>> live, from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. erik: the morning, everybody. welcome to las vegas, here for the salt conference, the gathering of the biggest, best, and brightest. stephanie: the one sure thing

you can bet on in vegas this week is a great gathering of extraordinary minds across the financial industry. we are going to be talking to a few. mike novogratz. bruce richards. there you go. erik: these are just three of the guests we have lined up. stephanie: how about a little news. we will take you to the bulletin. these are the top business stories. the labor market may be moderating with the economy. companies added the fewest numbers of workers in more than a year. private employers hired 169,000 people. that was fewer than forecast. we will get the jobs report on friday. the price of oil is rising.

it hit the $62 a barrel mark. there is speculation the oil gluttony may be easing. the u.s. companies have reduced the number of active oil rigs to the fewest in years. glad i am talking to boone pickens while i am here. shares of herbalife are up. it boosted its forecast and posted better-than-expected earnings for the first quarter. they are in a two year battle with mr. ackman. it has led to investigation by the ftc. >> our business fundamentals are strong. our strategy is the right one. our focus is on building a stronger foundation for our

business centered on consumer needs. that results in higher sales leader retention and sustainable, long-term growth. stephanie: hope he does not have to sell the new he bought for 100 million dollars. we have seen shares move over the last two months. he has been accused of running a pyramid scheme and the company denies the claim. antitrust regulators looking into apple over a new version of the beats music streaming service. the ftc wants to know whether apple uses its possession as the biggest seller of music downloads to put rivals like spotify at a disadvantage. apple is not commenting. a new round of funding for human resources start up. the company is valued at $4.5 million.

it provides free online software that companies used to provide benefits for their staff. insurers pay zenefits and they has signed up more than 10,000 small and midsized illnesses as customers. the pilot who crashed and airbus into the french alps has practiced the maneuver several times on a flight from duesseldorf to barcelona earlier that day. it was during a flight from barcelona where we saw the crash in a german aircraft. he locked the captain out of the cockpit and programmed the plane to descend 150 feet. -- to send it to 150 feet. -- to descend 150 feet.

erik: this is how we are going to kick it off. jeff, good morning. i want to cast our eyes across the continent and across the ocean to europe. that is where we have seen a significant move in fixed income and especially in germany. what does it mean? >> you have to recognize there are things going on from a regulatory side impacting global liquidity. they have put in rules that are being implemented over the next year or two. when you see markets moves, you see them trend further than you thought they would trend before. the other thing was, the

distortion created by 35 central banks. forcing markets to go low. you create these gaps when the market recognizes they have gone too far. stephanie: if you were janet yellen, what should she be doing right now? jeff: she is worried. you have a number where you probably are negative. you have the atlanta fed with slow growth. most economists are higher. you have to focus on the dollar. it has had a bigger effect than the fed thought it would have had before. erik: there are limitations to unlimited. mario draghi says i will do whatever it takes. up until now, everybody assumed he would get what he wanted. german yields went negative, swiss yields went negative. are there limitations to unlimited?

jeff: i do not think the central bank can lose. when they try to win, does it have an impact on the economy that you want. europe is doing better at the margin. some of that is oil prices. some of that is the weakening of the euro. you have these global impacts that are affected. the margin had been negative the last three or four years. you are seeing the start of stabilization. it will be a struggle to get it to list off. stephanie: carl icahn is super bearish on high-yield. >> you have to recognize when you are long credit, you are

short volatility. a lot of the things we try to buy our short duration asset. the underlying commercial real estate is doing well. you have very little building going on. you have rates that are cheap in the secondary markets to where interest rates are. you have a lot of capital flowing into the united states on the equity side. erik: that is the first time i have heard anybody say anything about credit is cheap. jeff: you are going to see a lot of the legacy commercial real estate have the ability to refinance. erik: in fixed income, i have not heard -- i am surprised. people say there is not a lot of value to be had.

many investors are migrating out of public markets and into present markets. jeff: you have to be careful with the basic high-yield. we have small positions. where we are focused is the niche markets that a fund our size can go after and have an impact on returns. stephanie: is there enough liquidity? jeff: you cannot be too big. you have to be careful and diversified in your approach to fixed income. erik: you talked about the unintended consequences of bank regulations on liquidity. where do you see it playing out? jeff: you will go to more electronic. you have seen that in many markets. the problem is there is not the offset of the market makers to take the other side. when you have everything trending, and becomes a tough market. you have liquidity and low

volatility and then you create the volatile gaps that you see in markets. erik: we are going back to a fixed income market that resembles the fixed income market of the 1970's and 1980's. jeff: i think we are moving towards there. erik: what does that mean? jeff: you have to have a diversified portfolio. the cost of exit is way too high. as an investor, you have to think about how big you can be and a certain it and you have to have enough portfolios strategies to allow you to have diverse investments. stephanie: is the industry getting ahead of itself with the electronic platforms? jeff: i think that is the issue. there is no mandate to provide liquidity, which is what the historic mandate of banks were.

stephanie: when the knife was falling, were banks stepping up and providing liquidity for you or protecting themselves in hiding under the desk? jeff: of course they were protecting themselves. you are always going to have time frames. in 2008, there were material risks to the banks' viability. we have not seen too much of that. it made the markets worse. capital has been raised from the banking system. the regulatory impacts are large. erik: how valuable was that shock absorption that the bank balance sheets provided if the liquidity was not there when you needed it most? jeff: anyone in the markets

knows liquidity is there until it is not. you have to recognize that and think about the markets you are in. one is hard is the number of markets impacted. rates markets and currency markets were still somewhat liquid at that time. the question for the next crisis is will both markets be liquid? erik: how far away as he next crisis? jeff: pretty far away. stephanie: really? you don't feel we are sitting on a bubble that is getting bigger? jeff: certain securities are overvalued. we are going through a dead super cycle. rates are not going to go through the roof. could we move 50 basis points? yes. we still have a global economy that needs low rate to continue to perform at the mediocre level that it is performing at now. stephanie: why is every issue

hot, hot, hot? jeff: that is where investors can get size and liquidity. when you go into the secondary market and you want to put $200 million to work, you drive the market's up so you can buy stuff at the market. erik: jeff thank you. he oversees over three and a half billion dollars -- $3.5 billion of klm offf. a lot more ahead from salt. bruce richards at 11:00. michael novogratz.

erik: time to bring you up-to-date on the top stories. the british election is a tossup. david cameron argues it is risky putting a labour party in pal or -- in power. polls show neither party is likely to win the majority. netanyahu one more seats than any other faction. even if netanyahu succeeds, a

judge has refused to lower a $7.6 million bail for --. sarao told reporters he did nothing wrong except being good at his job. coming up, is the oil glut getting smaller. the biggest risks in the market. we will talk about that. the revolving door from washington to wall street. how big of a problem is it if it is a problem at all? we will talk with bill daley. salesforce may have a potential buyer. bloomberg west editor at large editor is with us.

>> microsoft is a company that takes their office 360 product and offer sit on the cloud. they are selling licensed software and letting them have access. it is unique the way it is offered. they have built a big business by offering software to be used in a browser. >> why would microsoft want to buy this mousetrap instead of

another? >> salesforce has grown to acquisitions. they've not had cash flow and has had free cash flow in the last five years. the company that acquires salesforce will spend $50 billion to see its earnings go down. >> we tried to buy assets that are best in class and he says we have zero interest in salesforce. it makes you wonder why microsoft would want to get involved. >> that is probably in the eye of the beholder.

oracle has the number two product. they look at this the same way. >> is this in response to someone else taking a shot across the bow? you will not tell me what your sources are telling you? >> i will not. i heard comments made early last week that the valuation of salesforce was ridiculous. >> how big is the pool? >> very small. >> exxon mobil can afford it. for google, it is a less deluded

deal. you buy the business, you spend the money, it will be worth less than last year. >> cory johnson joining us. lucky us. we will be here all week. we have much more "market makers." the saw conference with eric and stephanie. ♪

stephanie: here we are in vegas

for the salt conference 2015. we spoke to jeff. erik: we have bill daley at 10:30. he is in the hedge fund world. stephanie: mike novogratz is one of the most well-known names in investing. when you look at what the central banks are doing, it is great to have a conversation with him. erik: it was two years ago he told us -- remember -- stephanie: i do not. i had a baby. he pretty much nailed it in terms of prediction. we are going to have more when

we return. salt 2015, we are in vegas. stick around. ♪

just because i'm away from my desk doesn't mean i'm not working. comcast business understands that. their wifi isn't just fast near the router. it's fast in the break room. fast in the conference room. fast in tom's office. fast in other tom's office. fast in the foyer [pronounced foy-yer] or is it foyer [pronounced foy-yay]?

fast in the hallway. i feel like i've been here before. switch now and get the fastest wifi everywhere. comcast business. built for business. erik:matt: welcome back to market makers. scarlet fu is in our newsroom. scarlet: a decline in inventories last week. economists and analysts were looking for a build of 1.0 6 million barrels. this is a draw. it looks like it is the first time since going back to early march. it is fairly consistent with what we heard yesterday. crude inventories fell last week . if you come inside the bloomberg

terminal here, this is the reaction you are seeing on oil prices. this is wti. a leg higher on the data. we are continuing to build up. that was a resistance level for crude oil and we are continuing to move from higher from there. i am going to pull the set to a one-month chart where you can see the advances made over the last 30 days. we are at the highest level this year. if you look at how we are doing since mid-march, we have gained more than 32%. matt has -- matt, that has led to speculation that it could slow down. crude oil prices at their highs of the session. matt: a fascinating story. thank you. top business stories of the morning.

the biggest back to back decline in productivity in more than two decades. it fell almost 2% in the first quarter. the second drop in a row. it pushes up worker cost at an annual rate of 5%. that activity -- this investment in new productivity. 100 59,000 workers radical, the fewest in 15 months. economists expect the payroll report to show few gains. a pharmaceutical company is paying a premium for another maker of rear disease treatments. they are buying another company for $8.4 billion in cash and stock. that represents a 140 price premium to synageva's closing

price yesterday. apple is going back into the bond market so i can return capital to shareholders. it will be the fourth multibillion-dollar debt offering. proceeds will be used for stock repurchases. it is borrowing money even though it holds 200 billion dollars in cash. that will allow apple to share it from u.s. taxes by keeping it overseas. a warning on the trade deal. elizabeth warren says giving president obama trade negotiation authority will help wall street banks. they will use the opportunity to rollback rules imposed after the 2008 crisis. >> we are deep into negotiations with the european union. big banks on both sides of the atlantic are gearing up to use that agreement to water down

financial regulations. matt: the white house says there is no link between the trade deal and wall street reform at all. manny pacquiao's opponent may be lawyers in a court. they say everyone who bought a ticket was ripped off because manny pacquiao did not tell anyone he injured his shoulder in training. he lost in the richest fight in boxing history. his promoter caused the suit frivolous. that does it for us in new york. let's head back to eric schatzker -- let's head back to erik and stephanie. stephanie: we are going to

continue our coverage here and try our best. we are at the salt conference. now we have one of the top dogs, a partner in senior tm at sky bridge. thank you for joining us. we are in your house for a change. >> for a few days. getting a lot of industry folks together. a nice lineup. portray us will be the -- stephanie: two very different strategies. what strategies are you most interested in. >> it is still in the venture and equity space. on john's side, he is less active. we think that is a great strategy.

a lot of people are speculating that ge disposes of their finance arm and will go on a big buying spree. in terms of dan, he does a lot of things similar. up until recently, there has been no activity. erik: lie so much? -- why so much? stephanie: there are -- >> there are not a lot of things -- if you want to capture some of side to that and guarantee a consistent return, it is a good space. guys can make 6% to 10%. equities are up, they can

capture the upside. given the corporate activity in the fact that it is built on a solid foundation in terms of the large volume of transactions one can do, it will continue for six to 12 months. stephanie: wind is your business make a lot of sense? we saw a big returns out of hedge funds. many investors said we needed sky bridge. we needed a middleman. returns are muted. investors are used to lessen and less. why'd you still make sense? >> that is a good question. investing is hard. it is not easy. picking good investment themes is challenging. we spend a lot of time looking at inefficiencies in markets and where you get the best opportunities. every manager and strategy is cyclical. nobody makes money every year

forever. they go through good times and bad times. our job is to say it is good. three years ago, mortgage-backed securities were fantastic. if we have another bear market we will be the best performing strategy. trying to figure out which strategies are the most proactive. there are a lot of talented managers that can execute and find the new guys. erik: a lot of them saying the same thing. you get paid to find the good things. do find there is a lot of good ideas? people keep coming and pitching and do not have much that is new to say. >> a lot of the frustration is based on the fact that there are no cheap asset classes.

if equities are up 20, you can make that. i think that is the biggest source of frustration. there is no 15 to 20 out there. we can talk about greece in argentina, but how much risk will you put there? because of the banking system due to dodd-frank, no more process competition, a lot of these more complex strategies they have a lot more opportunity than they should given that it has been zero for 6.5 years plus. stephanie: since the barriers of entry have gotten higher and higher, we see less guys start up. their performance is embedded

among 60 other guys. >> a gets higher and higher. $500 million, it is not a you honor. -- it is not a youawner. they have gone through a tough period because their strategy has not been well. greece is a tough market to access if you want to take risk. we work with several teams to figure out how to do that best. stephanie: they are already rich guys. they are not looking for the next big trade. >> there has been a dichotomy where some managers are about manager fees.

our competitors want to beat everyone else. they are there to take risks. they are not always successful. more often than not there is the competitor spirit. stephanie: thank you for happening -- thank you for having us. i am coming for skybridge. erik: we have more from salt. next up, bill. at 11:00, we will have bruce richards of marathon asset

management. ♪

erik: welcome back. stephanie and i are live from the salt conference. stephanie: a great morning. so much to cover. erik: he was a commerce secretary. he worked for jpmorgan. he was chief of staff for president obama. he is a managing partner. bill daley. we welcome you here. you come from washington to wall street. ben bernanke has come from washington to wall street. what do you think of that? bill: i think it is normal. a lot of people have the

opportunity to go into government and back to wall street. i think it is good. it brings the understanding of government into the private sector and vice versa. it is an enormous after. . a lot of governments and countries frowned on it. i think it is the strength of our system. not a weakness. overall, it is healthy. erik: what about the impression that is created, that a guy like bernanke is trading on his public service? stephanie: if he is trading on public service or expertise. bill: absolutely. then they wonder if they are

taking advantage of the knowledge or the experience you had in government. these are people the private sector need. the perspective in the private sector, a lot of them do not understand government. they complain about it, they criticize it. stephanie: do you think people understand the financial industry and the government? bill: that is what i am trying to say. it goes both ways. the complexity of governing is much more difficult than running a business, even though businesses are difficult to run. the fed, the white house, it is a different model. the idea that you could take one and impose it on the other and what works on the public sector works in a private set your -- private sector and vice versa works is not true. stephanie: it still seems like whether it is populous opinion

or many people in legislature, they look at the financial industry as public enemy number one. bill: we came out of a financially driven recession. many of us have done well with the recovery. many have not. a lot of people in washington look at the success over the last couple of years and says when is that going to come down to the average person. the fed has made interest rates at zero. that is policy. congress has not responded with fiscal policy. they are hopefully going to get a trade deal done soon. if they do not that would be a blow to our economy. erik: have you heard the latest from elizabeth warren today? she is making a case that the trade deals that it threatens

dodd-frank and bank regulations. bill: i do not get the connection. i understand people against trade. i led the fight for nafta back in 1993. it did help the economy. are there negatives to trade? of course there are. other negatives of technology success, to employment, yes there are. understanding the complexity and trying to bring it together. that is why he is fighting so hard. he is trying to reengage us economically. if we look at the success china has had, we better do it. for many of us, it has been good. look at the market. everyone follows it. employment has -- unemployment

has come down. expectations are a little more negative. it is probably a grade of a b minus. we have to put policies together. only congress can do this. not the fed. i find it interesting when people say if the fed changes and raises rates, somehow the economy is going to crater. if we are that bad, we have deeper problems. erik: whether it is issues like trade or banking is hillary clinton going to have to attack from the left to fend off people like elizabeth warren? bill: the fact is america is in the middle. whoever is the nominee of the

republican and democratic party they will have to appeal to the people in the middle. they both started off with 47 and are fighting over 6% of the american people. it is crazy, when you think about it. stephanie: is there a potential candidate with a plan you will support? bill: i think hillary clinton will come forward over time. the status -- the statement the secretary made, that is part of the economic plan. most people in believe we need immigration reform. it will be interesting to see how the other candidates stand on immigration. stephanie: i never interviewed you before.

what an honor. erik: bill daley, the former commerce secretary. stephanie: we will have more "market makers." stick around. we are live from salt here in vegas. please follow us on twitter and instagram. ♪

stephanie:'s garlic: this is how financial markets are trading. the dow jumping as much as 91 points. we are modestly lower right now. the dollar extending its weakness. productivity numbers that failed to beat economist estimates. raising the concern about the pace of the economy's recovery. oil touched $62 a barrel after domestic stockpiles dropped.

it is coming down a little bit. we are watching the treasury. a lower price means higher yield. reaching 2.2 2% before the jobs report. a source of concern, the selloff is an extension of the route in europe rather than the size of a better economy at home. implications for companies that want to sell debt. apple is down for a third straight day. look for more headlines. stephanie and eric, back to you. stephanie: when we return, we are going deeper. we are going to talk to bruce richards from marathon. erik: i want to talk about prater rico. stephanie: he said it was a great investment. we will be back. stick with us. ♪

.

>> live on bloomberg headquarters, this is "market makers," with erik schatzker and stephanie ruhle. stephanie: where will you find returns in 2015, and is this the edible market will finally end -- we are in las vegas for the salt conference and we will be speaking with mike novogratz. stephanie: we will talk -- erik: we will talk with bruce richards. stephanie: australia's first female prime minister is now out of politics and campaigns for a different issue.

welcome to the second hour of market makers, i am stephanie ruhle. erik: we are live in las vegas at salt a good first hour. we will start this hour with the bulletin. top business stories of the morning. the price of oil extending gains , now around $62 a barrel. the highest so far this year. prices rose after the government reported crude oil stockpiles drop for the first time in 17 weeks. analysts had forecasted the stockpiles would rise, oil is recovering from a six year low, down $43. shares of herbalife are surging, as much as 70%, it boosted its full-year forecast and reported earnings better than analyst expected. there in a two-year battle with bill ackman, those of prize, certainly not news, it has led to an investigation with the sec. their ceo says the company is on the right track.

>> our business fundamentals remain strong and we are confident our strategy is the right one, as evidenced as what we are seeing today. building a stronger foundation for our business, squarely on consumer needs, which results in higher sales leader retention and sustainable long-term growth. erik: shares have gained more than 40% over the past two months. salesforce.com is working with two investment banks on how to handle a potential gas potential suitors. microsoft is considering a bid for the cloud software provider and they have been approached by a potential buyer, that news broke last week, courtesy of bloomberg. they have a market value of almost $50 billion. get ready for sharp moves in some markets, the incoming ceo of credit suisse says incoming regulations will lead to volatility. >> reduced liquidity in many

key markets. you can expect liquidity. jamie dimon was right. that is a structural issue in the new world. erik: last month, in a letter to shareholders jpmorgan ceo jamie dimon says the next financial crisis could be made worse by a shortage of liquidity. madison square garden has rehired one of the worth coaches in history of the new york knicks, isaiah thomas will not have an official role of the next, he will be president and part owner of the new york liberty of the wnba. thomas last twice as many games as he won as the coach of the new york knicks and was sued for sexual harassment. stephanie: we are having a great morning in vegas. it is about to get better. bruce richards is the ceo of marathon asset management and he joins us. welcome. the last time you joined us, we talked puerto rico. you saw it as a great

opportunity, since then it has taken a leg down -- where do you stand? bruce: since then and rally and has corrected. we still like our position. the position we have is $77 billion of bonds in puerto rico. we own part of the revenue bonds of a coveted call prep, the power authority. -- a company called prep. we have a substantial position. other fund managers are negotiating with the government aligned with ge to bring in a new gas electric facility so they do not have to import oil to provide power to the island state. with that program, we believe it can bring energy prices down. require about a $2 million new money solution. we believe equity dollars are lined up and will underwrite the debt and equity for the solution. stephanie: chapter nine make sense? bruce: we will have to see what type of accuracy regime may or may not quite -- may not be

required. -- bankruptcy regime. we will have to see exactly how a restructuring might work. our plan does not require restructuring to keep the principle in place. simply, new money to provide a better solution for the islands in terms of providing power. erik: isn't it unusual for somebody in your position a distressed debt investor, coming up with policy solutions for the government of puerto rico? bruce: we do it all the time -- here is a company -- most of it is privatized in the united states -- caught dead -- can't add. whether it is a power company in the private sector we do this for a living and we have done this in many cases. worked through a restructuring plan which requires haircuts of

principal and new money. stephanie: what kind of return you hope to get out of an investment like this? as eric said, policy advising, the amount of brainpower resources and capital that takes for you -- why not just do a lot of homework inequities and go long? bruce: any credit market we like -- we look for credit situations -- great companies with a great product -- and this is a monopoly that has an overleveraged capital structure. if we can buy those bonds at $.40, $.50, $.60 a dollar, we think it is worth more. i would rather not quote a price. my complaints department coaches may well. stephanie: not important to me.

bruce: we dig it is a high rate of return. -- think it is a high rate of return. erik: the incoming ceo of credit suisse is talking about liquidity come a jamie dimon has been talking about bond market a quiddity and the list goes on. do you care about liquidity the same way? bruce: absolutely -- some changes are cyclical, some are seasonal, this is structural. the big banks who have made liquid markets and all the various asset classes, have been structurally dismissed from making the kind of markets they used to make. by dodd-frank and the volcker rule, and for every action einstein's theory of relatively the reaction has been severe. take the emerging markets -- just a dozen years ago there was about $50 bonds issued by companies in emerging markets, today it is over 500.

a dozen years ago, that market size was about two to $308 -- today's $1.6 trillion. there is no liquidity in the market. stephanie: how is that different during the financial crisis -- during a bull market, wall street banks took big positions. and 2007, when the knife was falling and marathon asset management was crawling to get a bid on 5 million bonds from banks, those banks were saying go fish. bruce: that is time of volatility, this is a time of stability. imagine risk in the markets, in the high-yield market in emerging markets -- among retail investors and were all the moms and pops and individual investors you can go in the high-yield markets and get great liquidity. yesterday in the marketplace, if

you guys write volumes times price around 60 $700 million. try to trade that much in bonds. erik: why is this a problem? bruce: it is a problem and opportunity. if you are one that has to sell in a down market -- it is a problem. because you are getting a lousy price. you thought it was worth 80, it is worth five point plus. you cannot get liquidity. as opposed to a dealer who can step in, underwrite the risk and maintain a fluid marketplace. you do not have the deal communities -- erik: why was that construct something that lasted for 25 years activity 1980's, before the securities deal with goldman

sachs and morgan stanley went public and levered up before the large bank mergers, the citigroup travelers, those ballots she did not exist. they weren't of the size you got used to in the 1990's and 2000. bruce: we have a $20 trillion equity market in the u.s.. in the high-yield market, in a structured credit market, these markets all trillion dollar markets did not exist in 1980. now they exist and they do not trade on exchanges. we are not there. you are relying on the deal community which has gone from being market makers to brokering more than -- erik: pretty smart -- markets will get best figure out a way

to deal with this problem. we are in a time between the old world and whatever the new regime will look like. bruce: there are a lot of perdition -- potential solutions. good intention. the reality is that these multi-trillion dollar markets do not have the bank sponsorship that goes with the underwriting and distribution when you sell it in the secondary market. for us, the good be labeled as opportunistic investors, that is a good opportunity to buy into down prices. or us to be a market maker, when vices go down we swoop up value and things we like and credits we have underwritten, that gives us good opportunity. stephanie: somebody set us coming he viewed this as an opportunity to hire wall street traders and become, not an official market maker, but step up their trading game. are you doing the same?

bruce: yes. erik: what do you see happening in europe? bruce: europe u.s. i think it is all a function right now of a small shift inflation. inflation has been running around 1.5% in the u.s. -- you look at the commodity price roll up, not just oil, but copper prices, iron ore, potential coal commodities make a turn and bottom and firm up. you take that and combine it with wage inflation that we think is on the horizon of happening -- we have out of limit rate on the cost -- unemployment rate on the custom 4.0%. -- 4.9%. we think the index and labor and inflation numbers will start to drift up from 1.2% to 1.5% to

2%. that is the difference between using and tightening -- easing and tightening. with that, we think that has been a fundamental shift and wife rates have moved higher. people are realizing that inflation is on the horizon. every central-bank in the world has been doing quantitative easing to try to create inflation. there is a saying, do not fight the fed -- what they are trying to do is fight inflation. at some point, they will win. erik: if we look backward, we will see the end of april as the bottom? bruce: i'm not saying it is the bottom, they will do quantitative easing for years to come. we may approach that again. i am saying in the u.s., we

will start to see inflation, enough to cause the fed to tighten and europe will have low-inflation because there are structural issues around their labor forces. stephanie: bruce richards, the ceo of marathon asset management. making the fun and fundamental. erik: we are live from the salt conference in las vegas, next up, the former australian prime ministers. and tom sandow. ♪

scarlet: benjamin netanyahu is ready to inform the president of israel that he has assembled a coalition -- according to several media reports channel two and israel radio. his party won the most seats in the march election, but not enough to form a majority

without several coalition partners. his deadline was midnight his time, roughly 5 p.m. our time, if he was not able to form a coalition by the bad lie, the president would have offered the chance to another party. benjamin netanyahu is ready to inform the president that he has clinched a coalition. we will keep you updated with further develop its. -- further developments. stephanie: we are back in vegas for the salt conference. i am stephanie ruhle. erik: and i am erik schatzker. stephanie: i'm excited to introduce you to our next guest, the former prime minister of australia two years after leaving office, her focus is on education especially in the developing world. welcome. last month, i sat down with melinda gates and she said education education of girls specifically around the globe is her biggest priority.

why is there such a shortfall when it comes to girls in the developing world? julia gillard: i have so glad to hear that because if we want to change our planet, we have to educate girls, nothing is more powerful than girls getting education. the terrorists know that which is why they add up -- abduct schoolgirls. they know the empowerment the comes with education. why are we lacking, it is hard -- we have made progress -- we are trying to get the remaining 15 million children who don't get to go to primary school into school. many of those are girls. we need to be working through the global partnership vegetation. stephanie: in the poorest parts of the world, even if you can get them into school, where do they go from there? julia gillard: it is the first

that -- and it is not the first -- the solution to everything, but if they do not get that foundation literacy, the things we aspire for our children it will be impossible to get the skills and capacity they will need to negotiate the rest of the world. and it of element -- the development are clear, a girl educated is going to have children later, less children, make an economic contribution to her family, her children are more likely to be vaccinated, likely to be educated themselves, and you get on a virtuous circle of changing families and communities nations. erik: how do you build support for this effort in the developed world where -- in countries like the united states, or canada, or australia or europe, evil are concerned about their own jobs their own livelihoods, the perception of inequality.

julia gillard: we have to get to people the broader picture. they are of course things what will happen to their child and their education, what if one of my family members get sick would there be health care -- natural concerns. in the planet we live in, so interconnected, if we are going to see durable peace and prosperity, it is our business to ensure there's education everywhere. we know what the alternative is like. without hope and prospects, what can become of their lives, they can be radicalized, they can end up fighting in a war like the one with isis. we want to avoid that. the u.s. has been a generous donor to the global partnership for education. we would like more resources, but we are thankful for what the u.s. has made available. what we are looking to now is to take a change from where we have

been with the level of resources for education globally, and where we can go. stephanie: how are you going to get there -- donors are on the decline? julia gillard: it is starting to track back up -- in a sine decline in the financial crisis. -- education -- what we want to see is big philanthropist step forward -- bill gates, melinda gates have done so much to change the world when it comes to vaccinating children combating aids and malaria. they were there at the foundation time when these global alliances were already working in education. we need big flavor boost of that order -- big philanthropists of that order. i am putting out a call of people of goodwill and good heart to think about investigating -- investing in education. what bill and melinda gates have

done also is bring their business expertise and that has made a big difference. erik: we thank you very much madam prime minister. julia gillard: lovely to join you. erik: more "market makers" after the break -- we are live from las vegas. ♪

stephanie: is there an opportunity in the corporate credit market -- one of the sectors top dogs will be here to tell us where he is cashing in. erik: plus, where to find returns this year, you will hear about that from michael novogratz live from the salt conference in las vegas here it we will be back. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. stephanie: welcome back -- i am stephanie ruhle. erik: we are live in las vegas from the salt conference talking to many of the worlds most intelligent, insightful, and powerful investors. stephanie: it remains some of the most exciting parts of the show are during the commercials. we are two hours into big u.s. trading day, markets in europe are closing. let's look at the numbers. scarlet: the stoxx 600, the broadest measure of european

equities could not hold on to its early gains, dragged lower by a stronger euro, as well as bali government bonds -- falling government bonds. down 6/10 of 1%. the dax was all of the place, up by only a quarter of 1%. greece remains an overhang, the debt talks continue -- the asset stock exchange index rebounding from earlier losses. the german bund, 59 aces points when it comes to the euro, not only do you have disappointing numbers in the u.s. you also have a better than expected numbers for europe's service sector. we saw it climb over 113.50, the highest since late february. the theme for europe is consolidation of recent gains and waiting for tomorrow's election. >> we need a panel. stephanie: thank you.

in a low yield environment, is their opportunity in corporate credit -- we will bring in a next for. -- we will bring in an expert. provident equity partner has over $9 billion in asset management. rich, welcome, my former boss. where is their opportunity in credit? >> great to be here. the credit markets are in adjusting plays, i'm sure you have gotten a lot of that through the commentary of the other people you have talked to. there is this dichotomy, we are roll up your sleeve credit investors. you cannot ignore the technicals. you cannot ignore the macro factors, sort of the factoring in -- if yogi berra was a market strategist, he would probably say is 50% fundamentals 50% technicals, and 50% the macro story. the fundamentals are interesting.

defaults in corporate bonds are as low as they have ever been. they will probably stay there. simply put, because interest rates are so low, it is hard to default if your bonds are miniscule. the markets have been so, native the worst companies can refinance their ways out of problems. at first blush, the funnels look good. if you look deeper -- the fundamentals look good. you got 35, 6 year bull market and you 10 to get bad outcomes as people get leverage higher. and the amount of below -- erik: are you saying, the credit markets are looking at now resembles what we saw in 2007? >> yes and in many cases it is even frothyier.

triple c intuit's, the number one predictor. there is no greater variable than triple c issuance -- it has been running for three years in a row at three records in absolute and percentage of the market. what typical he -- what did we happen, you wait a few years and have a spike in default rates. we are seeing those type of excesses of market just continues on. stephanie: how much worse is you quiddity -- is liquidity? >> the other 50% is technical. you say, they could not be better. there is no yield anywhere in the market here in high-yield bonds, you're getting 6%. people are rebelling against this but in the context of zero

risk rate, that is pretty good. that has become a crowded trade is the problem. on the mutual funds and etf's, the high-yield market only exists or those types of buyers. they are long only. everything is good when things are good. do you need liquidity when things are good, generally not. high-yield has historically had a reputation for gapping down because banks are the only balance sheet the market can rely on. i will give you a stat -- the total aggregate amount of outstanding bonds in the market, high-yield specifically, similarly for investment grade is double. what it was before the crisis. dealer inventories is less and substantially less. that is an accident waiting to happen. stephanie: dealer inventory -- when the market goes down, it does not matter what your

balance sheet capacity is no high-yield trader makes anything during a crisis -- why is it worse now? michael: -- >> it was not good before. in the old days, you used to rely on coupons. the story for high-yield, custody so asymmetrical for asset class, we say, if the market went down 10, i was still the even, because average coupons or 8, 9, and 10 they are five, or six out. in europe, they are in the threes. you do not have a lot of coupons to protect you. erik: janet yellen was speaking today, and she said a lot of interesting things -- she said that the increase in short-term interest rates could lead to a selloff on the long end of the curve. do you share that view and at what point you begin to prepare for that eventuality? >> i think everybody has been

prepared for a while and most traders have probably been wrong . everybody celebrating their five or six year anniversary of having gdp growth wrong and assuming that the fed would go to the other way. it has not. think about the markets, it looks like growth is slow, a lot of this first quarter was explained by whether. if you look at the high-yield ratios, the same economic stats that were in existence prior to all of this fed action, they are not that much better today. i am not sure, there is a case to be made on the flipside, that we resist in this environment. i remember from textbooks that said be aware of anybody that said the kind of difference. maybe, just because of the central bank policies around the world, this time is different. that 50% that maybe the macro

maybe that is really 100%, it has been for a while. stephanie: it seems that credit is priced to perfection -- are you positive, negative, or neutral on credit? >> i think the way you play it is -- we focus on the fundamentals. on dips, there is always opportunities to buy good names and discounts. we have had not hit -- we have not had that many. any strategy like, we run along short strategy. having the cash to deploy into the market on dips is one way to do it, especially if you're not in a daily liquidity mutual fun asset classes. your best intentions may not live up to reality, because you have no choice. the other place and where the bulk of the money we run is is in the liquid asset classes and structures. if you are in a structure,

you're getting itn ilqi at risk-return if you have the rightuod sourcing and structuring to find trades where you're not playing for the quiddity. one of the places we do that is middle market lending. this is a business. i worked at a bank for many years. this was a great business for banks. always been on bank balance sheets. post-radiation banks cannot do this. -- posts regulation. they want to focus on the big transactions. all the upper structure banks has to do these loans has gone to alternative lenders. like us. there are other providers. this is a way -- you're not getting the daily liquidity you would get in a big liquid loan, but if you can lock it up then

you are not bothered by the decreased of liquidity and hopefully getting a much better risk-return. stephanie: and it is not actually quit -- actually liquid. thank you. erik: stephanie's former boss. stephanie: and friend. erik: coming up, michael novogratz. ♪

erik: -- matt: time to bring you up on the top stories. apple being investigated over a new version of the beef music streaming service, bloomberg news reports that the ftc want to know about whether apple used its position as the biggest seller of music downloads to put rivals like spotify added this event. this has to do with apples ever

to line up record labels for beats but it already owns itunes. the fifth anniversary of the flash crash that rock market and the british trader accused of causing it will spend the day in jail, a judge in london has refused to lower the $7.6 million bail for the man -- his lawyer says his bank accounts have been frozen. he told reporters he had done nothing wrong but be good at his job. the human resources started has a valuation 10 times what it was a year ago. it raised $500 million from investors at a valuation of 4.5 billion dollars -- it provides free online software that companies use to provide benefits for their staff including payroll and health insurance insurance pays them for their services. those are your top stories.

back to las vegas. erik: more live coverage -- some of the biggest names in finance -- like the guy sitting next to us, michael novogratz the principal at fortress investment. you have come with a message to everybody. get off the train -- what you mean? michael: you have to come up with a title when you give a talk. we were looking at risk parity. if you think about the last 3, 4 years, stocks are on their highs come interest rates on their lows in yield. we are ready 300 year low in the church rates, in interest-rate volatility -- in interest rate. an all-time high in debt to gdp. together it does not feel great. the thought process was this could keep going if there is no inflation.

there is so little risk premium priced into the fixed income market, it was time to get short fixed income. erik: that's what you are doing? erik: -- michael: that is what we are doing. i had a talk in paris and gave that pitch, and it was prophetic, since then you have had a 45, 50 point selloff in rates. to have the same talk out here, the question is, was that the move already? if you look at charts over the last year, there has been a tremendously large selloff in rates. however, if you look at longer data charge, weekly charts -- maybe it is just starting. erik: is it time to get off the train or get off and wait for another train? michael: i think it is the time to stay off the train. how did it happen -- markets are interesting. it will be confirmed once the fed raises rates.

look at the last 3, 4 weeks. china cutting edges traits. the fourth major central bank to go liquidity for more. -- full boar. maybe long rates are responding to the fact that we will see global growth, but oil prices are going higher, copper prices higher. part of this is maybe these guys will get it right and we will see growth. part of it is, we had a weak first quarter in the u.s. again. the thought is, that is beyond us and growth should pick up any second quarter. part of it is employment cost index is heading higher. put it together, people get nervous when the five year basis point 10 year german yield. stephanie: why do equity investors ignored that and save the u.s. is better than the rest of the world? michael: markets rally for a

long time historically after the fed starts its rate hike cycle. i think you have to be careful this time. we have been nine years since the last rate hike and zero interest rates. think about how assets gets price, everyone gets priced off the discounted strip of where the u.s. trade market will be. we have been at the low level for a long time. if it is the giant tower in front of my office that just sold for 100 and that he dollars, or art or equities -- $100 million. if inflation comes back, all of these asset prices will look like they are at the wrong place. erik: because everything has moved in lockstep? rates, markets, credit market stock market? michael: relatively, i can't janet yellen's remarks -- i caught janet yellen's remarks -- stocks do not look expensive next to credit and government

rates. stocks look cheap versus those others. that is relatively. if you move rates up, you will move the rest of the asset classes. erik: what about the argument that there are no more powerful actors in the world in central banks and they are all pumping liquidity into the system. if the european central bank -- maybe the fed is not doing it -- if the ecb is buying here -- there will be a selloff in the rates market? michael: there will be for one of two reasons. one is, people will buy the fact that they might win. it might work. if we can create inflation, and the u.s. is the crucible because if they can create inflation, people will make the leap that germany is using the same ibook -- same playbook.

it is a big if. if i had an iphone i would pull it out as say this alone is a deflation machine. demographics are a deflation machine. we have structural horses that -- forces. that is the big debate. the fed is semi-schizophrenic. they have been shifting back and forth, changing the goalposts, because their classic models -- labor getting tight, inflation should be coming. they worry inflation should be coming and there are lots of indicators that's a wage pressure should pick up. average hourly earnings have not. the second argument is that the iphone, robots demographics maybe it different. stephanie: i carries a maybe if schizophrenia compare a

team of macro investors, how difficult is it to invest than the last way five years -- 25 years? michael: these are fertile macro environments. german interface retsina basis points and bill gross called it the trade of the century. -- german rates are 10 basis points. i think we have moved into an environment where you are a seller on rallies, not a buyer on bit. t. in the last two weeks the bull market has ended and the bear market has started. in rates. i do not know when that has a major impact on credit or equity, i think it will have a minor impact until the fed moves it.

erik: at what point do you go all in on this view? michael: things have moved so far, so fast that you wait for some correction and an you start re-shorting rates erik:. relative to how you felt about things in the post crisis time how much condition -- conviction you have about what you just explained? michael: we have seen the highest in prices in fixed income securities. we are 5, 6 points away from some of those prices. mi making a huge claim that german boones when i go back to four basis points. we have seen a probably low yield in 30 year treasuries for the cycle. stephanie: liquidity not an issue for you? michael: it has to them facts it makes the cost of business more extensive. it also creates all signals.

things move a lot further than they would. stephanie: we have to leave it there. erik: thank you. stephanie: michael novogratz. erik: we will be back with more. ♪

scarlet: bloomberg television is on the markets. midway through the u.s. trading

day, the dow jumped as much as 91 points at the open, but was not able to hold on. it has fallen as much as hundred 40 points, we have cut those losses in half. the dollar extending its weakness at his lowest level since february. oil prices above $62 a barrel on adid draw in inventory last week. -- an unexpected drop in inventory. joining me is kevin kelly. there is a lot of activity in trading, not in u.s. equities. we see so much volatility in asset classes, whether the treasuries europe, why are u.s. stocks so resistant? >> the news is coming out of europe. people have been focused on the macro basis, greece and germany. the real driver of volatility is the elections in the u.k.

if you look at the united kingdom, this year's projected to be 2.5% growth. david cameron has done a great job turning around the economy. if the labor party does win, it will impact stocks over there and good drive volatile markets tomorrow. scarlet: janet yellen was answering questions and made a comment about how equity valuations are high. she backpedaled a little bit and said if you compared it to other asset classes, it may be not so high. that barely made a blip in the u.s. stockmarket. phil us in their. >> the fed has a dual mandate of price stability and employment. she is commenting on the market and when she commented on the market last time it was on biotech stocks as she said they were overvalued, and they have run 30% plus since then. this is anti--janet yellen and

could be good for the market. scarlet: it is a janet yellen contrarian indicator. you are looking at it exchange rate that some may not be familiar with. bfor, what is the fun and what is the strategy? >> eric -- they focus on value momentum, even equal -- if you look at the market today, it has beaten s&p heavily, over 5%, the market is up about a percent, and it equal weight, all 400 names. it values them on fundamental basis and other factors. eric has cover that. lower your risk, by the 34 call in august.

you can ride of the market gains that have now produced year to date. no position is bigger than 30 basis points. if the name blows up, it will not impact it. scarlet: a cheaper way to get those returns. an etf that is handedly been -- beaten the broader market. thank you and thank you for the warning about to watch for the u.k. elections. more "market makers" after this. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. stephanie: welcome back to a very special day here on "market makers." we are in vegas for salt, the 2015 conference. we haven't a lot more coming. -- we have a lot more coming. erik: tom sandell -- he is an activist. stephanie: the crown jewel of morgan stanley, we will be speaking