Transcripts For BLOOMBERG Market Makers 20140207

This victorias secret star balances it with an ad director. I am Erik Schatzker. I am flying solo today. Stephanie ruhle is off, getting a long weekend out of it. Beenobless rate has not this long since october 2 thousand eight. Once again, it is not necessarily a positive. Welcome back. Theome back to figuring out jobs report. Michael mckee is here with the highlights of this mornings data from the labor department. I hope youre not here to tell me this was a good report. I do not believe it. Were going to agree to disagree. It was not a great report but not a terrible report. I would take issue of your characterization of it as that. It is only the establishment number that came in much lower than expected. We did we did see a job and the Unemployment Rate. We see more people getting jobs, 638,000. Whether you believe that are not. A big change in the household survey. We also do not see a big weather if that in this. You have to wonder whether theres something going on in the economy that is just a temporary fact there. See, a lot of jobs created in areas normally affected by the weather. A complicated report but not one terrible overall. Hanging in this there and earnings hang in there, we are about where we were in december and november. That is all well and good. A 63 Participation Rate is not good. Off of thea fraction bottom. Reportsointed out, the are hanging in there. I am trying to channel the average american. Good means improvement. There really was not much improvement here. From thelightly disasters december report. It is a disappointment in that sense. We thought 2014 would be better as he started to move into the year. Instead we are treading water. We are about where we were last fall. When you look at the 12 month average of jobs, we are about where we were in 2011. We are creating jobs, not just just not accelerating. Whether that will change remains to be seen. We thought it was going to. This is where the fed finds itself at this point. They have another jobs report before their next meeting. We will see if they have some better data to make a decision on than this report. I was going to ask you about data dependency in guidance. An Unemployment Rate this low was the just the fed ought to feel good about the labor market. Tot is about the only reason feel good. It doesnt say anything about tapering and whether or not the fed should or shouldnt keep up with its trajectory at the next meeting . When you look at the Unemployment Rate in earnings and hours worked, theres nothing there that would change their mind about the pace up tapering. What they are going to have to do at some point is get rid of 6. 5 . 5 threshold threshold. We are going to hit the threshold very quickly. They have already said that we are going to keep read below long after we hit that level. Why keep the level . It only confuses people. That would be the next policy change i think you would see. Thank you very much. It is a complicated business. Figuring out what the fed is going to do. The top stories from around the world. The apple ceo revealed the Company Bought back or team billion dollars of stocks over the past two weeks. Signal he isk is a really confident in what apple is doing. I hope so. Apple made these purchases after disappointing iphone sales sent stocks falling. Carl icahn has been urging people to take on more debt to buy that more stock eared Mark Zuckerberg has sold almost a fourth of his facebook shares over the past year. He now has about 479 million facebook shares. Facebook trading just off of its alltime high. Number 22 in the billionaires index with a net worth of almost 28 onion dollars. One of the biggest advocates for emerging markets says the worst is not over yet. You can expect a lot more selling in emerging markets because negative sentiment is pretty much in place. He oversees more than 50 billion in investments in developing nations. Matthew seemsa to be going to jail. 79zeroiving a perfect record. The evidence was devastating. It was not strong that to implicate his former boss steve . What happens now . Does the whale really slim free . Lets hear from our panel of experts. Inila had a front row seat the courtroom. Doug burns is a former petrol prosecuted. Bobby it is here. He is now a professor teaching Hedge Fund Investing at columbia university. Welcome to all of you. Lets start with you. You were in the courtroom when the verdict was read. Expression, if any, crossed his face . Blankhad a very dark, look on his face. The same look that has been on his face throughout this entire trial. He has been very hard to read. His wife was sitting behind them. She started sobbing. It was a very sad moment. When the jurors came in, you could see they were very somber. There were looking down at the ground. They were not happy about the news. The guy faces 20 years in prison. Chime in when ever you like. What does this tell us about the likelihood or not that he may some kind of ake plea deal with the prosecutors and avoid some of a prison time . Can you imagine the conversation when the lawyer when they were deciding what course to take . Should i go to trial . The lawyer said let me give you recap. The government is 78 no. The conviction rate in court is 93 . What was he thinking when he decided to roll the dice in a case was that sean evidence . Exceptions. S and the general rule is the government, being somewhat babyish, is you decided to go to trial you have made your bed and now sleep in a. This could be the exception to the rule because of how badly they want to get steve . I would take the other side. The basis that he is a rational trader, there are two things that we be going on. One is he has a free option. He may have something so powerful he has a get out of jail card. If the trial went well he can walk. Need to play his car. If it goes badly, he can still walk because he has some devastating tape of the 20 minute phone call and he walks in and says i am fond of jamaica. I am leaving tomorrow. That is plan a. Plan b is everyone has talked offered himay have a deal. They must have offered him a deal. Lets look at his track record. He falsified his resume that went to 23 federal judges. Hes than 223. He then goes out and they went through his name. He falsified the email that he sent. Know when the government found out about that. It seems relatively late in the game that this harvard issue came up here to the only released it late in the game. Know when they found that out. I can tell you this. Lawyer, when he has falsified the emails, he created a fake rent a Computer Consulting company. He could not take the stand. Semi the bowl had way more credibility than this guy. Bull had way more credibility than this guy. He did not lie to get out of every bad situation. He spent three months per homicide. A superb book. Youing that aside, when look at this guy, the fact is sammy the bull with a highly credible witness. I thought 19 people. This guy had every opportunity and has lied. Comes in and said i spoke to the doctor who gave me negative news about the alzheimers drug then i spoke to steve for 20 minutes and this is exactly what was said. Will juror on this planet believe that in my opinion. By the time they listened to him lying about the transcripts and to get into the mba program. He created a fake friends excel clockwork company. , how good at witness is he after this devastating thing . Changing your name. What name are you going by today . Do you buy the theory . It is a cynical view but theres a lot of cynicism and the story. Does he have any leverage left . He has moreple said leverage right before the trial. Does he have anything left . Change. Lippers does not his leverage depends on the quality of the get out of jail card hes got. The government leverage has picked up. Before he might have said show me evidence on a scale of one to 10. Bases, hisheory leverage has not changed. The government has. Lets assume that he does not have a get out of jail free card. Where does that leave the government . As far as Insider Trading is concerned. It seems like we might be at the end of the line. I think Insider Trading will continue to be a priority for them. As far as steve cohens own firm, i jumping there close to charging any more employees. I know theyre looking at others. They were larger charge him but they have not. It only managed to charge his firm so far. Of the things that puzzles me a little bit is the ease with which sac capital traders and managers have found other gainful employment. , look, ive nothing against them as individuals. Arent they toxic . It was due to such an independent group of people. There were individual teams within this group. It is altering the hedge fund landscape. Are the bestse known names in investing. All of these are teambased structures. You come in. You are the Value Equity Team or what ever. Are in Foreign Exchange if you are going to more and doing the emerging markets stuff, it is not necessarily the same as someone doing biotech stocks or that Team Obviously one heck of a harder time than Somebody Just trading and did not have much to do with it. It will alter how people invest in funds. Back to sheilas point. They were indicted. It is unusual. You cannot put an end. On some level, it telegraphed that they have arty conceded that they do not have a case. I agree. This is the exception to the rule. The government almost always says you went to trial you made your bed. This is the exception. He still holds that card. Hes got nothing. He has the ability to flag i testify about what that conversation was. You do not have to be Sherlock Holmes to figure out the fda report is bad. In i told the other guy. Come on. Ago, steve cohen was considered perhaps the greatest long short equity trader the world had ever seen. Who is he now . Is he the barry bonds of hedge funds . I still think people respect him as a traitor and individual. His firm, the u. S. Postal Lance Armstrong and doping. They are absolutely going to be heard. In the case of gilman, hes 80 something years old. Bothad thing is that for the of them, this will be the first one in their obituary. He did this with an astro. You are right. He has not been convicted of anything. Not forget that. Nobody has charged him with anything and nobody has convicted him. He still has to battle with the sec. Theyre the only ones who leveled any charge against him personally. They fouled a civil case accusing him of failing to supervise his employees. He had been making noises that he would fight the case as it was a very scary case for him. They want to borrow him a bar him from the security business. I think he was holding something to see. Dollar familyion office. Thank you very much. Lonely comeback, bitcoin will make him back him at the coin is plunging again. Why . One of the major currencies halted withdrawals. The riggingvolving of Foreign Exchange rates has gone even further. Robe. Rre twist in this one of the worlds most important Central Banks may have been involved. This is Market Makers. Find all of our interviews live and streaming as well as on demand, apple tv is the place to go. Erik schatzker. The bitcoin world is a flutter. The Biggest Exchange for the virtual currency, japan, says it is halting bitcoin withdrawals. The bitcoin faithful are furious lastple for removing the one from the app store. So furious that this kind of thing that this kind of thing is happening. This is from somebody named ryan. He took his iphone to a rifle range. He blew it to bits. Yes. In an apparent act of bitcoin love. Matt miller is here to talk about this. And iphone hate. Who of us has not wanted to shoot at our iphone for a plethora of reasons . He posted the video on youtube and said he is doing this because apple removed the last Bitcoin Wallet from the app store. What does that mean . Started usingt bitcoin, i was having trouble as change tong block work. That is where i used to store my iphone. A lot of people have very for people who want to transact in bitcoin and have iphones, theres no way to do it now from your phone . Yes. Interesting. I once went out for lunch and intended to pay for my lunch with bitcoin into my iphone battery died. When i got to whole foods, you have to have a working mobile phone. A lot of people have switched over to android because they have a great app. I keep mine on paper. Have a great pie chart showing all of the bitcoin exchanges. Mt. Goxt mountain bloc has the largest share. Areeople who have money stuck there. Theyre not allowing withdrawals. That theyin a release are temporarily halting withdrawals because they have some technical problems. It is necessary to temporarily pause on all withdrawals. Is it writes for cynics like right for cynics like me to throw around terms like bitcon . No. Whenever there is something that happens like silk road and people say theyre using it to , itdrugs and hire hit men doesnt invalidate the coin. These are things that people do with bitcoin. Youre saying they can no longer take money out of the bank. Jpmorgan limited your credit card use after target lost 70 million data. This is my point. Matt miller with the last word. We are going to be right back with Market Makers. Stick around. Withis is Market Makers Erik Schatzker and stephanie ruhle. Good morning. Today. Ie is off what does obamacare made me really mean for the job market . It could cost the economy more than 2 million jobs as people leave jobs they no longer need to get Health Insurance. What is some of the same people become selfemployed . Herewith some thoughts is the the Largest Online freelance exchanges, with us from san francisco. Good morning. The Affordable Care act is still pretty much brandnew at least in its implementation. What kind of an impact will it have on the job market . Thee predict in a few years American Workforce will be 50 made of independent workers. The Affordable Care act is going to simply make it possible for people to venture out and try different career paths that were not available before. X 50 . How many years . By 2020. What percentage of the American Workforce is employed today selfemployed today . About a third. How much of this increase that you predict by 2020 will be as an indirect or direct result of the Affordable Care act . That people have to work knowing that they can get Health Insurance subsidized or unsubsidized by the government . That is a great question. There are many others. Has beenability going on for a few years. One of the other drivers is technology. It is a lot easier for someone today to find work using the internet, going online. It is also a lot easier to get paid to using online marketplaces. It is a lot easier for businesses to connect with talent anywhere with a few mouse clicks. Were seeing in a combination of the infrastructure and technology and health care all contributing to this shift of work and contingent labor online. Workat about the kind of that people will be doing as a result of technology on the one hand and the Affordable Care act on the other . How is the nature going to change . Absolutely. That is another major driver of the shift. A lot of the work is anything you can do in front of the computer, knowledge work. Ranging from Market Research to Creative Work like writing and creating wonderful designs. Analyzing data. All of this is becoming a much bigger piece of our economy. It is naturally easier to do the work from anywhere. Do the workier to anywhere and anytime you want. How much of this work is available . How many of these people legitimately are fulltime employees, fully selfemployed . Of the 10bout a third Million People that are working , about a third are fulltime freelancers. Another third are moonlighted as. They have a fulltime job. They are supplementing their income by taking gigs online. Then there is another third to of other things in life such as retirement or studying or raising children. The are supplementing their income. So far this model is really mimicking what we see naturally happening through the temporary labor market except that it is moving online just like commerce started to move online about 10 years ago. Angst over the kind of jobs at the u. S. Economy is creating. Not enough highpaying jobs. Not enough fulltime jobs. Not enough dots with some form of protection. No form ofre is rejection and self employment. Are there higher wages . See. Me what you are people making more money working from themselves than they might if they went out into the workforce and try to get a fulltime job working for someone else . The data is fascinating. It is counterintuitive. We have been studying trends for many years. In the last year, the average hourly rate for u. S. Workers on a platform on our top form has increased by 4 versus an american wage average for employers increasing only 1. 8 . The average hourly rate on our platform is 33. That is significantly higher than the average rate wage for the u. S. Worker. What is the Business Model they are . Of the 33 and Hourly Earnings that the average person on lance, how much comes your company . Eight and three quarters percent. Why theat hired company . It is a markup model. A freelancer chooses the rate a what to pay. They decide how much money they want to charge the client. We market up by eight and three quarters percent. We add our fee on top of it. The client sees a complete price option for the work, pays us. We keep our share and deliver the payment to our freelancers. Sees is theclient taxes included effectively. Exactly. How would an increase, do you think an increase in the minimum wage effect the job market you are involved in . We see that as a positive. I do not think it will have a direct impact on our market in the sense that our freelancers tend to control their own wage based on their reputation and their perception of supply and demand which is a fascinating way to think about it. Everyone at the real answers use themselves as businesses of one. Bear in the best position to decide how much they want to work in how much they should get paid. A moment when their services are in high demand, they may increase their rates. In a moment when they see a lull they may lower them. It is entirely their decision. Do not think this will impact the type of work that gets done. In general, it is a good thing. Great to have you. If you very much. Lance, onee ceo of e of the largest freelance networks. 2020 half ofs by the u. S. Workforce will be self employed. A big scoop by Bloomberg News we come back. X breaking news for you here. The company that makes go Pro Companies has followed for an ipo. Now that twitter has gone public, you can make an argument around onenversation particular ipo out here on the west coast will be go pro, a company that has grown quickly and has a really cool. Also do story. The guy behind if you has a surfing background and wanted to get out on the market, cameras that take capture all of the crazy extremes that people like to do in a better way. In the early days the expectations were smaller. Lets go to the store and see what we can find to build a better widget that can handle all of the elements. All the things that are hard to capture on camera. When they got it right and theyre able to get it without any a lot on things like r d, this thing really took off. We are talking about a company that is private. They do not share their revenue numbers that might be in a position to be going public with more sales than twitter when it went public. It is also a company i not just see themselves as a maker of of cameras. I see themselves as a media company. You can see all sorts of really doesvideo which art he very well online and on youtube. They partnered with virgin america. They are looking to extend that. Those are some of the things to watch for. There is the news. Thank you very much. Goinglichman, go pro public. Now for a story that is rocking the currency market. Banks under investigation for manipulating some of the most important Foreign Exchange rates. They have the ultimate cover, a central bank. And written notes from a secret meeting in 2012 suggest the bank of england not on the new of the alleged in the relation of these rates but condones it. This is one of the reporters that broke the story. He is with us from london. Lets start with the secret meeting. Tell us about it. Story we publish today talks about a meeting that took place in april 2012. About a dozen of the most senior traders at the worlds biggest banks met up with representatives from the bank of england. It was a regular meeting. There was a discussion about how they trade in how they communicate with each other. The context was this was in the middle of the libor scandal when the worlds biggest banks were being investigated for rigging Interest Rates. The number of traders raised the issue of the fact that they regularly communicate each other with online chat rooms and orders. Our understanding is that the bank of england said they were fairly relaxed about the practice. They tell banks to continue as they were. They said they were not offer any guidance. Most importantly, he just sat on it. They decided not to escalate the matter. Here we are two months later in the midof a huge global investigation. The very centers of the investigation are the practices outlined in the meeting. Which obtains and or traders are most affected by this revelation . Take your pick. The seven largest currency dealers in the world, ibo like citigroup, j. P. Morgan, deutsche suspended always individuals or fired individuals as a result of currency investigations. Citigroup and j. P. Morgan in were part of a chat room that we now know had been given names like the mafia or the cartel. That was the name they gave themselves. What started out of an investigation in london has ray much read internationally. If you look at the traders, six so far in new york. It is a global thing. The bankers and the lawyers whom i have spoken with that are directly or indirectly involved are very concerned. The liborl know, investigation has resulted in several billion dollars of fines already. What is this really is cover for these banks and traders . What if the boe can be shown to have effectively condoned of this practice . As you said, i guess it provides reasonable cover. Is exactlynot know what was discussed in a meeting compared to what practices actually take lays. It is one thing for these guys to say we get on chat rooms and read regularly communicate. Said listen. When we traded at exactly this point in time . That time thene conversation came up in that meeting. I guess the bank of england has a reasonable argument to say we condone certain practices. Maybe we should done that. We did not know the extent of what was going on. Even if the bank of england should have escalated it, it is not mean the behavior of these in the was right with confines of the law. If what they are doing is no advised is now advised to be illegal, the fact that the bank of england did not do anything about it i do not think will help them in the courts. I am, for one, very interested to see how the bank of england response to allegations over this. Thank you very much. A great story from london. When we come back, from the runway to the app store. A victorias secret model talks about her other career. Yes, computer coding. That is next. At homeshe is not writing computer code, she is stretching the catwalk for powerhousesshion like pronto. She is the very real lindsay scott, a model who was working on several different mobile apps. We talked about a few of them. I have two. One is an app for sponsoring ugandan news. Theres also an app for models and actors and other artists to show off their portfolios. Quite how does it work . It allows the user to customize for folio. Portfolio. You can edit the images he could have multiple portfolios and show multiple portfolios for different castings. How do you make money . There is advertising and an inapp upgrade. How do you recognize the reconcile the obvious difference between the two things to do in your life. In one hand you are an object. On the other your clearly somebody who has some brain power to put it to use developing apps. As a model of ever felt like an object. Theres an artistic aspect to what i do. You put on different outfits and you become Different Actors a convey different emotions. There is a creativity involved in that that is similar to the creativity that is involved when im making my apps. Matchmaker is your next. That would be the last thing on earth you need is a matchmaker. Tell us about that. I do not know where your sources are but i like them a lot. Not need thisi do project. It is hard being in new york. Meeting people who are like you. It is very difficult. With the matchmaker , truly,el like you honestly youre having a hard time eating somebody who is like yourself . Im sure youre not looking for a male model who happens to be a computer geek, but really. Youre developing this app out of a sense of personal frustration . Is not just for love. It is also for friendship and business. Say you arent a bar or a business mixer you set your criteria say you are at a bar itlls business mixer tell you if matches are compatible. It is more targeted. It will notify you when there someone in your vicinity. It checks your personality. Peoples the other personality in your area. It will notify use the cynically when this person is a someone that you should be talking to. It is a way to promote reallife social networking and prevent missed connections from happening. It seemed like it would take an extra dinner him out of coding to create this. What went into it . What an extraordinary amount of coding to create this. What would into this . It only took a few months for the first version. It relied heavily on some of the ios 7 new capabilities. I had to research what it was capable of. And incorporate that into my app. And needed to put together an algorithm and a competitor or the algorithm. Servereeded to back end to help support all of it. Did you do all the coding yourself . Yes. Why do you think there are not enough women coding . Theyre trying to attract women. Why do more women not want to code . In our country we have a major issue of making Computer Science excessive bowl. It is only taught one out of every 10 high schools right now. Is a lot of fun. I challenge anyone who does not think it is fun. There is an interface that will allow you to make your own program. It is super important right now. Computer science jobs are growing twice as fast as the average job in our country. The fact that we have so few women and people of color involved is a huge detriment to our society. Our thanks to the model, coder. An olympic medal could be worth more than its weight in gold. It could. We know that olympic athletes get fame and glory by competing in the games, especially if they do well. What about fortune . If you win a medal from certain countries you can get paid big time. Kazakhstan will pay the winners 250,000 even if you and up winning just six plays. Sixth place. It has exam iskazakhstan these days boomtown these days. You could say this is pretty good for a postsoviet country. Love you will pay you about 193,000. The u. S. Is at 25,000. The big payday for u. S. Athletes who win gold in sponsorships. The u. K. , they do not give their athletes and he kind of bonus. They say they believe the drive and commitment required of athletes is motivation. Motivation enough. Other countries that do not pay out, croatia, norway, sweden. Win gold, you just have to bask in the fame and glory. Do you know if the canadians do . They are not on that list. 17,900. U. S. Dollars. That is for the gold medal. Just walk, if you away with the gold medal, most is made up of silver. 525 grams of silver. Worth about 635. Thanks very much. That is todays off the charts. Coming up, the wireless wars. Here with me will be the former ceo of Verizon Wireless. He will be talking about t mobile, sprint, and at t. Stick around. Live from bloomberg headquarters in new york, this is Market Makers. Wars, hundreds of bucks to switch characters, weve never seen competition like this. We are going to talk about it. The former ceo of Verizon Wireless is here. Time is running out for congress. The temporary suspension of the debt ceiling runs out today. They must get their act together to get the government to pay its bills. You may be just a Smartphone App away from getting booze delivered to your front door. Youre watching Market Makers. I am Erik Schatzker. Stephanie ruhle is taking friday off. The government says the economy added just 113,000 jobs in january. This is well short of the forecast by economists. Government hiring fell as well. Implement rate did minutes to fall to 6. 6 . Shares of linkedin went down nine percent. Sales have trailed estimates. This the fifth straight quarter of slowing sales growth. More problems for the Postal Service which lost 5 billion last year. It will default on payment to a retirees fun without government help. There still some time to service. , costs are down. Stephanie is out. I am going to happen have to call in the reserves. He teaches at the business school. It is nice to have you here. I want to begin our conversation by helping people understand just how much has changed in the Telecommunications Industry in the last five to 10 years. You got into it around the time that the biggest change was happening. The breakup of ma bell in 1984. 2007really took fire in and the advent of the iphone. There was a forecast very early on in the industry that there would only be 900,000 customers of wireless products. Now we have far exceeded that. Have isth that we phenomenal. Our expectation is that will begin to continue to grow. This industry has changed so much. There are fewer competitors in the United States. If you look around the world, there are still tons of competitors. Even with the four major competitors we have in our country, and continues to be a very competitive industry. How good is the Business Model in america . Or some of the real pioneers like japan . Onthe market here is based average revenue per customer. Look at the penetration rates in the United States, some would say we are more 100 penetrated. Every person in the United States has a phone or some people have two or three. When we can are you a multidevice guy . My wife and my five kids are. That all goes into the equation of how we determine an attrition. Here in the unit states. We continue to have good growth rates. It is a very good, healthy industry. That theyho complain have to subsidize the purchase of the phone in order to get people to sign up, they should not be complaining . Doing this since 1984. So what . There are still plenty of money to be made. If you look at margins, there are some as high as over 40 . Is there a case to be made that the american wireless ifustry would be better off you had to do what you have to do in europe which is by the phone . I dont think so. It is just a different model. You get to the same and equation. Arguethere are some who that if you have customers pay full price for the handset that is healthier. I go back to the point that this is a healthy industry anyway. You mentioned that there are fewer competitors in this country than there are in other parts of the world. There may be even fewer if one transaction takes place. I am talking about the potential consolidation of sprint and tmobile. At t tried to buy tmobile. Her steve alessi is sitting right inside me. Tmobile has been a target for a long time. Bring us up to speed on exactly where this stands. Ring ourappy to viewers up to speed. Sprint with softbank are making a massive er plush in washington. They want to get consumer advocates on board. They were to get politicians on board. They know the Justice Department does not like the idea of further consolidation. The Justice Department says it will hurt customers. Stoppedice department the deal between at t and tmobile, tmobile has been successful in driving the price war going on. Margins,ok at the tmobile is at 19 . If you look at verizon and at t, they are at 40 or 50 . They are undercutting their competitors. They are successful at it. They have had the most market share gains in the last three quarters. They are being successful. That hard to argue consolidation is good for the consumer. Have you ever seen an executive like the ceo of tmobile . We have plenty of good executives in this industry. Tmobile is very tough. They are doing very well. Is a smallerate base of customers to begin with. Absolutely. For a long time they had been losing subscribers. In this industry, there are ups and downs all the time. The fact that we have tmobile going at a very fast rate, that is nothing new. Largely, they have not changed. There is no up and down on that. On growth from one competitor to another, it changes quarter to quarter. On the margin front, it is very clear. Maybe the market when you think of what it ,akes to run a Wireless Company if you look at at t and verizon, it is costly to run this business. Margins,e running 50 where else is that happening . Tmobile has shaken up the industry. Is the idea of being a celebrity , some people mock him and is he doingte him, any favors for his shareholders. . At the end of the day it is managements job to get the highest price for the stock. Antics and the pricecutting has broughtoing plaudits from the Justice Department. They said this is evidence why no further consolidation is needed. If that is the case, he is but a hammer on the potential combination of sprint and tmobile. That is not good for tmobiles shareholders. I dont agree with that statement. Going back to the history of the industry, we have seen plenty of active growth periods that come with essentially stealing customers or lowering prices to the point that they are not profitable. The key for this industry has that when you want to sell your company, the way to do it is to pile customers on. You let the next guy make money. To that degree he is successful . What you described sounds the what Many Companies in Wireless Industry have done over years and years. We have fallen behind when it comes to our systems. Europe istructure in actually Getting Better after years of decline. Is that a source of strife in the industry . , what has happened in europe theres been a lot of discussion about the strength of the european wireless market. The strongest market is in the United States right here. Catching up, i dont believe that. Up, it is is catching the European Market with us. Do you think the Justice Department will let sprint and tmobile combined . If that happens, how might it the industry . Justicet think this department will allow it. The way this works in the industry is when there are acquisitions made, the Justice Department gets involved and there are requests to shed customers and sell to somebody else where there is a monopoly type market share. I know you will love this said, sprint came in and it is not possible. We need an independent tmobile out there for the consumer sake. It is a competitive it industry competitive industry. Is good for the goose good for the gander . If that was going to reduce competition wouldnt it reduce cap edition now . I have a much different view. At t should have been permitted to purchase tmobile. There is no reason in the world why sprint and tmobile should not be able to get together. I just dont see that. The industry is so strongly competitive. Tmobile independently a striking a price war. They are undercutting and serving the market as being theuncarrier. It seems to be working. Cutting prices is not a longterm strategy. That is a shortterm strategy. You cannot do that forever in this industry. Have to build the indexed infrastructure you need. You should go to washington. Tmobile is being shortchanged while they go to the extent of adding customers at the rate they are. We are going to continue the conversation in just a moment. Very much. It is friday, time to play the yearbook game. This billionaire graduated from high school in miami in 1982. All of our producers are saying you can guess who this is. F you are guessing, tweet me youre watching Market Makers on Bloomberg Television. See our programming live or on demand. I am Erik Schatzker. To americas Great Companies have an innovation problem . Walmart cant bring a more shoppers. Apple is struggling to come up with the new product that wows us like the iphone or the ipad did. Former ceol is the of Verizon Wireless. What is going on here . It is not just those companies. I did say walmart. They have singledigit growth. Exxon mobil has negative growth. Hewlettpackard has negative growth. Microsoft has singledigit growth. These are Great Companies. Great Companies Need to reinvest in themselves through r d and the need to reinvent themselves. I teach this at our Corporate Strategy class. If you look at some companies, classic examples that just missed the market. We talked about kodak. Even think about kodak and the digital camera, they had the First Digital camera in 1975. They did not introduce it. Sony did in 1981. They stuck to analog film. They should have been thinking about how do we reinvent ourselves . What should we be investing in . I Cloud Computing is something that theyre focused on. They are behind the eight ball. Ibm as well. Why is this happening . Is this symptom manic of something bigger or deeper . Is this a more fundamental largestthat americas companies are run . They are too comfortable where they are at any given point in time. You can never become kumble as a corporate executive. You have to looking at what is next. I guarantee you, i sit down with these people and that is what they tell me. They say they are looking to the future but they are paralyzed by uncertainty. I hear that word over and over and over. That is the explanation why they are not ended the cash not spending the cash. Uncertainty should not be where r d spending. Cash is piled up in corporations. We are seeing stock buyback programs. We are uncertain as to what comes next, particularly from a political and regulatory point of view. If you look at things like obamacare and the cost of obamacare. If you look at things like the nlrb or the epa. Just stymied about what comes next. Wouldested that money have a lower rate of return for a shareholder than a Cash Management account. Look at what Interest Rates are today. The best way to invest your money today to take advantage of the shareholder is to buy back stock. Reinvest in the company. You are just reinvesting in your own equity. I would do more r d. The best companies should continue their r d budgets. We have to think a quick commercial break. We will continue in a couple of moments. Denny strigl is a former ceo of verizon while wireless. View really want somebody knowing that much about your drinking habits . You are approaching 26 minutes of the hour, time for on the markets. Expedia stock is surging. Beat analyst estimates handily. It is up 14 . Theyre coming out of the Holiday Travel season, people are into Online Shopping for the next trip. Lincoln is headed in the other direction. Trail the forecast. 9. 6 . Ock is dropped when the comeback, we will continue the conversation with denny strigl. We will talk about washington. It is important when it comes to the Wireless Industry. Will republicans make demands over the debt ceiling today . That is when we go into emergency session to keep the government funded. We are also playing the yearbook game. Miami in thefrom class of 1982. He is not so young any longer. Well be back in just a few minutes on Market Makers. Live from bloomberg headquarters in new york, this is Market Makers. This is Bloomberg Television and i am Erik Schatzker. We are in a state of limbo when it comes to raising the debt ceiling. Republican still cannot decide whether to demand any conditions in exchange for raising the debt ceiling and keeping the governmentfunded. Latest. Ok is with the today is a key day, once it passes we are in emergency measures. They kick in today. The temporary suspension of the debt ceiling is listed today. The treasury will start to use its available twirls tools to extend the deadline. Last week in february is the official deadline. They do not have a lot of fudge factor because it is tax refund season. They do need to reach a deal. There is no real conversation happening. The republicans have not reached an agreement. Let us walk through the mechanics of these emergency measures. Nobody believes that when the secretary of the treasury says there is a last day. Is there a dropdead date . This is the first time where i get a sense from the Treasury Department that they do not have a lot of ability to fudge this. They have been adamant that their best estimate of cash reserves are expiring the last weekend in february. So much change ability because of the refunds going out to taxpayers, it is hard to gauge. Congress should not mess with this. You have the house going on recess. They will be out for two weeks under the current schedule. They have not set any timetable for voting on something to extend the debt ceiling. Nobody wants this fight. They are running out of time it even if they want to you to deal. Is this a legitimate threat . Or is this something that the administration is trying to get the public behind . It seems illogical to me that the government doesnt have enough money. It is still coming in. How real is this . If you listen to the Treasury Department, they have made it clear that this it is the first time we have had this moment in the calendar year. Whethers questioning they are giving bad information. They have the best information. There is a lot of politics involved. Will benefitrats if there is a showdown. They have to get off the table. The hard thing for john boehner is to get something done that appeals somewhat to his republican conference. There are some people who wont vote for anything at all. How does he get this done and save some face for republicans . I decide to ask denny a question. You know Corporate America pretty well. Verizon the ceo of wireless. Reflect the view of other Corporate Leaders . Is what we hear from the government is this believable . That the government financing has become politicized . My senses and several people that i talk to is that there is a lot of blessing going on. That is what we have had for five years of this administration. We have had our ups and downs. It always seems to be that somebody is trying to put pressure on the public to put pressure on politicians. To me that does not make a lot of sense. I am of the mind that we are seeing too much blessing. I would to see some honesty out of washington. I dont think we will see that anytime soon. In, a me just weigh letter came from the Business Roundtable today. Congress said the Business Community does care about this. They want it taken care of sooner rather than later. Ceos are weighing in for the first time. Nobody really sees this turning into a crisis and nobody wanted to be a crisis. They have to get it done and it gets harder as the days go on. I would like to see this off the table for a change. That is peter cook. Beny strigl is going to staying with us. I dont know if i can give it to them. We will be talking about good hooch. Shioned booch youre watching Market Makers. Had food delivered to your door from grub hub . Is inactive let you order booze for delivery. He is the founder and ceo and he is with us. Idea. Ms like an obvious nobody else had it, what gave you the idea to do it . It was a bit of a fascination. Technologyde lifestyle . E in how do you bring mobile to this industry . Denny strigl this makes a lot of sense. You can go into a lot of other industries. This is a big opportunity to bring a consumer mobile lifestyle to the liquor store experience. We are pretty focused right here. Before we talk about the business opportunity, what is it that you do . What is the blues come from and how quickly can i get it . You will download the app and set your location. Orderou checkout, the gets sent to a local liquor store that does the delivery for us. Youll get your order in 20 to 40 minutes. It could be as little as five to 10 minutes. It depends on how close you are. That is amazing. What about the range of selection . The liquor store by my location, they have some booze. But somebody looking for a notle of old granddad may get it from my liquor store. Becoming more intelligent drinkers. We are trying to widen the roddick product depth. Processing oury self. What is your profit equation . How you make money . Where does the money come from . We take a license fee from our retailers. This is about bringing stores tools to be successful. We work with our partners in boston and new york. Do you have to show them that you are generating a certain amount of volume . Without a doubt. We are working together and we are partners in this. That your thought here your customers are going to bring new customers by wordofmouth . Prettyall delivery is novel and people like to tell their friends. We see incredible growth on social media for us. My twitter handle is denny. Trigdrizly getsve order food and it delivered to my front door, is this a similar . We see ourselves as amazon for alcohol. You not worry about how they get it to you. It is the same with us. We will get it to you. You do not have to worry about how it gets there. Warded the name come from . It was a late night. We said why doesnt Alcohol Delivery happened from your smart phone . You are in boston and new york. The citys you decide you want to be in . To expand,e starting we have to figure out what the right cities are. Were looking at demographic profiles. There is a lot of time and effort that goes into different demos and factors of the population density. You wouldve the number of Liquor Stores in an area and make the model profitable for our stores. Is there part of new york city where it will not work . Right now in manhattan, from 100th street down, you can have drizly delivered to you. How soon . Within the next four weeks you will see us in brooklyn. How many boys . Employees . We have about 10 people and we are growing towards 20. Thank you for coming. Drizlydrizly he is the founder and ceo of, boost your front door. Do not go away. This has been a great hour and a great way to end the week. Denny strigl is the former ceo of Verizon Wireless. I want to talk to you about the internet of everything. Do a poor job of explaining the world of connected devices. The vision is real. If it comes to pass, it changes everything. Lettuce thing about this. There are projections that i have read that there will be 30 billion connections to the internet by the end of this decade. Think about that. They was just with us nick was just with us. Here is the issue that i have with the internet of things. But we are talking about is a sensor that is paste placed placed on a thing. It becomes internet aware. It can be used for anything from the number of cars that go buy a certain spot in the road of which is great for 70 was to put in a billboard. You know what that might be worth. We had talked so many years ago about the machine to machine connections. This is all part of that. The key to the success of the internet of things will be the price of that sensor and the cost of the connection to the cloud. Unless those costs are brought down significantly, it is going to be a tough go in the short term. Would you say the cost of connected to the internet, Internet Penetration in this country is pretty high. Korea ities like south is almost 100 . White is a connection cost need to drop . Why does connection cost need to drop . If i want my french connected to the internet of things, which i dont, i can do that already. You can, but it is at a cost. The you think about Wireless Network today, we think in terms of minutes of use. Now we are getting more to the data and bandwidth, that is a witty to measure. That is a different pricing scheme than anything the industry is used to. Is a huge opportunity for companies that make devices. It is not a huge opportunity for a company like verizon. They cannot charge what they want for data connection. It is all or nothing, it is onesizefitsall. I think you will see that changing. If you look at the Companies Like at t, verizon, sprint, the fact of the matter is that model is changing. You will see that there is some competitive prices that will enable the internet of things to grow. The other side of the equation is the cost of the chip. 30 billion of these things is a phenomenal number. We used to think about it in terms of all open your garage door or turning the tv off. It is so much more today than what we originally thought about it. Everything from keeping inventory over that little chip annoyed when a certain part is needed to be ordered. Those of the kinds of applications that we have in the future. And will be fascinating when it comes. Denny strigl is the former ceo of Verizon Wireless. It is great to have you here. It is friday and time to play the yearbook game. We have shown you this photograph of a billionaire who graduated from high school in miami in 1982. We will help to give you a couple of hints. He has less hair now. E mentioned his company it is a big one. It is time to reveal the yearbook game. Is jeff bezos. He is the ceo of amazon. Baby, it in the eyes, is only eyes. I guess so. On monday, stephanie will be back talking to the ceo of one of the worlds biggest drug makers. They sell to drugs for multiple sclerosis. I will see you guys on february the 18th. It is 56 minutes past the hour, it is time for on the markets. We are diving into derivatives. Bauer. Me is scott we are seeing some action. Et us talk about the s p what do you see here . We are seeing volatility get hammered. Equity is across the board. 178. E trading at if you look at that as 181 level , bigtime resistance. Points,two and a half if you look at the big picture you can see another 20 to 25 points to the upside. There is major resistance up there. I would expect a continuation to go up. We will sue the market go up a little bit. If resistance is at 181, are these averages . You hit it spot on. The paper flow is coming from the upside. We have seen volatility get hit so much so it becomes that much cheaper. We noticed that options and cisco are very active. Just looking back on the history bit, cisco moves quite a after its last earnings report. It dropped 11 last time. What are the options telling you . Earnings do not come out until tuesday or wednesday of next week. We are seeing a seven percent move. If you look at the implied volatility, it is increasing. That tells me that premium is going to get more expensive going into earnings. The market will inspire a builtin move. That would be a good eight or nine percent move going to earnings. Upside . To the this is a stock that could swing in another direction . It does not matter. If we look at that move, it doubts off 2170. Seven percent to the downside puts it below that seven percent to the upside. I will tell you that paper is buying some upside. Let us get to a trade. Tell us what youre looking at. Market has been gyrating all over the place, fixes like the same thing it. It is trading at 15 a half. Jobs report is out. Earnings are out. Things have calmed down. By march 16, i want to straddle for three dollars. I can profit one of three ways. I have to leave it there. Thank you so much. We will be on the markets again in 30 minutes. Welcome to lunch money, where we tie together the best stories, interviews, and video in business news. I am adam johnson. Take a look at the menu today. Hiring, but the question is are they doing it fast enough . Movies are all about the money it. Lego has plenty of and Insider Trading. You could send prosecutors after the big fish, you know that if, steve cohen. Andy pok chopra and deep ak