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tv   Market Makers  Bloomberg  April 8, 2015 10:00am-12:01pm EDT

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>> live from bloomberg headquarters in new york, this is "market makers." erik: an oil deal for the record books. we have not seen one this big in at least a decade. shell agrees to buy bg group for $70 billion. stephanie: will the obama administration push off a decision on the controversial keystone project? we will be speaking with the ceo of transcanada. erik: manischewitz rolled out a of products in time for passover. good morning, everybody. you are watching "market makers." i'm erik schatzker. stephanie: you like manischewitz? i'm stephanie ruhle. i don't like manischewitz wine, but i do like matzoh.
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it is the biggest deal in the oil and gas industry in the last decade. shell has agreed to buy bg group for $70 billion in cash and stock. that represents a premium of 50% on bg's closing price yesterday. shelves ceo told bloomberg the deal is a bargain. -- shell's ceo. >> if you look at the combination of the two companies come out we could do with the assets the fantastic assets that bg has with our capabilities applied to them, we saw a lot more value in that combination than the market. stephanie: the combined company would surpass chevron as the world's second-largest oil and gas producer after exxon mobil and would be able to get rid of overlapping cost to help offset the impact of lower oil prices. the price of oil could fall
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another $15 if there is a final agreement on a nuclear deal with iran. that is according to the federal agent -- federal energy information administration. economic sanctions would be eased and that means iran could make a full return to the global oil market. over in moscow, vladimir putin met with alexis tsipras, build as an effort to boost economic cooperation between the two countries. it comes at a time when greece is seeking more bailout money from the european union. greek officials say he is not seeking bailout funds from russia. you on musk, tesla is going after mainstream luxury car buyers. boosting the range and power of its model s sedan, also adding four-wheel-drive. that will boost the price by 7%.
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you on musk says four-wheel-drive was necessary to attract buyers in colder climates like the northeast. in chicago, it is four more years for rahm emanuel. he won a runoff against the county commissioner with 56% of the vote. his management style turned off many in chicago during his first term. his next challenge, fixing the worst funded pension system in the country. connecticut has won the ncaa women's basketball championship again. the huskies beat notre dame 63-53 for the third title in a row. they are 10th overall. the coach is now tied with ucla.
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you have to say that hurts. second place is the worst. erik: stephanie is serious when she addresses me by my full name. i think second place is better than third. stephanie: i think third is better than second. another day and eric and i will agree to disagree. i looked at a watch that is not there. erik: we will talk about that $70 billion deal that could be the first in the wave of megamergers in the oil and gas industry. shell agreement to buy bg group. adding partners to serve the
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bloom and energy consolidation. -- boom in energy consolidation. is that what we should expect? this is just the beginning and other majors like exxon mobil or chevron will start buying as opposed to selling? >> historically, there have been a lot of megadeals in the oil and gas space. people have been looking at the distress side of it since the decline in prices that began last summer. there will be a lot of activity on that side, of course. in the nature of shotgun weddings. this deal is interesting because , unlike most deals these days although a bit similar to the kraft foods and heinz deal, the majority is being paid in stock.
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it's easier to convince a target that this is a good thing to do because you will participate in the upside created by the deal because you are getting a lot of stock, and some cash. erik: is this going to be -- are we in for a repeat of what we saw in the late 1990's when exxon bought mobil and chevron bought texaco? >> when there is a groundbreaking deal for others in the industry to say what do we do in response. it could well be. it is equally possible that it's a one-off transaction. we think the energy space in general, particularly the oil and gas side of it will be active this year. erik: if it goes one way, the
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wave of consolidation, is there any consensus on which companies are most honorable -- honorable -- foldervulnerable? >> the ball is in exxon's court. they have shell closing in on them. look at the companies popping today -- a lot of people think it may be too soon to see this wave of consolidation. the weaker companies are not desperate enough yet and it will take a little longer. erik: do we say it is too wide because of what shell is having to pay? a $35 billion premium. stephanie: or the seller is
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delusional? >> the sellers are holding out. they think they may be able to whether this on their own. it's not the takeover investors that needed convincing. the shell investors looked -- erik: is that a legitimate concern? the bg's aren't like the independent oil producers in the shale patch. they can hold out. >> they can ride it out. one of the things that's interesting about this and mende market is ordinarily, strategic buyers are being rewarded when they do big deals. -- this am and am&a market.
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shareholders are applauding them for final using the power -- finally utilizing the power of their balance sheets. the premarket on shell was down. i think that's because they are using so much stock in the deal. you have to use a stock on the one hand to get the reluctant target to do the deal. on the other hand, shareholders are saying now you are using the stock and i'm taking a bet that you can achieve those synergies so the stock goes down. it's a delicate balance. shell is a smart company. i'm sure they believe what they said about it and time will tell. big enough to ride this out is totally different from what is going on with the shell guys. stephanie: this tears it open for massive m&a to come in the future. you've had a huge hiring spree. is that because of opportunities
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you think we could see an oil? >> we did do a lot of addition, lateral addition, supplementing our troops. part of it was focused on the site we are not talking about, the guys who will have to do something because their balance sheets are not in anything like the condition of the bgs of the world. this one was an eye-opener. the rumors have been a little bit about something like this but this one will make people take notice. i would bet that exxon is sitting down there in dallas thinking what does this mean for us. erik: the surprised tone in your voice suggests nothing of this scale has crossed your desk. >> we are working on some big
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deals but $70 billion puts them in the top 10 of all time. stephanie: $70 billion but it's a bargain. >> it could be. erik: time will tell. bob on the phone with us and here in new york city is isaac as well. stephanie: stick around. at world bank says it can end extreme poverty in the next 15 years. the president will be here to explain it all. erik: saudi arabia getting into the shell business. -- shellale business. we will be talking to russ girling. ♪
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erik: it's time to bring you up to speed on the top stories we are following this morning. a sign the real estate market is picking up steam -- mortgage applications rose .4% last week.
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the average 30 year fixed loan is just below 3.9%. mark mobius says stocks have risen too far, too fast. the shanghai index has doubled over the past year. mobius says the exciting of chairman -- says he is worried because investors have opened a record number of new accounts in china. when apple rolls out its new smart watch, and wants to avoid the condition of having customers wait in line. apple telling its sales force to encourage shoppers to go to the companies website -- company's website. those were your top stories aired the keystone pipeline may be dead and that's not the only bad news for transcanada. we will be speaking with russ girling.
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devastated by drought in california. making kosher cool? manischewitz is coming up with new products for you. stephanie: we are going coast-to-coast today. the world bank has an ambitious plan for ending extreme poverty by 2030. part of that plan is working with its new rival, the china backed asian infrastructure investment bank. larry summers is warning that this will erode u.s. influence on the world stage. let's ask jim young kim, the president of the world bank. if i had to choose a guest anchor if eric was out, i would pick this man. welcome. thank you for joining us. >> great to be back. stephanie: ending extreme poverty by 2030. we have a billion people living under a dollar $.25 a day. -- $1.25 a day. >> back in 2013, they said this
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would be our goal. we have gone back and looked at the 50 year history of the world bank group fighting against poverty and we think we have a good idea of how to get there. you have to grow the economy in a way that actually lifts people out of poverty, invest of people -- invest in people in terms of education and insurance is important. cash transfers to the poor with conditions. social protection programs, protecting from the effects of devastating extreme weather events and the evil act of the back -- you bola epidemic -- ebola epidemic. stephanie: where are you going to get the money from? i would love to think let's do a climate change overlay but we are talking about extreme, extreme poverty. climate change is like a high-class problem. >> climate change is a global
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problem. he's extreme weather events have a much more devastating impact on the poor than the united states. hurricane sandy had a devastating effect here. imagine what that would be like in a developing country. the end of extreme poverty will be very different than what people had originally thought. it has to involve the private sector new and creative ways of reading jobs and creating wealth and there is a lot great experience in the world in doing just that. erik: part of this effort involves a pledge by you to work with the asian infrastructure investment bank. you are taking a lot of heat for that from, among others, there summers, who knows a thing or two about international development. why? >> i think we are in agreement. larry summers is saying this is
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a reality, it's happening. he is critical of, we have to simply embrace the notion that china is now embracing multilateralism. i don't see this as a conflict between countries. erik: this past month may be remembered -- >> what we are saying is the world bank is embracing this system because the task of ending extreme poverty is a huge problem that requires more players. i'm not the u.s. i'm a multilateral institution. erik: there is this agreement the u.s. reserves the right to appoint the head of the world bank. stephanie: maybe were saying we
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will take all the help we can get. >> i was the first world bank president in history who had to run for the presidency and there was a vote. that had never happened before. fundamentally, that has changed. every new world bank group president will have to run for it and there will be multiple candidates. if china wants to embrace multilateralism -- 50 countries will be part of this. that is a good thing for the world. there's no question that the need for infrastructure financing in asia china to jordan, the needs are huge. there's no way that the world bank or any of the other institutions could meet that need right now. stephanie: what do you think about larry's concerns? >> i think the change in terms of developing countries having a
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voice in these institutions has already happened. we've already had voice reform. it used to be 42% of the votes were for developing countries. in 2010, we increased it and it's now 47%. will begin to parity? everyone assumes we well. moving to a situation where the voice and influence will be constant with the size of the economies. erik: is he right that there has been a diplomatic failure on the part of the united states and the british and french and germans? >> if you look at what jack lew has been saying recently it's similar to what i've been saying. we welcome it, but they should abide by international standards. in speaking with the other countries that have joined -- i
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was with chancellor merkel a while ago. we will embrace this as china steps into multilateralism and bring to the table this idea that you should embrace global standards. erik: how do you enforce it? >> we have done this for 20 years. we did not have safeguards 20 years ago. it is difficult to do, but every single bank has these and where we are protecting the environment protecting indigenous people. which is why i think this is good. stephanie: climate change -- compare the u.s. to the rest of the world. it seems to many people that we are not taking it seriously enough. we hear legislators in states like florida say we will not a knowledge climate change. it seems crazy to me. >> as a medical doctor, you look
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at the unanimity of opinion among scientists -- nothing in medicine has that kind of unanimity of opinion. stephanie: except in florida. erik: wisconsin, too. >> i've said this many times -- i have young children. a 14-year-old and 16-year-old. they will look at me in a few years saying, what were you thinking dad? how could you leave us a world like this? the good news is, we have this meeting in paris in december. there are things we can do that are very specific carbon pricing, removing fossil fuel subsidies climate smart agriculture. these are practical things we can do right now that will have an impact. stephanie: i like you more every time you are here.
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>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. erik: welcome back, everybody. stephanie: we have got a lot of news today. it's about the oil markets. weekly crude inventories are out and scarlet fu is in the newsroom with the headlines. scarlet: a huge build in crude inventories, 12.9 million barrels and did last week. three times what analysts had been anticipating adding to the
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supply glut in this country. crude oil prices were already down but have taken a leg lower as the session lows of the day -- yesterday, oil reached a three-month high. it has been up 21% since the low in mid-march. now, the evidence, the confirmation of all the supply not doing much to help lift the priciee here. saudi arabia expanded output in march. leading to the reconfirming of this idea up there is plenty of supply out there and no shortage of oil. erik: let's talk about big oil. big oil getting bigger. shell has agreed to buy bg group for $70 billion, making it the
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world's second-largest oil company after exxon mobil. a deal that could reshape the energy landscape. russ girling is the ceo of transcanada. you have to be mindful of these megadeals and the potential they do have to reshape the industry. how do you think this affects global energy? russ: i think deals like this will be logical in this kind of environment. we have seen this kind of cycle before where we see consolidation of the industry and then cad consolidation at other points in the cycle. it's a natural evolution. -- d consolidation at other points in the cycle. there is potential for more transactions going forward. certainly, that is what we see in low-price environments. those that have the capacity to take advantage of opportunities
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will do that. i would expect to see those kinds of transactions take place. stephanie: is there a range of where oil prices could go when smaller operators could get desperate and need this m&a? russ: i don't think there is anyone price that is specific for individual companies. the lower the price goes those that don't have healthy balance sheets will be constrained. erik: i would like to know how this deal or others like it might affect you and your company, transcanada. shell could come under a fair amount of pressure from shareholders to deliver on the supposedly and stated value of this transaction. shell is a big player in the canadian oil sands.
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some of the oil you would hope to transport with the keystone pipeline. also the company leading the group that wants to build the lng terminal the terminus for another pipeline you proposed building. russ: those are both correct and i think their investments in unconventional resources and the canadian oil sands are a long-term investment. companies like shell have made -- they see the long-term value in those and they continue to press those projects forward. they will look for opportunities in the current environment to do them. at the end of the day, those are robust opportunities that look very good in terms of global opportunities. as you think of places around the world that have access to oil and gas that can be put on the market, canada is an attractive place for that kind
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of investment. those places that will be short and where you want to place that reduction certainly places like asia pacific and europe come are going to be importers for a long time to come in the spellings will continue to grow. -- that's why we are seeing companies like shell and many others around the world with the same kind of interests. erik: three factors we have to throw into the mixer and we are living in a different world pricewise than two years ago -- on the other hand, you have the distraction tha and the fact that there is a flood of lng coming onto the market. you have two gigantic lng
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projects in australia that will come online and projects underway in malaysia projects that the russians and others have proposed. russ: this is a very competitive world we live in and there is no question that canadian producers need to rise to that competition. they've got lots of advantages. for a portion of those markets canada looks extremely attractive. for a portion of those people's portfolio, that makes a lot of sense. erik: you are confident that they move forward willth these projects. your company gets so much attention for keystone and he spent $2.5 billion, but it's
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only a billion-dollar project. those lng projects have a total value of $12 billion, 50% more than keystone. russ: correct. as we think of things going forward, we think of a portfolio of options. in terms of transcanada, we have a $12 billion in things we are constructing pipelines in mexico and alberta and power plants in ontario and this group of projects -- all of which we would expect to be put in place over time for the obvious reasons i mentioned. we have a lot of resources here and it's a matter of time sequencing those into the markets at the right time. it's a tremendous option for our
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company and for the canadian industry and all canadians. we've got something that's pretty unique to offer to the rest of the world in terms of reliability and sustainability. stephanie: where do you think we really stand on keystone at this point? every analyst says obama will reject the plan and punch it to the next administration because he does not want this marring his legacy. what do you think? russ: we continue to be optimistic that this project is needed. our shippers remain 100% supportive of it. the oil is moving every day in increasing amounts on alternative transportation modes that are less efficient and more costly. it makes sense to build this pipeline. stephanie: you have to be optimistic given what your position is. is it realistic?
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russ: it is realistic that a pipeline gets built. i cannot make a prediction on the timeframe. what i can tell you is canadian and u.s. production continues to grow, even with the downturn of prices. the market will continue to grow. the oil sands will continue to grow. the volumes are already moving. you have to connected with infrastructure at some point. i remain confident that this gets built. i can no longer predict or even attempt to predict when that might get done. stephanie: we appreciate your candor. russ girling is the ceo of transcanada, with us from toronto this morning. stephanie: anytime we have a guest who talks about the
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special opportunities that only lie in canada, i watch you smile. erik: reliability, sustainability, you heard him. stephanie: coming up how the drought is hammering almond farmers in california. ♪
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stephanie: welcome back to "market makers." it is time for me to give you the top story of the morning. royal dutch shell has agreed to the biggest acquisition in the oil and gas business in at least the last decade. the company will buy bg group $470 billion in cash and predominantly stock -- for $70
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billion in cash and predominantly stock. it will create the world's second-largest energy company. it huge increase in crude oil inventory here in the united states. rising by 12.95 million barrels last week alone according to the energy department. the biggest build since 2001. oil prices fell on the news and are now down 4% on the day. ted cruz is raking in campaign contributions and a jaw-dropping pace. his super pac was only formed this week and they are expected to have more than $31 million in the bank by friday. those involved say many of his big donors have not even contributed yet. history has been made in ferguson, missouri. the town where riots broke out
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after a white police officer shot in african american teenager, voters have elected two african-americans to the city council. three of the six members will indeed be black. the city council is in charge of hiring people to run the town's operations and enforce its laws. coming up in 10 minutes. mainstreaming manischewitz, the company wants to be known for more than just matzo. we will be speaking to the new ceo. mission to moscow, alexis tsipras meets with vladimir putin. a new chapter in the life of oyster. the ceo will explain. erik: california's drought is entering its fourth year. jerry brown is demanding drastic reductions in water consumption. if that extends to agriculture
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it could be officiae especially hard-hit -- >> it goes all the way back to the freeway where you can see the tops of the trucks . one third of my farm is all men's. -- almonds. >> demand for allmonds has soared in the last decade. it constitutes one of california's most valuable crops bringing in $6.5 billion last year. but, it is also among the first years, requiring 10% of the states irrigation water. -- thirstiest. >> when i planted these orchards
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, water was at $70 an acre foot. now, it's not hundred dollars and up. -- $900 and up. >> this year, he's leasing a third of his land. the cost of water to irrigate it would exceed any revenues he might earn. >> we are seeing hundreds of thousands of acres going on planted. there is not enough water in the system. >> up until now, investing in almonds has helped his business thrive. ensuring the farm survives maybe this small nut's greatest source of value. erik: i went to see him last year when california's drought was just entering its third
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year. how realistic is it that people like him should fear for his water supply? what jerry brown has demanded so far has only gone to municipal water usage. >> these guys are facing the squeeze -- they cannot get their hands on enough. the price is eating into their margins quite considerably. 20 years ago, they started planting these allmonds because it was a profitable crop and profitable per acre. it made sense to move from cotton and barley into crops like almonds. erik: a frightening situation for the entire state and for the entire country. stephanie: "market makers" will be back with a whole lot more.
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when they were, a makeover for manischewitz. we will be speaking to the ceo who wants to make kosher cool. if you can do it with "you can do it with anything. ♪
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stephanie: manischewitz wants to prove that it is more than just matzo appeared day of products may determine whether the company can go beyond profit for passover. with us is the new ceo of manischewitz. david, what is the game plan? when people think manischewitz, for the most part, the associate it with has over -- passover. david: we have up their game -- up our game quite a bit in the last year. we have added gluten-free
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matzo. we have seen a great uptake on those items and we will continue to do that as time goes on. stephanie: that gives us more choices during passover. what about the other 11 months? david: we have our season line of high-quality canned fish that is mainstream for us now. we are also when the process of identifying other items we can take out of the kosher section into the mainstream part of the grocery store. erik: that raises the most obvious question. can you make kosher cool? who will buy it and why? david: we believe we have a lot of kosher items but because they are in the kosher section, a lot of mainstream consumers are not aware of those items. we are in a process now of identifying a select group of items we think can exist in the mainstream section erik:. erik:like what and why would
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people buy them? we are not talking about matzo . david: we have high-quality soups and broths. macaroons can have mainstream acceptance. we are in the process of identifying those items. stephanie: what are you going to do to get them out there? a huge advertising campaign? david: we will take a test market examined the potential for these items in the test market and see we are getting traction and velocity for the mainstream consumer and we will go from there. once we have our distribution up to a certain point, we will look to do the full-blown advertising. erik: what do you think consumers will respond to? the idea that kosher food is better for you, safer, perhaps?
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david: the manischewitz name has a lot of equity. it has been around for one or 25 years in the u.s. market -- 125 years in the west market. -- u.s. market. stephanie: i can identify it -- i will eat anything that tastes good. how will you get me to do anything more than no what manischewitz is? david: we are not going to be marketing on the fact that it's kosher. it is -- the number one reason people buy food is because it tastes good. we are excited. we know we have high-quality items and we are going through that process now to identify the ones we think will have traction. erik: what kind of expectations are realistic? stephanie: two weeks and put them on tv.
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david: if you look at other products that have gone mainstream, hebrew national hotdogs or sabra hummus those are things that for a time just resonated with a group of people and have been able to go mainstream. stephanie: my mother only eats hebrew national hotdogs. a great point. good luck. welcome to new york. like eric, he is canadian. erik: a torontonian transplant. we will be back in a couple of short minutes. ted cruz has barely got his presidential campaign underway
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and has already raised an unbelievable amount of dough. ♪
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>> live from bloomberg headquarters in new york, this is "market makers." with erik schatzker and stephanie ruhle. stephanie: is this the next must-have gadget? bloomberg test drives the apple smart watch so you don't have to. erik: mission to moscow. greek prime minister alexis tsipras meets with vladimir putin when his country is running out of cash. stephanie: if money talks in politics, ted cruz is shouting. the candidate is raking it in. bloomberg exclusivea. welcome to the second hour of "market makers," i'm stephanie ruhle. stephanie: i' --
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erik: i'm erik schatzker. stephanie: you look off the charts today. red socks, a blue striped shirt. double stripe is a risk. erik: thank you. we begin with the blockbuster deal rocking the energy business around the world. shall agreed to by the british producer bg group for $70 billion. some cash but a lot in stock. the biggest transaction and energy in at least a decade. shell is paying a 50% premium over bg's closing price yesterday after a run-up in shares. shawl's ceo told bloomberg it is a bargain. >> if you look in the sector 50% premium is middle-of-the-road. if you look at what it does for the key metrics of the company,
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you will see it is immediately going to be accretive in terms of operating cash per share. erik: if the deal goes through the combined company would be the world's second-largest oil and gas producer after exxon mobil. it could set off more mergers. rivals, especially the majors, are going to look for ways to offset the impact of falling oil prices. the oil glut keeps getting bigger. crude oil supplies in the u.s. grew by almost 11 million barrels last week. the biggest build since 2001. it was a surprise. prices fell after the news, wti down 4% under $52 a barrel. mcdonald's hoping premium brokers will do something to get sales going. the world's largest chain adding sirloin burgers to its menu for a limited time. they could become a regular item if they catch on. happening at a time when mcdonald's is trying to simplify
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its menu to reduce waiting times. in chicago voters gave rahm emanuel four more years. he won against chuy garcia, a county commissioner, with 56% of the vote. emmanuel was obama's first chief of staff and admitted his breast manner turned off many voters. -- his brusque manner turned off many voters. rahm emanuel: i understand the challenges we face will cause me to work in a different fashion. erik: crime and fixing the worst funded pension system in the nation. second day of jury deliberations in the boston bombing trial. lawyers for genres and i have -- lawyers for dzhokhar tsarnaev and that he took part but say the attack was masterminded by his brother. tsarnaev could get the death penalty.
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stephanie: alexis tsipras in moscow meeting with vladimir putin. they seemed chummy, signing a trade deal and holding a press conference. putin says he does not blame greece for eu sanctions and tsipras says he disagrees. i want to bring and henry meyer in moscow. greece needs all the friends it can get. help me understand, what does vladimir putin want? henry: putin is looking to try and drive a wedge within the eu. eu sanctions, which have been harmful to the russian economy, are coming for renewal in july. while russia does not have a lot to offer greece it cannot offer a bailout but it can provide relief on countermeasures that barred eu food from russia. he promised investment in greece and loans for joint ventures.
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russia is trying to put something on the table to persuade greece to break ranks with the eu. erik: what is the thinking around the prospects for that to succeed? if he wanted to drive a wedge in europe, go for the brits, french or germans. greece is the odd man out already. henry: most people you speak to who know about the negotiations tell me that that is not going to work. greece ultimately is going to have to fall into line because it needs european money. there are other countries russia is also targeting -- hungary the czech republic, bulgaria. this is a russian campaign which is going to accelerate in the coming months. weather will be successful is another matter.
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european diplomats are confident they will get the unity to maintain sanctions. stephanie: if tsipras is not asking putin putin for money, how are they going to pay the principal and interest on the $350 billion of bonds and loans? it feels like they are delaying the inevitable. henry: the greeks know that they have not come here to try and get relief from that. the only way they are going to resolve the situation is by talks with the eurogroup. the russians are a bit of a distraction. tsipras is trying to get whatever russia is willing to put on the table, which is something. erik: how is this going to be viewed diplomatically? if tsipras is calling for a new
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spring and relations between greece and russia, is that a tacit admission he's ok with what the russians are doing on the ukrainian border? henry: it is a confirmation of what he has already stated publicly, that he opposed the sanctions. there are other countries in europe that hold similar views. greece has long historical ties with russia. of course, now, with the new government in athens we are definitely seeing a new level between the ties between greece and russia. that is something to watch for. stephanie: thank you for giving us the latest. henry meyer in moscow. erik: earning season gets underway. energy is to blame for the big drop in first-quarter profits since the recession. it's far from the whole story. scarlet fu is here with a look. it is going to be a fascinating earning season.
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energy does not just affect energy. scarlet: energy does not just affect energy companies but you have seen the trend of everyone quoting the s&p 500 earnings, e x-energy versus with energy. there is dislocation. let's start with the centers that will see profit growth. you've got health care, consumer discretionary, tech and telecom. health care and consumer discretionary are sectors with less of an international focus. you got pfizer merck, and you also have hospital operators within the health care sector. consumer discretionary includes retailers, homebuilders and carmakers.the big theme leading into earning season is the pace at which analysts are revising lower estimates. every sector has seen them lower, none more so than energy companies, earnings are slated to drop 63%. collapse really. stephanie: doesn't matter what the earnings are or the fact that the analysts
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adjust estimates and when we get the numbers they stay within a range? i rarely feel like we are seeing here is what the number is. it is all inside or outside the band of what analysts are expecting. scarlet: it is growth versus surprise. peter says we should pretty much expect about 70% of companies that report will beat estimates. the bar has been lowered quite a bit. that should not necessarily be considered good. that is typical. anything above that would be good. below that would be bad. you're looking at a surprise factor when most companies tend to be at lowered estimates. for energy companies, earnings estimates have come down so much even with the 63% plunge a lot of people are saying that is priced in two shares. joe wrote a story on this morning which really shows how there has been
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inflows into etf's, exchange traded funds that track energy companies. when the results come out you might get a rise in energy shares. erik: let's bring up that graphic that shows what other industries -- scarlet: are affected. stephanie: all of them. erik: are going to suffer a drop in first-quarter profit. scarlet: energy is down 63%. materials utilities and consumer staples. it's not as concentrated as energy. stephanie: why? scarlet: little change. i put that there because it is a negative number. little change at this point. erik: we can explain it. not a lot of revenue growth and a lot of regulatory pressure raising costs internally. scarlet: these are moving targets. they change throughout the quarter. erik: thank you. scarlet fu.
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stephanie: just to break it down, lower oil prices affecting industries across the board. who is going to profit and from this? distressed hedge funds. every time. oyster's next act. the netflix of books goes beyond the subscription model. erik: will you be first in your crowd to get an apple's my watch? should you be? our experts took it for a spin. they have some ideas for you. ♪
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stephanie: welcome back to "market makers," i'm stephanie ruhle with erik schatzker. top stories. oil prices are falling more after a government report on crude stockpiles. oil inventories grew more than expected last week. west texas intermediate fell as
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much as 4% after reaching as high for the year yesterday. it was trading below $52 a barrel. mark mobius says chinese stocks have risen too far too fast. a 20% drop as possible. the shanghai composite index has nearly doubled over the last year. that is the most among any major benchmark indices. mobius is the executive chairman of templeton emerging markets. he says he's worried because investors have opened a record number of new accounts in china. tesla is going after mainstream luxury car buyers. the electric carmaker is boosting the range and power of its model s sedan. it is also adding four-wheel-drive. all that will boost the price by 7% to $75,000. elon musk says four-wheel-drive was a necessity to attract buyers in colder climates like right here in nyc. those are your top stories of the hour. in 10 minutes, a bloomberg media
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exclusive. a record hall for republican presidential candidate ted cruz. his super pac raised more than $30 million in less than seven days. our experts checked out the new apple smart watch. erik: the on my book -- the online book subscription service oyster is turning over a new page. launching an e-book store it with five of the largest book publishers in america. here is oyster's ceo. you are launching an e-book store. are you nuts? >> we feel a lot of opportunity in the market now. the service has grown dramatically. we have over one million titles from authors like stephen king and j.k. rowling. he success how -- the success has allowed us to launch
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a bookstore. we are hoping to pair the best of subscription with the best of retail and put it in the same place as a comprehensive offering. erik: how do you out-amazon amazon? amazon has proven that people often pay for something on the basis of how cheap it is. or how comprehensive the library is. can you compete? stephanie: i'm going to go with myself. i'm going to buy the cheapest book. i could use you for research but at the end of the day and going to buy the cheapest but. -- cheapest book. eric: we see a lot of opportunity in the market driven by the subscription model. we couple that with a great design and user experience and discovery method. it delivers a lot of value for readers. there are really interesting trends in the market right now. the majority of the largest publishers are moving to an agency model for pricing books.
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we are expecting a lot more price parity in the marketplace which makes it a lot more attractive to come -- stephanie: break it down. let's say i an avid reader, what does that mean for me? a woman who wants to know all the titles and to buy the cheapest book? eric: moving forward we can see more pricing parity in the marketplace as publishers are setting the prices of their books as opposed to retailers setting the price. stephanie: that means your books are going to be as cheap as amazon? eric: very competitively priced amongst the top titles. erik: what is your competitive advantage? eric: for as it comes down to three things. it is the best content, it is great design for your mobile device under phone and tablet it is discovery across social and algorithmic and editorial. erik: pardon me. if subscription is as successful as you say it is, why are you doing this? eric: we really see an
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opportunity to take the best in subscription, which is growling the same way you are seeing it in television, music and movies and parent with the best e-book store and put together as an offering. erik: explain how does that change your customer behavior? it sounds great in a powerpoint. i went to know, to stephanie's point -- eric: as a customer you can get tremendous value. $10 a month and you can access over one million titles. we do not have every book in the world. if you want to read the new release you can actually buy it on oyster and discover subscription and retail in the same place. stephanie: let's say i use subscription and it is time for me to buy the new one. if amazon is cheaper, i am going there. eric: what we have seen -- totally, price is important.
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like i said there will be more pricing parity in the market. customers are increasingly choosing based on other things like user experience, design and finding a great book. we take a lot of inspiration from the off-line experience of browsing the local bookstore. existing retailers offer search driven environments. we are focused on the browse experience and delivering on the device you have with you all the time, your phone or tablet. stephanie: that is why a love spotify. i love spotify, i love my relationship. it is making me mix tapes. erik: what are the authors saying? i have to imagine they hate the idea of a subscription service. it is like going to the library. one book i do not sell any more titles. are they saying capitulation people want to buy books? eric: we really focus on building a model that is great for others, publishers and us as a platform. subscription allows people to
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find books they might not have. we try our best. what subscription allows is it allows people to find books they otherwise would not have found. ecl a spotify and netflix. stephanie: i love that. don't you? erik: discovery? short. -- sure. if i like it i'll buy it. stephanie: thank you for joining us. eric stromberg ceo of oyster. "market makers" will be back in a moment. ♪
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stephanie: welcome back to "market makers." during the commercial break i was loving on this guy. erik: let's talk about what is happening in the oil markets. stephanie: stephanie: let's talk about the oil markets. erik: the s&p energy index started out the day higher. we saw shell offer 50% more than yesterday's closing price for britain's bg. that had people thinking some other oil majors like exxon mobil and chevron or total are going to follow suit. stephanie: endless possibilities.
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erik: not just small companies maybe big companies. questions about anadarko or apache or phillips 66. if bg can get taken out, then almost everything is on the table. then oil stockpiles came out and all of a sudden the floor fell out from underneath the s&p energy index. everybody is revising cash flow estimates. stephanie: the whole thing is confusing. as oil prices go down it looks bad for oil producers except the fact that that could just mean more m&a opportunities. erik: the conclusion you draw is even though some of the stocks like pioneer or apache are either flatlining are trading down, they are not trading down as much as they were otherwise because there is a essential takeover premium being built in. stephanie: scores of guys in
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high-yield who has said oil is the place to be. very likely looking at this as a buying opportunity. erik: hard to raise enough leverage financials to take a something the size of apache. ted cruz's super pac is rolling in dough. ♪
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>> live from bloomberg headquarters in new york, this is "market makers." with erik schatzker and stephanie ruhle. stephanie: welcome back to "market makers." i'm stephanie ruhle. erik: i'm erik schatzker. stephanie: erik was mean to me during the break. erik: a heavy cross to bear. news in the drug industry. scarlet: the dealmaking does not end these days. my lan -- mylan proposing to buy perrigo. mylan says it sees meaningful
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accretion. combination of cash and stock, $205 perrigo would get. this is a profile for mylan a generic drug maker. it has made 18 deals historically worth $16.4 billion. this was bad to that here and it would be one of the larger ones. $205 a share. do we have the overall value of the deal? . not yet once we get that we can tabulate and see where it falls in the list of previous deals. look at how the shares are performing. this is mylan's shares, soaring on this announcement. mylan is the acquirer and yet
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the stock is rising, up more than 9%. perrigo is getting a pop as well up 7%. shares halted from trading. other headlines from mylan the board will offer an opportunity to serve as cochair that must be the ceo of perrigo. yes. he's the ceo of perrigo and he has been offered the opportunity to serve as cochairman. we keep an eye on developments. mylan proposing to buy the company for $205 a share. erik: was wondering whether mylan is not trading higher because this is a small premium for a drug deal. perrigo was at $165 $166 before the news broke. $205 a share is only about a $40 premium.
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nothing close to the kinds of premiums we have seen in other drug deals. the other thing that is worth mentioning, i went back a couple days and unlike the case with shell and bg it does not look like any word of this deal was leaking to the market. perrigo was trading flatline around 165. mylan did a good job and perrigo did a good job keeping it quiet. this is a proposal. scarlet: it is not a done deal. it is the offer being made. we had a valuation on the deal -- $28.9 billion. the premiums so far in the second quarter, the average premium of deals, the second quarter is not very long, is about 14.26% according to bloomberg. in the first quarter the average premium was 20%. this is far below the historical average of about 22%. stephanie: all right. thank you for giving us the
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latest. we've got to move onto presidential. politics and a bloomberg exclusive. senator ted cruz will truly be a candidate to be reckoned with. sources tell mark halperin that a group of super pacs tied to his campaign will have raised more than $31 million by the end of the week. mark joins us from chicago. $30 million can you put that in the context? a guy who many people say there's no chance he's going to be the next president. mark: not that long ago if you were going to run for president and someone told you your budget for the campaign was $31 million you would say that is pretty good. super pacs have changed the game. ted cruz is one of the most aggressive super pac-related fundraisers in the history of super pacs, which is not a very long history. when he ran for senate he had
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super pacs supporting him. i have never written him off but now people in the political world are looking at him and saying this guy might raise as much money as anybody else running besides jet push -- jeb bush. that means he's in the game. stephanie: let's look at republicans in total. at the end of the day we know that jeb is going to raise more money. if you are a republican donor, why give money to ted cruz? mark: not everybody wants jeb bush. they may not think he can win they may not be a big enough player in his world because he has so many people raising money. ted cruz's supporters, a lot of been in texas and new york are people who believe in ted cruz. they believe he would be a great president and they believe in his views on the economy, for
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policy. they won at least to have him and his ideas be part of the mix in 2016. erik: has enough time passed since citizens united to be able to draw some kind of a connection is not a correlation between the amount of money that you raise through these affiliated super pacs and your i guess, staying power as a presidential contender? mark: we saw last time people like sheldon adelson and others gave large amounts of money to need -- two new gingrich and rick santorum. citizens united has played a role but there has been a attitude change. in 2012 mitt romney and president obama were reluctant to be seen associated with super pacs. a lot of candidates help encourage people to give. you will see not just candidate activity but people the not embarrassed. jeb bush is trying to limit his current super pac contributions
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to one milling are checks. eventually he will change that. people like ted cruz and rick perry are going to take multiple million-dollar checks and not be embarrassed. stephanie: how grotesque is the election going to be? we see jeb bush and hillary clinton and we already see this type of super pac dollars piling up. how does the fact that pretty much every rich and powerful person out there for the last two years has talked about how important income inequality is to them, how we have to make a ship. we could face an election that is going to get into the gazillions in terms of campaign fund-raising. it is gross. mark: you could say it is gross and that is the view of millions of americans. other americans would say politics is important, ideas are important and it takes money to buy television ads and travel talking about public policy. it is the law of the land currently that this is legal. it's politics and money, not
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necessarily a bad thing. the important thing is disclosure and for us to have confidence that politicians are not being unduly influenced by people giving the money. stephanie: do you think there should be a cap? mark: i think the first amendment makes cap's difficult. i think there should be more disclosure and more sunlight on people then we can scrutinize and say does this person seem to be influenced? it is not just a rich people it is corporate interests and sometimes foreign interests and labor unions. stephanie: that corporate interests -- [indiscernible] mark: labor union as well. erik: if ted cruz can raise $31 million in a week, how much can jeb bush raise? mark: my colleague reported allies of jeb bush were trying to raise $100 million over several months. we will see as we get to summer how much he has raised.
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i think jeb bush could literally raised five or six times more than the next closest republican. at least i thought not until we saw these numbers from the super pac supporting ted cruz. jeb bush is going to be first. among the big news in the cruz reporting, cruz may be second. people have been speculating jeb raises the most, who raises the second-most. it might be ted cruz, not chris christie, rick perry, scott walker, rand paul. if he's second, that is a big deal. stephanie: all right then. thank you for joining us. bloomberg politics' managing editor mark halperin. see him later with "all the respect" at 5:00 p.m. eastern. we are going to be right back. so much money, it makes me crazy. doesn't it make you -- you remember -- ♪
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erik: moments ago, breaking news in pharma. mylan offered $29 billion for
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perrigo. shares in both companies are soaring. drew armstrong is here to give us a sense of what my lan is looking for. drew: a couple things going on. we've been in a period of record consolidation. like nothing we have ever seen before. mylan makes a lot of generic drugs, they make epipen. perrigo has over-the-counter stuff. finding synergies and making a bigger company. they can go to distributors and say we have extra products. mylan has something like 1400 generic medicines they make already. this makes them more ready to get scale. stephanie: why now? drew: seems to be the way the industry is going. we had take over after takeover there is also some bigger fish hunting around for companies like mylan actavis.
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there was talk that maybe teva might be interested in mylan. this would be mylan's biggest deal ever if it goes through. these guys say they have been talking for a while. looks like there has been conversation between the chairman of mylan and the head of perrigo for some time. erik: presumably, i guess perrigo's intransigence is why mylan is going public, and a hope that -- drew: we are in weird takeover rules. irish domiciles. as soon as you make the offer you have to make it public and put one of these filings out. seems like the conversations have been informal for a long time. robert coury is an informal guy
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very talkative. it could be years. a 25% premium over where perrigo closed, that is pretty good but not at the level of some premiums we have seen and pharmaceutical take a first. stephanie: perrigo trading at $208. does the strong dollar make this deal more attractive? drew: both of these companies are domiciled overseas. they are already inverted. you are not seeing attacks play. it does make a more powerful vehicle -- erik: it limits the premium. drew: but it makes it more advantageous if you are a for an domiciled country for tax purposes it is easier to make purchases compared to being a u.s. company. erik: the trading price of perrigo has dropped back, it was in the $211 neighborhood and now
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it is at $206.25. trading pretty close to the offer, maybe there are not other bidders. drew: i think people are still time to get their hands around it. erik: minutes old. bigger than anything mylan has done. that is bloomberg's drew armstrong talking about breaking m&a news. mylan offering to buy perrigo for $29 billion. stephanie: do you need an apple on your wrist? we review the new smart watch. ♪
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erik: when apple rose out its smart watch, the company once to avoid the tradition of having companies wait in line. it does not happen to samsung. customers waiting in line for days. apple telling salesforce to encourage shoppers to go to its
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website and place orders on the web. the smart watch can be pre-ordered as of friday. a few lucky reporters got a look. stephen has a first-hand account. is it enough to displace the rolex? >> i think it is the best smart watch out there. the hardware and the new interface is different from what you are used to. it is easier to use and understand what apple was going for it and maybe some of the android smart watches. stephanie: you are evaluating it, who is the smart watch for ? watch enthusiasts who love men's exclusive watches or tech nerds? stephen: somewhere in the middle. tech nerds will find it frustrating. the way it is constantly tapping on your wrist. if you get a lot of e-mail and are active this is going to be
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constantly tapping you or not at all. erik: tapping and not buzzing. stephen: it is called a taptic e ngine. it's entirely different feels like a bell ringing on your wrist. but nobody around you can hear it. the person sitting across from you is doing this every 10 seconds. erik: people are frustrated enough about the difficulty of controlling notifications on your iphone or ipad. it is that much more frustrating with this. stephen: personally i think so. stephanie: i hate notifications . they are like this in my life stephen: you never get to the bottom of them. they are constantly going. unlike ignoring your phone, it is hard to ignore. erik: let's evaluated -- stephanie: how do you feel about notifications? erik: they drive you nuts. does it measure up to a quality
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swiss watch as a luxury object? stephen: different kind of luxury object. you have the same design style but it is not the same type of craftsmanship. actually the rubber strap on the apple watch sport is almost exactly the same on a luxury watch five or six years ago. erik: you are not quite sold either as a performance object or object of art. stephen: i'm not sold on either one. i think it is going to get better and we will get more use cases. it's still a small ecosystem, especially compared to -- stephanie: but isn't enough of an object of desire for people to take if -- to get it? erik: $349. stephen: still more expensive than any other smart watch. erik: the rest of them suck. stephanie: people who have 10
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watches are saying let me added for the construction. erik: you have to have an iphone and it has to be with you. a number of other reasons not to own it. thank you very much. stephen, the watch expert. read the review at stephanie: that is it for "market makers." see you tomorrow. ♪
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scarlet: 56 past the hour, bloomberg is "on the markets." i'm scarlet fu. investors waiting for the
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release of the minutes from the federal reserve's last policy meeting as well as the start of the first quarter earnings season. u.s. stocks are drifting higher. dow and s&p putting on gains of about .2% to .3%. the big mover is crude oil. nymex crude plunging 4.5 percent, giving back some of its 10% jump the last two days after a massive building u.s. stockpiles. 10.9 million barrels added, biggest and 14 years. joining me is the senior equities derivatives trader at the mill capital -- vmo capital. we have to start with energy. a bid deal overnight, shell acquired bg. is there any inkling such a deal was in the works? >> and energy in general there is a perception that m&a is likely given where prices have gone and valuations. that particular tie up and the
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size is surprising. headlines like this are going to be more frequent as we go forward. scarlet: why? because people sense that the macro environment is going to change so you need to get deals done while you can or because a big deal like royal dutch shell and bhg opens -- and bg opened the door for other companies? max; it is macro related. easy money, take it while it is here. the depressed oil market assets being spun off at relatively cheap prices creates an incentive. scarlet: a quick mention of mylan making an offer to buy perrigo $429 billion. you were telling me -- for $29 billion. you were telling me mylan was sniffing around for a deal. max: there is an a lot of antitrust concerns with branded
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and generic drugs. i'd not heard of perrigo as a potential acquisition target but not too surprising considering the macro landscape in that space. scarlet: let's move onto your trade, on a semiconductor etf the smh. what is your strategy on this sector? max: i am bearish. we had a slew of negative announcements as of late. intel kicking things off. sandisk following suit micron's earnings with a lower forecast, not very upbeat either. this basic dropped a bit and then got picked up by speculation of an intel-ontario deal -- intel-alterra deal. i'm looking at the possibilities that things slide again at the m&a wears off and as we head into earning season which peaks next week with intel reporting
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before april expiration of the options. scarlet: give us your trade. max: the smh, intel is a major weighted stock. the april 54 calls for .45 cents seem like a cheap way to get a high impact earnings concentration. scarlet: you profit if the etf falls but you do not lose money if it stays where it is. max: the most you lose is the premium you pay. scarlet: max breier joining us today. "money clip" is next. ♪
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pimm: welcome to "money clip," we tie together the best stories, interviews and video in business news. i am pimm fox. the oil megamerger is back. royal dutch shell will buy bg group in the biggest deal in more than a decade. around the world, vladimir and alexis shake hands in moscow. a subtle or not-so-subtle message to european leaders. techi, you can buy the apple watch friday that we have our hands on one and we have a review. in politics, rahm emanuel wins


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