>> live from bloomberg headquarters, this is "market makers" with erik schatzker and. drugs time warner cable says that the 61 -- >> time warner cable says of the 61 billion dollar deal is not enough. >> tommy hilfiger, they're here to talk about how e-commerce is changing the retail game and how he thinks he will win over the millennial generation. >> why the marijuana vote could

mean big gains for democrats in this year's elections. "market makers" in new york city. >> super bowl time for us. they earnings. nobody loves banks more than a eric and i've. we have heard from jpmorgan and wells fargo, two very different stories. scarlet fu is in the newsroom to break data numbers. >> jpmorgan, their three year streak of record earnings has come to an end because a lot of one-time items. there is a settlement tied to bernie made off's ponzi scheme. analysts like to call it a noisy quarter when you strip out some of those one-time items, jpmorgan reported a profit beat of the dollar or descends us versus the consensus of $1.37.

they profit beat of $1.40. a rain check on commenting whether they would have a decline in earnings. what we learned from the earnings report in the fourth quarter of the treaded friends continuing to improve at jpmorgan even though trading revenue and equities did mi mis. investment banking fees were higher than anticipated thanks to an increase in ipo's and dealmaking. compensation is in area of concern because of expenses and the need to maintain expense controls. jpmorgan set aside $7 billion for pay and compensation, about 30% of revenue. the same as last year. the cfo sees a little bit way

to go on headcount reduction. >> how about wells fargo? >> the shares are falling in training right now. the biggest home lender clarified, they went higher in mortgage rates. we saw mortgage origination go down to 50 billion dollars, down from $80 billion. that was offset by rising trust and investment fees. wells fargo was able to make its quarterly numbers because of reserve releases. that is one to watch for. a drive to cut expenses continues that wells fargo. it got its efficiency ratio back in the range they were targeting. it is now at 58.5%. >> a wise move on jamie dimon's part when asked are these over? him to takebehoove

a victory lap. he does that and he is only going to be the target yet again because many people believe it was hubris, some say arrogance that made all of these regulators or lawmakers come after him so hard so it makes a lot of sense, why would he say yes if he is going to doing this? >> it is important to look be the fourth quarter. you highlighted three of the things that are concerned about for the year ahead, expenses and compensation comes of that equation, also how much money that they can make lending. the net interest income, many people hope things will become more profitable. i want to look at one thing which is the loan to deposit ratio. >> it is good. >> no, it looks terrible. jpmorgan has more deposit growth than any other bank in the u.s. but they are not making loans. the loan to deposit ratio is down 57%. if you don't make loans, you will not make any money?

>> they are caught between the wall and wall street. when they were making loans, people said that they were in dicey businesses. private equity firms are extending loans where banks and uncomfortable. >> what do they do with the deposits? that is a big problem for a firm like jpmorgan. any sense from jpmorgan as to what the outlook is for net interest margin, the profitability of the loan portfolio as a look into the future? >> that was a question that was put to jamie dimon and he did say that rising interest rates are a good thing for the bank in the over all strengthen u.s. economy would be good for the banks growth prospects. we have seen them move in rates overall and for bank like wells fargo you would think that that would read up there net interest margin. down eight basis

points, 3.26 % down with him. this is something that the banks are adjusting to. >> it makes sense that they are trending lower because the banks are taking less risk, there is no need for these big outside bonuses because there's no one doing the rockstar jobs anymore. >> i read the other day that jpmorgan was paying out less bonuses, i'm not sure that that applies any longer. the average pay at the corporate and investment bank last year $200,000. shade over that is a lot of money but it is a long way from the one percent him in a matter what state you're living in. >> if you look at where they for been hiring, it is compliance jobs. is jobs that are there to protect the bank. it is not revenue-generating. you will only get those big atsize bonuses if you are in revenue generating position. there was not enough and mende

activity to warrant a huge number. >> that is the story. >> these are the top business stories from around the world. attractive holiday shopping. retail rose more than forecast last month. general motors is still in the race to end up. 9.7 million derrick rose. top once their final sales number, on. google's acquisition of the laboratory will be a win. they are paying $400 million in cash for next. -- nest. kleiner perkins will see about $400 million out of that. not a bad trade.

but the battle for time warner am a you know what is going on. it is officially on. the company immediately rejected the medication offer for much bigger rival. they called it a lowball. we have been breaking news in the story. and it only continues. >> this would be good start for bankers for the year, that might get things off and rolling. at least those are the sides of this. the price so far that charter has offered is too low. as what we heard not only from charter but also from time warner. what happened yesterday is that charter came and said that time warner cable rejected our latest

bid. and so, we're going straight to shareholders. then, time warner said we have rejected their bid. already said that. it was some big double rejection that time warner cable came out and said, that is too low. with 160 a share. charter said that was too high. somewhere get done in the middle of those numbers? >> time warner shares are trading at about one dollar 30 5 -- $135. offerors do not see this getting close to $160. >> there's a question of will and he deal get done at all. time warner cable has taken the stance that we don't need to do a deal. what you don't think they need to do something? >> well, that is the question.

what this will come down to is where does comcast stand in all of this? that has been propped up by the idea that another bidder could get involved here may be in a partnership. basically elevated the shares because of there were only charter in the game, charter would have a lot of leverage. this is in late august. >> time warner cable has a position where if you look at the other cable deals that have been done, they are typically done at about 8.5 times forward earnings and that would value time warner cable at about $150 a share. sevens only at about point one times forward earnings. time warner cable has a point. if you use a set of comparable multiples, the citation should

be higher than what time warner is offering. >> is there something that does not make it as good as those other companies involved? it isrter says that their management. charter says they can do a better job of running the company. this >> you should be prepared to pay up for it. cable hasrner management. the new ceo will give me a chance that -- he just took over january 1. he has a new coo running the show. >> he wants to protect his job. >> he does get 50 million if he finally sells. >> may be a summer vacation. let's talk directv, weather channel. i am watching this wild twitter campaign. how much are people using the weather channel on linear tv?

>> directv has very detailed analytics. they know exactly how many people are watching. if the company is taking a stance that we are not going to pay you even what we were paying you, directv actually want to discount what they were paying weather channel. chances are they feel comfortable that less people are watching this channel than they think the value is and they are only paying about $.13 or so per subscriber. >> what do you think? >> well, i think they want to pay less money for all programming. doesn't?rovider >> the weather channel is in a unique position because a lot of cable networks are bundled in with other networks. it is hard to say that the disney channel am a because it is tied in with a lot of other .hannels >> if i cut it, i would be kicked out of my house.

any chattel that is tied in, is very difficult to cut the typically you have to cut all of them. the weather channel negotiate on their own. the weather channel is not in the same negotiation as all of his other channels meaning that directv could drop the weather channel and not drop all those other nbc channels. >> in the will world of content is king, to below willing to pay up, does the weather channel support? kind of >> the weather channels position is that their public safety. >> i can also turn on tv and see. >> how about every other channel. >> directv has one people to another channel which is more or less the equivalent. directv points out that 40% of

the weather channel's programming is reality television. you tell if that is public .afety >> thank you so much. >> when we come back, obamacare and the price of drugs.

>> the biotech industry had a huge run in 2000 13. biogen was among the big winners. have a look at the start. the doubled last year. our investors right to be so optimistic? let's ask the ceo. that you are excited about? talk to us about your drugs, the prospects. especially in this new world of obamacare.

year for us. great they did very well. this is done extremely well. well.been doing extremely we hope to have the same one in europe. we have three others that we hope to get approved. basically, for new drug launches including a lot of data on our developing pipeline. there is phase two data on a number of compounds for very important diseases. >> is a getting harder to win drug approval? a reputation for being tough or in some cases than the fda. what is your outlook? >> they have gotten somewhat

more stringent. i don't think that it is any harder than it used to be. i think the challenge is to demonstrate the value of the new drug. justify the prices that they need. >> from a profitability standpoint, what is the big difference for a drug in europe or in the u.s.? >> joint prices are lower in europe. in the u.s., there is pretty much free pricing. in europe, the price has to be negotiated. is the government. they are negotiated prices and they are generally lower than in the u.s.. they are playing an increasing role in the delivery of u.s. health care. experience inr

europe or in america over the next few years to mirror the kind of experience you have had with individual governments in europe? >> the drugs will have to provide a real value. they have provided mainly a minor increment in improvement. the drugs have brought real innovation, real improvement in the quality of care for patients which will be rewarded because of the impact that they make outpatients. our goal as a company is to bring forward drugs that meaningfully improve the lives of the patients. this >> what is your single most exciting drug in the gripe line? >> that is hard to say. we have a number of exciting drugs coming forward, there is a phase three compound. we will have data for that this year. we have phase two data which is

very exciting. ,e have six phase two compounds one, together with a biotech company in california to treat a disease called spinal muscular capture fee which is the most common genetic cause of death in kids. we will have data early this year to give us a pretty good indication on whether that judge is going to work or not. we have a drug coming forward for all summer's disease, for lupus, for a number of other diseases. hard to pick out which is most exciting. i'm pretty enthusiastic about all of them, actually. >> is there a single technology you will believe it will change people's lives the most? >> there's not a single technology. what has happened is the signs, but technology has developed just remarkably rapidly so we insightble of gaining in ways we were not a few years

ago. we are capable of turning this insight into drugs for rapidly. i believe we are entering an era where rather than the climbing every year on the productivity, it is on his way up and we are at the beginning of that. i think there is an incredibly exciting time for the industry. >> thank you. good to see you this morning. thehen we come back, politics of pot. we will look at whether legalizing marijuana can be a election day winner for democrats.

>> we are approaching 26 past the hour. we had better go on the markets.

if you look at the u.s. markets, the u.s. stocks are rallying -- are rising. retail sales, they actually advanced more than forecast last month. holiday shopping was not as bad as one thinks. those big department stores did have a tough time. it was those specialty retailers that get ok. >> it was a gain of 1/10 of percent. retail sales rose 2/10 of one percent. automobiles were up .7%. as much as anything, it shows how difficult how difficult it is to get a read on the economy right now. when you generate just 74,000 jobs and everyone is looking for 200,000, it shows you that -- it goes back to what i like to say about analyst estimates and earnings. it is not how well the companies do sometimes, it is how badly the analysts get it wrong. >> analyst after analyst is telling us, forget the jobs numbers, it does not matter,

fishermen and right before they it. >> online retailers, they don't have a monopoly in technology. to rick and mortar retail executives will be talking to us.

♪ a live from bloomberg headquarters, this is "market makers" with erik schatzker and stephanie ruhle. >> when tommy hilfiger releases first collection back in 1980 al -- 1985, there was not smart phone. the fashion icons sat down with me last night with the impending talked all about the hilfiger its online strategy. >> if they are shopping online, we have an amazing e-commerce site. both here and in the rest of the world.

8en we close our stores at p.m., they are shopping around the clock. it is a benefit to all of us. , your is most important chief technology officer or your chief designers? >> all of the above. you cannot live without both. in this day and age, you need great creative, you need great quality and pricing. if you are shipping something that someone orders online and it doesn't fit, they send it back. we make sure that our fits are great. we have to be price competitive in this market. we have to give incredible quality and at amazing prices. >> how much pressure are you under as a label to bring back sexy to the millenial? when you look at the millenials, it is miley cyrus and that is not a tommy brandt. >> when you look at hollywood and when you look at the pop-

culture world, there are the reese witherspoon's who have great classic looks. .r kate bosworth i followed those trends rather than the trends on the temporary side that come and go very quickly. i like something longer-lasting, more classic with a twist. >> is there such a dearth of top talent? when we look at what has happened to jcpenney or very fewie, are there leaders who really know how to run businesses? >> there are very few leaders in the world but there are great readers like terry lundgren from macy's. he is one of the best in the business. if you look at macy's numbers, they are powerful. then you look at h&m, companies like that, and they are powerful. top shelf is genius. they are fantastic, but they

are not a designer brand. having a designer brand is much different than having a mass brand. this provides something different to the consumer. status, a connection with a person, behind the label, so to speak, a lifestyle. we are really building and we have built a lifestyle global brand rather than just a fashion brand. >> do you feel the pressure to follow those that offer a much lower price point or is the luxury shopper happy to pay? >> tommy hilfiger is a premium brand. a luxury brand is quite expensive. but this is fast fashion not really well made. i want great quality, great pricing, premium positioning in the marketplace, and still attached the status to it. >> if there's one thing that a

tommy customer wants, what is it? >> everything. they want everything. it is never enough. if we put colored chinos on the selling floor. red, green, yellow, purple. they would want brown and they would want rust. we are continually expanding our assortment to make sure that we really check every single box. are they slim, are they tight, are they full cut, are they soft, are they washed, are they affordable, are they available? .hen, we continue >> you talk about this, there is the luxury market and there is fast fashion, youth don't talk about premiums. >> who else is in there? >> i would say j.crew is a premium brand. it is a lifestyle, they offer that. that is what the big department stores need to. when you walked into saks or

bloomingdale's, those were experiences. now, people are not going one- stop shopping. -- i had a chance to sit down with the ceo of saks. they are about to drop a billion dollars refurbishing their brick and mortar stores. this is at a time when you are wondering who is going into the store. when you do that, they had better offer something special. >> we are certainly looking at improving the look and feel of technology in the stores as well as online. we have a very successful website and a very large online business. this really looking at the bricks and mortar to make them more interactive and make them advantaged.ogically we will be working with architects on the look and feel but also working on the

technology aspect. .> she is the new ceo look at what she represents. she represents a milestone brand. you need to ask yourself, does your wife, your daughter, who they want to go to bloomingdale's? shop.e h&m, top do they want to go to bloomingdale's? offer ando experience. where do your daughters want to go? >> they don't mind going to bloomingdale's but they like going to the individual stores and they shop a lot online. that is a problem for the retailers. this they are spending all of the time online. do they want to go from brooklyn all the way to 59th? >> if they offer them something, if it is just an emporium that has lots of brands, will they go there? >> it raises some questions. let's say you are tommy hilfiger

this is a discreet retail environment. if you are running a department store, how many times can you reinvent the department store? >> i sat down -- well, you had such a great body. destination been to xl. it is a story for big guys where they are selling high-end things. where do they see growth? there is a store not for you but for the growth economy, check out what he had to say. >> and department stores have struggled trying to get into our business. they want to because there is that growing of america, people are getting bigger. people are getting taller and bigger. it is very challenging. in department stores, they might carry 18 size combination

of a pant and we have 55 combinations of sizes. lulu lemonoiding a moment. he is celebrating a friday of sizes. if you're looking for ways to expand. tommy obama has sold every guy that came play golf. he has already sold those shirts. if you're offering is understood people and you're willing to pay up. >> that is a problem. this these people have to wear clothes. not juste people getting wider, they're getting taller and they just don't want to wear the one pair of chinos that they can pick up a name aces. >> i like those interviews. >> thank you so much. legacy,ernanke posse janet yellen's challenges.

we will talk to the former chairman of the fdic, sheila bair.

him shall use it in him hi

>> how long has it been since the volcker rule was finalized? in only a matter weeks, but others are preparing to roll parts of the bag. this is all very technical and has to do with cbo's and trust preferred securities. it does point to the challenge in reining in the type of trading that dodd frank was designed to prevent. sheila bair knows this as well as anybody. she is with us from d.c.. i would love to know where you come down on this issue. is it reasonable that banks

should be pushing back on parts of the volcker rule which it admittedly in the eyes of some was tougher in its final version and many people expected? >> well, when they did finalize the rule, they simplified it, they made it a bit stronger. that was a good thing. a lot of the controversy now, i think it is kind of a sideshow. it deals with some of the smaller banks and the holdings that they have. they are not nice securities. dodd frank set a plan to face them. changing the culture of customer service rather than speculating on their own accounts. this scandal, we had some big banks and trading options that should be the focus.

>> the american bankers association is behind this effort. the big banks with lots more money behind them. >> that is probably the strategy. they have minimum amounts of trading assets. , i don't think they should ever thought about those banks. these are the targets of the vocal role. would be smart to take that off for the debate. >> from your perspective, couldn't you said that it is already a win? if you look at banks are set up,

their trade operation, the kind of risk that they take is exponentially smaller. >> that is true. this was an early casualty. the have some traders in the plane operations. there has been a lot of progress already. when the banks say they have gotten much less risky, they are talking about risking their assets. there are those with the rules that need to determine how risky and assets characterized. there have been some good progress, but not as much as we need. if you look at private he equity firms and saying they should not be taking this kind of risk. is aboutll or rule those invitations in the safety net. they can have the facilities.

it's a should be with title i institutions. they will be regulated by the fed. there are some concerns about increasing leverage duration, mismatches, a lot of that being caused by the very aggressive monetary policy. information more about the risks that are going on. we need to bring them into the regulatory area but i don't think we are there yet. your belief in reasonable regulation. with what some republicans would favor. what i want to know from you is whether you think government has

gone too far. this is a government wielding too heavy a hand? >> i don't want to comment on specific cases. i will say that generally enforcement action should be viewed as curative not punitive. enforcement action should be targeted in clearly defined behaviors. when the perception is that enforcement actions are being cured by deep pockets and somebody criticizing the government or whatever, then i think there is a real problem. such they should be handing too. some a warning that they have very large settlements. a lot of these activities are unique. that is a concern. what does it right for the doj to dangle the threat of a criminal indictment over a bank? knowing full well of the bank

has zero leverage, zero leverage than against that threat. don't like criminal actions being brought against institutions. i think we should use all the tools that we have. when there's criminal behavior on the part of individuals, that has not been used much. you go after people's pockets and make them pay a sizable fine out of their arsenal profits. when you get into charging corporations, then a lot of innocent bystanders, shareholders, employees can get damaged in the process. enforcement should be about changing behavior. the people who run the corporations, not the corporations themselves are really responsible for this behaviors. feel like it is punitive or it is spiteful.

>> i don't want to comment on specific cases. , clearlyenhanded articulated. we need to be curative in school. it is to be clearly articulated to the public. those that are trying to do the right thing want to comply with the rules. don't have an afford to mechanism. a lot of this needs to be done through regulation. to some extent, the bank regulators and other security is regulations let this get out of control where the enforcement people had to step in. there is a good effective regulatory enforcement as opposed to criminal and soulful enforcement by the justice department which is a much better way to deal with the industry and make sure that you have a clean respect for the

industry. it is in the interest of the industry to have their regulators getting added this. >> since he was elected to the senate, elizabeth warren has become one of the strongest or loudest voices on the subject as banking and banks regulation. how much of her views do you share? >> well, i think we agree on a lot of things. have very good to elizabeth on the senate banking committee could she is very knowledgeable on these and can have accountability when people come in, regular there's come in testify and asked the right questions and make sure there's accountability and oversight. on military issues, we agree a lot. she has introduced a bill, kind of a new glass-steagall. i don't see that getting traction but i'm glad she did it and i'm glad that john mccain joined her. this process. on

this she supports stronger consumer protections. there's a lot of agreement. asple try to tag elizabeth somebody really far to the left on bank regulations and i joan see it. a lot of the things that she says are quite accurate. i'm glad that she is a voice on the senate banking committee advocating for those reforms. >> thank you for joining us, sheila bair. >> when we come back, we are taking pot to the polls. thehe crabs may leverage issue of legalizing marijuana in next fall's election. -- democrats may leverage the issue of legalizing marijuana in next fall selections.

>> pro-pot voters in florida might unite to pick the governor. governors -- democrats are pushing for a statewide referendum on marijuana and republicans say the only reason is to manipulate voter turnout. megan hughes is here with the story. talk to us about pot politics.

>> republican say that there there to stoke voter turnout. it is hard to stipulate or speculate on motivation. are they pushing this referendum because they believe in it or because the same people who believe in pot are going to come out and support the party? one thing there's no question about is that there is a tie between democrats and support for legal marijuana use. you take a look at the latest polls, democrats, independents, the vast majority support legal use. republicans, not so much. if you drill down into the demographics, the vast majority s, 68% supportold this. >> this is not the first time we have seen this. let's assume that republicans

are right. this is not the first time we have seen a party manipulated an issue to get it on the agenda and help their cause. >> democrats would say that they did the same thing when you look at the george w. bush campaign in 2004. call rove said he did not orchestrate all of the same-sex initiatives that we saw. 11 states have that on the ballot. it helps to bring out evangelicals and republicans. , bringing out weed smokers, evangelicals, republicans. like a big party. thank you so much for joining us. about the legalization of weed. >> it happen in colorado, washington state >> when we come for, more "market makers" you. making a doctors appointment the same way you make a dinner reservation? yes, indeed.

. .

>> live from bloomberg world headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> google gets connected -- the acquisition of net labs is a door opener to millions of homes that use the internet to cut our costs and make life more convenient. >> inside information -- how long will the cracker down on inside trading go on? will ask the judge on the biggest cases all times. >> it's the newest campaign for president obama and the democrats -- fighting income inequality. but maybe it's not as bad as you think it is. we will be crunching the

numbers. welcome back to "market makers." i'm stephanie ruhle. >> we will begin with the feeling the pain from bernard madoff's ponzi scheme -- paying a claim to settle a claim after j.p. morgan spend more than $23 billion in legal settlements. when $61 billion isn't enough, the time warner cable ceo says charter communications takeover bid is a lowball offer and has rejected it. the combination of the two cable companies would create the world's largest pay-tv operator. turner says it has not received a serious response from time warner so charter has to make its case to time warner cable shareholders. square is holding its secondary offering that has a company valued at $5 billion. it's moving beyond far -- moving beyond smart phone services into retail outlets like star bucks.

>> let's talk about this big deal for google -- a big deal billion dollars is what they paid for the , theal thermostat maker third-biggest acquisition for google ever behind double-click in 2007. chang is here in the studio. i'm a huge fan of nest. >> i am as well. this deal was shocking. i just talked to tony fidel a few months ago and there was no indication he wants to sell his company. one third of the employees worked at apple, so he and his cofounder are former apple employees. nest looks and feels like apple. so subtly shocking that they sold, it's shocking that they sold to google and not apple. >> i'm not sure that i buy that.

to glue the cloud company and a big data company. of those attributes, let's call them that, fit very well with nest. company not a big data router them company. apple characteristically does that make huge acquisitions. nothing close to $3.2 billion. but when you look at an entrepreneur like tony fidel, ira member talking to him when he started the country -- started the company. maybe it's the romantic nature of silicon valley and you don't expect an entrepreneur like that to sell, but google is the keying of privacy invasion. that's one of the big interns. do you want google in your home when they already know everything you search? >> google is a proper noun and a verb. we use it constantly. we say out loud we are not

comfortable with these privacy issues, yet we use these things every single day. how many times do you use google every day? >> i can't even count. >> this is a hardware company and its faculty state -- difficult to scale a hardware company without an incredible amount of capital. they have $3.2 billion in the bank, assuming this deal gets approved. worryey don't have to about it and the possibilities are endless. about ae been talking nest security system or nest in your fridge rater, nest in your oven -- it could be everywhere potentially, but there are big questions. proprietaryon a operating system. what about android? is that going to change the experience? real is it that might not go through? >> i think it probably will go through. -- ir the folks at nest don't know if it's unusual --

everybody needs an exit. you either go public or get sold. >> this company is three years old. >> i've heard google is paying 21 times sales. if you get an offer 21 times sales, don't take the risk -- take it. >> snap chat and take it. >> nor did the guys at groupon. >> but there are a lot of people in the late 90s who wish they had. maybe they are saying take the great opportunity and he gives us a chance to grow in a significant way. >> and google is working on so many exciting things. who knows where google glass or driverless cars are going to go or these robotics companies they had acquired. it's definitely exciting. is i'mng tony did say not going to google to work on phones. i basically created the ipod and the iphone. i'm going to be doing much more exciting things. the want to bring in

principal from an investor firm investing in several internet of things are nuts. would you have thought google would be a likely candidate to come in and buy nest? surface, probably not. but with this acquisition, if you are in the start up industry, it illustrates the value of design. if you are thinking about validation for the connected home and the power of the connected home to change our lives, it is validation of that as well. as ayou look at google data company or wants to organize the world's information, this acquisition makes a lot of sense. >> were you surprised nest wanted to sell? >> that's a very personal decision. company,on for the it's a partnership in alignment with that and helps you get there faster or is it going to

derail you and take you off your vision? talk to you about design. steve jobs was an evangelist of design and apple built the template for the beauty of the modern consumer device. who else is doing well in the startup world? >> you mentioned square and i think uber has done a good job. nest has done a great job of hardware design and i think job own is doing innovative things. as consumers are having a more intimate relationship with technology, design becomes more important. >> does this make apple look behind? we have been talking about a but they iwatch or tv haven't done any of these things. in the last few weeks, we've seen samsung and google make huge moves. everything's apple has something up his sleeve, but what if they don't?

they probably experimented with all of these things, but what are they actually going to come out next? has really been nothing since the ipad. >> this acquisition puts pressure on apple to think about how they can extend their lead in the hardware space. they have defined best in class hardware for a long time, so with this acquisition, i think google is making a statement that hardware is an interesting space to play and doesn't limit where software can go. are we really on the cusp of the connected or network home? ira member 15 years ago when motorola was talking about connecting the home. it's been the promise ever since the dawn of the internet but it really hasn't come to pass. >> it's such an undertaking. after hurricane sandy, there were fireplaces going off at the

wrong time and people said i wish i never did this all stop >> and there were some real issues with the thermostats during the polar vortex -- people complaining it was two degrees outside and my nest is and working. if it was a regular thermostat, i could jacket up. asking if the internet is going to be a real thing. i think there has been a lot of problems with the software and hardware, but the open movement where you see many more innovators, smart things has ,ver 5000 developers independent developers are building on top of the platform. i think you will see a wave of innovation in the hardware combined with software space and it is about the control platform it sits on and how that integrates that will allow you to not have your thermostat rake when it is two degrees outside.

designers, wase the jetsons their favorite show? probably so. >> describe for us -- if you are successful and smart things is can i do?tment, what >> it and all that it -- it allows you to program your environment and your music system comes on. your coffee maker comes on and is very jetsons in some ways, but it's very convenient. if you leave the house and were you have locked the doors to me you can look on your phone. you can push a button in your garage door will stop -- will shut. >> what if my time warner cable is out and i'm not getting internet service question were >> some people still have land lines. but all of these people without land lines are sol. are we abandoning the basic

things we should have in our homes? >> i think these are solvable problems. >> what about wearables? a report came out that said wearables were not going to become mainstream until 2020. wearable devices and none of them have i actually felt compelled to wear. own have hade job major software and design issues and sometimes they just don't work. >> i think there is a utility question. when you wear a wearable, what does it do for you? the fitness things, when you get the data and what you do with the data can be a big gap versus something very in -- something very instant. if you are at a crowded bar and had a ring that would buzz when you have a message, that would be interesting and we have a company that does that. >> just yesterday, i sat down with the ceo of a sporting goods store and he said wearables are the most important thing and

tom brady wins the super bowl and you are wearing a tom brady jersey, that's what people want to buy. technology is interesting, but a solid sol's products. >> you need the utility and the magic that can be delivered through software and technology. if tom brady could win the super bowl every year, i would be happy. >> this is something you are putting on. you like fashion and you want to look at. i want to wear something that looks good and they are not at the point of customization. >> the cell phone started as these giant things that gordon youo carried around and now will see a similar evolution around other wearables. >> thank you so much. emily chang will be joining me this afternoon in the 3:00 hour. back, what ife

you could book doctors like making dinner reservations? there is an app for that and the founder will be here in just a couple of minutes. >> behind-the-scenes at one of trailggest insider trials, he will be joining us. this is "market makers" streaming on your television, tablet and on-demand on apple tv.

>> you are watching "market makers." as many as 32 million reckons could flood the health-care system and there could be a shortage of doctors. one startup is hoping to take advantage of the situation and help avert the crisis. zocdoc lets patients book with doctors and specialists. is here with us to explain what the future of health care may look like.

is it as simple as it sounds? appointment book an with the doctor the same way i would go and reserve a table on opentable at a restaurant question were >> absolutely. is as easy and it is free. it's a website people can go to and look at by the type of if you they need and need to make an appointment, they are on the browser to their mobile device. >> how do you get paid? do doctors paid you? >> we get paid by the doctor. we are solving a problem that is endemic, which is that you just mentioned artie million people potentially joining the health care and insured community. at the same time, doctors have a 25% last-minute calculation in their calendar am a so we use a resource and make a hidden supply of health care visible.

huge shortage of doctors, i would not think they have a availability. >> the average wait time when you are just calling around for a primary care doctor is three weeks. massachusetts,e where they implemented health care reform, is 58 days. you can book a doctor and boxed in boston in less than 20 four hours. >> let's talk about the crowd sourcing aspect of this. there are doctor reviews on your site. people can make changes on the basis of what they have to say. >> they only allow patients to theyw doctors and we know have seen doctors and other places where you have no good they have thatif

review. >> is it important to build a relationship with your doctor? is -- itlike zocdoc does not seem like the kind of relationship you should have with the medical profession. >> and it's not what we encourage. we encourage you to go to the doctor before when it's time for your physical. will find availability because the doctor has no shows that now enable you to book. >> how good a people are determining the quality of their doctor? >> i need one. >> i can only wait whether my auctor has a good bedside manner or whether he's treating me the right way. i don't know fees he's prescribing me the right antibiotics or if i'm eating well as quickly as i should. have't have to -- i don't

access to outcome studies and they don't generally point to individual doctors. >> outcome is a very difficult concept to crack. >> could you not track outcomes? >> there are many variables that go into that. --could certainly stop certainly start working on it, but what we have is the relationship between the doctor and patient. patient compliance, actually doing what is best for them, is something they can only achieve if they have a real connection to the doctor. thisis the first step on journey. the dr. needs to the right wing on this journey. tell us about affordable care act implementation and how it is affect in your business. if it is millenial that are supposed to be so attractive -- attracted to this and not my mom. clearly obamacare, everyone

talks about that as having a few hiccups. what you need to keep in mind is the actual product we are selling on these exchanges is not the shopping experience. it is access to health care. i think what we are in danger of the equivalent of a shiny new cell phone when you need it. you drive somewhere, your car breaks down and there are bars on your smart phone -- the equivalent could be an experience that is happening with potentially 30 new patients and doctors -- 30 million new patients and doctors. is there a correlation and not a causation between obamacare and what you see on zocdoc?

>> we are two weeks into obamacare -- >> and there are people looking for doctors who did not have insurance before. >> we see site -- we have seen slightly different patterns and what we have seen, which is they tend to think a lot further out. users are within 24 to 73 hours. obamacare books about two weeks in advance which is an unusual pattern for us to engage in. looking astually not many huge appointment as some people would have thought. ofy are doing a lot preventative stuff. >> that is very much what the government wants. >> but i think a lot of insurance companies did not expect it. >> he is the cofounder and ceo of zocdoc, a company that allows you to make actors appointments

the way you would reserve a table at a restaurant online. >> it's also an example of how useful data is. when we come back, we are talking about a way different kind of business -- the high- stakes at the big insider trading trial involving a former sac capital fund manager. what's going to happen? the judge from one of the biggest insider trials ever.

>> bloomberg has its own insider trading information -- the judge trial raj rajaratnam talks about the ongoing probe. >> president obama and the fight

against income inequality. is he really as bad as we are told? you are watching "market makers. we are taking a break and we'll be right back.

>> live from bloomberg world headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. lex welcome back. the year-long crackdown on insider trading could be reaching a 10 point. dozens of people have been convict it of fraud charges and or traders targets and executives at sac capital and of course the galleon group. galleon the cofounder raj rajaratnam is perhaps the biggest fish caught her he is serving an 11 year sentence for masterminding one of the biggest insider trading schemes in decades. lucky us, judge richard hollowell who presided over the 112 -- inetired in

2012 when does now for a bloomberg exclusive. tell us, what do you make of this latest trial question were >> it's a continuation, the next chapter in the government's 10 year push against corruption on wall street. there are probably more chapters to come, but this is a big one. >> i'm sure it wasn't easy -- with the government have been able to obtain a conviction of michael steinberg case and with this case have as much momentum behind it had they not been able to win the convictions in the raj rajaratnam case and send him to jail? >> they all build upon each other. there were no wire tapes in the steinberg case. >> the weight of evidence doesn't seem to be nearly as heavy. >> for the government got the

ability to use wiretaps or thought about it, they convicted insider traders on circumstantial evidence. it's more difficult with the ,vidence they are uncovering there are a lot of convictions and no acquittals. >> but wiretaps were the clincher in this case. the fact that we don't have them here, should they give us no confidence we're going to get to hen?e co >> that's a question only the prosecutor can answer. every bit of evidence that they are putting into trial now, the government has known about for a long time. toldact that the trader them that he should keep them in the dark, they've known that for a long time. that.till decided >> you seen the prosecution play

out and how they play their cards. how would you feel right now if you were the judge? >> i would feel i'm not out of the woods yet. of thing aatter chess game, there's always the possibility that a defendant is going to flip. that usually happens before trial. that usually happens when the -- when they are looking at a 20 year jail sentence. there will continue to be pressure to cooperate whether he has anything to cooperate about, we don't know. last week, wehe get his harvard records, he changed his name twice and was applying for clerkships while lying. is there a chance we are not done and he could flip? >> of course. that depends on what happens. no one knows what happened on .hat telephone number station

does he have anything to flip about? we will find out in the upcoming weeks. >> how difficult is the jury selection process? is it to find a jury that is truly unbiased and knows nothing about what's going on here? >> it takes time. world andthe business we follow all of this. juryhen i questioned the trial, he rajaratnam had been on the front of the "post those quote for weeks and maybe one of the jurors knew what he was doing. >> when you sent him to prison for 11 years, what were you thinking? 2000's, theyarly

went to jail for years for corporate fraud in the few years after that, people look back on that and they thought it looked way too long. the think it's going to be too light or too heavy? >> are are going to be -- there are going to be people on both sides of that issue. questions that a judge takes weeks and weeks to ponder. they will get 500 letters saying they should get time served and you have to sit through all the issues. crime,nificance of that and you have to come up with a solution. and it's not the longer sentence given for an agile fraud. >> are the only ways to punish

them jail time? what has to happen is there has to be a change in thinking and on wall street and on the hedge funds. we had a similar problem with price-fixing. industrial america was engaged with price-fixing. has been eradicated primarily because the government took a very strong approach to ,t and indicted individuals sent a few of them to jail and that probably solve the problem. steveyou ask a guy like hen to play -- two-page $2 billion in fines, he still very rich. >> that is exactly what the

government is trying to do year. >> what do you say, whether it's the industrial market or financial market, bad behavior will be rooted out because they won't stand for it. >> that is the argument the robber barons made 150 years ago . there are some holes in that argument and you'll find few defenders today. >> should hedge funds be punished for being sleazy? what if they make the argument that he was a bad apple, but there are 15 bad apples? he may not be associated with having direct conversations, but if systematically, you are hiring bad people, shouldn't there be punishment for that even if you aren't on the phone doing a direct trade? of the law, the prosecutor can go after any of and if thaties happens, the corporation has committed a crime.

what generally happens is the prosecutor in the wake of the indictment of arthur anderson, a companynvite because of what ceo did, we are going to throw 2000 people out of work. so they back off and take fines from the company but not go forward with an indictment. there are this many up to no good, then this lace is bankrupt? >> that is a decision made at sac, so you are on pretty firm ground. >> where do you stand on a case like arthur andersen or jpmorgan? we were just talking with sheila bair about this idea that the governor and -- the government can use the threat of indictment to extract multiple billions of dollars from an industry, because it's a bank and could not effect it -- cannot defend

itself disappeared overnight. >> i can't speak to jpmorgan, but i think the government realized i took a step too far shutt wasn't necessary to down the entire organization because of the wrongdoing of a couple of its partners. the problemhanged, with insider trading is more insidious and the government decided enough is enough. >> we are so lucky to have had this conversation. join us because insider trading isn't ending anytime soon. that is judge richard hollowell joining us for a market makers exclusive. >> when we come back, we are going to talk about income inequality. is it as bad as we are told? some statistics just don't.

>> president obama is likely to make income inequality a centerpiece of his 2014 agenda. we are almost are to your about it in his state of the union.

issome measures, inequality as bad as it's ever been in take a listenill to what neil a richardson has to say. it's a great argument -- the data are persuasive. what have you found? >> while it's true mediums have fell income -- while it has fell in the past 12 years, after-tax income has had a surprising effect when you look across america. make the looking to most money in america, they saw their incomes by one third during the recession. for middle income, it's been about a 1.5% decline in for the percent, incomes actually increased to ring the recession. the united states is a good job of cushioning during the incomeons for the bottom

of americans. >> and why is income inequality the biggest tagline we are hearing? is it just being used as a campaign tactic, which is in such bad taste. >> everything is used as a campaign tactic, i think, but it's just that we are transitioning in our economy. we are going from an economy in recession to an economy that is going to have to be running growth. there are two things -- two ways to cure inequality -- to grow the size of the pie and to redistribute it. the redistribution mechanism is pretty good. it is the growth mechanism that is faltering. when you take away the stabilizers like unemployment insurance, it really does affect the bottom income earners. >> isn't there one small problem? i'm not questioning your analysis, it's that there's a big difference between income and wealth. income is what i'm going to get this year and wealth is what i have built up for my parents or their parents have built up over generations.

percents in the one often have a lot of wealth in addition to income. >> if we threw wealth into this, it would be a completely different discussion. , for many,uality it's the home that led to an increase in wealth. we're not seeing house rice appreciation the way we did before the boom, so that mechanism for building middle- class wealth has disappeared or a lot of americans. that wealth inequality, you can expect that to get worse. >> but that might not necessarily be bad. the idea that people have for so long, if you own real estate, it should go up. >> that's true, but dynastic wealth is an issue. i think we're going to have to come back to this issue. great to see you. a senior economist or bloomberg government. >> let's take a moment to drink and the fact that erik schatzker just said "dynastic wealth."

when we come back, we have to talk about anchor earnings because it's starting today. we've got fourth-quarter reports from jpmorgan and wells fargo. we will dig into that a bit more on "market makers."

>> we have some headlines from tesla -- detroit auto show headlined. the company say they delivered 6900 cars in the fourth quarter, compared to its previous forecast of slightly under 6000 deliveries. the count is coming from the detroit auto show and pushing the stock way up, gaining as much as $10 in the span of three or four minutes. up by 6.5%.t's >> news on tesla, but we are talking about a bank earnings. the jpmorgan rock that fell thanks to the bernie made off settlement, but they post a record fourth quarter -- we are

joined by barclays senior analyst. it's a tale of two banks. what do you make of this? >> the results are similar. both banks saw an increase in loans, lower trading in mortgage revenues and higher fees elsewhere. i think expectations were set up differently and you see mixed stock reactions. >> how long is it going to be before these banks, jpmorgan jpmorgan more than wells fargo, move beyond the heavy hand of litigation? it cost jpmorgan $23 billion last year. >> jpmorgan took a big step. we will see the other big banks look to put this similar issue to bed, but on the mortgage front, hopefully we have heard the last. they are expected to be quite

smaller than we have seen the last few years. >> could we be talking in the fourth quarter about a more normalized operating environment for these banks or is that impossible as long as we have quantitative easing in play? >> there are a lot of moving pieces. standpoint, gdp growth accelerating, from an interest-rate standpoint, , it's going to take years for those to normalize. but by and large, we are moving closer toward a normal environment and as you get the financial reform hoosiers, banks have the -- financial reform measures, banks have the ability to adapt. >> jpmorgan has paid tens of billions in fines and still continue to crush it as far as making money. a -- engageorld, these risky is this is an just

pay the fines? >> if you look at the big banks, they have exited a lot of businesses that were lower return and higher risk and performed a lot of actresses -- a lot of practices. >> we are back in two minutes.

>> that's going to do it for "market makers." we will be talking about consolidation in the wireless

industry, plus the internet of things. dormanth us and dave will be with us. right now, it's 56 minutes past the hours and time for "on the markets." >> if you look at what people are watching in derivatives, they are looking into netflix. it's time for today's options insight. last year, netflix top the s&p 500 in terms of performance, with a 300% climb. and netflix won a golden globe for their original show. now the weinstein company will be developing a show on marco polo for the company. but how will this play out for the stock? i guessed when does with his options strategy for netflix. netflix actually reporting its earnings for next week -- what are you looking for? the stock is down about nine percent this year. 9% this year.

>> in the last week or so, it's traded in a tight range, but during that time, it is making lower highs and lower lows. in the short run, we will be in a slightly downward trend. the market is pricing in earnings of about a 12% move from where we are right now. that puts the stock anywhere from $2.90 up to $3.80. i want to buy next week's expiration, the $3.20 put and $3.05 put.sell the some serious support in the stock. if it goes down, that's what i want to be long the stock. i just collect the premium. >> you have zero risk because? >> i'm collecting premium. this is a credit spread to me.

even though i'm long this put, i'm sure to others against it. it's almost like a diamond in the rough if you are bullish on netflix. >> if it goes down more than anticipated? >> my breakeven point is 285. i don't mind being long because it's a good point of control and a very solid support area. are obviously looking to earnings as a catalyst in either direction. why not go a little further out with options play? >> in a stock like netflix, i like to keep it close to the vest because premium levels get so expensive. for the retail investor to go out three or six months, you are looking at serious margin cost to their account.

i like to keep it close to the vest and what are the short-term trends? maybe by the end of the year, the nasdaq rallies and netflix comes out with another grammy or emmy award when her. ende it trades 200 by the of the year. i'm only playing it for the short run because that's the best probability i have. >> why not a spread with a higher credit? >> i could do that, but to get a higher credit will give me more risk. i would have to sell either more puts or higher strike puts and i want to construct this so at the 285 level, that the level i am comfortable with that if i get long the stock, i'm comfortable with up there. if i did something with a higher i'm looking at a breakeven that is higher than that and that increases my risk row file which i'm not comfortable with. >> we will be looking at those

netflix earnings to see how your trade turns out. on theake a quick check markets -- we are seeing a rebound after declined yesterday , the biggest decline on the s&p 500 since november. better than estimated retail sales out this week with the nasdaq leading the grain -- leading the gains. gain. than a 1% "lunch money" is next. ♪

>> welcome to "lunch money." i am adam johnson. we take a look at the menu today. here's what we have got. the sports car is back. one of the many new models they have in detroit. we will show them to you. sharing the secrets of his success. separate ways to j.p. morgan and wells fargo. we will talk about that. we will hear from the biggest names in fashion and retail all under one roof. and south korea's latest export. we will kick it off with a