>> live from woburn headquarters in new york, this is "market makers -- from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> bringing a kernel case against credit suisse could spark -- bringing a global case against credit suisse spark a new financial issue. for artists it mean and labels, streaming download? >> your coffee table or catch could be the newest front in the

tablet wars. an israeli company wants to turn your furniture into the newest digital device. good monday morning, everybody. you are watching "market makers" on bloomberg television. i'm erik schatzker. >> and i'm scarlet fu in for stephanie ruhle. let's get you to the business -- top stories around the world. investors are not as a doozy e-cig about the global economy as they were just -- not as enthusiastic about the global economy as they were just a few months ago. this compared to the last poll taken in january. that separatists in ukraine overwhelmingly supported independence. the government is calling it a farce and saying the votes are illegal. allergan hasr

officially rejected it -- a takeover offer from valley and. -- valeant. drew armstrong is covering the story now. hat is next? >> we will be going back and forth on this thing for a little while. apparently, allergan had gone to some other big companies and gotten -- i don't know where. and there was talk with maybe glaxosmithkline. it leaves them in a difficult place. you have bill ackman knocking on the door on the one hand, and calls for help our going and aunt -- for help are going unanswered at this point. they meaning to -- may need to hold out for a higher offer. they may need to go out and look for something that is big enough to fend off this potential takeover.

we have seen it where someone wants to buy you, and you go out and buy something else instead, instead of taking the offer. we are waiting to see it too high for allergan shares -- shareholders to say no. leant has made clear they are not about developing our nt. >> they're both saying, these guys are going to come in and we don't care that much about rmb -- they don't care about research and develop it as much as we do. allergan is making that argument. up there and said, hey, look at these things in our pipeline. we still have growth on our own. do not take us over. we can keep doing this ourselves. >> short of going out and buying

another company, as you explained, as a defensive strategy, it seems as though that is all allergan has left. does that argument resonate with investors? >> to an extent, but you have to go out there and make the case. tell investors, we are better off alone without these guys and we have the products something -- the products that will make this something that will boost sales and earnings and create value as a shareholder. you have to make a strong case to do that. the pipeline is not out there yet. new are betting on -- you are betting on an uncertain future. >> we know that the biggest sugar in allergan now is about 9.4 -- the biggest share in pointan is now about nine four percent overall. is there a change running on the coattails of bill ackman? >> anytime you have a change in the situation, you will have those who will get in there and look around for a pop in the

deal. i don't know how much it would have changed the long-term shareholder mix of allegan. -- allergan. there is not much to change this viewpoint of allergan outside of this story with ackman. they're just trying to make the case much more loudly than before. same thing with astrazeneca. they are pounding the table every day saying, look at this great research and development we have. two different clinical trials in the last week or so. they've got to tell their story. to be takeover targets to do the same thing as well. >> thank you for covering pharmaceuticals here on bloomberg. goingre is a buyout through in the packaged food injury. olivia sterns has that for us

for -- for us. tell us about the deal. >> we are talking about packaged meat, breakfast meat. do you eat jim eating sausages? >> of course. >> we are talking those and ballpark and sara lee. they're going to buy pinnacle. they will pay about $4 billion in cash and stock overall. includes duncan hines. they are getting more into baked goods. also, log cabin syrup. pickles.c the goals -- it will increase their presence in grocery stores, but also in the packaged meat category and frozen goods, which he'll sure has been trying to get into. --hillshi'll shyer re has been trying to get into.

>> what do shareholders think echo >> they like it a lot -- what do shareholders think? but they seem to like it a lot. shares are up about 15%. the price is about 9.6 times adjusted earnings. that is well below the s&p, but pretty much in line with this factor. very good news for blackstone. >> is pinnacle the same company that blackstone bought for $2 billion in 2007? >> the bottom of 2007. we are talking $4.4 billion. this is a good deal for them. they own about 51%. the reason it's going to go through is because blackstone has already said they will vote in favor of the deal. >> you mentioned that hillshire has been on a buying spree. what else are they buying? withey're coming out things like flavored ballpark hotdogs.

flavor? ind of >> i don't know, chicken flavor? >> you don't want to know. hillshire and another company have been named as possible buyers. >> thank you for the latest on hillshire buying pinnacle. >> coming up next, it appears that prosecutors no longer believe that they are too big to fail. >> and goldman sachs betting that gang members can turn their lives around. that story, coming up right here on "market makers" on bloomberg television. we are string on your smart phone, tablet, and at bloomberg.com. ♪

>> you're watching "market makers" on bloomberg television. i'm erik schatzker with scarlet

fu. federal prosecutors are close to extracting guilty pleas from credit suisse and others. until now, the white print assumption was that criminal prosecution would put a bank out of -- the widespread assumption was the, prosecution would put a bank out of business. the question,to does it make any sense that the criminal please against guilty banks should come from foreign banks and have nothing to do with the financial crisis? >> the era of too big to jail is the shortest era in history, because it began with eric holder's strawman testimony last year where he said, well, we could -- we would love to prosecute, but we are very concerned about to be to jail. no one was ever concerned about that. he has to walk this dog back by saying, it is not too big to jail. we are going after them anyway.

it is all a bit of the pr campaign. the banks have been investigated and scrutinized by regulators and prosecutors add novelty him for the past five years -- ad naseum for the past five years. -- there is no individual case of note he cut they cannot make the case. not because of the fiction that they are too big to jail, which friendly does not exist. >> what about the ultimate goal of prosecutors and politicians? are they looking to jail a bank ceo, even if it is the seo of credit suisse? >> there is been -- has been a lot of criticism, even if it is only one guy. they have not really been going after a lot of senior bankers. to pull backng this more reticent attitude they've had about the

prosecution. but these are foreign banks and they do have less leverage run .- with the government a lot of people have pointed that out. these are the two that will be the test case for this new policy. >> do they want them to stop operating in the u.s.? at a wanting to put them out of business? >> they seem to be very cautious and are meeting with originators to understand the ricard -- the repercussions. my understanding is that there would be a harsher regulatory blowback if they charge domestic tanks, because they have an occ -- domestic banks because they have an occ regulator that is in charge of the charter. that could be catastrophic, potentially. >> richard, you said something a few minutes ago that if -- if federal prosecutors had case against u.s. bank that they would be bringing it. >> absolutely. >> however, presumably the stuff

that they would have a case over in the financial crisis is relatively recent when you compare it with what bmt and credit suisse are alleged to have done. is it possible to my using that as a timeline, that we may see federal prosecutions in years to come? >> absolutely. in holders statement last year -- in eric holder's statement last year in congressional testimony, right now, we are not bringing prosecutions because of concerns over too big to jail. again, a buzz word or phrase that i had not heard before his testimony. i would play -- pay reasonably close attention to this sort of thing. >> how could credit suisse he forced into a guilty plea is hsbc was not, and hsbc was the case over which, i believe, will hold her was lamenting -- i believe, holder was lamenting?

few years ago in 2008, they started this policy of deferred prosecution. they essentially would tell the bank, ok, you can pay a fine. you can acknowledge that bad conduct occurred, but if you promise that you will change her ways and we keep an eye on you, we will not prosecute. and a number of agencies, including hsbc, resolve the problems that way. but now, the banks see this as the cost of doing business. >> and admittedly, a high cost of doing business. they look athen profits, perhaps not that high. >> know, to say to the banks that the criminal conduct that could have jerk owning confidence -- consequences -- that could have.com he and , and then these other things don't happen, it is

surely not taken by the banks that the sort of things will not happen. >> have you looked at how bmt has responded to prosecutors looking into them versus credit suisse? >> my understanding is that bmt has not been as cooperative as the government would like. and in general, they have gone out of their way to punish those who cooperate and reward those who do. is what i'mand here wondering. why not fight the shakedown? if prosecutors are satisfied that extracting a guilty plea out of the bank won't put the bank out of business? why shouldn't the bank just say, bring on the indictment. if you are confident that we will not go out of business, then why not fight it? if they were convicted of what they were charged, they would not go out of business. that is alarmism and hyperbole.

the reason why they settle is the expenses can be meaningful. but it every day you are trying to get your strategy out to your shareholders and to indicate with customers, and all people hear about you is that you are charged with a crime, it becomes -- >> a black cloud. >> exactly. they want people to come in and trust them with their money. case that,y make the yes, you should put your yourement savings here when have just pleaded guilty to a felony. they have reputational damage. >> thank you for joining us. sheila carr and richard farley. makers"g up on "market while goldman sachs cares whether gang member stay out of jail. it is all part of the new investment. ♪

>> there is a lot of debate about whether we are finally coming out of the slow growth in the new normal economy since the economic recession. michael mckee joined us. we finally see a sustained time of growth? because of the winter weather, the second quarter is supposed to be stronger, but also payback for the weather. shortadvice to you in the run is just enjoy what we've got. like the weather outside today, it looks like it may be a good summer for the average person. look at job creation. we are on pace for the best year of job creation since 1999. that comes after 2013 being the best year since 2005.

we are really picking up jobs. it is a huge month. but over the course of the year it has been fairly substantial. but if you look at interest back tohe average going 2009 is five percent. an1999, you would have paid average of 4.73% for a 30 year fixed mortgage. about anre paying average of 4.21%. inflation overall is really low. and obviously, the fed has its concerns about it, but for the average person it's a pretty good deal, because what you want .o buy is costing less and with fracking, gasoline prices could be lower.

earnings have picked up a lot in the past year. the trend has picked up in the right direction. but because of the first quarter effect, we don't know exactly where we are. >> we are enjoying this now. why would there be a winter of discontent coming up? are so low., rates the fed has tapered and interest rates have actually fallen. over in the taper is the fall, then the markets will start pricing in when the fed raises interest rates. until the middle of 2015 you will see market rates go up. you will not have as good a deal in the future. inflation is set to rise on thursday. part of it was the effect of obamacare. the reason we have such loans laois and now. that will come back into it. -- part of it was the effect of obamacare, the reason we have such low rates now. that will come back into it. and the other thing you want to

keep your eye on is that congress did not end the budget battles.ebt ceiling they just postponed them until the beginning of next year. that could come up as well. things are not perfect right now, but enjoyed because it could be as good as it gets. seef next year, we could some tougher economic conditions. >> michael mckee, thank you. it does not feel that great. but the numbers seem to show it is. >> go outside and it's going to feel a lot warmer. >> michael mckee, economics editor with the latest. we are approaching 26 minutes past the hour. >> it is time for bloomberg on the market. and we should, i think, rightly begin with a view of the market. dow are on and the the way to set records.

we've talked about at least one of those factors, he'll sure dashiell scheier buying pinnacle buying pinnacle and other deals. companies buying companies, in other words. >> now that it has gotten started, it's a rush mentality. let's get to go though. the company reported a smaller company predicted. it provides wireless services on airplanes. this morning it is up 7.6%. street meets america's most wanted. that's what we've got coming for you. we will tell you about the goldman sachs social impact bond. >> and apple paired with these electronics is possibly a game changer for the music industry

when they finally announced it's going through. ♪

>> you're watching "market makers" on bloomberg, with erik schatzker and stephanie ruhle. >> i'm scarlet fu in for stephanie today. >> scarlet, it's not your typical deal in effect. in this case, goldman sachs is betting $9 million that boston area gang members can stay out of jail. you can to it as a new way to price risk. we have taken a closer look at goldman's so-called social

impact bond. what did you find? >> i found this is a way to get private capital into public spending. normallyjects are funded by government, and tackling social issues and crime. and you have others, bank of america and others saying they want to get in on this. we can help you expand it and then on the savings on the backend, pay us back. >> very excited about it. y echo what gets a bank ceo excited about -- why? what gets a bank ceo excited about social impact bond? >> they say they have shareholders coming to them wanting to invest, so let's do it. >> how do these bonds work echo are they cap or infinite -- how do these bonds work? cappedcapped -- are they or infinite? but they are just alone.

investors are trying to cut recidivism among young males to my mainly. we can save on incarceration costs and payback goldman. if recidivism goes down way more, goldman will stand to make $1 million in profit, but that ped at that one lane dollars and will not go above that. >> and the excess would go to the state? >> yes, it would go to the state. >> the idea is that money that would be spent on incarceration them afterk to helping them. >> exactly. it is going back in time and preventing those costs from skyrocketing. >> what does goldman sachs or , ak of america or a pax

private equity firm that was the first to social a -- two sponsor a social impact bond, what would they say to the critics who would look at this and it missed $9 million isl -- not much of for a company that makes billions. that this is windowdressing? >> sure, there are concerns that they may not get these things done. >> why not just give the money away? >> because they want to do create -- to create a market for this. in other words, the capital would come from other places, treasury todman's fund similar programs? >> yes, and this is not

philanthropy. this is on their balance sheets and investors are investing in this. >> who else is engaged in this kind of social investing? >> bank of america has done a deal with new york state. their investors have invested in a social bond to cut recidivism among older offenders. in london, the first deal was just done. in the u.s., we have seen private capital on the deal as opposed to just philanthropy. >> why is it that recidivism, you know, repeat offenses, seems to be the flavor of the month for social impact bond? is it because for the incentive to work you need to measure the outcome? >> yes, you need to be able to measure the outcome. is this guy in jail or not? that is easy. savings to flow back to the same payers that gave you money in the beginning. in this case, it's not just corrections cost. we have seen savings go back to

massachusetts. and there are other areas that this could expand into the next year-and-a-half, into health outcomes, education, other things that you can measure and track and then the savings will accrue to the person paying out in the beginning. >> thank you for bringing us the story. goldman sachs social impact bond and the effort to introduce incentives or social programs like these. >> coming up on "market makers," a speculative deal between apple and beat could be a game changer. ♪

>> time now for some "bloomberg west" tech and media headlines. samsung isn of recovering from a heart attack. he is 72 and there is no word when he will return from work. there's speculation he has been grooming one of his sons to take over. according to documents reviewed avoidingerg, ibm is disclosure requirements on sexual harassment by offering the option of arbitration. and the universal comedy "neighbors" was a box office champion is again, picking up $51 million in north america. it eat estimates. winner, "theweek's amazing spiderman 2."

>> and about the last time you online. to music you, too, might be wondering whether apple will buy the beats digital download. andy, the question to you. is the digital download ara over? -- era over? >> it's not over yet, but it is close to being over in america. in certain countries, it's completely over. scandinavia is all about streaming now. in japan, 80% of the market is still physical cds. >> that is amazing. >> what you are seeing is the beginning of the end. i would not necessarily say it is the end just yet. >> christina, when was the last

time you bought a cd? >> i don't even a member, actually. but for the niche player, someone who mixes their own music, you could see why you would want to buy it. but for the most part consumer , you are looking at an environment where everybody is stringing. and beats is one of the major places that is attracting a lot of attention lately, despite being the youngest of the bunch. >> it is brand-new. >> very brand-new. >> what exactly is apple buying andnd the name of dr. dre the connection to the headphone? >> break it up into three. first, the headphones, which is easy to distribute. everywhere you are selling apple iphones, ipods, you are selling headphones. apple will be able to combine the distribution side of it and

the merchandising aspect of it. and the second thing, they are buying a jump streaming service that has been -- a young streaming service that has been theted and integrated into hardware, as well as utilizing the software for the future to compete with spotify and pandora in the world. and the third thing is, they are getting a marketing group -- guru. >> a lot of people are speculating that this is essentially a fashion company that is creating wearable technology. and the next creation could be another leg in wearable technology. google glass, which is not that looksnable -- it kind of weird. anybody who wears it looks like a freak, essentially. and you have a company that is creating an aesthetic that a lot of people in the mainstream are buying, and that is essentially what apple would like to be at the end of the day. they want to be a strong fashion company.

having an apple device says something about you. and the beats is an extension of that. >> absolutely. a lot of -- >> a lot of people say that steve jobs would never do this deal. but at the very least, would he have admired beats for what it has become? >> absolutely. i believe jimmy andrzej -- jimmy , the packaging of beats, exactly how jobs package the presented toay was the consumer. to give it that luxury brand. they totally did that with the headphones. steve jobs, would he do this deal? probably not. but what about the artists? do they care what platform they're -- they're music is streaming on? >> it doesn't matter.

for the artist, it matters getting paid. >> and they negotiate their contracts directly with the government and the artists are fighting back on that arrangement. beats has a model where they negotiate with the company's, the record companies directly. , since it way, beats started, has been marketing itself as the one music streaming service that is the closest with the artist, that will help the artist more, and develop a marketing campaign around them. this is something they have been pushing since they won, which is also of benefit to apple -- since day one, which is also of benefit to apple. >> we have spoken about this before on this program, which is all of the other streaming services have technology-like companies. service thateaming

is music-like. trent dresner and others that they have wrought in have been -- trent reznor, and others that they have brought in as radio programmers have helped that. >> but will it be good enough to destroy the bane of the artists existence, which is the illegal download? the more people sign up for streaming, the less they will be inclined to illegally download, which still goes on. >> it still goes on, but a lot of the pirating is more for movies and tv. there is a shrinkage of it in music. >> the reason why beats has said it is the closest to artists is because it does not offer a free option. you cannot just go on to beats and listen to free music. >> like you can pandora. >> or spotify, for that matter. with beats isg that there is no such thing as a

free lunch. they were trying to think -- change the way people think about music, where it is free and you don't have to pay the artist for it. is,he other side of it don't forget that at one point, half of beats was owned at one time by htc. they learned from that experience when they bought back that 50% as to how to integrate the hardware. and the other thing, $3 billion for this purchase. for apple, that is nothing. >> i actually disagree with that. because they don't have access to most of that cash. if you look at domestic cash usage, they are doing an extreme amount of buybacks and dividends. that costs them a lot of money. and if you project forward to 2015, they are at a shortfall of about $9 billion. >> and that is why they did the $17 billion bond float not so long ago. but in the scheme of thing, when you think that beats headphones

does $1 billion in revenue, the entire record industry is $15 billion total, but apple makes that in one quarter. >> that is a good perspective. -- is we even call it a the album dead? >> it is the music industry. it is the music content industry, really, now. >> is apple doing this because they screwed up on music? >> idle think they screwed up. >> they relate to the party. -- >> i don't think they screwed up. >> they were late to the party. bea company like apple can behind and in the course of a very short timeframe can leapfrog because of their resources. at the end of the day, to bring in jimmy heidi -- jimmy ivy, who has the chops and has his finger on the pulse of the culture is a good move.

replaced tapes and then digital downloads replace that. what will -- and then streaming replaced that. what will be in 10 years? >> who knows? you don't know where technology is going to go and how it will distribute. >> cristina alesci, what do you think? 10 days from now? -- 10 years from now? >> what i'm thinking is 10 days from now and who is going to buy pandora and spotify. but thank you very much. -- >> thank you very much. >> wouldn't it be great to have a week like dr. dre is having? he may have found a place that could celebrate a deal that will make him one of the richest man in hip-hop. according to the "new york -- close to most to closing on a mansion formerly owned by tom brady and his wife gisele.

in, he will also have a state-of-the-art sound system. >> playing beats. >> of course. >> coming up, you will see how furniture is going to be turned into a tablet computer. no joke. ♪

>> imagine turning your couch or coffee table, any piece of furniture in your living room into a tablet computer. one company has found a way to do it. here is elliott. >> in the futuristic film open up -- futuristic film "minority report," they track down kernels before they commit a crime. this is more modest. our householdrn into more interactive ones.

his first target, overhead projectors. >> you can take any one of the 50 lane projectors installed worldwide, plus 10 million shipments every year, and transform them from a regular projector into an interactive room just like that, by putting it on your finger. >> the bird, which fits on your index finger, is just half of the technology. agent, google earth to the table. device ontoct any any surface and allow you to interact with it as if you were there. the agent is still in development stage. but its impact could be just as impressive as corning's vision of the future, except the maker of gorilla glass screens for ipad is betting on almost everything being coded in --

coated in touch sensitive glass. >> when you think of touch specifically, maybe you have seen a toddler interact with a tablet or smart phone. it's very natural for them. and that intuitive nature is why we think touch stays around for a long time. >> covering everything in glass may not be everyone's cup of tea. it's quite expensive, for starts. scientific technology looks to be heading to a screen, or surface near you very soon. >> i don't know about that. one of the appeals of using a ring is that people cannot see what you are doing. >>] discrete. although, one way or another, this is "minority report" come to life. >> just imagine what the sequel will look like. >> that is the whole point, right? you cannot even imagine

the future until someone with creativity and visions it for us. right now, approaching 56 past the hour and a time for on the market. we will show you where the nasdaq and the s&p 500 are come a because they are marching forward. not the nasdaq, but the dow and s&p are. the dow was a few points away from its all-time high. let's also have a look at hillshire and pinnacle foods. this is a deal we told you about earlier. in a goal is gaining, not surprisingly, because it is the -- pinnacle is gaining, not surprisingly, because it is the target of acquisition. >> pinnacle foods is what we should have there. that is pinnacle entertainment. it is trading up about 15% on the day. that is what you would expect.

>> it is a very skinny 1.39% right now. china,news out of allowing foreign development in new commodity trading. welling markets are doing -- better as well. higher.utures are stocks are higher in the u.s., and europe, and the emerging markets. also, a positive monday. >> we will be right back. coming up going hollywood. we will talk to brian grazer. ♪

live from bloomberg world headquarters in new york, this with markearket makers" erik schatzker and stephanie ruhle. >> sticker shock. whole foods taking the name at whole paycheck. checking out the lines to see a prices have gone more competitive. >> disrupting hollywood. betting big on short-term video. you will hear from brian grazer. .lex it i it is "market makers."

>> top stories from around the world. a record-setting piece on wall street. -- oprah record-setting pace. it has been up as much as .6%. a big takeover in the food business. the company that brings you sara lee take the goods is buying date -- duncan hines. clippers owner donald sterling apologizing for the racist remarks. saying he made it terrible mistake and will never do it again. the end they -- nba has suspended him for life. since -- been let social media takeover the story and then comes out with an apology. >> where were his pr advisers? >> chief washington correspondent peter cook is here

in new york today. editor andon is terry gog or who covers big banks and criminal prosecution. i think we will get to that. see you. welcome. why don't we talk about timothy geithner. his new book is out. facing criticism over remarks he has made from newly -- from neil borofsky and others. he made onthe round television. why don't we play a clip. panic, therencial is enormous collateral damage. deeply unfair in that context. the first imperative is to make sure you make the system stable. not because you care about the banks are want to protect them from mistakes but if you let the lights go out, the system will collapse around them. >> the debate continues to rage,

did timothy geithner and federal government save mainstreet or not? think this book will satisfy people who criticize timothy geithner for doing exactly that. he had his critics at the new york but at treasury secretary that as a first responder that he was too cozy with the banks. provides justification for that. he will never satisfy the critics with the book. he is articulating the position he has throughout the course of the administration and putting his final testimonial on what happened. not going to satisfy his critics. next month hillary clinton releases her book, " hard choices." timothy geithner looking to go back into public office? >> i do not think he will be

going back anytime soon. i do not think this is a job -- of books that to launch them into political career, although things could change. never say never. he talks a lot in this book about how he did not really like washington. his family hated washington. the idea he would go back to the environment he hated so much and described in his book would be described -- surprise. >> do you get a sense that something that happened during the financial crisis that he might be pulling back on or possibly regret at this point? >> i think the one thing in here that is new that he was more out in front on trying to do something for lehman brothers then ben bernanke and hank paulson. more daylight then perhaps we knew at the time. at the end of the day they reach the same conclusion, the -- that there was no way for the them legally to step in.

>> another surprising revelation in the book, larry summers nationalizing the institutions and kicking out the ceos and getting rid of the board the way they did with fannie mae and freddie mac. thehere was he on this? >> conversation took place. spoke specifically about citigroup. they didd of the day not have the cash to do it. >> that's money, that was already up there. 700 billion was in the offer. >> does he have any regrets about missing an opportunity to perform the financial sector for the better? >> the other critique made is there was a moment he could've made everything different because everything is pretty much the same now. >> so far he expresses regret that he and other regulators did not see the price is coming sooner.

the fed he that should have. i sense there were opportunities within dodd frank. he did not like everything about it. by mr guy think he would say it has helped to make the system more stable. would he have like to see things done differently, even less aggressive? maybe. the big debate over the volcker rule, but i think by and large he will give you the sense that he feels the safe -- system is safer but not as safe as it could be. >> when you look at what is going on with charges against suisseibas and credit , will we get some sort of an announcement this week? >> we are moving closer to an agreement. during the financial crisis we talked about collateral damage, risk, systematic meltdowns. there is the threat of that and what is happening today with credit suisse.

the justice department coming down on them, playing hardball and trying to get a guilty plea out of them because we do not know what is going to happen. it they actually do invite a bank, what is the collateral damage? there is an echo for what happens to the broader system when the deals get made. that is what the justice department is doing, going over the details. >> i do not know that the prosecutors can know that for certain. obviously nothing in the future is known for certain. i put in a number of phone calls last week to answer the question myself. theked what would happen if bank were indicted criminally or pleaded guilty to a criminal charge? i could not get an answer, even from calpers. the largest pension plan in the country does not have a set policy for dealing with such an eventuality. this is an organization known for insistence on good corporate

governance and high standard of conduct and even they do not know what they would do. would it continue to invest, do business? evenmanagement level, something as inconsequential as that. you see thefter attorney general of the united states to the bank video there is an incredible amount of pressure on the justice department. they have not had a lot to show for it, in part because of what happened with the financial department. i think there is incredible pressure. i've years removed to have something to show for it. years removed. inwhat happens if we test it the whole thing collapses? those of the questions they are looking at now. although, i think with the video coming out, there is definitely pressure to deliver on one of

these. also pressure for congress to deliver on this. >> are they going to trade -- treat an international bank differently than one based in the united states? >> no question. a good reason you are here come in addition to the fact that you are an expert on timothy geithner and criminal charges against banks and that has to do with technology, particularly and potential acquisition of beats. said are people that have i have heard everything there is to say about the subject but they have not. about this is me apple is a very focused company. they'vethe early 1990's started to do things. they started to make renters and cameras. had is when the company started to fall apart.

then it made iphones and ipods and did really well. time.it will work this synergies between beats music and itunes. raise the question whether it is the john sculley era all over again. >> it does kind of feel that way. there are some synergies. it is a very different kind of company. the company will be hard to absorb into the apple culture. seems like a very different thing. a diversion. maybe an interesting diversion or profitable diversion but does not seem like the apple so successful. my immediate question is why cannot -- why can't apple make this themselves? >> they probably did not get into it. probably people at the company

saying it will be a diversion to make headphones. now they say we have the cash, let's buy beats and then they did it. >> is this the way forward? multibillion-dollar acquisition. >> makes a little more sense for facebook. it is a sprawling platform with 100 different things you can plug into it. makes more sense to buy these companies. >> whatsapp? >> that was a crazy price. i thought 19 was a very high price for that acquisition. in general, acquisitions make a little more sense. apple has a couple of products. they should work hard to build one new product that makes lots of money. i am sure they will do that. acquisitions left and right, i do not think that

is the way forward. >> when they came out with earnings report last month, all of the analysts were out there saying they bought themselves time, giving investors a reason to stay in the stock. whether it is the next version of the iphone or something else. is this an acquisition that keeps people interested and keep them from turning away from the company? >> there has been huge pressure to end the cash they have. there is an argument they have to do something in order to please investors and get people to back off a little bit. if you are going to make an acquisition, you are going to spend a few billion dollars. lex doesn't it show up on the bottom line really quickly? >> sure. but they also spend $3 billion. they paid a pretty big premium for the company. >> what will get people to line up around the block?

>> there is no way you can have in the choir and have people line up around the block. the big question that has been hanging around the company since steve jobs left is can they do it again? we have not seen evidence they can. incremental improvements. >> maybe a little bit better but we have not seen magic. that is what we are waiting for. >> my 13-year-old son has been asking me for beats head phones, not an apple device. >> apple changing the cool factor. >> i think apple still has a pretty good cool factor. and very interesting cool factor. a very different look. the guy who helped design beats has been criticized. the actual tension between the elements of design. everyone once the cool factor. everyone wants to be the one the 13-year-old has on his ears.

>> there is a difference between being cool and sounding good. say they are the best headphones i have ever put on. about theill go on best sounding thing you have ever heard. audiophiles would say it is garbage and the marketing campaign. >> at thompson. peter cook, chief washington correspondent from d.c. -- nick thompson. >> coming up, one of the most-watched networks on youtube. time warner. >> cold foods trying to get away from the whole paycheck make them. -- whole foods. you are watching "market makers ." streaming on your television, i've had, bloomberg.com and apple tv. ♪

>> another big media company jumping on the youtube bandwagon. grouparner has joined the expressing interest in the popular youtube video network. for more, we're joined by senior west coast correspondent, jon erlichman. what is the thinking for time warner? weeks ago disney acquired a company called makers studio. the immediate question around town here was what is that going to mean? well you see more deals happening? everyone started focusing on full-screen. a lot of options have been coming to the table him a sum from traditional technology companies, others from newer alsors like relativity but from those like time warner

because people are watching how video consumed video these days and younger pete all are very comfortable living on the world of youtube. full-screen has done a great job of grabbing them and putting them under one house bu. the maker deal has already come, is a move to service like it be termed an offense of milk or by definition a defensive move. it was before they started entertaining bids. the two of us have talked about this already. amazing over the past six months this sector has gone from what felt like near death, one of the whichies out there recently saw warner bros. invest , said to be in real financial

challenges. building up the businesses is not cheap. you burn through a lot of cash. now we are talking about deal after deal and will there be billion-dollar price tags. the question is whether or not you can afford to be not in the conversation tied to this? whether you pull the trigger, we cannot say for sure. when companies say like disney's are going to go out and do a deal like this, everyone has to think about being at the table. shortryone chasing the form video sites. and the evidence that anyone beyond children visit the website and help the company make money? is. think there when you have millions and millions of people who are consuming the video tom and i cannot just be people under the age of 18 or fit team. last week, disney in the

process of filing maker. be peoplenot just under the age of 18 or 15. big partnerships with well-known people like morgan spurlock. he is making programs for maker. financially this business is figuring itself out. youtube is a huge platform. then you have to try to generate a real, growing profitable business off of the advertising revenue that remains there. clearly the ad box tied to youtube videos are not close to what you get for network television. >> fullscreen is back to bite peter chernin, but also

comcast ventures. can we make the assumption comcast is taking a pass on this ge? >> i do not think we can. if you think about it, all of the big media companies, they will do things like this. case in point, time warner, which we have now reported has shown interest in fullscreen was an early investor in maker. they did not end up buying it. they all kind of learn. you either take a few points, do homework or maybe actually buy something. >> a case of everyone cannot afford to be in it. jon erlichman, thank you. up, hollywood heavyweight, brian grazer, the executive producer of "24." now making a comeback. ♪

>> coming up, regulators may rules on commercial drones used. that has brought out the lobbyists on capitol hill. >> of course it has. plus, brian grazer, his new focus is on the smaller screen. this is " market makers."

streaming on your smart phone, andvision, bloomberg.com, apple tv. we will be right back. ♪

from bloomberg headquarters in new york, this is "market makers." m&a re ism -- there is news - the shares went down the most for whole foods market. onie hyman went investigative shopping trip to see how their prices compare. is it cheaper than its reputation? >> it depends on what you are

talking about. we shopped for a limited basket of items, only eight items and i have seen other pricing servers that put it at a premium. it depends on what you are looking for. we went to the fresh market, we , stop & shop and fairway around paramus, new jersey. when you talk about certain items like milk, pretty much the same across the board. organic bananas, pretty much the same. when you talk about some of the packaged food items, hole. pretty well. -- whole foods does pretty well. $3.65 -- shop and stop the equivalent was quite a bit different. three of these various grocery stores were offering three for five.

there was a promotion of whole foods that made them the cheapest option. you are seeing them competitive in many different ways particularly with their store brands. then you have to talk about the perimeter of the store, the fresh food stuff, the produce, the meet and other types of darien that's were you tend to see the premium. that is where whole. it's about 2/3 of its sales. >> people are shopping at whole foods for packaged goods? >> maybe that's why they have a reputation. asparagus in season right now in this area so you would expect to find local asparagus. whole foods is the only place that had it. it was more expensive. it is not organic asparagus. i don't even know if that exists. but it was one dollar per pound moore and fairway was the other more expensive option. if you want local asparagus, you have to go to farmers market or

you have to go to whole foods. if you want particular things, there are not necessarily as many options. >> the selection seems better in whole foods because the customers tend to prefer diversity. various analysts say that the so-called pure or fresh foods trend we have seen, the mainstreaming of more cooking at home and more fresh fruits -- fresh foods is not been beneficial to whole foods because other competitors are offering these items as well often at a discount. it is -- it has maybe driven traffic to competitors rather than to whole foods itself. i talked to the shoppers in the parking lot and we have a view of their comments. first and foremost, it's always fresh. one is a matter of convenience because i just came from the gym

and it's right next her but i have a lot of organic stuff that other stores don't have. fairway because they have a lot of organic stuff on the price is a really good. if you compare it to whole foods, whole foods has a big selection but it is kind of superexpensive. >> one of the things is people go to multiple places. the whole foods shoppers only go to whole foods. most of the other folks go to multiple markets and they are going more frequently. >> one thing i would say as an thational food shopper, is prices not take into account one important factor which is quality and sourcing. sometimes you want to know where the stuff came from. when it comes to meet in particular, whole foods is particularly good at that and you don't get that information from fairway or stop & shop. i talk and that's when to people, one woman says she

was a raw foods vegan. she goes to whole foods because she gets the quality. another older couple said they shopped there for health reasons , they feel they are willing to pay that premium. the challenge for whole foods has always been and continues to be how many people are willing to pay for that quality. clearly, the quality is better is just a question of what the audience is and who is willing to pay for it. >> they may have tapped out on that group? >> potentially, it is still growing but not as quickly as it has been. >> julie hyman, thank you very much. up, attack of the drones -- lobbyists want to have their say on these unmanned craft if regulators go ahead and change the rules. ♪

oflobbyists are coming out

the woodwork to represent industries from hollywood to real estate and they want to influence new regulations on the way for domestic drones. megan hughes joins us now. tell us about these industries and what is at stake. have seen a huge shift if you take a look at the companies that are lobbying on drones 10 years ago. andsee northrop grumman companies that make drones or had a stake in the defense industry. those of be the companies that would be lobbying and they still are. now you've got all of these commercial interests. the motion picture association, the national association of has been amazon looking at going into delivery with drones, agriculture groups. what we have seen in terms of this shift in lobbying shows the cross section of industry that drones could potentially impact. dronesps lobbied on

between 2012-2013. half of them were not defense industry. it's a huge commercial impact. >> why now? prn though amazon put out a campaign on delivering packages through drones, it has conceded this will not happen in the next year or so. why are companies in a rush to spend the money now? >> right now there are no rules on the books and we are starting to see people use these more and more for commercial purposes. it has been inhabited for many of the bigger industries to make long-term plans and long-term strategy around this without knowing what the rules will be. the faa has supposed to, by the end of this year, have a proposal in place for commercial drone use. that is a proposal so it will still take probably several years until we know exactly what that framework will be. they want to have a hand in shaping that.

industries of the where you see a lot of companies actually ask for regulation. they want to see rules on the books of a know-how to play. otherwise, the business will go overseas. >> is there anyone lobbying against using rules? >> absolutely, otherwise this would be an easy issue. take a look at the agriculture sector -- you have groups that want to use drugs for agriculture and you have manned these planes that dump fertilizer and chemicals on agricultural products, they are concerned about the safety issue. within that industry you have a split and you have privacy concerns him a defense lawyers groups are getting involved and how police are using drones. pilot groups that are concerned about safety and the airspace --

a lot of different issues to be looked at here aside from just the commercial potential. >> thank you so much>> manoming up, secret agent -- producer brian grazer helps to bring back the hits by show "24." ♪

this is "market makers." did you watch the season opener of the new "24?" the executive producer is brian grazer and we sat down with him to talk about jack bauer and whether we will see any more seasons of one of their other shows, "arrested development." >> we will absolutely try to do more episodes of " arrested" and i would like to do more work at netflix but the most eminent would be another season of

"arrested development." >> what about other networks like hulu and amazon? happy with them -- with netflix. i know the people at those different platforms. i do like netflix. i like that they pretty much pioneered the space. they are very artist sensitive people. they seem to be making good choices. "house of cards" is a brilliant show and they continue -- i think they have "aren't is the new black." and "arrested." they understand the thresholds platform orween the netflix itself and the network and content suppliers like producers like myself. i do like working with them. we will see what happens with the other ones. there are so many that are

trying to come to be. >> they are all trying to get into content. is there enough content out there? >> no, that to me is the controversial issue. the talent pool has not actually expanded. the talent pool that predominantly lives in the city of los angeles because that's ever leading export -- it does not really expand. what is interesting is these platforms are expanding and the ones that are succeeding marginally are operating at very high multiples which is kind of interesting. ultimately, they will have to come back to just who actually writes and tells an action the stories. that talent pool has not expanded by five times whereas the platforms -- >> why not? aren't there more talented rightists, artists, and producers? there are more people that

have talent, young people that have talent, then yesterday or a year before yesterday. the only thing that is kind of interesting here is that it is an art form that is a little bit of trial and error. screenplays,iting movie screenplays or television scripts, half hour or an hour or shows the: hbo that don't have commercials -- there is -- that is an actual art form that is beyond just falling out of bed in coming up with an idea. or it's beyond writing a novel. there are genius novelists that have tried to write script and has not really converted. error in trial and process art form that takes refinement. it does not happen overnight and it does not necessarily transfer from being able to be a great journalist and having a 10 page

or a 13 page piece in "the new yorker." it is a different art form. forwardshould we look to in the upcoming 2014 season on fox? >> good question -- it onrts to really kill episodes four and five. five is amazing. >> so i can skip episode 1, 2, and three? >> no, you have to see the first episodes. presumably, the consumer has seen episode one and two and three is great and they get better but five it just explodes in the kind of -- into the kind of soap opera/thriller show that of experience at the height 24. is i'mtionship with it an executive producer but i am

mostly just a fan. it's howard gordon, that whole there --hole group they are really making the show and i am part of it and i love it. when i can, i will turn it into a movie. >> really? that fox you do decide was the right platform rather than the binge tv watching of netflix? "wendyt of all, they own four." -- 24. they were actually loyal to us and we should be loyal to them. "24" got two years of how can ratings and people care about a serialized show? the way the chopped up narrative work and there's a split scene and eight ticking clock in those things became cool were not so cool the first year.

they were very, very cool with us. rupert murdoch himself was very cool to keep the show on the air. we are now into our ninth year essentially. i expecting it will be more years and kiefer and i are bonded together to make a movie out of it. >> there is a lot of name dropping there. i'm not sure i could bear watching another season. i would watch seasons 1-4 and it got repetitive. >> maybe it's how much they've -- it costs to make. even if you take a subset of people and can make the movie cheaper, >> you have to really deliver on a movie, the stakes are higher. >> really? that was the interview with brian grazer, cochairman of imagine entertainment. more "market makers" in a couple of short minutes. ♪

>> that will do it for "market makers." >> thanks for having me. who is on tomorrow?

there is a roving cast of female reporters. >> i have a problem with that but it has been delightful to have you here. it has been a year since jan who paid more than $1 billion to buy tumblr and there were criticisms about that acquisition you will hear from the tumblr founder tomorrow. it is 56 minutes past the hour "on the markets, almost, we are going "on the markets." we are looking at stocks starting the week in the green with the dow trading at an all-time high today. it's time for options where we look at what where -- and where the traders think the market might be heading. joining me is a derivative strategist. the market is higher by what is going on in ukraine where they had the two referendums in the eastern part of the company and equity markets are shrugging it off. what does volatility look like today? >> the most interesting

development over the last week in the options market has been the client in implied volatility measured by vxx and the decline in volatility measured by the vxx. we talked about it last week and at the client not just to lows since december but historical lows. it has been on the floor since option started trading on the vxx in 2004. that means investors are paying the least for exposure to implied volatility over 10 years or so. >> what does that signal to you? is this a buy signal for stocks? >> that's right, the signal could be thatvxx which has an embedded floor since february or so was potentially giving way and what has happened is just that -- we have seen spot vxx come down under the 13 level and if it's of the same that the s&p

has made fresh all-time highs, we think it means several weeks of upside for stocks from here. >> we have also spoken about how there seems to be an enormous convergence of cross asset volatility lower across the board. what is driving that and what are the implications? ofthe broadest measures cross asset come across geography volatility are not just on cisco -- on cyclical lows but all-time lows. some of them go back to 2000. is treasury markets, currencies, there really is no sign of volatility out there. there could be a contrarian read that folks are too complacent. we are of the view that we are about 1.5 years into a low volatility regime not just for u.s. equities but likely across asset classes and that could be sustained for some time. >> what is driving this? you have to keep in mind

there is a high correlation between volatility cycles and underlying economic cycles. even though wet are five years into the u.s. economic expansion that there are several more years of growth to come for the u.s. economy, suppressing financial market volatility over that time. >> you're also looking at hertz which is due out with earnings but they have been delayed? >> that's an interesting story is ar rental broadly sector that has consolidated over the last few years and hertz but dollar -- thrifty. you're left with avis, budget, and enterprise. with this acquisition of dtg, hertz has a new cfo and they are moving their headquarters to florida. there are lots of reasons for that company's missteps.

they did delay the fourth quarter 2013 earnings along with their 10k. >> isn't that worrisome to investors? then they have delayed the reporting of first quarter earnings as well. >> so what's the trade? >> the implied volatility of hertz over time is very narrow. the option market is saying there is not a whole lot of risk. we want to go out to september in hertz and play the upside. we see almost 40% in the stock on the upside. >> we will be "on the markets" in 30 minutes. ♪

flex welcome to putting money -- 40 clip -- >> welcome to "money clip." i'm adam johnson. we have apple and beats, as well as the latest on pfizer. in the world according to richard grant. -- richardts, jams, branson. he talks jets, jams and more. and this property could be yours. and it's not just brick-and-mortar, by the way. it its history.