>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. erik: not so penny wise. shares of jcpenney are getting hammered today. the department store chain lost money over christmas and the forecast is disappointing. how much patience do investors have left? stephanie: time is running out on capitol hill. republicans have until midnight to passes any bill or the department of homeland security will have to start shutting down. erik: up in smoke -- smokers can't wait to get cuba's world-famous cigars legally, but will that mean more money for

the actual tobacco farmers? you are watching "market makers" on bloomberg television. i am erik schatzker. stephanie: i am the very enthusiastic stephanie ruhle. my boyfriend is act, better than before. how was greece? erik: i sat down with the finance minister. in his rookie is a bit of a rock star. stephanie: how would you describe him in one word? erik: i can't do it in one word. cool, confident, charismatic. stephanie: you can say rockstar. he is the man. we have the few pieces of economic data hitting the wires. our producers are saying enough talking about rock stars, let's get to the news. scarlet fu has marketmore. scarlet: let's get the pending home sales, lower than what economists had anticipated, a 2% gain. it represents a bounce back from

the drop in the prior month. we should mention that the drop was revised as well. it was originally reported as a decline of 3.7% but it has been revised to a drop of 1.5%. pending home sales measures this is an industry report, not from the government. compared to a year ago, pending home sales increased 6.5%, a bit of a deceleration versus 7.7% gain in the month of december. in terms of the university of michigan consumer confidence, a final read in the month of february, an increase to 95.4 -- or i should mention a decrease to 95.4 when you compare it to january. but it is higher than what was originally reported and higher than what economists had been anticipating. surprising that the drop in oil prices as resulted in a bit of a dip their. you had oil prices falling which led to an increase in confidence overall but a little bit of

stabilization in oil prices in the couple of weeks lead to a slight in confidence. erik: scarlet, thank you very much. scarlet fu with the latest. stephanie: tim for the top business stories of the morning. ethe economy grew in the fourth quarter slower than previously expected. the government revised annualized rates to 2.2% down from the initial estimate of 2.6%. consumer spending rose by the most in over four years. businesses spent more on equipment and research and development but that was offset by smaller gains in stockpiles and a widening trade gap. shares down as much as 11% today, that is a big number. this is struggling departments or chain -- departments or chain reported losses during christmas and forecast that came in below estimates. the ceo has been trying to revive sales growth by expanding merchandise. before today, jcpenney shares were up 41% for the first two

months of the year. former ecb president jean-claude to reshape says greece -- john flood --shot clock -- jean-claude trichet says greece must have reforms approved by the international community. jean-claude: grexit would be a catastrophe for the greek people itself and greece as a whole. second, i would say certainly it would be something which would be very, very bad, and that is the reason i trust there will not be grexit. stephanie: greece got one foot of confidence today could lawmakers in germany approved a four-month extension with for the bailout. republicans in congress are vowing to overturn fcc regulations on net neutrality, surprise surprise.

the fcc voted along party lines to ensure that all web traffic is treated equally. what does that mean? companies such as comcast cannot charge a content provider for faster service. house speaker john boehner calls net neutrality a misguided scheme. comcast says a court challenge is inevitable and the best way to avoid it is for congress to act. congress may kick the can down the road when it comes to the department of homeland security. this afternoon house republicans are expected to cast a final vote on a bill to fund homeland security for three more weeks. that would avert a partial shutdown set to take place tonight when the agency's spending authority runs out. still, republicans insist that any long-term spending plan must block president obama's immigration order. the moment security secretary urged congress not to take politics. good luck with that. secretary johnson: this is not just inside the beltway political jousting. failure to fund homeland security fully has real impacts

on public safety. stephanie: yes, it does. democrats are balking at the republican plan. they say they will not negotiate on immigration until homeland security is funded through september. erik: more now on jcpenney's long, rocky road to recovery. the stock trading down about 8% right now. julie hyman has more on the story. julie: i'm still trying to wrap my head around jacque s de penney. stephanie: trying to give them a little swagger. julie: they could use a little swagger. in the fourth quarter like many retailers they did relatively well with comparable sales up 4.4%. but it looks like some of that sales growth was at the expense of promotions. we saw promotions across the board from retailers but at penney in particular they often been bringing back a lot of the sales and couponing eliminated under ron johnson.

the former ceo came back to repair the damage that seemed to have been done by johnson in part brought back a lot of the sales and promotions to get people back in the store. stephanie: not enough? julie: well, not enough to boost sales but we are seeing margins essentially compressed. it is below what analysts had anticipated, and free cash flow will be below what analysts had anticipated. erik: that sounds genius -- let's go back to what we were doing before, which created the need to bring in ron johnson in the first place. julie: exactly -- stephanie: at least they weren't in freefall before. julie: this gets to the crux of the issue. jcpenney was not doing that well. everyone says ron johnson killed this company. guess what, jcpenney brought in ron johnson for a reason because it wasn't doing that great. ullman has brought it back to where it was before but investors are looking for that next phase of growth. penney cannot rest on its

laurels. it is projecting 3-5% growth in sales this year. it has to kick it up to thrive in this environment and you guys know is a very tough one. erik: very few retailers are generating sales growth in excess of 5%. julie: no, we're not seeing it -- we saw big numbers from home depot, for example in a completely different market. stephanie: those are two different things. i want to talk about the gap for a minute. i talk about it every day --i walked outside are off as i see 40% off, 60% off. how are they doing this? julie: older navy seems to be doing quite well. in this environment where people are looking for bargains, old navy is priced at a low price point. yes, they have sales, or that is appealing to shoppers look for a discount. the problem lies at gap itself.

the new ceo has artie made changes and fired -- new ceo has already made changes and has fired the creative director. he says he is getting rid of the creative director position and brought in a woman from limited brands and a vice president of product design and development. it is a little bit of a tweak of position but the bottom line is they are trying to fix gap, they are trying to change the fashion mix. old navy is growing and the gap -- stephanie: so by hiring these people they are trying to get cool? people aren't going to old navy for desire. they go for value. julie: but at gap itself they are trying to get a little more passion back. it doesn't have to be super cool, it has to be cool enough. stephanie: you are a mom. do you shop at gap? julie: i do shop at cap. i buy a lot of gap kids.

stephanie: erik is like, none of the above, tom ford all the way. julie: what about you? erik: for my kids? stephanie: i am not so much the gap. lost me. okie-doke. julie hyman, thanks. guess what, i'm not loyal to anyone. if you sell cool stuff i will go there. thank you, julie hyman, giving us the retail breakdown. start spreading the news -- ward zuckerman may put "new york daily news" up for sale. erik: these days it is more like tony the toothless tiger. why are kellogg's sales slumping so badly? ♪

erik: time now for "the bulletin," the top is this source of the money. -- top business stories of the money. the prospect of higher u.s.

interest rates is boosting the dollar against all 24 emerging-market currencies over the past six months. china has put limits on depreciation so while yuan has fallen 2% on the dollar, the reality is fallen 23%. -- rial has fallen 23%. the a320 is a single aisle fuel-efficient jet, the sort of plan that is the mainstay of commercial aviation these days and competes directly with boeing's 737. remember aerieo, the service that streamed broadcast signals to subscribers? it went out of business. it is sold at bankruptcy option for less than $2 million. tivo was the winning bidder for the aereo trademark and other assets. stephanie: one of new york's

most fabled newspapers may be up for sale. mort zuckerman says that no deal is imminent but that he was contacted by potential buyer earlier this year. paul sweeney is here to explore the story and so is david fol kenflik, the npr media correspondent and author of "murdoch's world." what do you think of this headline? david: this is an acquisition mort zuckerman always had it to have the place of table, to be the kind of guy invited on "charlie rose," the sunday talk shows. it was, you could argue, vanity play, to play a role in civic society. he is in his late 70's and this is not a prospect that will be more profitable. they put up new investments on the digital side and i think with some good results, but nonetheless, he may say i want out just as he did with "the atlantic monthly" years ago.

stephanie: let's guess, who do the think oncewants it? david: probably -- stephanie: is mort zuckerman a liar? paul: these are vanity properties. we have jeff bezos with "the washington post." there are still people who want to own the marquee titles in the biggest markets. it wouldn't surprise me if somebody approached him. it is not a viable economic business in the long term, it loses money. probably one of the best economic scenarios is rupert murdoch owner of "the new york post," comes in and buys the "daily news" and shuts it down. david: i talked to sources about that very question and if that is the way it works, mogul to mogul on a billion or 2 billion or news corporation -- the younger generations are hoping

to deleverage their investment in newspapers even know a year and a half ago they split the company into. there are real regulatory hurdles. even though rupert murdoch has a publishing company and broadcasting companies, federal regulators are looking at them and it is one guy at the top of the paramedic for both. -- top of the pyramid for both. they have talked over the news about deals where they could both limp along and share some of these expenses. erik: i will borrow a line from the daily beast -- if the new york city daily tablet market really amounts to two bald guys fighting. stephanie: two bald guys fighting over a cone? very clever. paul: only a guy with his head of hair would say that. but these are wounded properties and a particularly financially viable companies could do a talk

by hundreds of thousands of people every day subscribing to them. these are top 10 circulation dailies so they are not nothing. you talk about jeff bezos and it being a vanity play for "the washington post" but it is still one of the best newspapers in america led by a tremendous editor, marty baron. it is an interesting moment and a time at which people can acquire papers for a smaller price target and they would've had to some years ago. erik: so how much is it worth? paul: i don't think it is worth much at all. $170 million in revenue. "the new york times" trades at 1.2 times that revenue and that is "the new york times." the numbers are not big. it is more the vanity play. they could be any hedge fund manager, any new york big with -- stephanie: how much does "the washington post" go 4, 250? this would be around 100.

wouldn't you think it would be worth more than "daily news." david: it is astonishing with all of these properties. a little over 20 years ago, the new york times company in a blender of catastrophic proportions acquired "the boston globe" for $1.3 billion. they sold it for well under 10% of that. stephanie: wow. paul: and rupert bought dow jones for $5 billion and wrote down a big slug of it the next year. there are a lot of people year -- david: there are people in new york who want to be players and there is this entire new cadre of fortunes made in silicon valley and technologies -- stephanie: no longer has to deliver all of his news in 140 characters. he will own "the daily news"! erik: does it offer as much of a

platform as it used to? david: it doesn't set the table in the same way it once did. "the new york post" and "the daily news" can pack a punch in terms of local and regional politics and particularly when you have players with new york ties. if you have chris christie, if you have hillary clinton, if you have mike bloomberg, the people who have ties or a presence in the city, it is still the global media capital and it matters. it is what people see on the front pages as they walk to the subway. stephanie: the day after a chris christie-style blender, there is nothing better than a "new york post" headline. paul: i love seeing the papers playoff each other and it would not be the same if there was only one. erik: thank you, david folkenfli k and our own paul sweeney. stephanie: can you believe that

this is what vanity plays are? i am not living right. erik: stephanie ruhle laying in a different league. stephanie: "market makers" will be back in just a moment. we have more to cover. erik's back. why would you want to leave today?

stephanie: welcome back to "market makers." i am stephanie ruhle. let's get you back to the breaking news desk where scarlet fu is looking at the action on the street. scarlet: heading into the final trading day of february, the question is whether nasa would -- nasdaq would end the blistering run with key milestones. for now it does not look like we are going to get there because we are backing away from those

levels. blame gdp, blame pending home sales, consumer confidence, all of which came in a little shy of what economists anticipated. so far this year the nasdaq is the best performer of the three major indexes, more than 5% more than doubled the the dow and s&p 500's advance. to top its record high, it would need 68 points, or 1.4%. unless it gets a big turnaround here and a big boost, it does not look like it will happen today. in the meantime, let's get you a couple of retail movers. i know that you and julie talked about some of the strategy decisions behind what has been going on at jcpenney and gap. gap is having its biggest one-day gain in seven weeks on a technical basis. despite eight soft outlook for the full year, investors are reacting to the stock wide-out

-- stock buyback announcement. jcpenney is falling as much as 13%, even as comparable sales recovered and profit margins got fatter. jcpenney rallied as much as 3.1% through mid-december so expectations are a lot higher now and jcpenney needs to do a lot more than just topping analyst estimates. ross stores trading at an all-time high right now. a new two-year $1.5 billion stock buyback program. stephanie: when was the last time you were in a jcpenney? scarlet: me? i think i went there to use the bathroom. not my proudest moment. stephanie: there you go, that is telling. you? erik: i quite honestly can't remember. i'm not taking about -- talking about weeks or months. it is years. stephanie: not saying i wouldn't go back.

jcpenney, do something. welcome me. thanks, scarlet. for fans of cuban cigars like erik, this is where it all starts. we're taking you to cuba.

>> live from bloomberg headquarters in new york, this is "market makers." >> hello once again. you are watching "market makers ." >> we have a lot to cover. let's get you started with the bulletin. the top business stories of the morning. shares of herbalife down today after it slashed its forecast for the year. the company is famously under fire from bill ackman who claimed it is a legal pyramid scheme. it is being hurt by currency fluctuations especially in venezuela. government regulators are still investigating ackman's claim.

the economy did not grow as fast in the fourth quarter as we thought it. the government revised the gdp to 2.2%. that is down from 2.6 percent. consumer spending rose by the most in almost four years. businesses spend more on equip in an and development, offset by smaller gains in the widening trade gap. consumer confidence has cooled down from an 11 year high. falling for the first time in seven months. rising prices at the gas pumps and bad winter weather get some of the blame. consumer sentiment fell the most in the northeast and midwest. the snow has been piling up. the three cofounders of carlyle group -- david rubenstein, phil conway and daniel were paid a

combined total of $800 million. the three founders of carlisle 800 million bucks is what they took him in 2014. that is about $50 million more than they got the year before. you have to give credit to the bull market. it has allowed carlisle to profit. people in south korea believe you cannot go wrong investing insects. -- in sex. shares in the condom maker soared. throwing out decades old and hedging loss. -- anti-cheating loaws. a maker of the morning after pill is at a five-year high. that kind of blows my mind. just because the law changed, suddenly everybody is ready to get their groove on. amazing to me.

>> really? >> if you are a cheater, are you paying that much attention to what the law is? >> before we get to cuba -- >> go back to greece. >> it is still a dicey situation there. subject to rumor and speculation. there was a rumor this morning that one of the four big banks was running out of money. there were long lines seen at atms in greece. it is payday and people go to the banks. they were wondering if this was a typical last day of the month. speculation spread like wildfire that the bank had run out of cash. the bank was forced to deny -- it's cfo spoke to our bureau in athens. it gives you a sense that even

with this agreement that they struck on friday, it is not all stable. >> i'm not surprised by that. we are not talking about lawmakers and regulators rushing to the atm machines. these are greeks who have been living for these terrible situations. clearly it is still a really sensitive time there. >> moving on to talk about cuba. top cuban officials are in washington today, negotiating a reestablishment after decades of diplomatic relations. this new openness means new opportunities for cuba's cigar industry. what about cuba's tobacco farmers? >> cuba's cigars are considered among the best in the world. perhaps the best in cuba are

rolled from tobacco grown here. the province of del rio. he has spent the past seven years working for a family that has spent the last one or 70 years working the land here. >> is this farm a typical tobacco farming cuba? >> it is unique. >> these 42 acres constitute the largest private plantation on the island. >> 2 million cigars. >> all our high-quality. >> high-quality does not necessarily generate great wealth. in a state-controlled industry in a commonest country, the government creates and controls the entire market. >> they don't share with us anything. they sell the cigars and get the profit. >> workers earn less than $50 a

month in factories like this 100 million cigars are rolled each year and sold. smokers in the west are blocked from buying these cuban brands but still purchased 300 million handrolled cigars from other countries. if the u.s. embargo and, the current market will be squeezed. current demand will only be met if more tobacco gets grown. the fifth generation of his family to enter the business. on a recent visit to new york cuba's best-known tobacco grower was launching a new high-priced cigar made of tobacco grown in nicaragua. >> using the cuban government would like the cigars to be sold in america? >> of course. it is a good business. very good business. >> good business in the u.s. may not benefit the farmers unless

the property rules -- and it will revenues totaled just $40,000 -- annual revenues total just $40,000. >> with my cigars, we will find medicines for hospitals. my country is a poor country. in another place, we can make more money. i love my country. i try to help my people. >> rich sentiment and for-profits are common where state-controlled commerce is as common as taxes for americans. >> fresh from cuba. how do people feel about the idea that a wave of new investment is going to flood cuba? >> these are guys who would love

to have more money. he was complaining to me about the fact that a lot of the equipment this not show up on time, because it is provided by the government. he would love to have that cash flow so he can run his business how we run businesses here. he cannot expand. under the laws, he can't. investment from the u.s. would be difficult for them to use because you only have one buyer and that price is fixed and that buyer is the government. >> for anything to change, it's just not enough for the u.s. government to reestablish ties with cuba. the government would have to change the loss. -- change the laws. >> it would require the regime to allow the guys to have more land and run the business. >> what is the probability that is going to happen? >> in the restaurant industry

you will see these private businesses open up. as a private farmer, he is very unusual. private money is extending into other industries. >> great story. we have to ask, what is your favorite cuban cigar? >> vegas robino. it was great. >> such a hard job. we will hook you up. i heard him say that to you. fantastic party you can catch this and all his pieces on bloomberg.com. >> breakfast cereal makers feeling the crunch. they are going for healthier options and saying no to frosted flakes, rice crispy, many others. ♪

>> will come back to "market makers." it's time to give you the bulletin, the top business stories of the morning. shares of jcpenney down as much as 11% today. issuing a disappointing annual forecast after reporting a loss through the quarter that included christmas. the ceo indicated that pennies is still hurting -- jcpenney is still hurting from the actions of its predecessor. >> we motivate them to shop more often and across more categories. some of the biggest opportunities our kids and footwear. we are trying to recover from the self-inflicted wounds of the previous strategy. >> the former pennies ceo was therefore lest any are.

he oversaw a very poorly received makeover that saw sales plunge. promising news from the housing market. pending sales of existing homes rose in january to their highest level in a year and a half. first-time buyers are still reluctant to enter the market. that is blamed on higher prices and tougher mortgage standards. the economy grew at a slower pace in the fourth quarter than previously estimated. the government revised the gdp to an annualized rate of 2.2% down from 2.6%. republican senator jim and half had made -- has made another effort to debunk climate change. >> national attention -- in case we have forgotten, because we keep hearing that 2014 has been the warmest year on record i asked the chair you know what this is, it is a snowball. from just outside here.

it is very cold out. >> there is not a snowball chance in hell that climate change doesn't exist. he chairs the senate environment committee and what is one of the most outspoken climate change deniers and congress. after a snowstorm five years ago, he and his family built an igloo and named it al gore's new home. >> remember this? >> theiry're great! >> what's that come uncle to ucan? >> a huge problem for kellogg's, the world's largest cereal maker. sales of its flagship brands have fallen.

this is the cover story of the new issue of "bloomberg businessweek." what is wrong with kellogg's? >> the apocalypse and cereal city. seven down quarters. they are closing cereal plants. a big problem if you are the world's used cereal company. >> is that kellogg's fault or a result of the gluten-free revolution? >> there is a massive fragment of the breakfast -- they are getting able away. -- nibbled away. egg sales are up yogurt, oatmeal. breakfast is still an $8 billion a year business, but it's shrieking as everything else is growing. -- shrinking. >> far post and general mills

doing as bad as kellogg's? >> not as badly. there is a management problem at kellogg's. general mills was successful last year with cinnamon toast crunch. post with lower prices on its brands. they have done better. kellogg's cannot get anything right. the market apple jacks to a dolts -- adults and did ok with that. >> is it a marketing and branding problem? when you think cinnamon toast trunk, i think of the ads from 30 years ago. my sense want to eat junk 24 hours a day but they feel no connectivity to tony the tiger they don't know about snap, crackle and pop. have they lost their marketing ability? >> there are examples of success but none of it is enough to overcome the top line, the

massive pipeline -- topline decline. you are right people are disconnected. millennial's who want to discover new things, there are niche products would the idea of the great big cereal brand those days are over. >> if it's a management or execution problem how does a company like kellogg's fix it? >> everyone thinks it is a takeover candidate. someone will come in and buy the company and take a private. >> do what they did for burger king. >> absolutely. or for heinz or anheuser-busch. i do think these are big valuable brands. they recognize tony the tiger. there is value there. the current people at kellogg's are hurting to extract value.

>> if they launched a huge marketing campaign and brought tony the tiger back -- kids eat breakfast cereal every single day. they are not eating that many eggs. my don't have green juice. if there is a great character, a prize in the box, my kids would be begging for. >> i don't think television advertising is going to do for them now what it did for them in that 1950's and 1960's. >> kashi is a success story from the last decade. they are seeing double-digit declines in some of their biggest brands. >> people decided sawdust doesn't taste good? >> is there something in their portfolio that shows promise? >> one of the big problems they've had is they have all

these brand extensions and big success in the last decade with special k but the snack bars and all that stuff that their snacks division is suffering too. they were down by 2%. >> they bought keebler and pringles. >> and an egyptian bakery company. they bought yoplait. people are switching from cheerios to yogurt. almost half of kellogg's sales in the u.s. are still cereal dependent. they have to do something to diversify -- somebody else will come in and transform that company. >> maybe if they made bacon cereal. good story. >> check out his cover story in

"bloomberg businessweek." pick up your copy or go to businessweek.com. >> what will john boehner do if fellow republicans reject a planned to keep the department of home insecurity open? ♪

>> midnight tonight, another cliff. funding for the homeland security department set to run dry. peter cook has the latest from the capital. this is not a fight between democrats and republicans. between the house and senate isn't it? >> a standoff between republicans in the house and senate. they are heading in opposite directions. at house is voting on a procedural move that will clear the way for a three-week spending bill for the department of homeland security.

it will give them three weeks to try to sort things out. you have mitch mcconnell and the senate pushing forward with a clean spending bill no language at all having to do with the presidents immigration executive action. two different tracks, both from republicans, both on a collision course. we will see the house and senate passed that three-week extension later today. there is a lot of infighting among republicans over this. democrats are standing back using her publicans of putting national security on the line. -- accusing republicans. >> let's say the funding is lost. what does that mean for us tomorrow on the next week? >> most employees at the department of homeland security 80% of the 230,000 employees will show up on the job. they just won't get paychecks.

that won't sit too well. the other thing that does not happen is there is some spending for localities training that will not happen as a result of the shutdown. it is clear they want to avoid that. they are not there yet. it is democrats versus republicans, republicans first the administration and republicans versus republicans. -- republicans versus the administration. >> peter cook breaking it down for us on capitol hill. >> coming up, the literary event of the year for some investors. the weekend warren buffett releases his annual letter. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> this nutritional sublet company needs a pick me up. herbalife feeling the heat from bill ackman and the ftc and its sales are stalling. >> investors in berkshire hathaway can't wait for warren buffett's annual letter. >> this guy is even more popular than warren buffett. the dog whisperer to the rescue. if your neighborhood is being terrorized by an aggressive mut give caesar milan a call.

welcome back to "market makers." >> my dad worships caesar milan. >> worships? >> he has a dog and his dog was tough to train. >> so does matt miller. you think matt miller salivates over cars and trucks and motorcycles? you have not seen him with cesar milan, but you will in the next hour. >> we start with the top business stories of the money. jcpenney shares getting hit harder they come down as much as 40%. -- 14%. a loss for the quarter that included christmas. the ceo indicated jcpenney still hurting from the actions of its predecessor. >> this year, we need to motivate them to shop more often and shop across multiple categories to increase our share of the overall spend.

some of the biggest opportunities are home, kids and footwear. we are tentatively recover from the -- trying to fully recover from the self-inflicted wounds. >> a poorly received makeover and sales plunged while he was in office. the economy grew at a slower pace in the fourth quarter than previously reported. the government revised gdp to the growth of 2.2% on an annualized basis, down from the initial estimate of 2.6%. consumer spending rose for the most in four years. congress is planning -- it is called beat the clock. house republicans inspected to vote on a bill to fund homeland security for the next three weeks. common insecurity would stay in

operation past midnight -- homeland security. house republicans insist a long-term spending plan must block president obama's immigration executive order. what greece really needs is a stamp of confidence from creditors. the former ecb president spoke to bloomberg television today and said the international community must give its blessing to greece's plans for economic reform. talking about speculation greece would leave the euro. >> and exit would be a catastrophe for the greek people. and for greece as a whole. that is the first point, of course. i would say certainly, it would be something which would be very bad for the eu area as a whole. that is the reason i trust there will not be an exit. >> doing his part -- greece got one vote of confidence letter to lawmakers in germany approved its four-month extension.

between us-led airstrikes and falling oil prices, the islamic state's finances are beginning to hurt. revenue from oil fields has plunged and a new study says the group's finances will decline further if it doesn't capture more territory. the task force says the islamic state also funded itself through bank looting, extortion and robbery. the world's largest hedge fund manager will bank on artificial intelligence. bridgewater associates will start an ai unit next month. the artificial intelligence unit will report -- he led the ibm integers -- engineers that developed watson. >> this really is in line with his egos. he wants his employees to be laserbeam focused. if they are dealing with an

issue, he doesn't want them training investing. you have to be 100% committed come in the zone. if you are a computer, you have a better chance of doing that then somebody arguing with his wife at 9:30 in the morning. >> i was taking a look at some news that came out the last couple of days. it gives you a sense as to why artificial intelligence holds such appeal for people like hedge fund managers -- artificial intelligence computers don't just beat humans at jeopardy. they now beat humans at computer games. some of the best computer games ever made a computer is 25 times better than the typical human five times better at robotech slightly better upon. also slightly better at space invaders. not so good at ms. pac-man or asteroids. >> i've always wanted to date

scarlett johansson. another hedge fund manager battling bill ackman herbalife -- ackman calls it a complete fraud. they have make changes to their sales practices. that is weighing on their growth. duane, what do you make of the earnings announcement? >> first of all, who would have thought that two years after ackman's big speech, we would still be talking about herbalife? earnings yesterday that you had the stock trading up as people saw that beat on that quarterly number. it will matter what happens over the next year. herbalife turned in a forecast

that people felt was a lot lighter than they expected, even though they did expect it to come down. the question remains whether this business, the a momentum has been killed by ackman. >> what are the problems -- it appears to be it is taking investors a long time to figure out what is really going on. to sort through the numbers and come to some firm opinions. the stock opened the day down but only fractionally. now, it is down more than 7%. it keeps falling. >> it is hard to believe there's many people in this for a traditional long-term play. it is pretty clear there is a good bit of speculation. it is very difficult for anybody to make any real concrete

prediction about where this company will go as long as you have this major regulatory overhang. you had a two-year campaign by bill ackman. how many companies can withstand the kind of relentless pursuit of a bill ackman in saying the company is a fraud? couple that with this criminal investigative demand, this investigation by the federal government and no one is clear where that might go will they get a slap on the wrist or be shut down? it will be difficult for people to decide how these earnings play out over the next year without some sort of resolution. >> have we heard from tim raney? he was an independent analyst, worked for bill hugely bullish on herbalife. one of their biggest investors. >> bill is still in the stock.

he added to his position last year and is still as committed as ever. tim raney appears to still believe the company is viable long-term. he has revised his numbers down as have other analysts. the analysts in some ways are flying blind long-term because they don't have any more clarity than anyone else as to what the ftc is going to do. you've got those who believe the government is really -- perhaps preparing some sort of significant case against herbalife. others read it completely the other way. >> take the bill ackman situation aside. let's say they are living on a straight and narrow, what are the currency headwinds doing? >> the currency has been a

real difficult for them. they did talk about several markets like mexico, korea brazil u.s. markets being markets that underperformed. the other markets they seem to be saying our currency related -- are currency related. the china unit making changes, some of the results this quarter looked good from that perspective. you have currency weighing down on this company but also a few markets that are showing trouble beyond that. >> the stock is being weighed down down 7% on the day. when we return, warren buffett has never written a letter like

this one before. his annual letter about 50% longer than usual. >> it is friday. time for us to play the game. look at this man. -- the yearbook game. he did graduate a year early send us your guesses. we await your wisdom. ♪

>> you are watching "market makers." time for the bulletin of the top stories of the morning. he was economy did not grow as fast in the fourth quarter as the government thought. revised down gdp growth to 2.2% from 2.6%. the university of michigan index

fell for the first time in seven months. rising gas prices and bad winter weather is to blame. confidence is flying high at airbus. the company ramping up production of its a320 aircraft to meet rising demand. airbus will produce 50 planes a month. the a320 is a single aisle fuel-efficient jet. the mainstay of commercial aviation. another casualty of the collapse of oil prices. used electric cars. the resale value of the nissan leaf and chevy volt plummeting according to the wall street journal. like the wall street journal. electric cars depreciate in twice as fast as traditional combustion engine models. average selling price just $10,000. one quarter of what it originally cost. >> calling all disciples of warren buffett. tomorrow, he will release his annual letter. investors are known to treated as sacred text.

this time, it will be one for the ages as he celebrates his 50th anniversary aperture have a way and charts its next century. i want to bring in the man looking at that same question. larry cunningham is the -- he is in philadelphia this one. tell us what we look have to look forward to. >> people have been looking forward to this letter for 50 years. this year will have a retrospective. it will be full of lessons. he always puts one big teaching lesson in there. this will probably be something about the difference between building a business and sustaining it. >> the whole world has been wondering for years already because warren buffett is getting on, almost 85 years old

how is it that anybody else can do what he has been able to do? you study warren buffett he has picked a couple of horses on which he hopes berkshire hathaway investors will bet on. >> for the book, i interviewed a large number of ceos -- those people have a lot of the same skills that warren has. they believe in the sense of permanence at berkshire. they believe in managerial autonomy and understand how a decentralized is this works. -- business works. while no one has the full set of skills that the war warren buffett has, there is a stable of talented managers at berkshire hathaway from which the board of directors is able to choose a successor at some point. very impressive group of people.

the culture warren has built into the business and the culture that the subsidiary is ring to berkshire is designed to last. things like a very long, whole experience. they believe in autonomy and a trust-based culture. these factors are designed to make a corporation last and i think berkshire has the best chance of any company of surviving and a kind classic figure -- iconoclastic figure like one. -- like ward. he calls them the all-stars. they are terrific men and women. i surveyed hundreds of shareholders for the book. i asked for them to nominate three people they thought would be capable of taking over as chief executive. i ended up with 12 people who were picked large number of

times. they are all terrific men and women. i have no doubt the board will make a good choice. >> who do you think would be best for the job? >> all three of those are great. they have different skill sets. ajit has been there the longest. he is a superstar in that dimension. matt rose has done phenomenally well at acquisitions aperture halfway energy coupling, allocating $20 billion in capital. matt rose probably has the distinction of being the longest -- the person who has run a public company for the longest.

he has a different set of skills. they are all terrific. the other part of the secession plan envisions having howard buffett become chairman of the board of directors. that has everything to do with making sure berkshire maintains the values. in case there is any laxity howard will be there to remind them of the importance of berkshire culture. >> i respect the fact that all of these people are capable or you think they are equally capable but you have to have a favorite. if the decision were yours, who would you pick '\? >> i list 10 or 12 in the book. i have met and spoken with most

of them and they do have different strengths. i will bet the board doesn't have a favorite. i bet they have some sense of here are terrific people. given the time one or the other might be an ideal fit. >> if it is that much a roll of the dice, how can it be -- how can the case be that this company has as good a chance managing success as any major corporation? no company i can think of is as closely identified with a single individual as berkshire hathaway is. yet, we are talking about any number of potential combinations , i don't see how that's possible. >> i lay out the argument in "berkshire beyond buffett." it's much more than a single personality.

it really is an institutionalized culture that reflects a set of core values including the sense of permanent managerial autonomy. >> how is it that berkshire hathaway across-the-board can be this flawless? especially given its in the investment world. the most hated industry there is. how could warren buffett have created such a utopia? >> i'm not sure if it's flawless or utopian but certainly stands out as an exemplar. it has had its share of mistakes. warren has never made any bones about it. it has a better image or track record than most is because of the idea of integrity. 30 years ago when warren stepped into leadeth salomon brothers --

lead salomon brothers, he told everybody that they should never do anything that they would not be happy to have a journalist report on the front page of the newspaper. sometimes people make a mistake or have a lapse in ethics and violate that standard but that basic standard that principle of integrity is so baked into the company. >> thank you for joining us. the author of "berkshire beyond buffett." >> we will be back in a couple of minutes. stay with us. ♪

>> it is friday come everybody. time to play the yearbook game. have a look at this young fella. he comes from the tech world. 1991 in maryland.

he graduated a year early. get clever. note to word answers. -- two word answers. ♪ . .

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> welcome back to "market makers." i'm stephanie ruhle. >> and i'm erik schatzker. a quick check of herbalife shares. down three dollars. almost down 70%. the reported earnings. it seemed like it was good news. the market seems to have changed its mind this morning. we talked about this with our reporter in atlanta and he wants to clarify one thing.

life is basically several investigate all demand, in case there is any confusion. it is a civil investigation. >> all right, or herbalife is not the only thing we are looking at. markets in europe are searching. we want to check in with scarlet fu for the action overseas. scar how does the week look? >> it looks pretty good. any evidence of yield is helping to drive the european stocks before the ecb d scales quantitative easing next week. they are off a fresh seven and a half year high. they are looking at another record high. and airbus getting as much as 8% after reporting a 15% gain. this is really a remarkable investment environment right

now. rbs included a chart to show the asset class has negative yields on sovereign bonds. the reason why? quantitative easing. not only are yields turning negative, the yields are fading. take a look inside the bloomberg terminal. this is the italian 10-year spread to the german bonds. you see the trend going down. and today it got less than 100 paces points. it got to 91 basis points earlier today, which shows the risk premium of italian over german debt has been coming down.

that search for yield continues but the seb will be -- bea -- the ecb will be ready to step it up next week. >> thank you scarlet. >> yields may be declining for italian government debt, portuguese government debt. but i spent a few weeks -- >> a rock star. >> the guy where's doc martens. how many european finance ministers walk around -- i mean, if he could he might go around shirtless. and doc martens. >> now you're getting into vladimir putin territory. he would not be the only one. >> but flatten your putin is not just the finance minister. >> that is true. >> they have a four month

bailout extension, just approved by germany today. that was a big hurdle. german lawmakers have approved the extension. now it is back in greece's court, in prime minister alexis tsipras's a court. i am among the skeptics. how much can greece hope to accomplish in the space of four month to make a difference? they can begin these reforms, if they wanted to come in next week , but what can you do in the space of four months? and what if you do not succeed? and if you do not succeed, you are low on credibility. i talked about this and here is what he said. >> i do not know if we will succeed. i have a complete commitment personally and my whole team, my whole government. we are utterly committed. we have one thing going for us. we are an inexperienced

government. we have no strings attached. we're the only government elected with no connection whatsoever into it interests that need to be squeezed. this is our asset. we are inexperienced but then again, experience in greece does not have a very good track record, does it? >> to say you don't know, and i respect your candor -- >> do you want me to lie? >> absolutely not. but what if you fail? >> then we deserve the wrath of the greek people and our european partners. >> the wrath of the greek people. you can count on that. the wrath of our european partners? what could that be? would the europeans kicked them out of the euro? it has to go both ways. >> from the perspective of the market, it seems like it is going to be a calm, smooth four months. >> they rally hard on friday.

since then it has been a steadily steadily -- >> what are the next four months going to look like for him? not easy. >> it is hardly going to get easier. it is only going to get harder. everybody believes that greece is running out of money. if they can come up with money through debt restructuring or a bailout -- it will be a tough job indeed. >> do you think greek politicians are going to be canceling their month-long summer vacation plan? they are going to go either way? >> we are going to move on from greece and talk about the american oil discount. what is with texas? selling for less than brent? ♪

>> last i checked, the world is awash in oil, right? there is oversupply globally.

prices are down. but here in the states, texas crude is 12 bucks cheaper than the equivalent in europe. which raises the question. bloomberg's alix steel is here to explain the wti -- >> the european version is more sophisticated, refined? >> [laughter] well, it is heavier. maybe more refined? there has been a widespread differential over the last 17 months and the speed we got here was particularly fast. it was $7.50 in weeks and this is a huge difference. two stories going on here. here in the u.s., as you said erik we are pumping a lot of oil. it is not dampening demand. at the same time storage is going bananas. it is filling up fairly quickly.

refinery runs her down, so refineries are leaving more oil sloshing around in the midwest. same deal here in the u.s. you can see to 14 million barrels. pretty huge. >> ok. let's talk about what is happening in europe. >> worldwide demand actually picking up. hit a record in december. but libya, totally off-line at this point. nigeria has not delivered anything to the market and iraqi exports are being hit by bad weather as well is not so great rates coming onto the market -- >> in other words, there is a good reason that brent is trading at a premium? >> and the markets are killing it right now. refiners have a lot of incentive to burn a lot of crude and make a lot of product because they are making so much money for those products versus here in the u.s. >> [indiscernible] >> at some point this party for

rent will come to an end. a they will have to process different product for the summer. then prices will get to why a no one will want to buy it anymore. it is a catch-22. you like it when it is cheap, but when it is too expensive you do not area brent will -- you do not. brent will come down at some point. >> when? >> the number one question they are getting from clients is when is the last barrel going to -- >> the market does not buy that for a moment. oil is sitting at $49 now, but the june contract is 62 box. >> it is much lower because of the current storage issue, especially since we start pumping a lot of product in the market, that will have overflow as well. margins sink, less demand for crude. >> all right, thanks very much. >> $11.40.

>> never. >> never? all right. >> when we come back. this guy never has to raise his voice. he is known as the dog whisperer. we will hear from scissor malan about his new program. ♪

>> it is time for the bulletin everybody. the top business stories of the morning. let's begin with jcpenney, the stock hit early today, down as much as 14% urea it has recovered some of those losses but still well into the red. the struggling department store chain delivered an annual forecast below expectations. and let's hear it for the three cofounders of the private equity firm the carlyle group david rubenstein, danton yellow, and a colleague were paid a combined

total of $800 million in 2015. you can give some credit to the bull market. they sold stakes in the portfolio companies they owned and managed. and aereo -- you remember this area they captured over the air channels and string them to subscribers. their assets have been sold at a bankruptcy auction fetching less than $2 million. tivo one of the winning bidders for its customer list and other assets. >> that is some bad news bears right there. get ready. he is america's most famous dog trainer. at cesar milan, known for his role as the dog whisperer, is back in a new series called rescue 911 where he goes to neighborhoods terrorized by aggressive dogs.

our own in-house doggie daddy matt miller said down with him and found out how he became the master of the woof. >> i was in los angeles, in the hood. before i was called the dog whisperer, i was called the mexican guy who was good with dogs. if a dog is tired by walking, he will not give you problems. if a dog is trained, he can still give you problems. tiredness gets rid of the problem. >> how did you know you had this gift? i mean, a dog whisperer is significantly bigger than a mexican guy who walks dogs. >> well, and mexican guy on television. the whisperer part because -- becomes more magical for the viewers. >> where do you get the magic from? >> it is instincts.

the instinctual, emotional world. i teach people to live in these worlds. my dog is my baby. my dog is like my soulmate. it comes from this perception. this is an instinctual world, common sense. >> your new show is called cesar 911. it is on nat geo. i am going to pull some pictures of my dog steve. i have always wanted your help. i thought, if cesar were here -- >> that is what is important. he said not steve, you. you need to train people, not dogs? >> that is correct. people send dogs to the dog trainer and the dog behaves good for the doctrine are, but not the human. you are pretty much just throwing away money.

so, let's help americans invest their money right so they become educated and see it as an investment, not an expense. >> i know it is me because i have watched every single episode of your show. what about opportunities -- you sell dog accrued tomorrow -- dog accoutrements. what else is out there? >> pretty much the entire world is my dog park. >> [laughter] would you open, say -- dog day care camps? >> i think education first before you tell the people what they need like grooming in this. a lot of people do not know how to be with their dogs. that is business number one. that is something that no one has ever done in the whole entire history of humans and dogs. >> the pet industry is pegged at being a $58 billion industry.

>> at least. >> is that number right? >> a dog as a child, right? you want to make sure your loved ones are well taken care of. >> then why we have more dogs in shelters today than ever before? >> because the human does not follow through. the human is not committed in the relationship. he looks for excuses to get rid of the dog. it is something about the dog. i'm going to get another dog. >> you have met with loads of celebrities pet lovers, dog owners. it was the best dog owner from the celebrities that? >> they all are. >> know, who is a big dog lover? opera? >> jade a pinkett smith. she is tiny, but powerful. >> tiny but powerful. your dad loves cesar milan. why? what is so special about him?

>> he has figured out what the problem is. >> that is? >> it is the dog -- it is not the dog, it is the human. >> who loves cesar milan? maybe, just maybe his new show will help matt miller set steve straight. >> have a look folks. he comes from the tech world. 1991, eleanor roosevelt high school in greenbelt, maryland. is it time to reveal the answer? >> it is. ding, ding ding. i think he looks exactly the same. i can hear our producer in my ears say he looks little bit like joe weisenthal. he does. >> let's reveal the answer.

who got this right. "too easy. let's see your high school photos next." ouch. >> i do not think my hair even fit in my high school yearbook photo. >> a viewmaster with a full real of stephanie's yearbook photos. ♪

>> it is 56 past the hour. that means bloomberg television is on the markets.

we will see all the indices are wrapping up for february with gains of at least half a percent. we are wrapping up the month with a bit of a whimper. down arrows across the board. the dow hovering near record highs, and the nasdaq backing away from that 5000 level 20 points shy. joining me for the option insight is the senior derivatives strategist at a company. we had janet yellen testify before congress earlier this week. we have the ecb coming up next week and in the meantime we have a lot of economic data to sift through, but it has not given investors a direction as to whether it is pushing higher. >> i think there's a lot of confusion in the market and a lot of fear last week. gdp, consumption, pmi figures. the headline numbers have been week, but if you get down into the weeds, consumption is

incredibly strong. wages and earnings are moving higher in select places. investors not sure how they want to position. >> they are not sure how they want to position, but we see the vicks has settled down here. -- the vix has settled down here. will next week's ecb conference was that backup? >> i don't think so. the market will remain chilled out. i think that there will be more volatility to come off in the short-term. >> where is it going? >> my forecast for the vicks is around 18, 19 on average. this will not last very long but in the short term, it is a catalyst that could make the market pay. >> ok down 18.5% this year, you see a bull case and a bear case

for the stock? >> right. i think that goodyear is going to try to make amazon's ethereal, playfulness nature of their business model a liability for them. they announced recently they are going to have a new commerce platform, probably in the second quarter of this year to allow customers to find the tires they need, have them sent to a local dealer. which could be much much better than the old-school way of going to a dealer and not being able to compare prices or try to go on amazon, not be sure what you need and figure out a solution yourself. those are bad options. goodyear may have more potential here. that could really turn things around in a big way. >> on the other hand -- >> on the other hand, the technical and the price based movement is not that great. this is the kind of interesting thing i like to look at. the last six months when the market has been down, goodyear

has fallen one point on average. i think that looks pretty bad. >> give us the trayvon. >> -- give us the trade then. >> the trade is to look at the april 28 calls and sell the july 28 calls. the difference is high volatility means near tom -- near-term options are extremely low. you can profit if the stock is on the upside. >> if it's the still -- if it sit still, you lose out. >> correct. ♪

>> welcome to cesar milan" -- welcome to "money clip" where we bring together the best clips and interviews in business news. all right, the cameras are rolling. there is a rambler r --umbler -- rumbler in cuba. and see pack is ready for battle. who killed tony the tiger? coming down from a carb loa