and away above the system we have now. the timing for this is perfect

in some ways because you do have huge chains rolling out technology on their registers and all of that technology is going to be able to use apple pay. this ishome depot, creating a moment where you have this huge infrastructure change resisted banks have the change but apple has gotten into a time where people are ready for something different. >> target no longer get your personal data or you should -- or lose your credit card information. thank you very much. we will be right back. ♪

>> coming up, it's not your

everyday acquisition. ibm is unloading its chip unit by paying someone else to take whole foodsplus rolls out its first national ad campaign. it has cattle and beef. who is the chain trying to attract with the message values matter? ♪

>> live from bloomberg world headquarters in new york, this is "market makers" with erik shatzker and stephanie ruhle. >> it is 11: 30 in new york city. you are watching "market makers ." stephany is on her way to the robin hood investors comfort -- so brendanonference, fraley is kind enough to join me. >> information is getting exchanged. >> speaking of information and exchanging -- ibm shares this morning have taken a dive. they're dragging some big names down with them.

the company strapped its earnings target, big blue down about 8%. the dow jones was down 119 hasts and warren buffett lost many hundreds of millions of dollars on his stake in ibm. things ibm had to say that rattled people. one was that demand evaporated in december and the company, knows a price to some as having problems making the shift from mobile to cloud computing. >> on your first point there, they keep talking about these issues they had in september. execution, sales and software. we have seen this industrywide shift to cloud computing. ibm's software portfolio is not based on the toud yet, so they are trying

push those old legacy products into the cloud and it seems like a hacker -- seems like they have some starts and stops to that. wise, ibm talks a lot about the cloud but i was shocked to read an industry analysis that said not only are they behind amazon in terms of being trusted to do things in that cloud, they are behind rackspace. >> clout is front and center with what they talk about with investors. they bring in $100 billion in revenue a year, 3% of their total revenue. jargon that you are hearing is about cloud and data, but the actuality is maybe not that much is coming from those new initiatives. >> all this talk might be masking another fundamental problem at ibm. >> one problem they brought up

that may be scrapped today was this epf roadmap. someone argue to the detriment of investing in the business, so at this point, they are saying we are not going to get there. if it was going to be close next year, you might think they might maintain it but if you look at whether guidances for this year, they lowered their guidance to about $16 a share. be $18 fort would 2014 and we are seeing that just not going to get there. >> it has been clear for a while that the roadmap 2015 -- employees use to call this roadkill 2015. is there any chance they're going to turn this around? r&d, but r&do much in the right businesses. to prove what they have to offer is superior to the winners in

cloud right now. very much.u lots to talk about with ibm. i'm sure we will be doing it in the days to come. >> coming up, keeping you shares may- buying be more than just one single company. ♪

>> breaking news on a couple of solar power companies -- david einhorn spoke at the robin heard -- robin hood investor conference recommending solar stocks according to be but the conference which is closed to the media. terraform power and son edison are the names you mentioned. son edison he said he had already taught in the second quarter with an average price of $15.55 a share. rising electricity

prices should benefit son edison and now he's adding terraform power. both of these stocks as you would imagine have been spiking in the wake of this news. we will continue to watch them and bring you more from that conference. fax david i norton moving himself a market mover yet again. .et's talk about zayo this is a company that stands between you and your internet provider. it went public on friday and shares took off. it's something the obama administration has in time for net neutrality. let's talk to pimm fox about this. >> here's an interesting concept -- we had all of this turmoil last week in the market and everyone was worried about whether new money is coming in for an ipo.

this went off for thursday night, the stock moved higher about 16%. is a big player in something called dark fiber. imagine you want to watch your netflix movie -- there's a fiber cable that goes for men big switch talks to someplace netflix has all these movies. the actual fiber in the ground, .hat is zayo they compete with level three. there's not a lot you can do with just a wire. yet the connected to a speaker or wire -- they do that but they are a big layer in the dark fiber and the stuff that in the ground. >> the dark fiber is unused. >> exactly. you want toand if build it out, they are going to offer that capability to you. one of the things that is interesting is this idea you

could consolidate a lot of this dark fiber. >> why is this a bet on the obama administration regulatory policy? different lanes on the information superhighway and they can go it different pays thecause netflix cable company for that, then you've got different speeds and you need more fiber. fasta question of how you're going to need to carry that traffic. pursuing it will have to pay more for the internet connection. >> that is who ends up paying. >> you play -- you pay eight dollars a month. you have whatever the fee is for hulu, more and more, the more you eat the more content we can shovel to you. these guys go public last week,

the stock moved higher. the stock is up today as well. executive, the chief used to work at icg communications. they were bought by level three and knees are the two big players. >> laying new fiber or are they just buy all the fiber put down in the late 90's and early 2000 by the likes of 360? >> level three bought global crossing. is a continuation of that. it's not only laying new fiber but it is consolidating. you get a little more power and pricing. if you own the pipe, you've got to pay the hyper. >> nobody ever lost money betting on the likelihood fcc will cave on regulatory policy. >> it's interesting to talk

about that because the open, and time for the fcc has been extended to the 29th of october. they do this 180 day clock thing. i think they stop the clock at a 80 so they are taking seriously a lot of the pushback from states particularly about the increased costs. no issue has generated more feedback than net neutrality. show.m fox, watch his he sits down with former head of nbc universal, bob rice. >> a new campaign of from whole foods appealing to their customers'values. ♪

>> whole foods has a new message to consumers -- value matters. not as in what you pay for your food but as in the type of product itself -- organic but

shovels and humanely raised meats. that is what whole foods wants to drive home in its first ever national advertising campaign. >> at whole foods market, values matter. we sellhe fresh beef comes from cattle who had room to room. no antibiotics, no added hormones. third-party rated for animal welfare, raised by people with responsible ranching practices on over 1000 ranches. >> whole foods is facing more competition than ever before and have cut their rose for cast. investors have finished the stock. will this new campaign jumpstart sales? the vice president of communications of whole foods joins us from austin. i'm inspired. i want to buy a farm and put a farm to table restaurant on the farm. what really working, but did you ask the ad firm to do? the ad firm to talk

about our true story. we have been quietly talking about ourselves with our customers and in the media for some time. it was an opportunity to really tell our authentic story. we have a higher stand -- the highest standards of any grocer in the industry and we pioneered the organic and natural food space. we want to tell everybody what is different and what we value. tell about the standards we have established that are higher than anyone else's. about your market research. what percentage of people do whole foods believe could be shopping at your stores is not shopping at your stores now? .> that's a good question we do ongoing research and talk to a lot of consumers and customers in our stores. is a well-known brand but what is interesting is they didn't always understand

all the differences in the standards we put out in the marketplace. consumers are very interested. we have a lot of share of their mind space so we wanted to talk about our standards in a broader way. the time is right for our campaign because we are growing. as we continue to expand, we are opening new markets in new places for consumers to find us. they tell us they want to come and they are wanting to know where their food comes from and how it is sourced. it's the right time for us to go out with these messages. is it a concession? does it say prices are not going down? >> i would not necessarily say that is the case. it's one part of the overall strategy, but on a regional and local basis, we look to make sure we are providing great value in every department across

a wide variety of selection. we marry that with the great value ismpaign, but inseparable from values. >> why not make that more of the point? but i'msay i'm sure pretty certain your market research would also show lots of people who might be favorably disposed toward shopping at whole foods don't go there because they think it is too expensive. would challenge them to come back into the store. we have been aggressively working to reduce our pricing and lower our cost to pass the savings onto consumers. i think you can find great value and a lot of our departments. i'm sure you are right. in fact i know you are right because i shop at whole foods wrigley enough to know that is the case, but there are all of those other americans who have not set foot in a whole foods and may not necessarily setfoot

in a whole foods on the basis of an ad that says we sell humanely raised food and organic produce as opposed to you can get better food and it's not going to cost you any more. >> i think the more we go out and convey our values and our local markets talk about the great values happening in the communities and with all the products they carry. consumers will see not only do they have an option to find a good, better or best pricing and whole foods but they will see the standards in which we operate and build our business. something wees are do unilaterally across our stores and markets and on a local basis, you will see great value in the store. you will hear that from our local regions and the store and the national is the overlay of our stores.

goingere are you geographically where you were not already? continue toe will look at new markets and opportunities. i think we are being creative when it comes to new formats and areas we can go. we continue to evaluating every new opportunity. we are at read hundred 99 stores today and shortly we will pass 400. >> let me put a finer point on that question. areas? going into poor >> we are looking at every market as its own unique opportunity. we have had great success in markets like detroit that maybe people have overlooked. where there is a rich food culture and people are interested in where their food comes from, we will be there. foods.global vp at whole >> we're going to take a short

break. we be right back. ♪

>> that is going to did for "

market makers" today. >> i learned i need to get a better pen. everyone here has a fountain pen. i have a pencil. >> tomorrow is a big day from robin hood. stephanie is there this afternoon and she will be back here tomorrow. you will hear from the former treasury secretary, larry -- the ceo of glenview capital management, larry robbins, someone whose opinions and thoughts you need to hear. right now, it is 56 minutes past the markets, -- 56 is past the hour and a means is time to go on the markets. >> investors are digesting disappointing earnings from ibm and awaiting apple's quarterly results. a derivatives strategist from mk m holdings joins me. i want to talk about volatility. we have seen the return and some of volatility. forward insee going

terms of how volatile it's going to be and how are you going to trade on it? >> our view over the last several weeks is seasonal volatility combined with volatility across asset classes retire in the dollar would result in u.s. equities suffering a severe pullback, more than we have seen in the last couple of years. saw that and we think it's thinknd from here, we u.s. equity and implied volatility is setting up a nice move higher. >> we're looking at a short term measure of volatility. >> a lot of questions in this environment about how to lay on the short side of volatility. you can do it in futures or options. one way is to do it with the

liquid products but they are short volatility and take advantage of negative role yield. a spread between six-month future and spots with the highest since 2011 and we expect that to continue to unwind. and is upwardt sloping. that's what it should look like when markets are roiled the way they have been. you don't want to fall asleep on them. >> that was it. last week was it in terms of crazy volatility? >> yes. think about it. ix intraday -- the highest we saw since january of 2013. the highest since june of 2012 -- that was a real risk event we

saw. impact on residual investors. you don't walk away from an event like that and forget about it will stop people were impacted by what happened in 2008 and we expect market to move higher. rnce saw a lot of volatility and i know you are watching the etf linked to the euro. part of the selloff last week was due to what is going on in the euro zone. eurohappens with the question mark do we continue to see it go down? but yes. versionhave seen is the monetary policy to drive volatility higher and benefit the u.s. dollar relative to the ecb. the fed meet next week and it's widely expected that qe will be wound down. people are waiting for the qe program to get ramped. the dollar index coming over the

last few days, we think there will be sustained pressure on the euro going forward. that is why we want to keep position. but how do you position? the call skew is lifted. we want to look out to march of next year and sell a 130 strike call to buy a strike put. it's a near equivalent of being short stock and you can do that for about $.40. >> talking about all the different volatility plays in the market. we're back in the markets -- back on the markets in three minutes. ♪

>> welcome to "money clilp." i am olivia sterns. we actually have good news about ebola. so going to be a long road to market for drugs that actually work. focusing on fixed income and why the markets may be more fragile than you think. joinedol and yahoo! forces? choo hits hismmy stride.