tv Market Makers Bloomberg February 2, 2015 10:00am-12:01pm EST
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>> live from bloomberg headquarters in new york this is "market makers." >> taxes on corporations and top earners. more money for infrastructure and education. president obama sends his budget to capitol hill. >> how do you get first-time home buyers back into the market? we'll ask the ceo of a real estate giant. >> it is like a license to print money. today, we will start profiling the world's best-performing hedge fund manager. good morning, everybody.
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i am erik schatzker. >> and i am stephanie ruhle. did you watch? >> i did. >> and? >> what a terrible way to end a game first of all. >> an amazing way to end a game. >> nobody should win or lose like that. >> the point is they won the game. >> a terrible call. in any case, i was also bummed out by some of the advertisements. >> i was bummed out but i enjoyed "like a girl" so much, who gives a hoot about nationwide. real news, breaking, on the state of manufacturing in this company. scarlet fu is in the newsroom ifm headlines. >> manufacturing in the u.s. grew at the slowest pace in a year. the manufacturing index posted a bigger than expected drop. 53.5. the consensus was for to climb slightly, 54.5 from a read of 55.1. i was revised lower than what it
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had earlier been reported. construction spending also smaller than expected increase as well. a gain of 4/10 of 1% when economists were looking for increases of .7%. added all up in terms of markets, u.s. stocks are at the loews for their session. they opened higher but they could not hold onto now we have declines of .5% for the dow and s&p and the nasdaq, a decline of almost 1%. >> there you go. everybody is a bull into you get one shred of bad news. suddenly, they are all sellers. scarlet fu, breaking down the reactions. >> meantime, a budget proposal from a democratic resident to a republican-controlled congress should be a nonstarter. the latest from president obama today may be just that. it promises tax hikes on the wealthy. perhaps it is not dead on arrival. peter cook is here to tell us why. a symbolic act, we could wander
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from a lame-duck president, or maybe something more. a window of opportunity to get something done. >> most of the president's his budget act, to be sure is dead on arrival with the republican congress. there are aspects of the plan overall that do pose opportunities for the president to work with republicans. we have talked about some of them before. there is news in here with regard to infrastructure investment tied with corporate tax reform, that has a possibility for progress going forward. there are other aspects of the plan that republicans may like. they like for the fact that he will break the sequestration numbers here and increased defense spending. but they will not like a whole host of things including -- notably the tax increases on the wealthy and there is nothing at all in dealing with long-term debt issues. the deficit effectively stays much of the same in the next 10 years. the reality is dead on arrival. opportunities for negotiation going forward and it opening bid
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if you will, from a lame-duck president. >> let's talk specifically about the president's proposals for taxing overseas profits. >> what is significant here is he has proposed this before as part of corporate tax reform. you link it to infrastructure spending and it is a win-win. companies get to bring money back from overseas and then money gets dedicated to things that republicans and democrats both like investing in roads and bridges. what is significant is he has finally put real numbers to it and expanded it. 14% one-time tax rate on all overseas earnings. overseas right now, $2 trillion in all. you have got a number of companies at the top of the list . ge affected by the proposal. once you get past the one-time hit, he changes the corporate tax code and puts a 19% minimum tax rate on all foreign earnings going forward. that is a significant number. it is lower than some people thought and higher than others
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would like. it will be the basis of negotiations going forward. it is the most significant detail, if you will within the plan overall. it could be a big factor going forward shaping debate. >> you have a sense yet whether those are numbers republicans can live with? people like john chambers, the ceo of cisco, who has been campaigning relentlessly for a tax holiday on profits parked overseas, will not like the 14% number. 14% is better than 35%. so is 19%. >> exactly right. that is where the debate will begin. a lot of this will rest in the hands of people like john chambers. will they lobby aggressively for a deal that fits the framework the president put forward, the trade-off between lower corporate taxes and some short-term infrastructure. the business community could make a huge difference here. we are not going to be talking about these numbers.
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the president and the white house knows that. democrats are talking about a 6.5% holiday tax rate. this number will come down if it will ever be a deal with republicans. where it is between 6% and that 14% remains to be seen. but it is the basis of negotiations going forward. >> thank you very much. that is peter cook. in the next hour, democratic congressman chris van hollen will be with us, the top democrat on the house budget committee. and he has a few plans of his own for what to do on corporate taxes. >> exxon reported a steep profit drop in the fourth quarter thanks to plunge in oil prices. do not cry too much for the energy giant. it still made $6.6 billion in the quarter. but that is down by more than 20% from a year ago and cash flow tumbled. let's bring in our own alix steel. let's break down the exxon story. is this just a cause and effect of falling oil prices?
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>> no. it is of being a really big oil company. you make billions, production falls, you have to spend more to try to keep production flat. exxon's his production actually fell almost 4%. this has really been the story for big oil. i got my hands on an itemized receipt of exxon for a show oil well in oklahoma. it is way cool. >> [indiscernible] >> this is a big get. a journaling cost. $5.7 million. you are trailing, moving mud and chemicals and water to the drilling site. then you have your filling cause. you frack and that goes in to produce oil. that costs over $3 million. all told for one well, you're looking at a cost of $9 million. exxon explored and drilled last year.
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that is an insane amount of money to actually run in place. the question really becomes, what do they do now? you spent $9 million. will you close up shop and go home or will you keep producing the matter what the oil price is because you already spent the money? we are seeing the latter. they continue to produce. parkways coming out and saying there are about 4 billion barrels per day of oil. the cost is already sunk. why bother shutting production. >> part of it has to do with the expectation on part of investors and others that exxon will meet some of the target that it has set out over time. the same goes for chevron and the other majors. they do not want to be, almost ironically to be seen as reducing production, even if it makes economic sense in the short run. >> exxon has an enormous balance sheet. analysts say they can weather this storm. they are in the hole for 20-30 years down the road.
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that gives exxon's, in some expects -- in some respects, some restraint here. $22 per barrel, maybe max. there will be taxes. $50 per barrel hurts your margins. but he were still making money. >> it is not so much what the costs are, but whether they will be there to sink future cost. >> here is the bigger issue. shale oil runs try fast. the first year you get a ton of oil and that it declines. producers have to drill quickly and fast to keep production flat. that production might be at risk , but you will not see that until this year. that is what i'm seeing. >> thank you for breaking it down. >> dirty enough for you? >> she has got her hands on itemized -- people wanted to get themselves on a guest list
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for the playboy party in phoenix . alex wanted to get her hands on the itemized receipt so she could write down exxon. that is why we love her. thank you. our own alix steel. when we return, the top of the charts. we will kick off our month-long profile on the world's best-performing hedge fund manager. >> plus, will this be the year of the first time homebuyer? we will speak with the ceo of one of the nation's biggest real estate firms. ♪
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the future of alibaba. it will involve artificial intelligence and robots according to the cofounder, jack maher, speaking in hong kong. he said alibaba thinks of itself as a dater -- a data company. alibaba will invest significantly in artificial intelligence. the longest losing streak ever it sells for in eighth straight month, january decline of 7%. there is speculation he will continue to feel the pain caused by the chinese crackdown on corruption. in france, producers love -- giving this to me just to mess with me. in france, the former head of the international monetary fund is going on trial over whether he took part in an international prostitution ring. dominique has been charged with "aggregated pimping."
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investigators say he played a role and his employer denied the charges completely cleared >> home ownership. it is called the american dream and remains out of reach for many borrowers. first-time homebuyers accounted for only 29% last year, the lowest since 2008. president obama is hoping to revive homeownership rates with several new programs including one which would cut mortgage premiums on fh loans to people with low credit scores. is it enough? re/max ceo dave liniger is with us. what will it be like in 2015? >> we will see a recovery that is better than what happened in the last couple of years. prices have leveled off. they are not the double digit. interest rates are the lowest they have ever been. government programs will help
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bring millennial's into the industry. >> do those more kneels want to be in the industry? it is not about the fact that they cannot get the money. they do not want to own a house. >> i do not think that is correct. if you look at our sales last year 31% were to millennial's. as their agent, they are not only buying downtown but they lead -- leave downtown and go to the suburbs. we are seeing a good recovery. >> how does the behavior of these young couples compared to what you saw 10-15 years ago? -are quite different. if they get married, they get married at a later age. they seem to be putting off decisions like homebuying to a later age. >> how much of that is cultural? these decisions to have kids at
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a later age, these decisions to buy a home at a later age, how much of it is cultural and how much of it is economic? >> i think a great deal of it is economic. they obviously imitate each other. culture does play a part. but they have not had the jobs they needed when they came out of college. a little bit of wage growth, i think you will see a big change. >> the more people who own homes or want to clearly the better it is for re/max. but do you think it is a good idea for the federal government to be trying to incentivize more homebuying and to deliberately attempt to raise the homeownership rate? >> i cannot tell you that clinically is the correct thing to do. i will tell you it would help the economy greatly if the housing industry could get some legs.
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>> say that in 2005-2006. i feel like barney frank was telling americans it was our birthright, part of the american dream, to own a home. many americans who simply should not own a home. >> i would totally agree. we went through a her in his foreclosure mess because of the subprime mortgages. it was really a disaster for the economy and our industry. >> can i go back to the point you made a moment ago about how it would help the economy with homeownership? why is that the case? if a landlord eyes a home, if more of these homes are being sold going to folks who will end up renting them out as opposed to occupiers, is that necessarily a bad thing? landlords often invest in refurbishing a home in order to be charged a higher rent. many of the people who are cash
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strapped and end up i a home have no cash, no money to go to home depot and buy new windows or caulking or floorboards or drywall or whatever the case may be. >> you are correct in what you are saying. if you look at some of the big-box stores like home depot, they figured out that 16% of their sales occur within 16 months of when somebody buys a house or six months after they sell a house. it is a costly endeavor. if you're going to do a resale. however, the thing that is good for the economy is new home building. every house that is built, it is at least 3-4 full-time jobs that are created for a year. at the lowest level of new home building in decades. >> what happens if the new homes that are built, people either do not have the money to buy them or they buy them and cannot afford it and they get foreclosed upon? i am just not sure how that is
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good for the economy. >> i think the economy has turned around enough. dodd frank has put enough rolls out there. for the most part, people are putting 10-20% down for the vast majority of mortgages unlike 8-9 years ago when the vast majority was almost no down payment. >> how has dodd frank affected the housing market? i guess i do not follow that. >> they put requirements on the banks that the bank had to continue to own a certain percentage of their mortgages. most banks create mortgages and try to sell them off. if the banks have to continue to maintain a large ownership, then they cannot reinvest the money. >> what do you think would happen to the housing market if some of the proposals to perform, fannie mae and freddie mac, went through. if in fact they would become private entities, it took take d -- it could take several
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years. >> that is probably true and that is not the worst thing in the world that can happen. if you look at our neighbors on the north, they never had the subprime mess. they require people to put a 20% down payment and the real estate business is cyclical. they go up and down. people who invest real money into property do not going to walk away because prices dropped by 10-20%. they will wait it out and do not flood the market with properties. they know it is a long-term investment. >> what you think about hot markets? i spent time in miami and my mind was blown that just five years ago, aligned -- miami was one of the cities in the epicenter of the crisis. there is construction everywhere, apartments going for $10 million. doesn't it feel bubblish?
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>> the truth of the matter is probably as much as 25% of the purchasers are cash purchasers from outside the country. >> wasn't that the case in 2005-2000 x, the brazilians in miami bill young -- buying up real estate question mark what is different now? >> what is different now is prices were dramatically down. even in florida, they are well beneath the prices they were getting 6-7 years ago. >> dave, thank you very much. great to have you on the show this morning. dave liniger is the cofounder of re/max. >> stay with us. when we return, we are talking hedge fund giant. ♪
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>> live from bloomberg world headquarters in new york, this is "market makers" with erik shatzker and stephanie ruhle. >> welcome back. i'm erik jeff zucker. quite some stephanie. >> we are going to begin this half of the hour with the top stories of the morning. a pay raise for meg whitman -- hp raised her compensation to almost $20 million. hp stock is up by more than 25% over the past year. the company will split into later this year. she will run hp enterprises which focuses on corporate customers. the justice department has stuffed up a five-year
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investigation of moody's. the issue is whether they inflated credit rating string housing boom. prosecutors are wrapping up a similar case against standard & poor's. president obama plus new budget is challenging republican on the income gap. the plan was sent to congress today. the money would be used to pay for infrastructure and education. republicans are calling me budget top-down redistribution. tired of snow, cold and ice? it is grand how day -- groundhog day and punxsutawney phil said there's this -- so there six more weeks of winter. the biggest tv ratings in super bowl history according to preliminary data from nbc, which broadcast the game. the network says new england's last-minute -- worse should we say seattle's last-minute loss
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was seen and 49.7% of homes in large u.s. cities. the total ratings will be released later today. >> eric thought it was a tragic ending -- erik thought it was a tragic ending. >> i guarantee bill belichick did not wake up this morning and say that was a lousy way to win. cracks you didn't have to try very hard. >> moving on, for the next few weeks, we will be highlighting some of the best hedge fund managers in the world. get it on the stands right now -- it's the february edition. these are the funds with the best performances of the year. bill ackman's pershing square was ranked number one. highline capital management was ranked 31 on the list, returning 10%, using a long/short
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strategy. walk us through the strategy. >> we believe most equities are valued efficiently by the market. we focus our time and effort trying to identify and better understand situations that are treat -- situations that are changing and evolving. by focusing on those types of situations, we feel we can do a better job analyzing more complicated equities. things that may take several years. >> what is an example? >> for example, the implementation of the affordable care act. it's a complicated law and there are many elements people immediately notice mainly that the uninsured will become insured. that we noticed something most people missed -- and it's a clause called mental health rarity, which will require health care insurance plans to cover mental health facilities in the same way they cover
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acute-care hospitals. this will cause an increase in capacity utilization for those who own mental health facilities. there are a couple of public companies that are players this area and they are going to see a big benefit in 2015. >>'s how long does it take -- how long do you have to wait to see that change come to fruition ? hedge funds have to offer investors more and more liquidity. they've got shorter and shorter timelines. how do you have that iron got? >> that's an important point. the do offer liquidity, but we don't know how to invest short-term. investing short-term is a recipe for failure and our clients understand that, thankfully. we benefit from having great long-term investors. these things take time to play out.
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in our view, the near-term events are crowded. we don't want to compete with them. >> that you are investing in liquid securities that you could sell if you had to. >> absolutely. the more liquid, the better. when you make a mistake, you want to move on immediately. >> the affordable care act is one, what are some of the other catalysts. is it appropriate to call them catalysts? >> they are evolutions. sometimes they are quite subtle. the cable bundle is breaking and there are channels that are absolutely critical that viewers want to watch. >> like bloomberg? >> cbs, bloomberg -- fx. i'm astonished at how good "the league" is.
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>> i don't even know what that show is. >> it's a great channel. it's almost as good as bloomberg. but there are other channels that are not so important and the cable bill has gone up and up over time. consumers are angry and cable companies are putting their foot down. there have been examples in the last year where cable systems have thrown out certain channels and it's clear the financial opportunity remains for the important channels, those who own the best content. everyone else is at risk and that's an important change and there are various ways to play it. the whole trend toward over-the-top the top and digital monetization is an incredible change. >> talk about some of the companies you think will win and some you think will lose in a world of over-the-top. >> i think the winners are obvious. fox, for example, they happen to
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own the network i'm a fan of. but their larger networks are perhaps even more important. cbs and espn, these are critical channels. they are going to capture more and more of the money as time goes on because they dominate in sports which has to be viewed live. the channels that don't have sports and don't have content deemed critical by the viewer are in trouble. i would rather not disparage anyone name names, but you can turn on your cable system and scroll through the channels and you see examples of things you would never be that interested in. >> what sectors do you think are right for change? >> the precipitous decline in gasoline over the past few months combined with the strengthening job numbers is a recipe for the consumer sector to recover. it has been a disaster for years. the u.s. consumer has been
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hurting. these companies have struggled. you can invest in low-end consumer companies announcing bad numbers, yet they are poised to recover. convenient stores like dollar general and dollar tree are poised to recover. there's a rent to own company called aaron's. they are all across the south. >> is it early to get into those trades? maybe it has been early to be in those kinds of trades? >> lowe's companies have struggled and we have had success being short the same companies over the last couple of years, but now it's time to get behind these companies.
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their well-managed. >> are you generally net long? >> our funds always run modestly net long. in any given year, we cannot predict the direction of the market. but over 20 years, the market drifts higher stop we never want to be too long that it is troublesome, but we want to be net long overtime. >> how do you feel yes over 10 years, the market drifts up? do you feel the aspects -- let me put it this way -- are the prospects you are long better for 2015 better than the stocks that you short question mark >> that is how we think about our for polio. we want our longs to outperform our shorts. we're long companies that i mentioned that are about to get a tailwind where something is changing and there are other examples like constellation brands, which is a fabulous
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company which is a domestic to stringer of beer and wine. that's poised to not only cut their costs but increase their sales. to have a fabulous of a graphic. they distribute corona pacifico -- peter lynch said by what you know. they are also cutting your costs. they use about 4 billion glass bottles are year and are paying approximately $.18 a bottle. late last year, they cut a new contract that will allow them to those bottles for $.13. five cents is not a lot, but multiplied by 4 billion. >> you say you want your longs to outperform your shorts. i was talking to a hedge fund manager on friday night and he said i longs are doing great but i'm getting crushed on my shorts. in the past two years, has been
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tough to be short. >> shortselling is not easy. it requires a lot of creativity and a lot of people to be thinking. no one person can come up with enough shorts to fill a portfolio. i have a lot of people around me who are great short-sellers and we find companies that are using -- that are losing market shell -- losing market shares. companies were there is something wrong with her and customer. enough of those in a portfolio may not earn absolute return to the given year, but it will earn us alpha. >> will they always underperform? this market has rewarded crop companies -- crap companies. broadly speaking, they have been some of the best performers. >> like what. >> companies with weak balance sheets and junk bond ratings. >> him him him -- open your eyes
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and two years from now, spreads may be wider and those companies may not do so well. this could be a wonderful point with which to engage some of those shorts. >> do you have a number one favorite position? >> intercontinental exchange. taste in atlanta, an incredible ceo. this company is the dominant player in energy futures. the exchanges they own and manage have the dominant market share in brent crude. as the market becomes more volatile, there are more -- there's more trading in the future. they trade some short-term interest rate futures and as
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interest rate policy evolves, they will benefit. >> how do you feel about the cash equity business? >> about 9% -- >> do they spin that off? as i like to call it, the museum downtown. x they should cut cost -- >> they should cut cost. there's so much obsolete technology they can improve and replace. i was an intern on the floor of the new york stock exchange and i have friends there but they are going to make that more profitable. at that point if the market does not reward them with a higher mark it, they should spin it off. >> -- higher multiple, they should spin it off. >> stay with us. you are watching "market makers" right here on bloomberg
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>> welcome back. it's time now for some of the top global headlines coming in this hour. the new prime minister of greece is looking for allies in his fight against austerity. germany and others in the euro area want the new prime minister to stick to the terms of the existing bailout agree it -- agreement. he will travel to brussels seeking a deal on a new agreement. >> we have resembled drug addict's craving the next dose. do i believe greece as we are now should be taking another bunch of loans? no. it's not that we don't need the money, we are desperate because of the and liabilities we have. >> is it the commitment and liabilities that made them desperate or the fact they are
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in economic freefall? the new government wants the debt written down so they can increase public spending. north sea oil is turning into a buyers market. some of the biggest names in the oil business are trying to sell older costly wealth. they've become less profitable with the collapse in oil prices. apache and marathon are among those that may sell their north sea assets. in hong kong, pro-democracy protesters were back on the streets for the first time in more than a month. demonstrators want china to back off its decision that candidates for election must be vetted by the government. after 79 days of tests, police cleared demonstrators off the streets in december. >> let's return to our conversation with the ceo of highlighting capital management. we began by you telling us what you do differently, and clearly it's up 27% in 2013.
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but why is it from where you sit, so many other equity long short funds have struggled. -- have struggled? >> i don't know about other funds, but some have given up on specific equities. they missed out on all the alpha one can earn shortselling. at highline, we take that seriously and short companies -- short companies'specific equities. >> -- >> that's not a true long-short equity fund. i understand there's a need to hedge and there are credible securities -- >> is it an investment strategy? you don't have your investor say, guess what, we just invested in some etf's, i'm
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taking 2% from you. >> some of these investors use that to invest their hard-line exposure. we are good short-sellers, so we want to short sell specific equities we have done our work on. over the last few years, there has been good alpha available doing that. >> do you think certain strategies are in trouble like if and-driven? >> event-driven is successful as long as companies can do proactive things and activists can force them to do so. >> what happens when interest rates are not low and you can depend on activist's? >> that changes the reality. may be they are good at restructuring. in that environment shortselling will work better and perhaps those funds can embrace that strategy. >> do you think the accusation
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that long-short equity is by and large market beta? >> i don't think that applies to our fund. >> am not accusing you of that. >> comparatively i would tell you we implement the strategy the right way. i've taught a couple of generations of investors to implement the strategy well and as a team, we are poised to do well over the next couple of years. >> you have talked about how you surround yourself with capable of short-sellers and have spoken a couple of times about your team. how do you build a team? do you rose -- d poche good long-short managers? >> we prefer to get people in their young, train them from scratch, not have them bring to us other managers habits and have us preserve the unique approach we have. we believe in teamwork and the
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people we hire have to believe in that as well. we are able to combine the amazing experience of a veteran group of investors with the creativity and high energy of a young group of investors. >> where do you get them from? >> there are some amazing people graduating from top schools will stop we look at management consulting firms -- all these evil have wonderful analytic training and we fill in the investment training. >> what is the most unconventional resume you've ever hired? >> one of our top people wasn't x movie producer. he had an mba from chicago and moved out to california. -- was an x movie producer. he's a hilarious guy and he really adds to our environment and is a terrific consumer investor. we taught him from scratch in 2000. >> where did you find him? >> i knew him from along time
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ago. i had been tracking his career. >> what a pleasure having you on. >> he is the founder and ceo of highlighting capital management one of the top performing hedge funds of 2014. >> there will be more "market makers" when we return. you know we've got to talk about the super bowl and the winning and losing ads, not just the losing team. ♪
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>> this is "market makers" i'm scarlet food. the dow jones avoiding another day of triple digit point declines. at least for now. if you look at the 10 year yield, it is higher right now but still holding near its lowest level since 2013. oil prices much waiting -- up .4% will stop traders say the short covering rally is still a factor in today's trade.
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>> live from bloomberg headquarters in new york, this is market makers with erik schatzker and stephanie ruhle. >> those suitable role -- super bowl ads, the winners and losers. >> the secret sauce at chipotle. how are they doing it right when mcdonald's keeps getting it wrong. >> who knows this man? you will see a lot of him in the next few months. a new poll says scott walker is the front runner in the state of violent. welcome to the second hour of market makers. >> i'm erik schatzker.
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we are here in newark city. >> let's get you started with the bulletin. these of the best stories of the morning. assigned that the slowdown overseas may be hurting u.s. factories. exporters are being hurt i the stronger u.s. dollar. this was the biggest strike by a u.s. oil workers since 1980 and its and its second official day. workers walked off the job at nine refineries. only one has had to curb production. the ceo of lands and is resigning. they spun off lands end last year. he set out to accomplish what he wanted to do. he will be replaced by the president of the lj and cabana. those two brands don't seem to coincide. "american sniper" is the is
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grossing more movie of all time. it has now grossed almost $250 million domestically. that beats out the classic " saving private ryan." the movie has been nominated for six oscars are in have you seen it? >> i have not. but i will. >>shareholders of gfi rejected a planned acquisition by cme group. there will be a hostile bid. howard, is in a battle? you are the only been out there. there are more offers waiting in the wings somewhere? >> management did a backward inside takeover like a leverage buyout.
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they got together and they were going to buy the company. it did not work for me. i was a shareholder. $4.55? we continued to compete for it. now that we got what was left of the management deal that was turned down on friday, people should tender to us tomorrow. of course you feel that way. >> why does the market seem to have -- i can't reconcile the stock price with an all-cash offer on the table for $6.10. >> management came out with all sorts of last-minute things trying to seem like something was wrong with our bid. they were. they lost 80/20.
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it went our way. both independent companies iss came out in favor of us. for 6000 -- $6.10, we are fully financed, all-cash committed and ready to go tomorrow afternoon. it sounds like the best thing i could think of buying today. how hard is that? >> wide you want to own it in its entirety? the business is suffering right now. every guy i talked to on the street who works for you or another broker says they are dying. the street is not what it used to be. why is it so valuable to you? >> classic consolidation. gfi aro's money at 10 and 3%. that would save $50 million he year. they have their own network that is smaller than ours.
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we can put them on our network and save $20 million year. consolidation means you can make more money with the same asset. >> gfi had a $31 million operating profit. last year a 20 million -- 21 million dollar operating loss. that would've been a positive number last year? >> we think we can improve the bottom line by at least $50 million. we have all the pieces to the puzzle and they have the pieces but they are smaller. they just don't have as much revenue going into it. you can pick up all of that expense. we are not talking about people. they fit nicely. they have a great energy business. a are like a puzzle piece. >> why not hire there good guys
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and leave the rest for dead? >> we love to hire best people. the best way is to buy the company. >> you're going to fire people? >> producers is value for us. >> 2037 people they employ, how many are producers? >> 1300, maybe 1400. it's not that. they are in offices all over the world. it's going to work beautifully. it will shock people have beautifully it works when companies fit together well what the puzzle. it just works. >> you think the broker business is going on beautifully right now? i understand what you are saying, these pieces fit together. when i think about the overall business, volumes are down and traders are making less money. how are they hooking up their brokers?
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>> volumes at banks are lousy. you have interest rates at no. -- nil. it's getting excited with the dollar rallying. just being smart businesspeople, sometimes you don't need the economy to grow to give you a gift. sometimes you have to be smarter than everybody else or it remember when the tanks were consolidating? that's what this is. getting that revenue, $700 million in revenue and combining it. what you've got is a player who has the scale and scope to take out the expensive and bring profits to shareholders. i'm not saying we're going to kill it. we are going to be smart and slug it out and make a ton of dough. i think this transaction is going to work great. >> i'm not saying we are going to grow until it. >> you are right.
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volumes have been low and spreads are skinny. however, we have a forecast of sports from feynman. i want to play you in a search of the conversation. this previews will we might see a few months from now. >> in an environment where more capital is charged for holding inventory and there are more burdens on cash to trading, i think it will be more expensive and for the same price it will be less liquidity. as demand for liquidity comes up, you will see people we are a big liquidity provider, you will see providers, the woodwork. >> that came out of a conversation about whether all of these fears about bond market
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liquidity are justified or be realized? lloyd said once it becomes expensive, people will want to provide it. do you agree? >> i do. banks used to provide that liquidity. very cheap. that was the deal. they would be times when it was tough and you help them out when times were good. since that trade is going away, you will see hedge funds, sovereign wealth funds people with capital sitting on the sideline, they will hire the good people from the banks and shazam it, they will be in the same business. what a shock. >> until now, interdealer brokers covered just that, brokers. now, private equity firms and hedge funds are liquidity providers. are they going to be covered in the future directly by you? >> exactly. that is exactly correct area --.
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a bgc broker is there to be your guide, your assistant into the transaction-based. goldman sachs and the banks, they put their capital up to provide that liquidity. >> they look more like brokers. >> people with $80 billion in capital can be a broker. they are not good at it. they need to make a lot of money. they just won't provide that liquidity is often and other people will come along the sidelines. the banks will be in the middle of liquidity. all of the sides are going to calm in. think of those hash marks from yesterday. it will be the sovereign wealth funds on the sidelines and down the middle will be the big giant banks. >> they are going to say it's ok with us if you cover our client? >> these are not really their clients. >> 100%.
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the banks biggest clients are had funds and mutual funds and private equity firms. they will say, you can cover them. >> the true by side clients are going to do business with the banks. the firms like city dell, jump trading those that have jumped into the pool, that is what the banks used to do. now you will see a world where the banks used to do things by providing liquidity in places where it's not worth it. government bonds, corporate bonds, places where it boring to put out capital for a big bank. you will see firms come in there. it will be a new type of firm. it will have a name a similar to high frequency trading. you guys will come up with the name and i will be talking about it in two years.
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that's what's going to happen. >> i love it when howard is here. it's a gift. >> do you have intentions to run for mayor? >> there is a group of people that tries to push me to run for mayor. i love my business. i love what i do. the odds are zero. i am telling you right here. i am not running for mayor. there is zero shot. i have so much to do. >> you are not running for mayor. how you think build laws euro is doing? >> i drove in last night and the streets were plowed. manhattan provides an economic driver for new york city and if you disrespect manhattan and its driver, you respect the monetary way we make money. let people not shop and spend money. at the end of the year you wonder why we have a deficit in new york. business drives it.
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when government says it's not about business, they are in the wrong side of the car. engines drive money and that's business. >> it sounds like he's running for mayor. what do i know? howard, always an absolute pleasure. never at a loss for words. >> never a dull moment. >> tomorrow afternoon, gfi. you will make $.60 a great investment. tender them to us. you will see how well we do with it. >> come to papa. >> bgc partners and hannah fitzgerald, howard. >> it is more fun to talk about the big game, we will take apart all of the commercials. >> an uphill battle a congressman will be here to talk about the new budget. ♪
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>> it's time for top headlines around the world. let's begin with what's happening in ukraine. a rebel leader is calling for a full mobilization. the president is calling for a cease-fire. peace talks broke down. fighting intensified over the weekend. an australian journalist with al jazeera was released after a year in an egyptian prison. he is on his way home. the fate of two other journalists is unknown. in venezuela, pharmacy executives have been accused of waging economic war. he has had them arrested. they aren't used of creating shortages of everything from heart medicine to diapers. >> it was a blip of emotional
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advertising. dads emerged as a top theme. let's bring in at age deputy managing editor. i want to talk about the dancing. they may be dads, but they don't love feel good dad ads. they love cheeseburgers and women. why are we suddenly doing this? who are the ads for? >> we are a bunch of dead sitting in the living room with other guys and getting weepy. maybe it's the ad with our daughter in it admiring the way we brought her up. there was a big play to make dads more recognized in advertising. this follows the last couple of years. some people said what about dads? this is the next iteration of. >> if you were to take a straw
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poll of dads this morning, the you think they found the super bowl commercials touching moving memorable or they just want to see another victoria's secret commercial? >> i think the question is the results going forward. i think some of those ads did stand out. maybe not as much as a puppy getting rescued by a horse. it's your family. don't you care about your family question mark >> when my husband watches football, he isn't thinking about me. one that i just don't get is nationwide. we have a clip. >> i won't ever get married. i died from an accident. >> 7:30 p.m. in the middle of
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the super bowl, my kids are next to me watching not chose. >> the kid dies. everybody loves that. >> who loves that? >> i'm kidding. this let-up the internet last night. it's an insurance company, it's not going to bring your kid back. what kind of state of mind are they putting us in? it's not like the nfl who has this conversation about domestic abuse and needs to say something about it. they should up the party and said here's a cute kid. i have horrible news. he's dead. that was a real head scratcher for a lot of people. >> whether it's about the nationwide commercial or the dad commercials, are these advertisers getting their money's worth? the list price is $4.5 million for 30 seconds. that's a record. i watched the whole game and every commercial.
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i can't remember who ran the data adds. i remember nationwide. >> baby nationwide one. >> it paste all the other brands. it was like 12% positive mentions and largely negative. the others blended together. i think there were some talked about the product and entertained us. >> before you go if only 12% of the commentary around nationwide was positive, does it matter if it's positive or negative? everybody was talking about. there was nothing i saw where i felt like i needed the product or it >> they thought being talked about was good. putting some fear in you is partly strategy for an insurance company. >> let's bring it up a little
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bit. >> this was a fun and. why not. >> why does this work? >> it's entertaining. it stands out. we are not tooling around in moody cars. >> why did this company what to spend that kind of dough on a super bowl commercial? >> it was their entire budget. they talked about the product. when you walk into the hardware store, you're going to recognize it. that would be ideal. >> i would rather go with inept in. this is my favorite. this was special. take a look. >> show me what it looks like to run like a girl.
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throw like a girl. >> this was my winter. >> me too. >> this has been a winner all year. they did not have to spend the extra millions on it. this is a resident commercial. it is emotionally resident that makes you feel good. i think this was the family one that make you feel good. >> one of the agency thinking about for next year? >> i think they are going to cheer it up next year. there will be more smiles. >> thank you so much. >> we will be back in two minutes. around. ♪
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welcome back. we weren't supposed to hear from the president for another 20 minutes. he is speaking now. he is at the department of homeland security headquarters in washington. he is making remarks. he is praising them. we expect him to talk about his budget proposal, $4 trillion. it would tax foreign corporate profits. the money would fund new infrastructure spending and tax cuts for the middle class. here is the president. >> are we going to build an economy where everyone who works hard has a chance to get ahead? that was the focus of my state of the union address a couple of
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weeks ago. the idea that this country does best when everybody gets a fair shot. everybody is doing their fair share and everybody plays by the same rules. the budget that congress has in its hands is built on those values. it helps working families paychecks go further. as the economic rivalries, it gives americans of every age the chance to upgrade their skills so they can earn higher wages. it includes making it two years of committee college free for responsible students. it lets us keep building of the most attractive economy for investments in research and infrastructure and expanding faster internet.
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it's also a bunch of the recognizes our economy flourishes when america is safe and secure. it invests in our i.t. networks to protect them from malicious actors. it supports our troops and strengthens our border security. it gives us the resources to confront global challenges from isil to russian aggression. we have cut our deficits by about two thirds since i took office. i am going to repeat that at night that -- as i always do. they think that jefferson has shut up. since i took office, we have cut our deficits by about two thirds. that is the fastest. of sustained deficit reduction since after the demobilization
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at the end of world war ii. we can afford to make these investments while we are remaining fiscally responsible. we cannot afford -- we would be making a critical error if we avoided making these investments. we can't afford not to. when an economy is doing well we are making investments and growing that's part of what keeps deficits low. the economy is doing well. we have to be smarter about how we pay for our priorities. at the end of 2013, i signed a budget agreement that helped us and arbitrary cuts known as sequestration. people here know too much about
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sequestration. many of you had to you with those cuts. it made it harder for you to do your jobs. the agreement to reverse some of those cuts boosted our economic growth area part of the reason why we grew faster last year was we were no longer ardent by -- burdened by mindless cuts. we were more strategic about how we handle the federal budget. we need to take the next step. my budget will and sequestration and fully reversed the cuts to domestic priorities in 2016. it will match the investments that were made a mess to clean dollar for dollar with increases in our defense. just less week, military officials told congress that if congress does not stop sequestration, there could be consequences for national security.
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our military is stretched on a whole range of issues. i want to work with congress to replace austerity with smart investments. we can do so in ways that are fiscally responsible. i'm not going to accept the budget that locks in sequestration going. it would be bad for security and bad for growth. i will not take a budget that severs the link between national security and our economic security. we would be willing to increase defense spending, but we won't increase basic research. those two things go hand-in-hand. if we don't have a vital infrastructure, if we don't have a broadband lines across the country, that makes us more vulnerable.
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america can afford being shortsighted. i won't lie. the budget i sent to congress is fully paid for through a combination of a spending cuts and tax reforms. let me give you an example. our tax code is full of loopholes for special-interest like the trust fund loophole that allowed the wealthiest americans to avoid taxes on their unearned income. i think we should fix that. we should use the savings to cap taxes for middle-class families. that would be good for our economy. there are republican to disagree. i have said this before, if they have other ideas for how we can keep america safe, grow the economy while helping middle-class families i welcome their ideas. the numbers have to add up.
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but we can't do is play politics with economic security. you know what the stakes are. the work you do hangs in the balance. just a few weeks from now funding for homeland security will run out. that's not because of anything this department did it. the republicans in congress who flooded everything and government through september except for this department. they are now threatening to let homeland security funding expired. let's be clear. we can have a debate about immigration. i'm confident that what we are doing is the right thing. it's the lawful thing. i understand they may have disagreements with me on that
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although i should note the large majority of republicans agree we need immigration reform and were prepared to act in the senate and should have acted in the house. that's fine. that's how democracy works. they usually don't agree with me. but, don't jeopardize our national security over this disagreement. as one republican put it, if they let your funding run out, it's not the end of the world. that's what they said. i guess literally that's true. it may not be the end of the world. until it passes funding bill, it is the end of a paycheck for tens of thousands of line who continue to get work without
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getting paid. order control and customs agents, airport screeners, immigration officers, men and women in the coast guard. these are just working to keep us safe, they have to take care of their own families. the notion that they would get caught up in a disagreement around policy has nothing to do with them. if republicans let homeland security expire, it's the end to any new initiatives if a new threat emerges. it's the end of grants to states and cities to improve local law enforcement. the men and women of america's homeland security apparatus do important work to protect us and
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republicans and democrats in congress should not be playing politics with that. we need to fund the department. pure and simple. we've got to put politics aside and pass a budget. this is one of our most basic and important responsibilities as a governor. i am calling on congress to get this done. every day we need you to keep america safe you need the resources to do your jobs safely and efficiently. you are able to work after your families while you're are out there working hard to keep us safe. we asked a lot of you. the least we can do.
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i have your back. i will fight to make sure you get the resources you would deserve. that's what this budget is about. it reflect our values. it makes sure that we are making investments that we need to make america safe and growing and make sure everybody is participating no matter what they look like or where they come from or how they started in life. that's what i believe. that's what you believe. let's get it done. [applause] >> that was president obama speaking at the department of homeland security. he says incidents tension of the state of the union address.
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let's bring some reaction from the top house democrat. he is the ranking member of the budget committee. peter cook is in our washington bureau. peter, why do you begin? >> thanks for joining us. let's start with the basic question of where the budget is going. the president outlined his vision. one of present something that is more reasonable that might get done? >> what this budget does is reflects the priorities of the american public. if you look at a lot of these initiatives that the president forward, a large majority of the public supports the focus on middle class economics trying to make sure we make the investments necessary to grow the economy and be at the cutting edge of this global economy.
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there are provisions that allow middle-class dollars to go farther. the childcare tax credit, making sure people are making -- taking care of a loved one because they are sick. these priorities are in line with the public's priorities. >> go ahead. >> let me follow up with one quick weston. your counterpart in his statement said it never balances and it's not a serious plan. we have to borrow money just to afford the programs we have. is a mistake to not do more in terms of long term challenges? >> he significantly cut our deficit. he cut by more than half over the last couple of years. this puts us on a sustainable footing. even in this coming year, he got -- cuts the deficit further.
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the president is focused for the country is focused, on accelerating economic growth and trying to boost paychecks for american workers. i would hope republicans would support that policy. in tom price's budget, it's going to be another round of trickle-down economics and there. is another round of tax breaks at four people at the top will boost the economy. the president says economy does best when everybody is doing well. >> i thought i heard him make a veto threat. >> he was clear. he thinks the current disinvestment in america is going to lead to american decline. i don't think it was a veto threat. it was a very clear message that
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the president believes that we can't under invest in defense or things like our national infrastructure education scientific research and innovation. it would be bad for the country if we were to continue to decline a not meet those objectives. >> is that all about raising spending above the sequestration limits? >> i'm talking specifically about these cuts in important investments. the national institute of health, the purchasing power is 20% below what it was over a decade ago. that means new cures, new treatments for diseases that plague families are being left in a laboratory undiscovered. it means we lose our
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cutting-edge in pharmaceutical innovation around the world. the returns on those investments have been huge. it's shortsighted not to make them as we provide middle-class tax relief for working families. >> much of this isn't going to rain much traction. where is the most promise for bipartisan agreement that would allow for parties to come together? what issue specifically? >> i think there are two areas. one is the plan to invest in infrastructure. the president proposes we get rid of special interest tax breaks that encourage corporations to move jobs and money overseas and take those savings to invest in our infrastructure here at home.
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it overlaps with the republican plan put forward by dave camp. there is some overlap. the other area is republicans on capitol hill senator kaine and senator graham recognize we need to invest in national security. we need to do that. it depends on these investments in scientific research. there is room to move forward. the president wants to do that in tandem. his budget would restore many of the cuts to investments in scientific research and education. it would also restore funds to defense and national security. >> i want to ask you about the morale. as you look at this edge it, are
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democrats in the house satisfied that this president is pushing the envelope far enough? >> i think there will be broad and deep support for the president's initiative. a lot of overlap with some of the ideas that i put forward. the main combination here is making the investments necessary to help the country grow and sharpening our competitive edge. combine that with tax relief recognize the squeeze that many families have felt. that is where we are focused. unlike the republicans to have the top down view of the economy , the president says we are strongest when middle income
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hedge fund heavy hitter. we will continue our deep i've into the top 100 managers. we will speak with bruce richards. >> we are coming up on a 56 past the hour. that means we are back on the markets. this is scarlet fu with more. >> stocks are succeeding for now. the dow touched its lowest since wiping out. consumer spending slipped and jim's trigger joins me. we were just talking about how this is a theme across the markets. for a while it was bad economic news. is that the case? >> the volatility landscape overrides at this point. it's really a good than just the
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employment report this friday. we are confident the economy is moving at a decent pace. europe is less convincing and there are concerns out of asia and china. it is the level and sustained level of volatility of ross asset classes they continues to be indicative of instability and some data points are not going to change that. >> what metrics are you paying attention to. we were focused on oil. what metric or index would you have your itunes on western mark -- western mark --? >> it's across geographies and it continues to hover around cycle highs. currency volatility is elevated. we can sterritt crude. -- stare at crude. it doesn't even ring into
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discussion u.s. equities. it is hovering around the 21 level. it has not been below 14th since december. this ends violently. that's what we are warning our clients. there could be an inflection longer-term. that is our concern. >> let's get to trade. it's on twitter. what is your traded? >> we want to be long but heads the quarter. our focus would be on monthly active users. last year was 284 million. our analyst expects a. there is risk. we like to use a collar to fix that. we want to capture the first quarter of 2015. what we want to do is buy a 46 strike call. we want to do that for even. the payoff looks like being
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long. we are doing it in leveraged fashion. >> we are saving some money along the way. let's get to a stock in the news. jcpenney was initiated. they say the stock is overpriced relative to its ability to grow. there used to be open interest in jcpenney, but not now. >> after january it was three times that a year ago. you've got decreasing interest. what is left in that open interest? arguably declining interest what's left is very bear. >> no one is looking for them to rebound anytime soon. just a quick look ahead in terms of earnings any reports you
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think could make a difference in the broader market? >> we are watching along with twitter some internet names like yelp on thursday. they move sharply on their earnings reports. >> a lot of momentum names in that crowd. thank you so much. we've got much more coming up. we will continue to monitor the financial markets. the s&p 500 is higher as is the dow. "money clip" is next.
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>> welcome to money clip read we tie together the best stories and most important people. here is a rundown of the super bowl offering a storybook ending. greece goes looking for love in europe. they get some tough parenting in france. general motors seems to be getting a lot of lawsuits. the attorney gives us an update. it's a $4 trillion
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