>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> the battle for your tv screen, aereo wants to expand its controversial screening service -- streaming service but it has some powerful enemies. >> the state of american business. we will hear from the top business lobbyists here in the commerce ceo of tom donohue. >> it is the crack cocaine and marijuana. the new way of getting high on pot is called dabbing. and it could be dangerous. you're watching "market makers" here in new york city. i am erik schatzker. >> and i am stephanie ruhle. people are talking about the

extraordinary pbs sac documeary. i wanted to see, but i went on neil young and carnegie hall. >> we rick rieder have a director guest with us rick rieder, --we have a terrific guest with us, rick rieder, at blackrock. billion.seas $640 right now, 60 seconds, how do you feel about the new year? >> free optimistic. i think the bond market, you know, coming into 2013, rates were distorted, we work 130 base points off of normal levels, we are back to normalcy, and i think it is good for bond markets, equity markets. bond guys are not supposed to have a very optimistic view of the world -- >> certainly not right now with the top of tapering -- >> yeah, but i'm actually -- i returns,s is positive i think it will create some positive returns in the broader

market should be in good shape. >> what was your optimism level this time last year? >> different. part of what was happening this time last year was this extraordinary qe program and you got over the fiscal cliff. all of a sudden people had to buy assets, there were not enough assets to buy, you are squeezing, the 10 year with getting to 160, 165, and you knew it was wrong and it all end up igniting in may and june. you knew it was coming but the question was when it was coming. i still think there are enough financial assets relative to demand because it -- but it feels better because we have the paradigm has the right level of volatility and the right convexity. >> where going to take you to vegas were a lot of people say it always feels really good, but we are there because it isn't ces, the consumer electronics show, and our man, jon erlichman, is standing by for an exclusive interview with one of the hottest tech companies'

ceo's. raisean ounce and has another 30 41 and dollars to continue its rapid expansion. they -- another $341 million to continue its rapid expansion. >> if you think about the future of television, this has been one of the dominant stories of the last couple of years. internet television art up, locked in a battle with the broadcasters, you're right, they just got $34 million in financing. joins usjia, the ceo, now, good to see you again back at ces. financing is, you know, that is a story on itself, but we want to know about where the money is going, the expansion, as we highlighted, you are in 10 cities. what is the game plan now? >> just to continue. we had a pretty exciting year in 2013. we went from zero to 11 markets. we will continue that growth trajectory and expand, hire more people, more platforms, new features.

2013 and 2014 were big build years for us, and we are knee- deep in the middle of that. x-unit hoped to be a 22 cities by the end of 2013, you are in 10, new york and boston, in terms of the priority cities over the next few months, where are you looking a? probably for to they will get analysis and as we are able to do that. >> as we highlighted, you have been locked in this big battle with the broadcasters. potentially making its way all the way up to the supreme court. what is the likely outcome in terms of when you will know, when this all could potentially be resolved? likes our belief in our marriage is obviously very evident and clear. my understanding is in a -- >> our belief in our merit is

always a very evident and clear. it will become clear with the roadmap looks like on the legal front in the next few months. >> you are confident if you are successful, it all of a sudden raises a lot of westerns about the multibillion-dollar world of retransmission fees, what the pay tv providers are paying the broadcasters to carry their channels. you do not pay them. if you are successful, do you think all of a sudden that world of retransmission fees goes away? >> i don't think so. the fact of the matter is lots of people today use antennas, and retransmission has not gone away, and i do not think that well. there are two classes of consumers, one that are focused on what i will say a lot of internet video combined with antennas or broadcast tv, and others that i large packages from cable companies, and i think that bifurcation has existed. about 54 million, 57 million individuals that in some way shape or form use an antenna.

i think there is a lot of rhetoric around this whole concept. is inlly, that model existence today, and this is just bringing it into a more modern format. >> the pay-tv providers have been taking a look at what you are doing. we reported that they thought what if we did our own aereo service. what you think about that possibility? could we potentially additionally see you partner up the pay-tv providers at some point? >> i cannot forecast on what they are doing or not doing, all are nows consumers looking for an alternative, and whether it comes from aereo, netflix, a combination of a variety of online services, they want simple convenience. the other problem is there is nothing on the internet that is $200 or $300 a month without the internet fundamentally does not tolerate that. you're looking at a world that is eight dollars, $10, $12 a month.

figure out how to serve those consumers in that category. >> do you think this is driving something else -- the sale of tv stations? a lot of big sales of tv stations run a country, you have owners want. that there is a top and that market if surfers like aereo will contain traffic? >> i'm not sure. i'm not smart enough to know that. twice you are smart enough to raise $34 million. you have a lot of money. there is a marketing question, i think every understands what' hulu is, what netbooks is. does everybody understand what aereo is? >> i think the general market of aereo is relatively unknown and at a summit we need to get to. faithful tribe of early adopters and there are a lot of them, so we go into a city, we let them -- that traction has been very solid. we have primarily been revolving

-- relying on word-of-mouth growth. we will modulate that based on whether we feel like we are ready for the general market. the manyore marketing, millions, maybe billions of dollars a pay-tv industry, since to get its message out, could we sue some similar types of advertising, marketing from you industriespay-tv ends to get its message out, could we see similar types of advertising from you? >> i'm not sure. it is infinity base, so i think it will be a wait and see. the great thing about digital technology as it is very cost- effective so we can make a lot of money without spending a lot of money on marketing. >> chet, what do you like watching on tv? live,"ve "saturday night "cbs sunday morning," and "60 minutes." >> and maybe a little bloomberg tv too. chet kanojia at the summer like sideshow. bloomberg tv was a

given, you do not need to add that in there, he has it on all the time. aereo just securing $34 million in funding, they will have a lot to do. thank you, jon, enjoy yourself anin vegas. >> bookseller barnes & noble has michael hugheseby to ceo. like microsoft will find its next ceo industry. alan mulally took himself out of the running for the job, mulally says he will stay with ford until the end of this year, seem able wonder who is in the hunt of microsoft. bates as well as cloud computing boss mandela are considered front-runners. hedge funds trailed the s&p

index, and found that hedge funds returned an average of 7.4% in 2013. the s&p 500 meet him at its best informants, almost 30%. i have to turn to you. only 16 hedge funds outperform the s&p. what does all this mean for asset management? the s&p 500 had an extraordinary year, being subsidized in different ways, and i think people talk about qe, but because of this tremendous finance over cut -- over companies, s&p had a tremendous year. if you look over a period of time, they generated a lot of funds on big match row -- big macro funds. most investors would be pretty good, if written -- a 15% return. >> investors say we want you to have a big return but they do not want style dress. that is what we saw in 2006,

2007, and many fund managers got into businesses they should not have been. are we running that same bit today? >> i do not know style drift is a problem, but what is happening in the fixed income market, what has become harder and harder is to manage an individual bond portfolio. in terms of -- i manage my own bond portfolio for years. it is hard to do it in us you are tactical, aggressive about finding an asset, finding a new opportunity. it is becoming more and more challenging. think about 10 years ago when the system was leveraging, you had somebody vehicles to buy, aaa, it has changed. i think that is why you are seeing people with proactive management take advantage of opportunities. >> how much harder is it to be an active investor today than it was 10 years ago like you just said? >> i don't know that it is harder. i think the information flow is extraordinary, the ability to tap into different markets is extraordinary.

>> what do you mean by that? >> our ability to look at an asset, if we are looking at a manufacturer in malaysia, our ability to get information from understand the business, understanding industry, and that we have people all over the world that help us with a that individual sector risk. we have built of a tremendous amount of research over the last couple of years to try and be -- so we can provide -- >> how does a startup manager even try to compete? >> i think you can do it as long as you pick a niche and you are very much isolated towards i'm going to try to be the best in the world at that particular niche of the marketplace. i think beyond that, to try and tackle what is happening in the global i think is pretty darn hard. with one other funds cannot run the strategic income fund, i have hundreds of people around the world that are asset backs in europe, what is going to happen in terms of china and do we buy credit in china, you have got to be able to do that effectively. i do not know how you could

invest in really create durable over time. >> all right, rick, great. we have a lot more we will cover within the next hour. what exactly are they doing inside blackrock? come back, maybe this is one of the reasons unemployment is still a problem. our robots replacing jobs and keeping people out of the workforce? that is next on "market makers," on bloomberg television, streaming on your phone, your tablet, and at bloomberg.com and now we are on apple tv. ♪

>> you are watching "market makers." i am erik schatzker, here with stephanie ruhle. we are talking with rick rieder of blackrock, the world's largest asset manager. if you're going to manage that much money, in fact, you do not have to invest that much, if you're going to invest in fixed income, you have to know about

the economy, which is why want to ask you, why does rick rieder care about robots? >> because they're cool, erik. >> they are cool, and i think they are changing the world. there is -- i think we are going through an extraordinary period that does not get nearly enough commentary about the productivity -- people talked in the 19 90's and internet revolution. i think the manifestation of the internet is playing out right now. you are creating this incredible movement toward companies becoming more productive using technology. just to give you a good example, since 2000, we think 35 million jobs have been lost or have been gained through technology, through productive activity -- through productivity. 35 million have gone away because the productivity.

depending on how you measure it. if we are watching something, and part of why inflation stays low and there is no wage pressure, part of why education is such a big deal in this country, because those lower level, if you think about companies like foxconn or bmw or some of the fast food restaurants, replacing with humans, technology is something that is happening. >> hold on -- the jobs go away, but in turn these companies make more money? profit margins over the last 10 years, and you take the benefit you have gotten from labor, or the reduction in labor, you will see that the cost of your debt has help for sure, and other enhancements in terms of the decent cost, but truly productivity and largely labor -- because the us to be there was an incredible set of data you could look at and you could see were companies' proficts increase and then hiring increased right on top of it. but the cycle does not happen. you do not see that transmission mechanism in the hiring because

you can replace it through technological innovation. isthe way, i do not think it a fixed-income guy. huge ramifications for on employment, and inflation which are the two fed mandates. will influence fed over the next come i don't know, one year, two year, three years. >> walk us through those implications for unemployment on one hand and inflation on the other. >> i think the economy will grow faster than people think. i think there was a series of little things that are happening that are creating a more buoyant -- which i think is a consensus now, i think you are going to see a bit of in greece fiscal drag going away, you are seeing a bit of consumption increase, leading mechanism, housing mechanism, a lot of little things from where you were three years ago that are converting to a bit of velocity across the economy. i think it could lead you well above the 3% growth rate. so you have a dynamic. said, employment is

clearly improving, however it is improving a lot slower. you take the percentage that you take the participation rates, unemployment is improving a lot slower. the fed is in a tough conundrum, and i think janet yellen is in a tough conundrum, and the curve comes in because you think about over the next one year, two years, growth picks up, the mandate is full employment. growth picks up, employment is not continue alongside of it, how do you adjust policy? i think you will see volatility in the three-year, five-year part of the curve. >> won't be lack of employment or lack of job creation to match the pace of economic growth help to tamp down inflation because people will not be earning -- there will not be people earning money? >> i think you hit the key point. i think when we hear janet yellen talk more about what her initiatives are going to be, you have a couple of factors on inflation -- wage pressure being the big one, energy and technology, productivity on the

others. i think what janet yellen is going to talk more and more about because employment has these structural issues, it is hard to move the unemployment needle. i think she's going to talk more about lower bounds on insulation, hitting the runs on inflation because she is not worried about the upside. i think it will be a hallmark of the new janet yellen chairmanship. >> what do we do about all of these unemployed people who are no longer looking for jobs? if we are facing this boom in productivity and technology, if i have not had a job for 18 months, 2.5 years, can i ever get one? >> i think there are things that have to be done better fiscally driven of including small business lending. small business lending programs have a real velocity -- that could be initiated because most of the net hiring in this country as new businesses, small businesses, cash from overseas spent on capex.

if you create that, and i'm a big believer in education, you have to retrain and increase or improve our education in this country so that the jobs that are going away -- >> factory workers who do not have a factory anymore. >> yeah. by the way, one of the things that i think is interesting as part of why the fed has to be so concerned about housing real estate is you have to make sure construction -- that was such a big driver in the last decade. if housing does not stay where it is, then construction is going to be a big part of it. education, training, keep make real estate is improving. all those things have to happen. you do not need more qe2 get people hired. there is no transmission mechanism there. >> janet yellen have a harder job than people realize. it is not just about stepping on the gas. price that was a terrific way of explaining the thesis. why robots matter to a bond guy.

we will be back with blackrock's chief investment officer, rick rieder. >> plus, an optimistic voice from washington. he says you may see gop and democrats cut deals. ♪

>> where approaching 26 kathy hour. past are approaching 26 the hour. we want to show you where twitter is ridding today. this is an excuse to talk about how twitter will report its results coming out for the first time, february 5, we knew twitter was doing it differently -- it is only taking lessons from analysts and investors, you guessed it, via twitter. there is even a special twitter tterir for it, @twi

-- >> isn't that like mcdonald's only serving mcdonald's at an analyst meeting? ♪

>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> you are watching "market makers." i am erik schatzker here with stephanie ruhle. will dislodge it and easy be the bane of every investor again this year? that we have a two-year agreement on the budget, we are zeroing in on that with the chief strategist of public in washington, and of course black rocks fixed -- blackrock's fixed income bureau's rick rieder is with us. already, republicans are gearing

up for the election. what do you say? >> there is some truth to that. i'm not sure that is a bad story for the markets, but what i would say is that's the type of crisis that we saw here last year, debt ceiling crisis, government shutdown, all that stuff is not going to recur in 2014. >> why? >> i think both parties realize they didn't know norma's amount of damage to each other, especially the republicans who are there plans. they would better -- they would rather talk about obamacare. i think both parties would like to avoid that. i think they will get a few things done. we will get a budget completed by the middle of this month, we will probably kill the cut that will affect military retirees. we may do a little bit on unemployment benefits, though i think we are getting close to the end of continuing to extend them. >> i was going to jump in and asked to the question, you'd go a bit deeper in terms of unemployment benefits and what you think the odds are with the extension, or not? >> the main issue is you have

got to pay for it. i think boehner and most republicans realize they will be good for their image if we do get an extension, maybe only three months, by an extension, but how do you pay for? do you cut off saturday mail delivery? that is too controversial. do you get from the farm bill? yeah, that is a possibility. you get it from fannie and freddie? i do not think that is going to happen. i think they will be able to taper another extension, but that is the hangup. >> greg, you think most of us think the deficit is increasing, but you think it is decreasing. are you misreading it -- our people misreading it? >> what a story, stephanie. show a the reports will dramatic decline, in fact, i am not on any kind of medication this morning, i will predict that we are going to be close to a surplus i 2016. why? fiscal restraint. we are not spending any new money. number two, a huge surge in

receipt growth as the economy will improve. i think we're close to a balanced budget in two years. quite is he right, rick? i would fill both fronts, tax receipts, everybody in washington and the marketplace has been pretty blown away by how high the tax receipts have been in the last two years, that more than anything else. >> greg, rick was telling us earlier that economic growth will be a lot stronger than most people think, it will have at least a three handle on it. i presume that is factored into your math, that stronger than anticipated growth will grow even higher tax. >> i think there is a new piece of the puzzle that makes it more likely. if you look at e*trade number yesterday, we are having a surge energy ofports, of all things. you see a surge in the manufacturing sector. i think after the trade number yesterday, you could revise the fourth quarter gdp of two above .% i think this economy is starting to grow and it is still not well appreciated in washington.

--you touched on one thing in terms of potential in this country, x port fuel, export as a potential, you talk a bit about policy, things policy could do going forward that could be great philosophy to export growth -- what are the chances we see significant movement there? >> i would say the biggest wildcard by far is the keystone pipeline. as we get a deal on the debt ceiling, the republicans will speak -- will seek to extract something. they are not going to kill obama care, they're not going to dig deep into the spending cuts, but the keystone pipeline will be on the table. i think the white house the bargain that one away. i think by spring, keystone pipeline will be proof that will reinforce a great story of energy. >> greg, jack gerard of the api was on with us yesterday talking about how the american petroleum institute, chief lobbying group with the oil and gas industry, would like to see the export ban on crude lifted, would like to see lng terminal approval

speeded up, is there any hope of that happening? they clearly wanted for a reason, but if what you are saying is true and what rick appears to concur with is true that energy exports can help fuel economic growth, perhaps even drive jobs, that sounds a lot like the api's policy platform, but it would in theory be good for everybody. >> yeah, i think there is a chance, i think keystone is likely. on some of these other issues, you have got to hit a lot of democrats to go along. the wildcard here is mary landrieu of louisiana who is in a tough reelection fight. if you get her on board, and she is, she could drive this issue with moderate democrats. i think there is some hope, not as good as keystone, but there is some hope for that as well. >> all right, well you mentioned she has got an election to worry about, everybody in d.c. is worried about the us -- about these midterm elections. >> i think it pretty good election for the republicans.

i am on the 50 yard line, i am not an advocate for any party -- the republicans will keep the house largely because the way the distance are drawn or some might say gerrymandered, and i think obamacare will continue to be in our trust for the democrats. the really interesting story of the senate, where a six seat gain would give the republicans control. i think they will easily get three to four. i think both houses stay as conservative or maybe even get a little or conservative. >> greg, t murray much, greg valliere of potomac -- greg, thank you very much, greg valliere of potomac research. >> we will be discussing definitions with rick. let's see if rick rieder can define what insider trading means. stay with us. ♪

>> we're back with rick rieder, chief investment officer of blackrock's fundamental fixed

income portfolio. the big story for the last several years has been steve cohen and his insider trading investigation. last night, pbs was frontline with the hedge fund billionaire, including one clip from one of his depositions several years ago. >> now, the sac compliance manual at the time provided that if you were in possession to turn out public information, you could not trade. >> actually, i do not know what it says. >> you do not know what sac compliance manual said? >> when it comes to trading, i rely on council. >> you can watch that old frontline documentary for free on its website at pbs.org/frontline. you run arn to you, massive business. is it fair to say that insider trading rules are vague? accounts is one of the that would get the first call from broker-dealers, the first call from research analysts. do you really know what inside information is or not?

>> i think it is pretty darn and whatt is material is information that is not in the public domain. i do not think there is a lot of ambiguity. fix income is a bit different, in no situation where you are brought over the law, and you get over the law, there's a difference in determining what is immaterial and would assign the public domain. >> your gut reaction when you see the biggest equity fund manager out there say it is a little unclear what insider trading is, what do you think about that? >> i don't know, it is so hard, i mean, everybody -- he sss he that was appropriate. i think people have a pretty good understanding what is the material and what is in the public domain and that is it. it is digital. there is not a gray -- >> every asset manager is under pressure to perform whether you are running a mutual fund or running a hedge fund. is there any way to get an honest edge?

when you hear people like steve --en or roger around them >> in my mind, there is one way to get a real edge. markets are incredibly complex, they require an incredible amount of information, i have been called a workaholic in a bunch of different settings. to understand what is happening, i hear a lot of people who give the superficial, you know, skin deep layer of what is happening. it is incredibly complex. what is happening in the emerging world is incredibly complex. the only way to really -- i think, a durable way to create an edges to let information flow and you have got to dig into so many -- to understand, the conversation we had earlier about employment inflation, jobs are improving, there is an incredible set of influences that are creating that -- i just don't think you can take a superficial pew of it without getting really deep. there are some phenomenal economists and analysts who can get at the first and second derivative what creates these

influences. >> where is your workaholic predisposition taking you when it comes to the investment work you do? this is supposed to be a terrible year for bonds, what do you say? we wereple things -- talking about earlier coming into this year, coming in last year rates were too high, today, rates are getting certainly in the long end of the curve, i think rates are more normal. fair value and the 10 year, low threes. however, what is becoming tougher, a lot tougher in fixed income, a lot of four people were hiding in the last year to try and protect themselves for duration from him flesh and -- from inflation risks, that got tight. the thing we're spending a tremendous amount of time on today is thinking about -- i do think there is volatility on the front and because i think that policy will evolve long and, more attractive, unions people got out of because they wanted to manage interest rates risks,

that is addressing. things like the -- >> you like puerto rico? >> i think orrico still has -- >> -- i think puerto rico still has structural -- at the municipal, some state and local debt, help your debt, there are some real opportunities, particularly the long end of the curve. emerging markets this version, european bank capital, that is going to come to the marketplace. i would say -- we were talking about spain and italy and peripherals and portugal, that is starting to run out of gas i would say. i probably have a bit more upside, but that is starting to run out of gas. we are looking at where levels are today, and 10 years spain and italy inside of 4%, 10 year treasury is that three. are we going to have -- is ecb -- is draghi going to try to stimulate spending? for sure.

>> what is your biggest fear? >> there is no doubt about the fear in the world, the same fear that manifested itself in june of last year, may, june of last year, and it was not that bernanke miscommunicated, it started in japan, and it started on the fact -- people were losing confidence in that illsary policy to cure all because you think of what your plan is going to do or has to do, what the ecb has to do, china, india, central bank influences there, i just think you have to keep a big eye on monetary policy around the world to make sure it is working until you get fiscal policy that follows through. that is the big one because you think about where the trades, where crowded trades are in the system today, people are riding japan, but you have got to watch it carefully, you have got to make sure it is working. >> there are some signs in japan and in europe that fiscal policy is followed monetary policy,

maybe not as quick as investors might like, but of course there is a public appetite you have to consider as well. >> 100%. japan is i would argue the only place in the world were you have -- physical, structural, and monetary policy. they have a burden in front of him in terms of the size of the debt load. 2014, are we going to have all the signs that things are going reasonably well? i think so in japan. europe is trickier. but monetary,cal creating coordinated monetary policies is tricky. we have to keep an i on how that works out, what is the next thing that mario draghi will do with the currency, to not weaken, what is your going to do to simulate lending as you go through an aqr -- >> when you say watch closely, that translates to you need to be nimble. how can blackrock be nimble especially in something like japan given your size? >> first of all, markets are sizable, second of all, there

are a whole series of insurance you can utilize that can be more active. you think about the etf market, and how aggressive you can be getting in, getting out of markets, think about the indices, how you utilize those, and the other thing is because we spend such an extraordinary amount of time on research and analysis, to try and be early in terms of getting in and out of markets, be thoughtful about stats quite frankly i would argue it allows us to relay an influence over when markets are moving, when we have to have better insight. >> rick rieder of blackrock, lucky erik and i to have this conversation. this is one of those mornings where i say i really like my job. rick, thank you again. rick rieder, chief of income portfolios at black rock. >> when we come back, the newest way to get high on pot. it is caught dabbling. we will find out why it is dangerous. ♪

>> how cold is it here in new york city? yes, that is icc on the hudson

river. thehat is eyes you see on hudson river. air travel got off to a rocky start. storms, all kinds of snow, and subzero temperatures. scarlet fu got back to town after her original flight was canceled. she brings us an off the charts to show us the extent of the chaos. >> my flight got canceled but bloomberg was smart enough to -- >> there you go. >> misery loves company and not is why we put this together. anyone who had planned to fly over this past weekend through yesterday, january 4 through january 7, knows the pain for everybody. my thanks to the global alliance group. they crunched the numbers and made them available to us first. new york city led the way when it comes to delays. ark, laguardia, new experience more than 3500 delays over the last four days, 2000 plus cancellations. chicago was second when it comes

to delays, but look at how many cancellations they had a crack canceled -- they had -- >> canceled outright? >> more than they had delays. all the nicknames had to be in chicago. antarctica and so on. >> we get that from mike mckee. i love the name for the >> cars covered in ice. >> people were posting their favorite warm jacket for this kind of weather. what i found interesting was what jetblue had to do, fortunately i did not have to fly jetblue, but they canceled flights for a 17 hour period, 1800 flights, 150 thousand passengers affected. they said something about how they had to get pilots a new rule about 10 hours for pilots, but part of a you have to think is their horrible situation a few years ago, and they did not want a repeat of that. so they just preemptively to some extent canceled and that we will sort things out for the next couple of days. >> things are slightly warmer it

is a balmy 20 degrees. thank right, scarlet, you so much. time to move to something else that is kind of hot. weed. marijuana legalization has been one of the biggest stories in the year. it is legal in washington state and colorado also be drug have a reputation of being safe, impossible to overdose on, but there is a new and controversial method of getting high on pot and have some in the marijuana business very worried. our own trish regan travel to denver to find out more. it is a new twist on an old high -- this is a blowtorch? >> this gets it done quickly. >> it is packing a heated punch was >> rocklin, very pure, lots of people are feeling this is the new wave of cannabis is days. blowtorch to get a super concentrated hit of thc, the chemical in marijuana that makes people high. >> along the side, you will see all of our mothers.

>> they sell pot in denver. >> the joint is made up of flowers which has anywhere from a 13 or send to a high of 20% thc. what we have today is around 90%. >> 90%? >> ef. it is great. -- as crack is to cocaine, dabbing is to pot. >> it is just a concentrate of cannabis. >> to make the thc extract and held in dabbing, marijuana flowers are rinsed with a solvent in a wrap. >> a goes into the tank through over thewashes extraction, goes through the bottom into the collector. >> what is left behind is a sticky, almost pure blob of thc called butane hash oil. >> what jake will do is clean up the ports now until it is red- hot. once he gets it to that point, he will put this dome on it, and

the dome basically captures all of the smoke. that is a dab. >> recreational use of pot is now legal in colorado and washington state, and that includes dabbing. the marijuana legalization movements message has always been pot isn't safe. -- pot is safe. video these strike a show, amateurs have caused explosions while trying to make it in kitchens. there have been reports of debra's passing out from intense highs. that at some worried about what it all means for the newly legal marijuana business. heri-jud people call it ana. connection with it to hair wind. we do not need that right now. let's do it responsibly. let's do it carefully. offnd some people are put

by this. it is scary looking. does that hurt the industry overall at all? >> i think the naysayers and people opposed to marijuana like to use this as ammunition and they like to say there are blowtorches and fire in danger, but marijuana has never killed anybody. >> it doesn't taste as good as it looks? of oil cost $50 versus $15 for a gram of pot, but because of the high concentration, a little less goes a long way. >> the joke is a dab will do you. >> are you feeling it right now? >> oh, yeah, of course. >> trish regan, bloomberg news, denver, colorado. >> ok, so the naysayers are concerned that they have seen people passed out from intense highs and it is scary looking. i would say i've seen people passed out from intensive highs from drinking brewskis and doing keg stands. >> the gravity bong is not so high-tech anymore. with fine to be talking the business of marijuana, but it to be talking about the business of marijuana when you

are so clearly stoned, oh, my. "market makers" is back in two minutes. ♪

>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> what the business lobby wants this year. a new tax lobby, immigration reform, and no tea party candidates. we will talk to tom donohue. microsoft has to shift gears. alan mulally does not want to be ceo. who does bill gates choose? nasa's white elephant -- they don't need this test bans, but congress wants it built. i am stephanie ruhle. >> i am erik schatzker.

>> welcome back to "market makers." it is time for the news feed. these are the top business stories from around the world. companies added more workers and -- than forecast in december. adp payrolls rose by 200 and 38,000 jobs. it is the biggest increase in more than a year. the winter storms in the midwest and northeast came with a hefty price tag. according to aviation technology billion was what lost work time. a line cancel more than 19,000 flights. schedules are almost back to normal. the smartphone or tablet may be keeping you from a good night's sleep. a wavelength of light, like the ones from wireless devices can

jumble the body's sleep rhythms. erik schatzker, i believe that. >> melatonin. it is all about melatonin. has turnexecutive down microsoft. alan mulally is not leaving. with us from the west coast, cory johnson. >> he is a global operator. >> i am wherever i need to be. we're going to talk microsoft. it is interesting to be a student of business history. i am reminded of 20 years ago when blue kirschner was brought in to ibm to replace an insider.

lou turned history, that icon around. iserestingly, the side note the company that was nipping at its heels was microsoft. maybe it is time for a fresh set of eyes from the outside. think alanne mulally or anyone like alan --ally >> i think he considered it, the firmthat he did not give a denial months ago -- >> no, no, no. he told matt miller he was staying in detroit. takeaway -- matt's takeaway was that it was a non-denial denial. microsoft was seriously considering mulally.

lou was the comparison they were looking at. is a guy who has had turned around for and could maybe do the same kind of management approach to six microsoft. -- 26 microsoft. microsoft. >> there is a short list of 20 people, what do they do? this --arted added to adding to the stock last year. there are some things they can do. >> the fact that they have not been able to name a ceo yet -- >> i think they have to take their time and find the right person. report that they thought they might get this done by the end of last year.

in the middle of the year, they said they would take their time and not get it done by the end of the year. >> who wants the job? steve ballmer is on one shoulder and bill gates is on the other, big big brothere -- times two, do you want that gig? >> who once -- who doesn't want me assets that microsoft has? it is the same reason you own the stock. it is a cash cow, has a lot of flexibility. commitments,ome but they can do a lot of things will want of assets. >> you could be a hero. >> or you could go down. >> speaking of assets, how many ceos did -- go through before

they found somebody else question mark is not that easy. >> i don't want the job. >> an interesting place with the tremendous -- i think ibm is in a worse position. one of the biggest developments going on is the adoption of the cloud. companies are not buying the stuff they used to buy. they are outsourcing and you see the struggle that companies like oracle, cisco, ibm, hewlett-packard, all of these hardware slingers that are having difficulty growing. placessame time, you see like the cloud where could be an opportunity for microsoft. it has been for amazon. that is the turn they have to make. >> if i am a senior person at microsoft, am i looking at a job

elsewhere because i have been overlooked? best andf the brightest minds are at microsoft. you make a lot of money there. somebody has to be in charge. if an outsider can bring a fresh set of eyes and bring peace, that would be appreciated. >> microsoft people do not leave. one of the things that people in the technology community talk about is that because microsoft is such a big organization, someone can make their career and the most famous thing that they spend is a new -- spend their 15 years on is a new save button. that is an entire career at microsoft. it doesn't create senior leaders at smaller companies do. it doesn't have the kind of project heads that go on and lead other companies. there are not a lot of people that have left microsoft to run other companies. it's a sexy save button. >> there isn't as much of an

ecosystem in seattle as there is in san francisco. >> there are a lot of tech companies in seattle. i don't think that is the reason. get advicealone to on who should run the company. the strength he has as he has been able to assemble an all-star cast to leave his companies. what makes him the ultimate dealmaker? who can findy --rt people and he lets them he gives them enough rope to hang themselves. people he has found have gone off and innovated at the top of their work way -- -- stock may have been one of

the issues with mulally. ofhas over 900,000 shares unvested stock in fort. end of the day, they're going to -- the person may get is going to be worth whatever they pay. that is cory johnson and christopher marangi. to talk more with chris about john malone and consolidation in cable tv. this is "market makers." we're streaming on your phone, tablet, and bloomberg.com. now we are on apple tv. ♪

>> it is time for bloomberg west. a -- onmbers has put the conductivity market. $19 trillion. that is how big the opportunity is.

chambers spoke at the consumer electronics show in las vegas and describe the world in which objects at home, hotels, and airports are all connected to the internet and no consumers -- in nose consumers preferences. cisco is trying to sell more networking equipment. any will start testing service in the u.s.. they will rely on 70 million sony devices that can connect to the web. sony is negotiating with nbc, cbs and fox for programming rights. china's largest e-commerce website is saying no to that coin. o bitcoin. bard --central-bank barred them from using it. malone, the most

interesting thing right now is his bid for sirius. operation onve one optimize cash flow? >> you should expect the unexpected from john. the thinking had been that they would extract some capital from xm.do -- from sirius they turned that on their head on friday and bought the whole thing in. they want access to all of sirius xm's capacity. rate about three times run and they announced last night that they were going to take leverage to four times themselves. i think it could be higher than that. it is like the cable business. recurring revenue business, there is a lot of ability to --

>> if you level serious xm up, your goal is to hand it back to shareholders. xm -- sirius xm up, your goal is to hand it back to shareholders. >> you can buy back liberty stock, which has health back in it. aboutn buy liberty for $141. from $109 that -- is sirius. it is about $141. you get for free, another $17 in public equities and $12 in private entities such as the atlanta braves. >> is there any parallel to be drawn in the way that they use sirius? >> it is the float for liberty to go out and do other things.

sense, there's not a doubt in your mind, charter communications and time warner cable that that is the pairing? >> that deal makes sense to me. that is a high probability transaction. in doubt. may be liberty can be patient. time warner cable is not going to roll over. -- do youople think think he is the right guy in the position? >> i know tom from his days in cablevision. he invented the triple play. back when he was announced in 2003, people were scratching their heads. he is an innovator, a money maker, he knows how to generate cash flow. i think he is the guy to run this business. >> now that there will be a delay between now and whenever

charter decides to make a move does thatarner cable, create an opportunity for comcast? >> i'm not sure they would be shut out. everybody has looked at how they can play in this transaction. there might be movement to play on the front end or the back end. acquire time warner, charter may want to sell off. cox has a concentration on the west coast and l.a.. that is where time warner and comcast both have systems. >> how do you figure out what cable is worth? >> that is what it comes down to. at are looking subscription, recurring revenue business. in three fastest pipe quarters of the country. that gives the option element. it may not be a service they can

offer tomorrow, but the business will evolve. that will become more valuable as time goes on. >> we have been talking about telecom because of the antics that john leger has been up to. guy is always entertaining. it makes me wonder, not about t-mobile, but in the context of cable, how much of a risk those verizon and possibly google posts of the cable business over time? >> they are challengers in different ways. you have verizon that has a national wireless footprint, which is probably the one viable competitor to the cable broadband plan. plans areroadband going to be the best way to do lover -- to deliver data to the home. the next generation --

>> maybe they only have the money or the desire to subscribe to one service, they're going to make that wireless. they will sacrifice speed -- >> or are they? they are working very hard on finding ways to transmit forte over mobile. think ite point, i will happen. it is a matter of timing. at some point, if you can get 8k, which is beyond imagination. >> there is a limit to the amount of spectrum that is available. that is why you have seen all of these moves where dishes buying up spectrum. that is why spectrum is so valuable. >> what don't you like? at this moment in time, it is hard to go wrong in the cable industry. not -- they are

slightly cheap, all of them. you have the precipice of a consolidation that will help everybody. as i look out five years from cable isears from now, not going away. >> how consolidated does it get? >> if you asked me years ago, i would say you're going to have two national telcos and two national cable companies. at that time, i would have thought time warner cable would have been the consolidated. beyond the time warner cable coming of cox, cablevision, and a bunch of others. >> none of those looks like a national player. ,> if you put them together cablevision, time warner cable, and charter together, you are nearing 20 million there. this will play out over years.

john malone has talked about consolidation and confederation. this concept of confederation. the cable industry is unique because they don't compete with each other. they can share technology. brian roberts would like to guidee his ex one -- x1 platform and the rest of the industry would love that. to investhe resources in that is why they added in the fourth quarter last year. will we see cable companies competing with each other? sell you amcast bundle over the top in time warner cable's footprint? i don't see that happening. the value is in the pipeline. thank you for joining us.

great to get your thoughts. he is a portfolio manager. >> this is rocket science. why did nasa build a $350 million test facility it doesn't need? that is coming up on "market makers." ♪

>> it is time for bloomberg's "mama markets." bloomberg'sou a -- "on the markets." is down so much more than the s&p 500. this helps explain why the tao is not as good an index. machine.onal business

it is leading the dow down because another price of $180. it is down by less than a percent. 500, it is pretty much flatlining. decline on thele s&p 500 and that would be microsoft. there's a good reason for that. not moving toy is seattle. he is staying at ford. ford investors seem to like it. they are up about one and a half percent. the opposite is at microsoft, where it is unclear who the next ceo to run the company will be. that is where we stand today. they're looking for some more concrete news out of microsoft, knowing that mulally is not showing up is not enough. heriverbed technology is ofget of a takeover offer

elliott associates. the stock is trending up almost 12%. they have said they will pay 19 bucks a share or possibly more. the market likes it. we're back in two minutes. ♪

>> ♪ ♪ >> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. now, to a story on taxpayer waste. finish expected to building a 350 million dollars structure to test rocket engines in mississippi. built, it is no longer going to be serving a purpose. megan hughes explains. 300 $50 million tower in mississippi is a government project designed to test rocket engines. inspector general tells a tale of taxpayer waste.

this is the engine that is supposed to test. the test would simulate app to two -- altitudes of up -- altitudes. the rockets were part of george constellation program which was killed by president obama. no rockets need their engines tested. none. nasa is expected to finish building it anyway. that is because mississippi senators fought for the extra $57 million to finish it. the space center in mississippi accounts for 5000 jobs and -- in a county with 45,000 people. premiere center is the rocket engine testing facility. it is a magnet for public and private investment. . analysts say it is conceivable that a rocket built by a private

company may use the test stand in the future. in the meantime, nasa is going to spend $840,000 a year on a test stand that will not be used. engineers, likes engineers probably like that project. >> they like the look of it, but nobody will be using it. he is the voice of more than 3 million businesses, so what is on the agenda this year. we will talk to the ceo of the chamber of commerce, tom donohue. if you missed our interviews, catch them on apple tv. ♪

-- you areching watching "market makers." get ready for a fight between

the tea party and the u.s. chamber of commerce. that he willaid step up efforts to challenge republican candidates and congressional primaries this year. that is part of the agenda for a powerful lobby in washington. tom donohue is with us. good morning to you. you say you are going to backhand at it. strategyhe chamber heading into the republican primary? >> it is not what you introduced the story with. folks,ve the tea party when they were originally established and talked about controlling spending and reasonable taxation and smart trade policies and wanting to fix the american economy, i applauded them. the people we have a difference of opinion with and have challenges with are the folks hitched their trailer

to the tea party wagon, but they want to do is shipped on the ,overnment, not pay our debts approach these challenges that we face in a way that is not going to get anything done in congress. if we don't get it done in the congress, we are not going to get it done. >> it is clear -- good that you clear that up. i think some people thought there was a difference of opinion between the tea party and the chamber of commerce. who is that you have a problem with? who are the people that have hitched their wagons to the horse of the tea party, who you plan to challenge a primary? >> i will give you an example. wheree a particular place we have an extraordinary member ourongress and we rate members on how they vote, not how they talk. are probably a 90 or 95%

voter and somebody wants to unseat them for not being conservative enough. then are the people that wants, if they would win, they would go to washington, vote against expanding the debt. we have to control that. they would vote to shut down the government if they don't get their way. my view is, if we know that they might be a candidate and might get elected and name -- and we will not get anything done with them, we ought to make sure they don't get elected. >> why be ok. who should we be aware of? opaque.not being you don't do well in the elections if you go out for a primary, before some people have committed to being a candidate or not. i will give you an example of what we did in alabama.

we went into the first district in alabama where we had a very good candidate running that had business experience that believed in the things that we do. we had somebody that fit the characteristic i just described. we quietly went into alabama and with the help of others and now we have a good candidate and not the one that we would have ended up with. you will see that happening again and again in both the house and the senate. >> how worried are you about mitch mcconnell? leader in courageous the senate and he is -- he has got a real challenge in his reelection. we are not going to worry about him. we're going to help him. >> how much, when you talk about help, what do you mean? is it a matter of the amount of money the chamber willing to put

into play? >> the chamber spends a good deal of money, but we are different than the organizations that come together just during election years and gather up a bunch of money and go and spend it. we're glad they do it. but we have a brand. have state and local chambers throughout the united states. we have our own field guys and gals operating in all of the critical districts and states where there are elections. we have a massive communications operations that works every 300 625 days a year. we do not have to go out and put this together for elections. bring is the brand, the state and local chambers, we bring businesses, associations, and we do bring money. we do not contribute money. pad that we can go to dinners, but we basically invest

money. we are independent expenditures and we don't check with the candidates. >> you are up against a lot of money. think for example of the coke brothers. is there anything you can do beyond what you just described to keep that money from getting to candidates that you oppose that you elected. >> i think some have been sensible about the way they spend her money. the koch brothers run big business. you approve of the way that sheldon adelson spend his money during the presidential primary last year? >> we don't do presidential elections. you just said that you respected and thought that he was sensible -- >> i am talking about the house

and the senate. >> let's go back to the koch brothers. >> i didn't talk about adelson personally. i said the money he invested went to candidates that were in support of the enterprise system. >> that's what i meant. i didn't mean to characterize what you are saying. you made it clear that why comes to congress, you approved of the way that sheldon adelson spend his money. >> generally speaking. >> let's get to the koch brothers. fact they spend money. they challenge conventional wisdom and they are business people. they really understand the serious challenges that we face. they might support, it is still to see. there haven't been to many people aggressive in primaries. we did a few of them last time.

we do discuss the matter with them. we cannot coordinate with the candidates, but the people that support the elections can talk to each other. i am sure we will be talking to them about where they're going and where we are going. is gone on fort years and i am glad they are in it. you know what we found out after the last election, while everyone was talking about the money that was on the side of enterprise and business and some would say republicans, they were carrying on and all sorts of noise turned out the democrats spent twice as much as the republicans. >> are you going to be urging your member ceos to give generously? >> of course. if you don't play in the game, you cannot complain about the results. you be an advocate to say let's change the rules of the game? the money is so massive at this

point. if you have people with pockets as deep as the sheldon adelson or koch brothers, when does it end? ought to be careful about all the criticism in the amount of money that is spent. a great portion of it is spent on media and press. i don't know if you thought about that. when you're trying to reach -- we have 350 million people in this country plus or minus, it takes a bit of money to do that. concernedarticularly about it. i am more concerned about people that want to limit the rights of folks from any part of the political spectrum. i don't care. guarantees then in theseparticipate processes and i will defend it for a long time. >> there's not a dollar amount to are windowing -- willing

spend, you're just saying we are here to keep up? moneyling people how much you spend or plan to spend is nothing more than a mark that when the election is over, everyone will say to just spend more or less. i know what makes a good story. we spend a significant amount of money. the chamber is a major organization. we have 450 people working for us 24 hours a day, seven days a week. 52 weeks a year. we do not start an election by saying let's go get a bunch of people to work in the selection. we have them all the time. the conversation with you correcting me that there is not a fundamental difference of opinion between the chamber of commerce and the tea party. it was the tea party, members of the tea party, who helped stage the showdown over the debt ceiling back in october. what happens if they do that

again come february and march? >> i don't think they will do it. and i were if you having a cup of coffee, we could talk more specifically, but i think it was people -- if you look at who they were, we could name the organizations. i don't think they are the tea party. there were some tea party people that joined in. a lot of people in the house joined in on that because they know -- they in no way wanted to be singled out and said that they did not vote right and then had a primary candidate. when we get down to the real business and we will, you will see there are enough votes to move forward. can you help us understand a type of tea party candidate that you like? so we can separate it. alabama race and that will explain the story. i like the candidate and person

that one, and i did not like the candidate that one. i am happy with the results. >> should we expect more races to be played out like the one in alabama? >> yes. >> one of the problems is that i am not sure all of your members are willing to go along with the chamber's strategy. deep pocketed members have raised money for republican candidates and done their part to get moderates. they say that they are not sure they can trust the gop to do the right thing anymore because of the deep philosophical and ideological divisions within the parties. do you trust the gop to do the right thing? are deep philosophical and ideological divisions within the democratic party that are frightening. we all would like to see the middle of the congress, which

people, they retire, they died, we are going through a change, that we will get a middle back. we have 300,000 members. i cannot run this place with my colleagues worrying that this company or that company or another company would do something different. generally speaking, you can measure how you're doing by how you are being supported broadly and on the occasion of the elections. we have much broader support than the people who are willing to participate in the elections. i continue to tell them that if they don't participate, and everyone on the other side does, don't complain to me if you don't like the results. week, 52seven days a weeks out of the year. clearly, the chamber is production, how about those in washington? is there a chance of a tax overhaul? >> no. i think there is a chance you

could get some individual tax things tied into this bill or that bill, but a comprehensive it overhaul, first of all, would have to be done through normal order. through the existing committees. it would take a long time. it would have to engage corporations and small companies llc's, so you would have to deal with individual taxes and corporate taxes together. it would take a long time and cannot not be done this year in my opinion. >> a tax overhaul is something focusing onhas been for so long and so may people would like to see it. tom donohue is president and ceo of the u.s. chamber of commerce. >> we are going to take a turn to a man very different from tom donahue.

, saying he is not predicting the future, this guy is. he is the digital prophet. aol's digital prophet. we are revealing his third prophecy for 2014. my third trend, i think this is controversial. -- will be a trend. i have a social footprint. i follow too many people. what is interesting about this one is that if i de-friend and un-follow, i will have the right number of branded people that i can listen to. when that be nice? inyou want to get nasty 2014. you think it is the year we're going to be de-friending and un-following. this goes against what we have been doing in social media for the past five years. >> it is not a popularity

contest. influence is important. it is about the number? i don't think so. i have no time in my day to discover anymore. if i de-friend and un-follow, it is a great thing for brands. >> what about celebrities? rihanna has millions of followers. they don't know her, but they feel like it is a way to connect with her. don't you think that is important? i used to read the liner notes on the lp. i don't have that type of -- intimacy. do i find it in hundred 40 characters? that is not the sort of intimacy i want to have with somebody. that is the one i connect to because -- >> you have been doing it already. you have been dwindling down the number of people that you follow. >> i think of all of the information that is thrown at us and he is saying push them out,

care about a small unit of things and get the best stuff. it is an interesting idea. it is not about how many followers you have. >> a lot of people still think that way. we're are taking you "on the markets" when we come back. ♪

>> that is going to do it for "market makers." tomorrow we are going to be talking about sweet, cushy rides. ceo of rolls-royce's

automotive division. ande are going to sign off bloomberg television is taking you "on the markets." alix steel has more. >> we are cracking down on derivatives. inside the spotlight is going to be on retail. the s&por outperformed in 2013. joining me is max breyer. there were couple things that were positive. we had lower gasoline prices, a better stock market, better housing prices, what is your outlook for this year? >> there was tailwind working in favor of the consumer space. the result was outperformance of the entire market. we had consumer discretionary up about 41%. includedhe tailwind tax cut extensions, falling energy prices, rising home prices.

into this year, there are challenges that were not present last year. rates, rising interest they take a bite out of profit margins. a little more of an acceleration and tightening of the labor markets. that means higher wages. for retailers, wages are the highest costs they face. >> if we take a look at the etf, what would be a good options strategy? in theave some catalyst at retail same-store sales tomorrow. we will hear about a holiday sales season, which is an important component. there's a conference next week. there is an etf called xrt. a gives you exposure across the space. if you are looking to hedge your exposure, we think it puts bread in that index or etf -- they put

spread in that index or etf, that is a smart way to get exposure. we look at the 81.5 put spread. that is a nice three-week put spread at this point. a four-point spread cost less than $.50. it is trading around 48 cents. >> what about longer-term? longer-term, we probably look to widen that spread. a four-point widespread would be too narrow to give you detection in the longer-term. likeuld look at something a 10 point put spread. >> how would you exit the trade? would you sell it want to hit its target? >> being a short trade, it would be in expiration type trade. it is a small premium to pay. for four looking

percent. you mentioned negative catalyst. let me give you positive. jcpenney came out and said its gross margin and sales would improve this quarter. we also might have higher minimum wage. that debate is going on in congress. the target whisper number is $10.10. what happens if that pans out? a the minimum wage would be negative in the retail space. >> people have more money to spend? >> it would be tough to call that demographic is the driving force behind retail spending. johnson redbook came out with sales figures for the weekend of january 4. last week sales. they said the overall level of sales activity was high over last -- over the year prior. you have the widespread adoption of free shipping and online competition that is off the

charts. you have a high level of promotional activity and what that is creating is sales at the expense of margin. >> what is your risk associated with this? >> the risk is the premium you spend. if the xrt, etf does not pass through, you're going to lose $.48 to the dollar. markets" againhe in 30 minutes. ♪ ..

♪ demo look to lunch, lori tied the best stories, and interviews. >> welcome to "lunch money." we try to bring you the best stories and interviews. what is new with the consumer electronics show. can domino pizza what do domino's pizza, twinkies, and boeing jets have in common? and the sochi olympics, will it be that bad? the battle