"market makerslife from bloomberg headquarters in new york this is market makers with erik schatzker and stephanie ruhle. stephanie: is really pharmaceutical company teva i say $40 billion unsolicited offer for mylan. erik: 50 years ago, moore's law forecasted the capacity of computer chips but with physics get in the way? stephanie: they call her the queen of r&b. mary j. blige tells me what it is like to break into a new

medium while producing an album at the same time. erik: good morning everybody. you are watching "market makers ." we begin this hour with some of the top stories you need to keep track of. it could be a $40 billion pharma deal. teva opted to buy mylan but right now it is just an offer. to propose accommodation of cash and stock valued at $40 billion. a 23% increase to mylan's close last week. mylan took the unusual step of publicly rejecting teva before it made an offer. it recently made an unsolicited $29 billion bid for parago. people familiar with the matter of greece say the ecb may reduce the amount that could be borrowed for collateral. this is happening while europe

waits to see greece will agree to a new package of economic reforms in return for more bill money. in an interview with bloomberg one says no one is optimistic about greece right now. >> we have to be totally realistic. it all depends on the maturing of the position of the greek government understanding that in any case if it wants to deliver growth and jobs which is the main goal of that government, it has to produce recovery program. erik: he says he hasn't heard any european finance ministers are just greece should abandon the euro. the ride sharing service u ber now has a deal with a major critic or company. capital one card called holders will get a percentage of their uber receipt return.

the largest u.s. wireless carrier reported for scored a profit that beat estimates but nevertheless verizon had to give away tablets and offer deep discounts on iphones at the counter to rival t-mobile. it also attracted fewer customers and expected. in russia, the economy shrank last quarter and an annual rate of about 2%. this summer was blamed on the collapse of oil prices and sections impose over russia on his conduct in ukraine. russia central bank is forecasting the economy by 4% is here. here, we're celebrity our first pulitzer prize. won the highest price in journalism for a groundbreaking series that showed how u.s. corporations can lower their taxes by buying a foreign company and using it as a new official headquarters. congratulations to zach.

we will see him a lot of it later. stephanie: that is absolutely awesome. erik: there is no higher honor in our sport called journalism. stephanie: zach making harvard crowd. how about some more on the takeover offer. and $40 billion offer from teva for mylan. we are joined now from tel aviv. david, i want to start with you. wonder they want out of this deal? david: teva has a best-selling drug that has been on the market for two decades. it is the best selling drug and multiple sclerosis industry. it will face generic competition this year. this is an urgent moment for teva to do an urgent deal that

will immediately help it grow. this is the urgency you are seeing here. the largest ever deal teva has ever proposed. it is the biggest deal being proposed out of israel ever. erik: we have a situation where there are two competing unsolicited bids. teva going after mylan and mylan going after another. which one will succeed? >> this is a soap opera and i don't think there is a sense right now of exactly how this will layout. we are still waiting for mylan to make formerly it's $29 billion offer for parago that will affect this entire thing. both of these companies have very seriously independent personalities at the executive level and cultural level. they don't like each other. this could get nasty at some point.

there is robert corey a big personality. he wants to hang on to his personality. teva people have a strong identity. a huge part of the ice drilling -- a huge part of the israeli industry over there. stephanie: to these guys have massive payout deals? drew: with have seen this time and time again. a lot of people are making great golden parachutes but the mylan folks haven't saying they want to make a huge big deal of their own and make a buy. they don't want to get bought. erik: if teva isn't successful buying mylan that teva itself becomes a takeover target? david: i think that is highly unlikely. with teva's market rising to where it is, it is a bit too expensive.

as we have reported in the past there would be quite a few problems. teva would be a hard deal to do. the release of central government opposition and opposition from the labor union. that would be very difficult. the main idea here is for teva to buy mylan. shareholders for both companies seem to be pressuring management to support this. drew: it is something we have seen and that is probably where the pressure is coming from on this given the culture clash we know about. teva has said they think they could save about $2 billion here. they are already in the middle of a big cost cutting move. the closed 11 plants last year

and are looking at 16 more. these are two of the biggest generic drugmakers. mylan makes 1400 and teva makes over 1000. stephanie: seems like a colossal mess. a huge amount of money and a big mess and no one wants to do it. drew: generic business is all about cost and getting things down as low as you possibly can. if you can find synergies to make and doing one of these mergers is the way to do it, that gets her margins up. mylan has made big promises about improving their margins. teva is facing its own challenges right now. just one of the biggest things investors are looking for to meet the promises. erik: the premium in the deal right now is 6%. drew: that is a little lower than we have seen in the pharmaceutical industry this year. erik: as his arms spread -- this is arms spread. drew: right, sorry.

it has been skepticism about whether these things will get done. i think we will see multiple offers. have seen things drag out in this industry this year. at some point mylan will have to make a formal offer for parago. so haven't seen a formal offer delivered. those folks are probably sitting and waiting to see how this plays out. they aren't necessarily interested in being but at the price offered. there is a lot going on. there is a triangle of some sort. erik: is there any sense in tel aviv right now about how aggressive teva is willing to be and how much more there may be for mylan beyond the cash and stock on the table? david: all i can say is if you look at the history of the ceo at teva and when he has made a

strategic move of that sort, he has usually delivered. he used to work for a food company. he decided to make a move and expand in brazil. big merger there. he delivered. he did the same for an aggro generic company in israel. he was able to do a merger with china. there were huge problems there but he was able to deliver that. if he decided to go ahead with this and this is fairly problematic in several issues with cultural issues and antitrust issues, he sees it going through, that is my sense. stephanie: thank you so much for breaking it down. drew and david joining us. can i just say how much i love it? we have an amazing segment and both guests are our own bloomberg reporters. there you go. erik: as i was saying ge is not

done shrinking its finances. we will say what is on the block now and who might end up buying it. stephanie: the queen of r&b and hip-hop makes it to the big screen. i sat down with mary j. blige and talked to her about her new documentary an album. -- and album. ♪

stephanie: it is time now to bring you up-to-date on the top stories. in dupont is setting the stage for an interesting shareholders meeting next month. the chemical company posted better-than-expected earnings in the first quarter and also warns that the strong dollar is setting rusher on profit. activist investors will push for seats -- for four seats on the board. the board chairman bill ford

says the automaker is not growing as fast in china as it is used to. he spoke to bloomberg tv at the shanghai auto show. >> we are in this for the long haul. and all the markets we have been in over the years, we have had great growth entryman to scratches and all kinds of things. -- we adapt. one of the great things about our management team is how they deal with reality. they don't deal with the world as they wish it will be, they deal with it as it is. if that means we have to ratchet back our expectations a little we will do that. stephanie: ford says the company 7% growth in china is still better than the rest of the industry. he was egypt's first freely elected civilian leader and now mohammed has been sentenced to 20 years in prison. it was convicted in connection with the killing of protesters in 2012.the military that overthrew him and took over the

government . the new regime cracked down on his brotherhood group killing hundreds of supporters. he was elected after the fall of longtime strongman us to mubarak -- hosni mubarak. coming up the anatomy of a pulitzer prize. for one of our own bloomberg reporters explained the complicated tax law that allows inversions and journalism's biggest prizewon. plus we take it as a given every year. our computers keep getting faster and pretty soon we will have to rethink that. i got to sit down with the queen of hip-hop. we will hear from mary j. blige. erik: no ceo wants his company to be systemically important. you are forced to become safe and sound. ge capital is shrinking in the

hope of making the company the first to shed its system and clean important status. it is selling billions of dollars in assets and is now in talks to sell $74 billion of commercial loans and possibly more. aaron klein was a top official and helped write the financial reform law. tell us can just be successful? does getting rid of these mean ge does not impose the systemic risk? >> good morning fx for having me. this will be a major test. ge will oppose the first major test to the treasury department and the acts to see whether this will be a two-way street or whether a hotel california was created where you can check and but never check out.

stephanie: since it has been put into place, the banks have gotten smaller because they have had to and other companies like blackstone have gotten so big. shouldn't we be looking at them? aaron: that is a good question especially with the assets being distributed. parts will go to the regulated financial system like to wells fargo. other parts may go to asset managers. there is a broader question as to whether systemic risk is like the second law of thermodynamics of energy, it can be either created or destroyed, only transferred. erik: what about the wells fargo side? they are part of the group with blackstone buying real estate assets and now it is in talks with ge along with a number of other bidders. is this the kind of deal regulators can support? aaron: the parts of dodd-frank

that may have unintended consequent is of encouraging companies that are large to get larger like a $50 billion cut off for any bank to be systemically significant. you saw john say i could be 45 or 75 but it was place to be is 51. with regards to wells fargo, regulars have done a good job of setting tired levels of regulatory penalties. one of the theories behind dodd-frank is allowed private businesses to decide whether there are military cost of size are with the advantages that may come through. what you are seeing here is a great test case of whether or not the market can efficiently determine these who should on what assets given various regulatory structures in place to make sure the system doesn't crash. stephanie: is the market deciding that or has regulations

been put in place others only a limited number of buyers? if it is not black stone, who would be in a position besides maybe -- erik: here is the issue. the commercial lending business is not a bank per se. ge is a large financial operation. it made me wonder whether this should be the kind of deal that regulators can get behind because wells fargo decide jp morgan and a couple of other banks are hoover rang deposits and having trouble lending. the loan to deposit ratio is dropping. nobody wants to see that happen. they want to see good credit being extended and buying a platform like the commercial lending business in theory should give wells fargo a way to use some of its deposit financing. i was going to get into the risk but let us -- stephanie: how about the questions?

erik: should it not be the right kind of deal? aaron: i think these are important questions. some research we did showed the value of size of very large financial institutions may be going as a result of -- growing as a result. i think stephanie raises the key question which is is is the market's decision or regulatory decision? it is a combination of both. ge made a market decision but they did under the face of a different regulatory regime. this is one of the first examples of dodd-frank really fundamentally being in place and checking up the financial order -- shaking up the financial order. to test whether or not the status is indeed a two-way street. stephanie: do you think dodd-frank has worked? aaron: parts of it have worked

very well. the establishment of the consumer financial bureau and the creation of a new failure resolution regime for large financial seditions have worked. other parts are a work in progress. it is not clear that the federal reserve fully copperheads and understands the tremendous amount of insurance industry of which it is now in charge of. stephanie: five years after, can you call a work in progress or at some point do you throw the towel in and say it is a failure? aaron: i think it is a very good point. at some point, congress will re-examine what is working and what isn't. we have been doing that for a several years and have a set of recommendations for ways regulators and congress can improve a framework. the framework of dodd-frank is here to stay. erik: every bank ceo will tell you at least the ones who run system and clean important banks they will say i don't like it but it has made the system

sector safer and sounde? is that not make it a success? aaron: to some degree. you have to walk the right line. leading to the financial crisis we had growth based on an unstable financial system, the collapse of which was for millions of americans and trillions of dollars of lost wealth. it was stable financial system is the one with no lending and that is absolutely -- stephanie: we have to leave it there. you think those makers think it has been effective or do they learn their lesson? erik: we have to think about it. we will be back in two minutes on market makers. ♪

>> coming up we are celebrating

here on bloomberg. the pulitzer prize and who won it in a minute. stephanie: mary j. blige goes multimedia. night and watch a documentary about how she made her latest album. ♪

announcer: live from bloomberg headquarters in new york. this is "market makers," with erik schatzker in stephanie ruhle. erik: welcome back to "market makers." i'm erik schatzker. stephanie: i'm stephanie ruhle. i'm excited to get to our special guest. i want to give you guys news. president obama's chief economist says everyone wins if greece start growing again. the chairman of the council of economic advisers spoke to bloomberg tv in berlin germany. he said not fixing the greek problem is a risk the world should avoid. >> greece is struggling right now.

that is part of the problem. you need economic strength in order to make those repayments. that's why coming together in figuring out how to strengthen their economy is in everyone's interest. people need to get down to work. there is not a lot of time. they are further behind than they should be. stephanie: u.s. officials are not convinced by european promises that the fallout from a greek euro exit would be contained. shares of under armour are lower in trading today. the company forecast full-year sales that missed analyst estimates. under armour is making it tougher to post the massive sales gains investors of got youtube. projected revenue increase this year am a 23%. the lowest since 2009. jordan spieth, that kid won the whole masters.

ibm's first-quarter profits beat analyst estimates. it held course that those estimates had been lower. ibmerik: beating guidance that you lowered. what an achievement. stephanie: that's why this practice is ridiculous and i personally think you should not promote it that is just me. new initiatives like those accounted for 27% of its business last year but that has not been enough to make up for revenue loss third investors and falling sales -- through divestitures and fall in sales. that is what is extreme never to me. they did not do well but because they did better than analysts said and those analysts lowered estimates, the stock seems to be ok. erik: a little bit of justice. stephanie: under armour is down.

erik: other reasons not like it. stephanie: blue bell ice cream expanding their recall because of the threat posed to potentially deadly listeria bacteria. it is recalling everything that it makes that includes ice cream, frozen yogurt and other snacks. at bacteria has been found in several factories and other places. three people died after eating tainted bluebell ice cream. five others got sick. i believe it was chocolate chip cookie dough flavored. wonder what this says about chris christie's potential presidential hopes. one of the new jersey governor possibly longtime political allies is now backing jeb bush's presidential bid. he has donated $10,000 to rush's political action committee. joseph carrillo's was chairman

of christie's 2009 campaign for governor. erik: bloomberg has won a pulitzer. zach mider won it for exploratory reporting for exposing one of last year's biggest business stories. how companies do deals overseas as a way to cut taxes. it is called tax inversion. zach is here with us now. congratulations. zach: thank you so much. erik: it is worthwhile going into the mind of the guy who won the pulitzer prize as we want to understand. stephanie: what did you do last night? zach: we went across the street and celebrated. stephanie: dear kids know what happened? -- do your kids know what happened? zach: they watch the live stream . they were disappointed when there was no trophy. stephanie: they would see you on a podium with a gold medal. we can build that for you.

mike bloomberg can do anything. erik: how did you decide this was a story that was worth your time? zach: i've always been fascinated by these inversions. this is where a u.s. company becomes a foreign company by essentially shuffling papers around and claiming we are irish or panamanian. last april i realized there were a lot of these deals in the pipeline. companies were preparing to bring many more of these deals to market and i thought now was a good time when people are going to be thinking about it anyway to really dig into our companies are doing it and how. erik: the inversion dates back about 25 years. zach: 1982. erik: even further. it is gathered pace, why? zach: the u.s. tax system is basically the same as it was prior to 1982. it is not that u.s. corporations

pay more taxes than corporations and other countries it's the system in the u.s. favors foreign firms over domestic ones. it is better if you are doing business in the u.s. to do it as a foreign firm than to do it as a u.s. domicile firm. erik: so by an irish drugmaker and move your headquarters to dublin. stephanie: when you're reporting came out, what feedback did you get? what did they say? zach: heard from all kinds of people. it is interesting because there is not a clear villain. the corporations are doing it but the corporations are doing what their shoulder -- what their shareholders expect them to do. stephanie: the corporations are operating within the confines of the system that the government created. erik: although to be fair -- zach: although to be fair you have creative lawyers who come up with unprecedented -- stephanie: is that not the point

of a tax lawyer? zach: you have to lay some of the blame congress that continues to have the system that is so it tracked try to avoid. -- so attractive to try to avoid. erik: the president tried to put a patriotic spin on inversions or at least call them unpatriotic and they passed summer stretches ever able to put some -- past some restrictions. zach: we did see big deals including what would've been the biggest ever fail because of the president's actions. stephanie: what? zach: the abbvie transaction was shyer. they never got as far along. there's died for other reasons. presented at did not want to be bought. -- ashford zeneca did not want to be bought. there is no question you're going to see more. stephanie: you have any idea how much money the u.s. government

has not brought in because of these inversions in federal taxes? zach: we try to estimate that and one of the estimates was about $10 billion already that would've been collected if all of these companies had not inverted. you should expect that number to rise significantly because the fresh crop of inversions that recently happened are much bigger companies with more earnings potential. as those companies earn more and more, that is more and more profit that will not be exposed to the u.s. tax system. erik: are we going to hear the story come back up during the presidential campaign? are we going to hear senior legislators talking about the need to include inversions in tax reform once the conversation moves in that direction? zach: some of the biggest companies have gotten a little gun shy about this because all the attention it got during the middle of last year. walgreens would've been the biggest ever.

they decided not to do it. it's got to be at least part of that on the margins the cause of the public attention on it. you might see a period when the biggest companies don't want to start this debate again. eventually, you're going to have to imagine that companies are going to do it. stephanie: is there any high school middle schoolteacher you want to think right now? zach: my wife kristin joyce mider is the one i want to thank. stephanie: there you go. zach mider. this guy won a pulitzer. stay with us. ♪

stephanie: welcome back to "market makers." i'm stephanie ruhle. a big takeover offer earlier today in the pharmaceutical business. teva has offered to buy mylan.

the price more than $40 billion in cash and stocks. that represents a 23% premium to mylan's closing price last thursday. teva was considering a bid against -- i guess we were onto something. mylan took the steps of publicly rejecting teva offer. mylan is trying to get bigger. it recently made an unsolicited $29 billion bid for perrigo. a giant farm in iowa is the latest to be hit. more than 5 million hens may have to be destroyed in a state that produces one of every five eggs eaten in the united states. almost 8 million turkeys and chickens have been destroyed since march. we have reached a milestone in new york. ridership on the subway system has reached its highest level in more than 65 years.

more than 1.7 billion people rode the subway last year. that is an increase of almost 3%. coming up, hip-hop queen mary j. blige has a new album coming out and a new documentary. plus, our investors hunting for a bear market? will be speaking to the chief u.s. strategist at goldman sachs david kosten. erik: is moore's law hitting a dead end? gordon lewis predicted that the power of a chip would double every year. even think moore's law for the technology that powers your iphone and your car. today there are 1.4 billion transistors on intel's chip.

the next processor will have even more. physics may be standing in the way. steve, i have lived moore's law. when i started covering technology in 1998, the state of the art was 250 nanometers and now we are down to 22 nanometers go to 14. right now you can fit for thousand of these things into human hair. steve: i found an amazing moore's law prop in your green room. who started 50 years ago the eraser at the end of the pencil was about the size of a transistor. now if i make a dot on the piece of paper, it can contain 6 million. erik: there are people who say moore's law is running out of gas and will hit a dead end. steve: i've been in the business for 30 years and i've been hearing that for about 20 of

those years. we see the same visibility. we can see about 10 years down the road. for the next 10 years, still looking good. it is getting more difficult. stephanie: what is driving this message that it is running out of steam? steve: i think if you are in the business of doing this, and is the coming difficult for you -- stephanie: smack talk. steve: intel is committed to that stuff. push against the laws of physics and make the world a better place. erik: with current materials that you are using, what are the physical limitations? steve: we have a ways to go. we're going to go to 14 and then there's 10 after that. i'm not going to give away. each time you're making transitions half the size.

when you make them have to size, you get half the power and half the cost and things get better. stephanie: get better for whom? i would not think they are better for the producer. steve: it gets harder to do it but we do it for financial reasons as much as anything. when you follow moore's law, the economics mean you can make transistors at half the cost. because of more -- because of moore's law, we will make 20 billion transistors every second. stephanie: the ratio never changes so you are in the same edition? -- same position? steve: you can use moore's law to make the same size as last time or half the size of the chip. i see you are wearing a wearable on your rwrist. that's why we can make these things run on a tiny battery all day. erik: anybody who likes to use technology needs to be an enthusiast because if and when

moore's law runs out of road some of what we have begun to take for granted since the dawn of the semiconductor era will cease. what about alternative materials? things like photon anil computing -- photon nano computing? cutting-edge materials that have not made it yet. steve: nano tubes, spinach on it , there is -- spin tronic's. silicon valley still has a way to go. erik: how much money is intel spending now on developing new materials for a decade down the road? steve: it is very important. that is what our company does. we have thousands of thd's who spend -- thousands of phd's who spent all day thinking about this stuff. we know that people are counting on us.

it is not just the smart phones and laptops we have. the products in our world were designed often praetors -- were designed on computers. stephanie: how much do you love your job title? futurist. steve: pretty cool. i get to help people think about what's next. erik: steve brown. he is a futurist and works for intel. stephanie: market makers gets its groove on. more than we do every day. we will be joined by mary j. blige. i sat down with her to talk r&b, documentaries and the future. ♪

stephanie: the tribeca film festival is in full swing in nyc. it kicked off last week with a special performance from the one and only mary j. blige.

blige chronicled the making of her album at a documentary screening of the festival -- at the festival. i sat down with the queen of hip-hop and asked her if producing the document tree in a different city caused a creative start. mary: i needed to get out of here. i needed to get out of the united states because everything was so stagnant and redundant for me as an artist and on top of that it was mountains of negativity being thrown at me. i needed to change the environment and breathe. stephanie: why does going to another city do that? one could make an argument that that is running away from reality. mary: you can't hide from yourself. no matter where you go, there you are. i can run from here and still have all the stuff i'm dealing with. i went over there but it was still there. i was able to express it on record and live and take a break

from the chatter. the chatter is everybody else. the situation is you. stephanie: what you want me to know there's a lot of darkness and pain? mary: i want you to know i'm human. if you think that i think all day that i'm just a great person all the time i can't have people -- i can't try to full people like that. i don't like to deceive people. you cannot think i'm an angel. i'm not a horrible person. i'm not malicious and don't think about hurting people but it's just important that people see i'm human. stephanie: do you see that in music now that is so highly produced, do you think this is not authentic artistry? you are a true artist. the artists you were speaking of , sting, bono, elton john, they

have staying power. you think that is lost because things are highly produced now? mary: i can't say that people are not making authentic music to them. people are living in their time. we are at a time with social media is the thing. you can make an album that quicken just put it out. people are just expressing themselves the way they feel they can. stephanie: do you like this social media revolution or do you find it invasive? the fact that people can put out a record overnight, what do you think of that? mary: there is the blessing and the curse of it. the blessing is the paris go thing i was doing yesterday when i was speaking directly to my fans -- the periscope thing i was doing yesterday when i was speaking directly to my fans. the curse is access to too much, especially for children.

access to too much information. when we were younger, we didn't know anything about what they can find out on the internet. the negative side, the blogs and the horrible people who say any horrible thing and any moment. that side is the curse. stephanie: she loves london she goes to london to record this album, make the documentary and her driver, she is a proper english driver and she happens to love the music. he is playing sam smith in the car and she says, what is this? she says play some more, the next thing you know, i got a meet this guy. she goes and meet sam smith, watson to the recording studio sam smith crying, they are singing together. collaboration all started with a taxi driver. erik: i love that story. stephanie: authentic. you can see why people love her so much. she is without a doubt a performer but this woman is

real. how lucky am i that i got to meet her? ♪

announcer: live from bloomberg headquarters in new york. this is "market makers," with erik schatzker in stephanie ruhle. stephanie: when the smart money is going. we will find out where it's going. we will be speaking to u.s. strategist for goldman sachs david kostin. we're going to find out what is behind that shortage. welcome to "market makers." i'm stephanie ruhle. erik: i'm erik schatzker.

we will begin this hour with some stuff you need to know. the world's largest defense contractor has raised its annual profit forecast. lockheed martin recorded this reported improving -- offset the impact of defense spending cuts. the company that makes jet engines for military planes beat estimates for the first quarter. hewlett-packard is carrying out its plan to refocus on the core business. hp has agreed to sell snap fish. terms of this deal were not announced. that usually means it is not materials. hp will maintain a partnership with snap fish. maybe over drivers will start asking what's in your wallet. teaming up with capital one to give customers of the company cheaper rides. quicksilver customers will get 20% off when the use their cards to pay for uber rides over the

next year. the united states is trying to quell a furor with poland over remarks about world war ii. the state department spokesman went into damage control mode. >> director callomey did not suggest -- did not intend to suggest poland was responsible for the holocaust. this is something we wanted to make clear. erik: about 6 million poles were killed during world war ii. perhaps -- president mohamed morsi has been sentenced to 20 years in prison. he was convicted in connection with protesters -- convicted in connection with the killing of protesters. morsi was elected after the fall of hosni mubarak. bill gross just tweeted some

interesting thoughts on german tenure bunts. scarlet: he's mckenna call on german bunds. the 10 year german bund is not short of the lifetime. he says it is better than the pound in 1993. the only question is timing. if you take a look at the bloomberg monitor this is the german bund today. what you have are yields moving higher. that is a move higher in the price. if you look at it this year very different story because we have seen the yield on the german tenure bund go from 10 basis points to below 10 basis point. although it back to 1989 around 1990, the german bund yielded more than 9% now does below 10

basis points. tom keene and i were just talking about this. of all the bonds that have negative yields, more than half our european. a lot of demand from the european central bank and investors who are trying to go along with that ride because the ecb is buying all of this debt as part of its quantitative easing program to stimulate the economy. that is driving yields lower and further into negative territory. when that ecb effort ends, there will be a gap between german bund yields and u.s. treasury yields. bill gross is looking for that spread to narrow. when he talks about shorting the bund, he's talking about shorting the price down, yields up. stephanie: thank you. scarlet fu. u.s. equity markets seem to have taken a breather in recent weeks. the s&p 500 is up just over 2% on the year and goldman sachs says lately its clients have been looking for eris trades to make. they are actually looking into shorts. want to go short.

david kostin is with us. chief u.s. strategist at goldman. why the change? everyone was so bold up on the u.s. economy. they love equity markets. what gives? david: the u.s. stock market trades around fair value. at 2100, which is where we are today, it is my view that for their value at the end of this year. the only modest upside in my perspective, you have the earnings season which has been coming through about 20% of the companies have reported. in line with expectations. it is a messy quarter. strong dollar. you had that as a general trend. there has been some growth. the issue is, where is there better investment opportunities. we look at areas outside the united states like japan. looking into europe. here in the u.s. the stock

market trades closer to fair value. some people looking maybe at hedging their portfolios. erik: how about going short? david: depending on portfolio managers which are in long short leverage community that is a strategy. if you are in a mutual fund context -- we know for a fact that historically speaking the mutual funds do an excellent job under waiting stocks. with a bloomberg basket that we trade. it is generally done -- relative to where hedge funds are short. from a downside risk mitigation that is more -- a better track record. stephanie: what does that mean when you say golden clients are looking for bearish trades? does that mean negative stories? things that go short on? or does it mean distressed trade like oil trade that could go up? david: the market is generally

trading at an elevated or expensive level. what are some ways to identify potential stocks that are likely to underperform the index? for example we know historic we speaking that stocks trade and alex the street and extreme -- trade and extreme underperform, regardless of how fast they deliver sales. one way of thinking about the markets. the other way would be underweight mutual fund positions. positions mutual funds -- that is another way thinking about the potential stocks fell under perform. narrow dispersions. the market this year and the last couple of years has had a separation of returns across markets. more difficult to choose stocks both on long and short side. stephanie: difficult to differentiate yourself. david: correct.

the range of returns within the market is more narrow. stephanie: isn't that a positive? you can kind of hide out in the middle. market like this where great investors are going to outperform -- david: it is generally more difficult environment. one of the ways to achieve that would be some things that are working in the market. to avoid some ways -- what are things that are working? scott -- stocks that have significant domestic revenues. within technology were more than half the revenues are overseas here's a stock that is more domestically oriented. though stocks have outperformed. the trend of a stronger dollar continues. another strategy would be buybacks. corporate buybacks have been a

significant driver of the market. the only net to -- nearly net demand for shares is corporate repurchases. i think that is likely to continue. erik: we're in the middle of earnings season. a nine out of 500 s&p names have reported. -- 89 out of 500 s&p names have reported. david: energy has a very significant impact this quarter. four numbers to keep in mind. 6% negative headwind on sales from energy. 3% negative headwind from foreign exchange. the tailwinds, 4% growth and about 1% compositional change in the index. stephanie: four -- david: from modest sales growth

-- if you take away the energy, it will be slightly positive. erik: help resolve a debate for us. you are a strategist. you're lucky you are not an analyst this morning because we have taken one side of a debate that if a company beat earnings estimates it says less about the company and more about the estimates. stephanie: that analysts are changing with their analysts -- what their estimates are and the company outperforms. erik: or company like ibm which guided down and beat its own guidance. what do you say? david: it is less about their results for the quarter. it is more about the prospects for the corporate company. the earnings being reported relate to last quarter. erik: it makes much more sense to look into the future. david: you look at the current activity indicator goldman has from an economic perspective,

running a 2.5%. that suggests the economy is getting better and that would suggest you want to be a seller of the gross stocks that are done well. when the economic activity in the first quarter was week, growth was scarce. now, as the economic data is getting better, you want to be thinking more about values does that becomes better valuation. erik: we should be looking into the future. stephanie: but we should be celebrating companies and buying stocks from companies that outperformed analyst estimates when those analysts change their expectations and lower them? david: the economic data was decelerating at the course of the first quarter continued. earnings were cut. stronger dollar. stephanie: we don't move the goal line in football. erik: is it relevant trying to value stocks and give investors good advice? is it relevant whether a company

does or does not beat estimates? david: if you are very near-term, thinking about the individual quarter and tax positioning, that may matter. erik: it has more to do with market psychology than anything else? david: what's more relevant is the fundamentals. is there increase in consumer demand and demand from customers? that's why the conference calls that take place are helpful in terms of understanding what the company's book of business looks like. stephanie: what is more relevant is that eric and i have decided and we are going to keep asking you the same question until you agree with us. until you do that, we will review sitting here for the rest of the show. he is like, that is not going to happen. david kostin him a bank you so much. -- david kostin, thank you so much.

we have to relish these moments when chester and i are on the same page. -- when erik and i are on the same page. erik: what really matters in investing. google makes major changes to the way search works on your smart phone. some businesses may find themselves far down that list. stephanie: a new twist on an old burger commercial tagline. at chipotle, they're asking where's the pork? ♪

stephanie: welcome back to "market makers." i'm stephanie ruhle, here with erik schatzker. a very big takeover order -- offer earlier today in the pharmaceutical business. drugmaker teva has offered to buy mylan for $40 billion in

cash and stocks. a 23% premium to mylan's closing price. mylan took the step of publicly rejecting teva's offer before it made one. mylan is trying to get bigger as well. it recently made an unsolicited bid for perrigo. shares and credit suisse fell. a key measure of financial strength drop in the first quarter leading to speculation it may have to raise capital. it was the last earnings report for ceo brandy dugan. >> the measures we took from the first quarter i think of been effective. we have continued together healthy assets. in the quarter we had 70 billion

total. stephanie: income was up 23% for the quarter. dramatic moments in mesquite, texas where police came to the rescue of a man trapped in a burning suv. police rushed to the vehicle and saw the driver was still alive. they were able to drag the man away and get him to a hospital. he was badly burned and had several broken bones that they did get him out. those are your top stories for the hour. coming up he hacked his own body and found a way to make himself bulletproof. just another silicon valley entrepreneur. the little piggy's went to market. to pull a wishes it could find him. -- chipotle wishes it could find him. erik: another example of google's power to make and break company. google is changing its search

algorithm to favor businesses with mobile friendly sites. if a small business doesn't have one or something that is not actually a company, it is going to fall down the list of search results. corey johnson is with us. google is being in some corners demonized for this. google announced months ago it was going to do this and furthermore gave the world a list of instructions. here's what you have to do to make sure your website is optimized for mobile. cory: if you do business on the internet it should be no news to you that google is an important source of finding new customers. comment market share in the u.s., monopoly sized market share in the eu. google is so important to any company doing business on the web. it should be noticed -- between no news to you that mobile is an important part of doing business

if you're using the internet or doing commerce online. when google announced these changes there was fear that this would be like prior google shuffles. it is when they shuffle the algorithm and change the way certain sites are ranked. that is been disruptive particularly to crummy companies that are click magnet to try to get a lot of clicks to generate revenue but do not offer services. google has historically swept those companies out and not let them back in with the new algorithms. this is entirely different. they announced back in february, explain how it is going to work. they let them run a tool against the website so they could see how they would show up in the new rankings and make adjustments. i think it emphasizes how important google is to all of the world of business because so much of that business comes through google. stephanie: if we knew this was coming and google was transparent, wire people raising their hands now? cory: i don't know how much

people are actually upset about this thing. for those companies that put up a website to sell something 10 years ago and it worked and did not make any changes or a deli or dry cleaner put up their phone number and thought that was enough, we're entering a time where there will be more searches done on mobile devices than on the websites. this algorithmic change from google is only going to affect phones. it is not going to affect websites that are searched on computers. a thicket underscores that the world is increasingly mobile internet -- mobile and that google is important. erik: what does google get out of this? cory: we are engaged in this narrative from the very start google has been saying we will give you the best search results. we will be unbiased and try to surface the things that are most relevant to the customer.

on the other hand, they launched services since they made that promise to the world and investors when they went public over tenures ago. their other services -- went public over 10 years ago. the google flight results might not be the best flight results. this is an existential issue that could affect their top line if not their bottom line down the road. this is a chance for them to say we are going to be relevant on your phone what we used to be on your desktop. stephanie: where are you? are you moonlighting at an airport? you're not in the bloomberg san francisco studio. cory: i have mouth to feed. no, we are at the big arts conference. over 26,000 people gathered from all over the world on this issue of cyber security and the evolving threat. a huge deal in all the world of technology. covering all day in san francisco. erik: thank you very much. corey johnson will continue at

the rsa conference. stephanie: market makers will be back after the break. ♪

stephanie: you thought we were done? when we return, we have the story of a mother of coffee and a silicon valley -- a mug of coffee and a silicon valley dreamer who put them together. erik: what's behind the pork shortage at chipotle? we went to pick farms to find out -- to pig farms to find out. stephanie: i have never been to a pig farm, a haltho farmg. i've never actually been to full

length. -- i've never actually been to chipotle. ♪

>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. stephanie: welcome back. "market makers" we look at markets around the loop. we want to get back to the breaking news desk for our own chief correspondent scarlet fu premier jiang yi-huah the action out of europe. it is not just about greece what is happening in the market? scarlet: there was a german investor confidence survey this morning which showed an unexpected drop.

european stocks falling sharper but they did manage to close higher. for the dax, the week euro helps sales at the german software business. greek debt negotiations continue. the eu has now lost a quarter of its market value since late february. the euro's were covering some of yesterday's life is that when you look at it over the longer term it is no urinary 12 year low. as we told you at the top of the hour, rockstar on manager bill gross is making a call on german blooms. a tweet he says that the ten year bund is the short of the

lifetime. he's expecting yells to spike once the european central bank ends its quantitative easing program. it will create some much-needed inflation. erik: thank you. for centuries people have considered gold to be the best store of value. prices have fallen by more than a third since they had a record back in 2011. blackrock's larry fink is on the record saying there are better places to put your wealth. he says the two greatest stores of well internationally today or contemporary art, and a do not believe that is a joke and an apartment in manhattan vancouver, london. this says something. stephanie: this says something that you would see a measure guy like larry think say something like that. jim chanos, who is and has been a contemporary art collector for the last 20 years, is completely bearish.

he and i went through the tent and he went through lo mocking. he is saying this is a mockery of this art. the bottom could fall out any moment. erik: good, but has not. the same goes for new york city real estate. erik:stephanie: here we are apartments in miami going for 20 million dollars, $30 million, $40 million. most international buyers, or new york buyers who do not want to pay it for a new apartment. erik: people are paying $100 million for a condominium. when you think the most expensive than in vancouver was? erik: i don't know -- stephanie:

i don't know. erik: $55 million for a condo in vancouver. stephanie: we saw a condo right here in new york city sell for $100 million i. that is a whole lot of money. guests were real estate has gone the most in the last year in new york? where lives. ---- brooklyn where erik lives. i went to the oakland park zoo. and even? -- have you been? coming up, the coffee that can make you invisible. or so, it's creator says. ♪

erik: at the height of his silicon valley success, he decided to pack his body, losing more than 100 pounds and clearing his cloudy mind in the process. a cup of yak butter tea showed him the way to the most powerful couple of coffee. this is part of our eureka series. we take their innovators back to their moment of innovation. ♪ >> our biology changes in response to the environment around us, in ways that are not obvious to us. so when you change the environment around you or inside of you can have profound effects on how you know, how you perform, and the quality of your life. i have made it my mission to make the changes in the environment around you that make me more effective at everything i do.

i am a professional bio hacker. i'm the creator of bulletproof coffee. bulletproof has always been about identifying taking advantage of every single thing that makes people perform better. when you drink it coming just do not care about food. no cravings, no hunger, or 46 hours. a little clarity that you have not felt in years. i used to weigh 300 pounds. i have serious cognitive problems, i was frustrated. i made it my mission to ask this problem, to literally go out and change it. i've decided to put all like resources and efforts into upgrading myself. part of this was a trip to do that.

i went to a very remote region and at 17,000 feet alone elevation, you can expect to feel like a zombie. i felt lights turn back on. i was amazed at how good i felt and when i can back to the states, i said i want to create that feeling. i looked in all the types of tea, and realize that coffee works better for creating the clarity i was seeking. one of the most important variables was the coffee beans themselves. different types of copy have a different type of effect on how you feel. mold toxins are a primary differentiator. i wanted to have the right kind of coffee that do not cause a crash or jitters or being cranky. milk has things that sickticks

to the antioxidants, and butter does not have that. this is about 6% of the fat in coconut oil. the lack of sugar cravings, it just turns on right away. we add that to our coffee. what it tastes like is the best latte you have ever had. you drink it, and then five for 10 minutes later, you feel more like yourself. and then two hours later, you did not even want to eat that legal order that donuts because the strong cravings for food go away, and that is the amazing thing for bulletproof coffee and that is the secret for why it is so popular. it works.

things that make us better humans are what i am interested in. my mission of bulletproof is to show people what it feels like to be stronger, to have the energy, and to be a to bring it every day. coffee is just the beginning. ♪ stephanie: bulletproof coffee. as a general rule i try not to ingest anything that starts with bullet. and the idea of butter --but i would try anything. erik: i'm not persuaded. there are lots of other things you can do. coffee is not the first place i would turn to change my life. stephanie: fruits, vegetables eat more healthily, exercise. erik: i give credit to people for trying. if they believe it, build a business. stephanie: coming up, we

will tell you white probably cannot find enough heart for for christmas popular decision.

erik: how about the top stories of the morning? in russia and the prime minister's says the economy shrank last quarter ended a at an annual rate of 2%. he says the situation is stabilizing. the central bank says the economy may contract by about 4% this year. the maker little ice cream is recalling everything it makes, including ice cream, frozen yogurt, and other snacks. the bacterium has been found in several different factories and other places in three people died after eating tainted bluebell ice cream and many others got sick. the senate has agreed to vote on her confirmation loretta lynch

would be the first black woman to hold the job. republicans had insisted on completing the vote on a bill for confirmation. stephanie: tochipotle halted sales of park and its quality restaurants because it did not meet standards. julie hyman went to a pig farm herself, all the way in iowa to find out. let's take a look. julie: imagine a pig farm. you probably imagine a scene like this. ♪ at alder lane farm, you will see pigs in a pastor, eating

from a trough, and maybe some chickens along the side. and of course, a big red farm. >> you have a style playing their runow playing there and nursing her pigs. julie: the vast majority of big farms in the night states actually look like this. they alternate between pens for gestation and farrowing, or giving birth. they have bars, to keep things from fighting each other, and also from lying down on their babies. they are found in covered pens. farms like overland must conform to a 14 page list of regulations.

they will only by pigs that will never be given antibiotics. >> it is done the old-fashioned way for the old-fashioned flavor. julie: that limits their production to 1200 pigs a year, versus brenneman which raises 600,000 to sell to food. individual sales are less productive as well. overland has half as many eggs per litter as brenneman. >> if we did that style, we would produce $.34 or 40% less per day of the week. we will not even be our own country, let alone or. julie: the conventional industry dwarfs conventional but demand for quality is growing. >> as fast as we recruit additional farms, that is how fast we sell it.

the demand has outstripped supply for the last three years. julie: they expand 18% to 20% annually. a pace they call manageable. that may be as fast as they can grow, much to the sick chagrin of hungry customers. stephanie: i'm glad you're back from the farm, rather being in iowa, where there is no word s bird flu. talk to us about the experience. julie: it was an amazing experience. some of the differences are very apparent when you see them. they inside versus outside. and then there are some that are not quite as a parent, but also account for the differences in productivity. the breeds that are used are different. you have a trend in the 1980's toward leaner meat, and so people started raising leaner

hogs. they stuck with the higher fat content because they thought it was a better aging experience -- eating experience. erik: that is where the flavor is. julie: the pigs that overland have to be fed manually. give them the food. at the brenneman facility is automated. erik: relatively large agriculture in both cases, but one is clearly more commoditized and automated than the other. julie: that is fair to say when you're talking about a scale of 600,000 pigs. i had to keep getting them to repeat themselves. they have won the one facility, but obviously it is a huge number of pigs. the assertion by brenneman pork

is that if you want to be a lot of people on a large-scale and a low price, he says this is the way you really have to do it. there is a place for the premium product, but there's also a place for that commodity. erik: this raises some important questions on what are you are getting out of the commodity product. what you getting, what is the cost benefit? key questions. clearly it is more offensive to buy the other four, but should we be buying less of the other stuff? eating more vegetables, and less meat? most scientists would tell you that is good for you. julie: if you look for the livestock industry is going, there are others were moving away. stephanie: there is none other farm like --i would love to be the farm that could step in and take to police business -- chi

potle's business. thank you for your report. bill gross is going to be a street smart. we will see you tomorrow.

>> is 56 minutes past the hour, which means that bloomberg

television is on the market. we are midway through the trading day, and stocks are fluctuating after corporate earnings and the takeover offers in the health care space. the nasdaq best performer of the trio, now of about 6% this year and within 1% of its bubble high. joining me now is our analyst. we are struggling for direction. we do not have any conviction one way or another do we? >> we are not seeing any conviction in the marketplace, and a good way to look at it is last year we were actually at this spot. nothing has really happened. we have gotten over the ebola scare, crimea, and everybody seems to be downplaying the stronger dollar situation. we have not gone anywhere. last year, to the summer was

really slow. maybe volatility will come back in the fall, but right now it is nowhere to be seen. >> and we may not see until the fall. i thought earnings was supposed to provide a measure of excitement or a catalyst for investors for investors who were looking to do something? >> you would have thought it would have to move it investors are moving abroad overseas and they are diversifying themselves out of the u.s.. you have seen that in fund flows. if you look at sap, they reported yesterday. the revenue was up 22%. their operating margins are excited to be 18%. ibm was down on the revenue side. we we're winners and losers, and most of them are abroad. "market makersscarlet: microsoft will be reporting on thursday after the close. what kind of strategy do we have in mind even that they had such a big reaction last time?

>> it is only an play a 3.76% move in the stock. given that there is a low implied volatility, investors can actually take advantage of that. what they can do is buy the point and by the call. it is called a straddle. expecting an outside move for this friday, you can buy the 42 point and expected to move because we do not know how the stronger dollar is going to affect them. they are competeing pretty heavily against this. these options expire friday, so it is solely based on the earnings. "market makersscarlet: you're looking for an outside move. the only way to lose money as does not do anything. >> yes. we are seeing last quarter, it

blew out, and that is the big concern. tact is where the earnings are coming this year and they are most exposed to this stronger dollar. scarlet: what are you looking for this week? whether economic data or the greek talks? >> we're looking for companies like starbucks. they're going to report after the close. they have had a huge run and they are expected to contribute as well to the s&p earnings. the guidance from those going to be telling. scarlet: thank you for joining us. "money clip" is next. ♪

>> welcome to money clip where we bring together the best stories, the best interviews the best news in business. here's the rundown. the outgoing ceo of squareness wheezes all about the earnings -- a credit suite is all about the earnings. in voters we're going to show you the ultra luxury offerings