Transcripts For BLOOMBERG Market Makers 20140213

Tell us to talk to us. It is snowing up and down the east coast today. After two months of record cold snap, there are problems keeping up with the demand of salt. Welcome to Market Makers. K is off this week in colorado. Scarlet fu is helping me out. Good morning, you talked about comcast and time warner. The deal is more than 45 billion. Christina has been talking to executives and studying the fine print. Give us the overview. Pulled a shrewd move. It was talking to charter about and in thenturer middle of everything, it went around everyone and negotiated a deal on its own with time warner. It is the price the time warner wanted, 1. 60 per share. It becomes a matter of selling it to shareholders. Did that today on the call with analysts and its a big price. When you look at how historically these these stocks have traded, this is a phenomenal price and could spur some further consolidation. We are looking at some of the smaller players now that charter is left way behind. This is a long time coming. Time warner cable and charter were flirting for about eight months before anything happened and then comcast swoops in and takes everything away. Is there any indication that this will run up against any trouble from the department of justice . Of course, the government will review this case. They will take a look at the business. If you actually look at comcast business and time warners business, there is very little overlap in the markets. There is actually no overlap in their business. It will be hard for the justices of the fcc to find issue with that. They will find that comcast will be a huge player out there wont have a lot of leverage with local programmers. And National Programs that on the contact and justice may not like that they will dictate content but not pricing. Comcast will argue that they have contact they have never tried were before. They will make the case that they are not as big as they seem on paper. Buthat story is complicated why did Time Warner Cable selwyn been losing subscribers the cable players have to get bigger in order to stay in business. People are cutting the cord and over for them to be able to push back on costs especially programming, they have to get bigger and bigger on the pipe that is what really would jumbo loan has been talking about. That is hazel play that the Cable Companies have to write. Other companies will have to do something to get the leverage of programmers. Charter and cablevision are presumably scrambling right now. Iq. Thank you. Joining me on the phone is kris morandi at gamco. And 3. 5bout three million shares of comcast and Time Warner Cable. He knows what he is talking about. Deal. Talk about this the price is 159 per share. If you look at where there are trading now, it is only about 140 five dollars. Does that mean investors are worried the deal wont go through . There is clearly some settling that needs to happen but im not sure thats what it means. Andwn both Companies Investors might want to lighten up on one. We own all these players and this is a value servicing event so we are happy. Are you concerned that the government will say this smells too much like a monopoly . Fcc and the doj, their job is to scrutinize these deals and they will take their pound of flesh. Ultimately, i think the deal will go through. Lets talk about john malone. You have talked about him is the king of media deals. Was he left out in the cold here . He is probably outsmarting us all. Hes got an investment charter through liberty media. Charter did not have to do this deal. Pattern, a good growth one of the base best best managers in tom rutledge. I would expect them to participate in additional consolidation, perhaps picking up the markets that comcast has. Comcast t that they top comcast . They have the capacity to do it. Especially if they include a significant cash component. It would probably face less regulatory scrutiny than comcast would. It is pointless to compete with comcast given the relative sizes. I would not expect them to overbid but you can never count them out. What markets would they divest in the deal . In new york, we are hating life stock with time warner. You wait and time warner Customer Service hold forever. Happy because be of comcast retains that market, you will have the opportunity to participate and they will allow on their other services to improve. I presume that comcast will want to hold on to new york and l. A. , the number one and two largest advertising markets in the u. S. But i dont know. Affect with john malone is trying to do with syria . The market is looking at syrians and saying there is less pressure on liberty to sweeten their stock deal for syria. I ultimately think they will go through with it because there are other than of its longterm to bringing in syria. Theres much pressure on them to sweeten. Does this empower comcast to charge more . How much more power does comcast get as far as the power they programming cost is one of the synergies but it is small. Management downplayed that him a call. 11 millione how subscribers makes to comcast. I dont think thats a big part of the deal. Nobody is crying for the programmers. Cbs who has been one of the vocal, reported last night they editor for quarter. A dealdont think like this hurts them . I dont think its necessarily good for them but comcast happens to own one of the broadcast networks and one of the largest asian groups at nbc. Was will have some constraints on them in dealing with programmers. They are living under some with the consent decree. Im not sure the market changes all that mark all that much for programmers. This is in the hands of the supreme court. I dont think this has much impact in what happens with aerio. It is in and of itself. We will have to see if its a Legal Service and the on that, we will sue if congress decides to do because congress has the to effectively outlaw that service. Its not clear that if it were legal that companies could essentially offer and aeriotype service. You are basically long every entity in this deal. What is your ultimate outcome . What would you like to see happen. . Consolidation would be good for the distributors. When you talk about competing against large multinationals new company the would probably be better. Thank you for being with us. What are you wearing . In this cold weather . Suit3. In my its business as usual here. No one is exciting me. Thank you so much for giving us the latest on time warner and comcast. What about antitrust issues with this deal . In a moment we will check in with peter cook and see what the buzz is in dcn shares of cisco open lower after Sales Forecast missed some estimates in spite of a good quarter. We will be with the cisco ceo, John Chambers next right here on hope boat Market Makers, on bloomberg television, streaming on your phone, your tablet, and bloomberg. Com. Welcome back. Worlds biggest maker of Network Routers and switchers and forecast yesterday that sales for the next quarter may not he up to par. The company is seeing increased competition and continued to the police and selling products in emerging markets. Here to talk about these challenges is the ceo John Chambers who joins us from Company Headquarters in san jose, california. I want to congratulate you. The stock is not necessarily feeling it that we need to take a moment and acknowledge you had a good quarter. Yes, we did versus expectations. It played out exactly as we said it would. Revenues were down 10 and we were down 7. 8 rate earnings we returned 4. 9 billion to our shareholders, the most we have ever done and raised the dividend. Each of our orders and these product categories grew faster than revenues. We came in line exactly with what the consensus was for this next quarter. The number of people who raised estimates and lowered estimates were equal. We are coming back like we said we would. Can we talk about the Way Investors approach Tech Companies . Companies that have been around for decades, does not seem that investors want to give you a chance to have a second or third chapter. They are so winters by new technology that is not shown revenue or proved itself. Is that frustrating . I dont think its frustrating. It is stimulatings to say how you navigate about this. Many of our peers have become irrelevant and what cisco has done is reinvent ourselves for the fifth time. We are moving from selling boxes to selling solutions to our customers. In the u. S. Market, we grew at 13 yearoveryear. Which is need to do that on a global basis. Sell us toho help us sell these architectures where you can buy these products, like worldwide technologies, they grew with us 30 last year. Our strategy is working and we are exiting well and watches not off each quarter doing exactly what we said we would do or better. When do you expect to return to growth . We said we would watch orders in q4 q1 in terms of orders. We will be very conservative in our backlog and continue to add to it. Continue. Can we talk about im sorry, your turn. Let me talk about china. You look at what occurred in emerging markets last quarter, they were down 12 . When we set emerging markets moved down six months ago come if they would have gone negative on emerging markets, they would have made a lot of money and everyone in the industry said we are ended good indicator. We are a good indicator. There was a financial problem in 2007. They said the u. S. Markets would go up 2012. We sold them are we saw emerging markets improved last quarter. It is too early to call it a trend and we are not facing our guidance on emerging markets. China is unique to cisco, slow but steady progress there. I know the Chinese Market very well. Its one of the few vices were i am patient. The future. Bout you said you think the internet 19hings could be worth trillion. That is a lot of coffee machines and thermostats. That number seems high to me. What do you think is really on the horizon . I think it will be better than that. Year were the Tipping Point will occur in the internet of everything. It will empower us to become the number one i. T. Company. We have been focused on this for six years. At the consumer electronic show a couple of months ago and the World Economic forum last month in davos, it was the Top Technology project. In the retail space, it is 1. 5 trillion in profit. Most retailers get that. Many basicg how companies are saying i will be a technology company. Israel is the First Digital country so this is a trend we are leading an amateur power our growth for the next decade and we are positioned well for that 19 trillion in profits. In five years, how much of your business will be tied to the internet of things and how . Think you will see perhaps even the majority of our business tied to the internet of things. It requires what we call architectures, putting our product together to achieve Business Results in a quicker time frame at dramatically lower operating expenses. The big trend in the industry like cloud and Data Center Evolution where we are that number one infrastructure player, the big trend in the mobile side, we are the number one wireless player. The biggest trend in terms of security where we try to become the number one security player coming together, this will account for the transition. I think it could make the difference in cisco being number one in i. T. The ability to transform these is us movingrofit with products integrated together and consultancy integrated together and we are wellpositioned to be come our trust the trusted advisor for our customers. When you say transition, i think retirement. You have a trip to tahiti planned anytime soon . You will hear from us about our ceo succession planning when we announce that. I look forward to talking to you a number of times in the future and perhaps of the right time, share it with you. Thank you so much. I know the stock is not feeling it but you feel pretty good about that quarter. John chambers was asked to deliver and thats what he did. When we come back, more on our big story, comcast agreeing to buy Time Warner Cable and will the government raise antitrust issues. You are watching Market Makers, on bloomberg television, streaming on your phone, your tablet, and bloomberg. Com. We are approaching 26 minutes past the hour u. S. Stocks opened lower undisciplined Economic Data, jobless claims rose in retail sales unexpectedly fell in january. The indexes have been steadily paring their losses. The nasdaq is out of the red and now positive. Indexes, we are looking at most Industry Groups losing on the day. Are off by half of one percent and utilities are higher. Treasuriesstocks, are up. The u. S. Government will be auctioning 16 billion of 30 year notes later today. The british pound is stronger. It is the firmest versus the dollar since may of 2011. The chief economist of bank of england says Interest Rates will rise within two years. Oil prices are coming off a little bit by 1 4 of one percent but still above 100 per barrel. Data from the International Energy agency shows that Oil Inventories in advanced economies tumbled in the Fourth Quarter by the most since 1999 because of robust demand in the u. S. And other developed nations. Companies,individual whole foods is falling this morning, down by more than eight percent. It lowered its fullyear forecast as growth slowed because of increased competition not only from outside companies but also whole foodsnew stores are capitalizing are cannibalizing sales from other stores. We will be right back with on the markets in 30 minutes. Welcome back. The number one and number two Cable Companies in the country want to combine forces. We need to find out if washington will stand in the way of comcast time warner. Peter cook has more on that part of the story. Who has to sign off on this and what are the chances they will . You have three regulatory agencies the department of justice, the federal trade commission, and the federal communications commission. They have some say in the matter. The fcc big test is if this is in the Public Interest are i. Thatense i am getting is they expect this to ultimately go through despite the size. It will get a lot of scrutiny but these Companies Might have to give up a few things. Comcast might have to give up a few things to get the government green light. In terms of competition, they will be take but they dont directly compete in any of the markets now and thats a big factor for the government, particularly for the department of justice. They might be able to improve Pricing Power for customers. They might have more control over the programmers and those are two things in their favor. The big issue here is that you number twoone and getting together in the government will look at that and ask for a lot in return. Will they ask for so much that they make this deal less attractive to comcast . The fcc is expecting a pound of flesh so what do they want . We already know that comcast is willing to give up 3 million of time warner customers in order to stay at that the Million Dollar mark in terms of tv eyeballs. That is the magic number in the industry. Its about a third of the market. They dont want a cable operator to be bigger than that. The other thing they suggested is a commitment to Network Neutrality to not discriminate against content flowing over their pipes into peoples homes. That has been a big issue in washington. Its a commandment they made when they took over nbc. They may have to model that same agreement they did with nbc in this deal. They may have to surpass this if they want the government blessing. That is a test whether they ask for so much that they make this less attractive to comcast. There is a senior comcast executive at the state dinner the other night, what does that tell us . Coincidence . Maybe, who knows . Even before the state dinner, comcast and time warner still have a lot of friends in the city comcast is a very powerful player in washington. Brian roberts spent time with the president and washington and on Marthas Vineyard as well. He is the ceo of comcast and the companies worry active across the country. They give lots of contributions to democrats and republicans. You look at the top five recipients of money from comcast in washington in terms of lawmakers and its a whos who of congressional leaders in both parties as well as leaders on telecommunications issues. They have given to a lot of folks here who are very powerful. Those connections will help comcast. Its good to have friends in high places. Thank you, peter cook. I want to bring in the founder and managing art and are of Capital Advisors who specializes in media and digital properties. This deal was so they that you made it here in the snow and i heard this man dug out his taxicab, is that true . We got stuck so i had to help out. You really did . New yorkers do that. This time Warner Comcast deal you said it they get enough and i will make my way to bloomberg brief why is this a big deal . Its a huge deal. The landscape is defined by these kind of transactions and there is a whole bunch of things between programmers access to the internet. This will require a very heavy review of where power sits between distributors, programmers, and the web so it is very interesting. If the government does not mind a monopoly because it is not affecting customers, it is potentially going to affect content producers. The government does not care about that . I think they will look closely at what the increase comcast was always a very powerful company. It bought at t broadband and became a large player. Just because you have power does not mean you misuse it. They have been a good Corporate Citizen for the most part. Its fair to say that if you look at these two fires, it was time warner who through cbs off the air and also has been more aggressive with smaller or grandmas, not comcast. The question is how they measure market power. The government usually get that wrong. The market will look at the concept of being worried about one third of the country is the wrong measurement. What is the right measurement . In manhattan, how many people can you buy cable from . Market power has to be looked at on a market by market basis. I think they will look at that there will bend lots of scrutiny of the concept of how much is too much power and i think programmers are the ones who are the most nervous. Not espn and cbs but who could get hurt . Even them. Cbs was off the day off the air for how many days . You cannot he is successful programmer not have a relationship with comcast and that is more so after this transaction. How they manage that relationship with the programmers is really very important. Its probably where the greatest amount of fertility will be. Do you think charter time warner would have been a better deal . Who knows . You are combining businesses which do the same thing. Theyre both very well run and charter has excellent management. The real proof of this will be how many accommodations they have to make to the government. The government will ask all the wrong questions. Why . By nature, government looks for answering questions as simple soundbites and this is not simple. And needs to be done carefully on a market by market basis. This is no different from the government and derivatives regulations. In the conversation among television station owners, the definition of a Television Market is the four or five licensed tv stations. There are 100 other broadcasters that dont go into the definition of market power on a broadcast level. Governments tend to ask questions about where the action is. Do they not know how important bravo is . In new york and l. A. , people say the future is not about cable. People not have cable anymore. When you own a home, and you put cable and it still . You walk into a house and you get an offering to buy telephone, cable and internet and someone is signing up for those that great i think there will be an increasingly large number of young people who access their video maybe not sitting at the television but they are still watching television. This argument is a little overplayed. Lets talk about john malone. On the surface, one would say he lost but did he . He was not willing to pay anywhere near this. This is a pretty big defeat for charter. You are number four before. There were a couple of dogs log were were bigger and the big dog just got bigger. How you can make up that ground we may well see charter and other competitors in the cable arena wanting some accommodations and wanting to buy certain assets and that may go into the mix of the government scrutiny. You think that will be a number of asset sales . If you look at every large combination of does this is like this, Even American Airlines buying u. S. Air, the government has to look to grab some piece of this. Im not sure they ever do the right thing but there will be marketsthat like cable with pieces that are sold as accommodations. Action has to be in Internet Access where this is the largest source of access in the country. They are combining the number one and number four. Andhe issues of web access fair access particularly for independent programmers who have no power in this game, you could wake up and if you are a tiny programmer, you could have a great Single Channel like bloomberg. That negotiation with a jim boeheim of gets with a behemoth gets harder. Do you think the government is not balloting this and if so, what should they ask for a consideration . Besides moving bloomberg to channel for. I think there will be a fleet of wellpaid lobbyists in forington defining the ask different constituencies. Some will be ethnically related and there will be small programmers and there will be religious groups, all caps of people that come to the party saying we need this in order to be supportive of the transaction. I think it will be a large and long and arduous ride to get to the end of that. Is there a chance the deal will not go through . They are very bright areas where they will have to make some accommodations. They clearly took the step because they want to define the conversation and did not want to be on the outside. They will find a way to get it done. Thank you so much for joining us. Cab driver, your and our viewers thank you. John chachas, founder and managing partner of methuselah capital. Back, a power play in rome. The Prime Minister tries to keep his government from collapsing. We will have that next right here on Market Makers. The Italian Government is on the brink of collapse once again with a power struggle within the ruling party that could lead to the Prime Ministers ouster as early as this week. Hans nichols is in rome with the latest. The leaders of the Italian Democratic Party are speaking now. What are we looking for to happen today or tomorrow . We are looking for it to be oafish. To be oafish oh. The mayor of florence is in charge to be official. He is not the Prime Minister. Just done iss thank letta for his service which is a clear indication that this government under letta will collapse in a longer be the governing party. Can they form a government without having new elections . Can they simply swap out the leaders at the top . That is clearly whatrenzi wants to do, reformatting liquor pace. At a quicker pace. Form his new government and form a government . Does he go to the president of italy and come together to bring the coalitions together and say the onus is upon you to form a government . There has been a great deal of uncertainty are out this morning. There is more clarity now. There was one local news report that says letta has resigned and we are working on confirming that. Right now, we have the leader of the party who is not the Prime Minister saying that the current party, the current governing Prime Minister is no longer Prime Minister. He wants to start a new chapter in some were surprised that enrico letta lettas government lasted as long as it did. How will this affect their Austerity Campaign . Is a lifetimen in a tie and politics. The reforms that have been inaugurated, they were initially on astarte measures they were never really put into place because berlusconi reald some of them back with a property tax. Letta is a pretty fierce in fighter. He has a challenge from within his party. It looks like he has lost it. It looks like letta will no longer be Prime Minister. When not sure quick how quickly that will happen but as far as the overall austerity measures, they both want to have an Economic Program that gets cap the gets growth going in italy. We will get gdp out of italy tomorrow. This is an economy that is very much struggling with unemployment at 12 and youth unemployment at 40 and their debt to gdp ratio is second only to grace. You were the White House Correspondent for years. How does the political divide in italy compare with the partisanship and divided government you saw in washington . Only compare neoclassical architecture here versus neoclassical in washington. They are simply two different to compare. With the Coalition System here, you dont have the power of the presidency. You have governing coalitions a veryme minister who is weak Prime Minister, not a lot of centralized power. For whoever the Prime Minister is is marshaling his minister together and getting them to do the same thing. It makes the american presidency seem imperial by comparison. Its a much more consensus driven. And slower. Hans nichols, thank you for joining us from rome this morning. Highway departments cannot get enough salt to get the eyes off the road and we will tell you why, next. Welcome back. There you have it, a live shot of midtown manhattan where winter storms have been pummeling us him and not just here but from georgia to maine. Highway departments have been struggling to get the salt they need to keep the roads say. A roseined by , explain the problem. We like to make light of the issues they face in atlanta. Serious business. The two issues you are getting at our there is a lot of snow and there is a bottleneck for the delivery of salt. Looking at the volume of snow, we have had about double the number of snow events that we usually have. We had 81 so far this season. Typically, you have about 45. Why cant they just deliver it . Whereyou look at a map of the salt mines are in this country, you realize that while there are a lot of salt mines, they are in concentrated places. You got three in kansas, one in texas, one in louisiana and if you up the new york state for it the big one that looks like the full moon is in ontario. That is the largest producer in north america of salt, accounting for about 45 . It can understand why atlanta is having a tough time. There are no white dots around atlanta. We have plenty of salt but we just cant get it there. Lori roman is the president of the Salt Institute and said where do we stand . Its a bottleneck so when will cities know they can get it . They can get it if they pay up. Welcome to america. Typically, salt contracts are negotiated by municipalities in august. Typically, there is an escalation clause of 50 . If you think you will need one million tons in the u. S. , we consume 30 million tons over the course of the year. If you need one million tons, you buy that and there is another 500. If you go through that, you have to pay the market price and thats the issue because we have double the snow. They will get it but they will pay up, in some cases, twice as much. You end up trucking it in rather than bringing it i a barge. We have the salt and the plows in new york city but down on the main streets of tribeca, there are no plows. Thats why i live on the upper east side. Adam johnson, thank you so much. This guy loves tractors and trains. Guy stuff. I will smoke a cigar in the snow later. Movie . Ou see the lego i didnt. Margarita with salt please. Its approaching 56 pass the error and i means its time for bloomberg to take you on the markets. Thee are now looking at major indices positive right now. They have a race there earlier losses. There we go you have the s p 500 up by almost two points. The nasdaq is the best performer of the group. It was pretty split earlier as far as Industry Groups within the s p 500. If you look at whos leading the way, Telecom Services companies are getting the most bump followed by Technology Companies and Industrial Companies are still on the downside. They look at how the s p 500 has done over the last two days, we had a slightly lower day yesterday and opened lower this morning on the back of disappointing Economic Data retail sales fell unexpectedly in january and there was an increase in jobless claims last week. You want to see that number move down. We are pretty much where we were in early trading yesterday. Not much of a change over two days. If you look at some of the individual companies, whole foods is a big decliner in trading, off by 7. 6 for the Quarterly Earnings last quarter disappointed and the outlook for the full year was also a little bit light. It is facing increased competition from outside vendors and the newors stores they open cannibalizes sales from existing stores. We will continue to talk about comcast and Time Warner Cable when we come back. Live from bloomberg headquarters in new york, this is Market Makers take Erik Schatzker and stephanie ruhle. Comcast agrees to buy Time Warner Cable for 45 billion trade we will look at what this means for a big media company. Obama jump starts the debate over the minimum wage by raising it for government contractors. Will this have impact on what congress does . Manufacturing in america will be cheaper in the next few years. We will tell you why. Welcome to Market Makers. Im stephanie ruhle. Erik schatzker is off this week. I am joined by scarlet fu while erik is out in the snow. He did not have to go very far for that. Lucky you and me, we have scarlet. It is all anyone is talking about the ultimate bundle. They charge the cable providers to carry their single signals. A bigger comcast would force networks to set lower fees. An analyst at rbc capital and ouris joining us, senior west coast correspondent Jon Erlichman in los angeles is smirking. Explain how these fees work and what may change here. This has become a big business, a wonderful business for these Media Companies which in the past were largely tied to advertising. Cable, of the growth of this other business basically materialized where the Cable Companies would end up paying those small Cable Companies some money to be carried by the Cable Company. That became their business model. Then the broadcast networks over time said, we could be doing the same thing because we have a lot of people watching our programming. We spend a lot of money on it and so we want to get paid for it. This has become this amazing revenue stream for them. When they go into the court of public opinion, they generally win. And Time Warner Cable having their blackout fight last year. Few people have sympathy for the Cable Companies, so the content players are able to get more and more of this revenue from retransmission fees. Now they have to go back and talk about how this affects them. Cannot play comcast on Time Warner Cable anymore. I dont know that it makes a huge difference for the biggest layers like his man fox, who get paid players like disney and fox, who get paid a lot. David, now that we have Time Warner Cable and comcast as an entity, thats a different kind of beast entirely. Comcast is always been different because it has the content to go along with the pipes. Why havent we seen more deals like that . Vertical integration between content and distribution . A decadehrough almost of exactly the opposite. You had media conglomerates simplifying their Corporate Structure and business lines and returning capital to shareholders. Cnbccomcast deal was an anomaly when it happened and i would not expect to see vertical integration between distribution and content. What is generating returns for shareholders is big capital returns and sticking to your knitting on your core businesses. For, didtter question the distributors want to hedge themselves by owning more content, as opposed to the content guys wanting to hedge themselves by owning more distribution or the reasons john was pointing out before. For the reasons john was pointing out before. There are so Many Networks out there, and people only watch a few networks. Could we see some of those single networks get acquired . Perception that most people only watch 15 or 20 channels, even though we all have 200 of them. The 15 to 20 channels are different for all of us. And those channels can exist in a bundle, but its very difficult for any of them to exist on all a card basis. Ala carte basis. The question in connection with is, when you have a behemoth like Time Warner Cablecomcast, will that put pressure on the smaller, independent layers players . We all had to breathe a sigh of ief knowing that comcast it is probably as aligned with the media owners as you can get for a distributor has its in the Media Business here in its the owner in thet rsn country. Thats a hot point of contention. Gradere married to that generally they are more aligned with the content layers players. That makes comcast a different kind of animal. You cover the Hollywood Companies and studios. The community went to bed last night digesting this big deal. What has the reaction been . What is someone like bob iger at disney thinking . We spoke to him and asked him this question. What you think about charter and Time Warner Cable getting together . They will be cautious in what they said. His comment at the time was, is not going to change will this be the 800 pound gorilla . Cant live people without espn. In my house weve got to have disney junior. To 10 channels will be different for everybody. Somey has, compared to players, at least three or four that will be in most peoples group. You are the less desired channels, you have to be thinking about the kind of leverage you have got. Were going to play this game for the next few years where the strongest players and content can continue to go back to the paid tv players and say, we want more money. The paid tv players probably continue to lose and your cable bill goes up. Everybody has to think about what will happen at that point. They be the traditional system blows up maybe the traditional system blows up. I want to add one thing about why bob iger should react the way he did. You have two adjacent players merging. Likeay the one competitor a direct takes a dish out or the takes a direct out, leverage swings further towards the distributors but two noncompetitives merging does not have that big of an impact on the content players. Of the companies that you cover, who stands to benefit the most and who stands to lose . Comcast is really the best in class purveyor of technology, particularly on the tv everywhere side during those companies that have taken the most advantage of their platforms, i would point towards a fox or disney. They benefit the most from this expansion, best in Class Technology and tv viewership. Going to benefit defensively against the netflix and amazons. What all of this technology does netflix. Netflixes in terms of technology and the consumer experience, our cable operator is among the worst. I have time warner. Operating Time Warner Cable is not user friendly. I dont even use my free ondemand channels because i cant figure them out. You should talk to a Comcast Subscriber and they will tell you about their ex one box and infinity product and how it is best in class. Its a real differentiator. Tell you that a guy like Reed Hastings at netflix is pleased that stephanie is not pleased with their experience. Theres a lot of people who look at that traditional cable grid and say, really . We have teslas and iphones and we have to look at this. At what they will do in terms of how they will their programming, where they have flexibility to make it really cool you want to look at kids content, look at how interesting it is. They continue to have that advantage, on top of the fact that it is 8 a month. Flip it another way. What is supplanting the dvr in terms of time shifted usage . Vod. Our kids use vod. One of the reasons that vod is not supplanting netflix more is your limited ability to stack shows. If you going to vod and it worked, you would find five episodes of a series. You start to get the number of players contracting and the bestofbreed distributors kind of running the game. You can make advances in things like what the product can do along with its content from a technology perspective. This can really be really positive for the media aspect. We have to leave it there. Thank you, david bank, from rbc capital markets. Were going back, to be talking apple. Where a couple months away from the newest version of an apple tv set. Might even bet ready by this holiday season. President obama raising the minimum wage for one group of workers. Watch all of our interviews on demand on apple tv. Apple may be close to introducing a new version of its apple tv box. Be unveiled by april and involve a content deal with Time Warner Cable. A comcast deal could change everything. Jon erlichman is back with us from l. A. We want to start with you here because this is the hockey puck. Were not talking about apple tv. Not the big, shiny thing. Is it a big deal . Whatr less ambitious than they were originally trying to do, allowing consumers to buy cable channels individually if they wanted to rea. Few more channels. If they do the deal with Time Warner Cable, you would get the Time Warner Cable app on your tv. Think apple is the smartest guy in the room. You think they are surprised by this . Yes. This was done in complete secrecy. Philadelphia outsmarting cupertino . Outsmarting everyone. Its changing the landscape. Why is apple left in the dark here . Have been in discussions, active discussions. Are doing that, youre still negotiating. Either side holds back information to leverage each other. Ofyou think the city brotherly love is messing with apples game here . A could be. You does not change is if are apple and youre trying to offer channels directly to people, its a tough game because of the connection the cable industry has with the players. Intel creates the school new tv product and says, this cool new tv product and says, we are going to sign our own content deals. They were not a position where they would get the same kind of rates the Cable Company would. Et apple is in that same whether comcast or Time Warner Cable comes together, apple is a challenge position of being able to come out with that amazing product where you can watch whatever you want anytime you want, all controlled by apple. Why is apple so challenged . Were talking about an updated, improved the hockey puck could be available for sale by the holiday season. This seems like a long lead time for something that should have been done years ago and we should be looking at a real apple tv. Tim cook talked about it as a hobby project, and i think they were focused on other things too. The bigger scale tv is something maybe they were also thinking about. You have seen other products come to market. Google has its chrome cast device. You want to talk about amazon coming out. To time is right for them come out with something new, maybe better. You show on the screen that silver remote, which i constantly lose in my pillows. There are Little Things they could make additionally strong. If this is the way they have to shiftede they have focus to say, this hockey puck is where were going to make the experience better rather than focusing on the big tvs. Do you agree . I agree. It is really a promotional thing for itunes, where they sell and rent movies and films. Hollywood is relying on digital downloads. Set top box does the same thing. Now theres even less reason for those two to work for each other. Comcast has everything. Is apple using a playbook from its itunes stay with the music industry, disrupting that for television . You are exactly right. Apple was trying to debundle television the way they did with music. Thats not going to happen. Say, tv is going the way of music. You think they are not the same. Not even close. Its a harder nut to crack than the music industry. You have cable and satellite guys and all the programmers working with each other to make sure that the netflixs and apples of the world dont disrupt what theyve got. Close in proximity but different worlds. The meetings between the leaders in tech land and in hollywood can be strange. There are fun stories about that. Really the case, why would some of these content players be spending the money, like in the case of disney, why would it be spending the money to create its own apps for apple tv . They are hedging their bets. They are certainly not betting against the company like apple. You have seen a huge rollout. Apple is really interested and invested in the idea of more apps being available on its tv product the same way theyre available on the iphone. The experience is getting better. You have bloomberg tv on there. Theres a lot more options and people are investing on the apple platform. Things are moving so quickly, apple trying to keep up. Our senior west coast correspondent joining us from l. A. Companies herers in new york. What jack lewr has to say next on Market Makers. Stay in. Treasury secretary jack lew has a warning for the rest of the world, you cannot count on the u. S. To get your economies moving. He was interviewed by our own charlie rose. At ae u. S. Cannot grow rate fast enough to pull the whole world along. The difference between three percent at 3. 5 makes a world of difference in the u. S. But its not enough to make up for losing a percent in europe or losing a percent in china or losing a percent in japan. You have to look at these major parts of the World Economy and say, what can they do to grow more. Europe, countries that have surpluses could do more to stimulate growth and demand. The world needs more demand. Of thatan watch all interview with treasury secretary jack lew tonight on charlie rose, at 8 00 p. M. And 10 00 p. M. Eastern. Its time for bloomberg to go on the markets. When we look at u. S. Stocks, the indices have been grinding higher and are now positive. The s p up i nearly five points, up a quarter of one percent. 2 stocks are higher eight are down, led by cisco. At 2. 7 four percent. There is a 30 year bond option later on today. The bank of englands chief Economist Says Interest Rates will increase within two years. Youre seeing that interestrate differential come into play. Oil easing from a fourmonth high but still trading above that 100 a barrel mark. Individual movers, you were talking to John Chambers earlier. Cisco falling this morning after it forecast declining sales. The company said it is because of weakness in emerging markets. Hen told you earlier that thinks the internet of things will make the majority of his business. The natural gas boom may lead into another area. We will talk about made in the usa. Billionaire tom stier sets down for managing money. Ons is Market Makers bloomberg television. Welcome back to Market Makers. Im stephanie ruhle. Production from overseas markets back to the usa. As labor get smart offensive overseas and consumers put a premium on a patriotic label. Our next guest says the next wave of the renewal of the american many fracturing world will be pushed off by something else. A senior partner at Boston Consulting Group is here. What is fueling the next made in America Movement . We see wages changing. Natural gas is quintessentially american. We have been able to develop a lowcost energy source, 40 of the world price. Where fracking is allowed. Do you think this competitiveness will change the way some of the states are looking at fracking . When new york looks at pennsylvania and says, [indiscernible] is new york going to get on board . The question is which states will allow and which ones will not trade the states that allow it will have to deal with the Environmental Issues that will come up. At the same time they will be able to get a lot of tax revenue and create jobs in their states. Could the minimum wage increase make jobs move back overseas . It could. Minimum wagehe level are service jobs. If there is anything, it will be tiny. Whats the next drive to this made in america . Higher prices overseas or lower here . Both. We see companies in japan and in europe looking at manufacturing in the u. S. Because its cheaper to make it in the u. S. Than in their home countries and that will create more jobs here. In china, we see wages continuing to rise. These are pretty dramatic changes that make the u. S. Extremely competitive. Whos going to be affected . Automotive parts and Automotive Industries will be affected during we will see anything that relates to ethylene and natural gas. Rubberfurniture, we see products. We see all sorts of products. Basically two thirds of all we import from china is potentially able to come back. Do you think it will . And probably will take over the next five years. In 2011 we projected this would start in 2015. In 2012 we realized it already started. We think by 2020 there will be a big impact in the u. S. Economy. What country still remain more expensive than the u. S. . If you look at most of continental europe, thats the case. France and germany are 17 higher than the u. S. Japan is 10 higher than the u. S. , and the u. K. Eight percent higher. Can they change their plans . It is hard. The labor structure in the u. S. Is so different than in europe during if you work in northern europe, you have lots of Work Councils and they are focused on keeping existing jobs rather than having labor solidity. U. S. Labor solidity that allows us to do this so effectively. As investors are looking at 2014, are there specific businesses they want to have an eye on . Just a few. Ack in the debate over minimum wage. How its going to help bring jobs here. President obama made it clear where he stands. He raise the minimum from one group of workers. We will have the next right here on Market Makers. If you miss any of our interviews, you can watch them on apple tv. President obama has fired the last shot in the battle over minimum wage. His executive worker minimum governmentaffects contractors. There is continued debate over raising the minimum wage. Theres a lot of political noise around this here. Look into what a fair minimum wage should be, what did you learn . I learned that debate has been going on for years and there has not been a lot of clarity on it in political circles, but there has been progress. Be coming seem to around to the idea that a modest size minimum wage does not have the harmful effects on employment that you read about in your freshman economics textbook. Not that there is no affect at all, and the effect gets bigger when you get to large increases, but something in the range of 10. 10 seems to be in the range that would not do a lot of damage to employment and would help the lives of people who are earning low wages. President obama came to a level that sounds reasonable. From . Did he get 10. 10 he picked it up because its the bill that is been introduced in congress by congressman George Miller of california and senator tom harkin of iowa. It from was they thought it was in the kind of range that would bring back the minimum wage to roughly its peak in terms of buying power. It is actually slightly above the peak it previously reached in 1968. It is a positive for lowwage workers who are struggling to get by. You bring this up in your article. We know a family cannot subsist on the minimum wage. We know that many families do in those countries. Our policy makers relying on the minimum wage to do too much when they talk about increasing at to a level thats more reasonable . Scarlet, thats a very good point. The problem would be if they said, the minimum wage will be our vehicle for ending poverty in america. That would require a minimum wage of 20. It would be impossible. It would cause largescale unemployment. The minimum wage is best thought of as one strand in the safety net. In cooperation with the earned income tax credit, food stamps, subsidized medical insurance, subsidized housing. It cannot do it by itself. Theres got to be other measures to supplement it. Is the goal to get to a point where the minimum wage is not that instrumental, not as important and not so influential in determining whether a family can subsist . Of the story aut scenario where in fact the minimum will wage becomes less haves relevant because we strong job growth in this country and Strong Demand for labor. Employers are reaching out to find people for jobs. Workers are managing to increase their skills and training. They are able to get jobs above the wage floor and the floor itself becomes less important. That is the dream. That is something people continue to move towards even as there are political winds swirling about. A terrific article on minimum wage in this weeks cover issue. Looking outside, it has not stopped. Still openchools are in new york city, which is extraordinary if you think about it. Private schools are closed. I have a kid in school. My worry is, can their teachers get their . Olivia sterns is taking a look at the weather on the west on the east coast. The snow keeps coming. The storm that started in the southeast is causing the most Flight Cancellations today since Hurricane Sandy in 2012. Flights have been canceled. Yesterday 4100 flights were canceled. Sincest canceled Hurricane Sandy back in 2012. Governor cromwell put out a tweet saying he is declaring a new yorkrgency for city. The snow keeps coming in central park. He had seven inches of snow by 9 00 a. M. Up storm working its way from the southeast coast. More than 10,000 flights were this week. At least 14 deaths have been blamed on the storm system. Governor cuomo declaring a state of emergency. Thank you for that update. I hope youre not planning to go anywhere for the long weekend . I am, but im driving. I just want our kids and teachers home safe. Treacherous,are our most important treasures should not be on them. Billionaire tom stier does not know how to retire. That story coming up next on Market Makers. Welcome back to snowy nyc. How about hearing about a superrich guy in california . Tom stier is one of the richest men in the country with a net worth estimated around 2. 6 billion. By the time he stepped down in into 30had turned it billion. He can afford a few different laces to hang his hat. He gave betty liu a tour of his ranch in Northern California for the latest edition of titans at the table. The Northern California coast is one of the most picturesque places in the u. S. Its no wonder that this is where it tom stier ansys time. If you miles inland from the pacific is the ranch that he and his wife bought in 2002. Only an hour outside of san francisco, it is a world away. Running this huge ranch, how is it different than running a hedge fund, a 20 billion hedge fund . [laughter] its incredibly different. Asset, butlike an its actually dramatically changed by the people who run it, like every organization i have been in. Thats where the comparison ends. The ranch has a staff of 15, including scientists who are studying ecologically friendly ways to raise cattle. You move the animals from place to place. That is how the big herds of animals have moved across the plains of the earth. But we would think of as real it turns out scientifically that we are right. The way we are grazing the different animals causes the land to soak up twice as much carbon as normal. Always bucked against conventional wisdom. He and his wife chose to settle here near their alma mater, stanford university. I intentionally chose not to live in new york city. I never felt as if i was really part of that community, even though i have lots of friends and it. Is that why you left wall street . Be adid not think it would great place, and i dont think my wife thought it would be a great place to have a little kid. You like the outofdoors it would be hard to recreate this. Stier tries to get out to his ranch a few times a week. The ranch plays host to local School Children who come to visit dorothy, the 300 pound pig. Bull,s got a pig, not a even though hes a big wall street guy. His philanthropy is not just about charitable giving. Is one of the leaders in the keystone pipeline, hes finding himself. Hes an environmentalist. He did not want to live in new york city, did not want to raise his kid here. A lot of the billionaires on technologyast, these guys, they very involved in environmental conservation. I remember there were reports that michael dell bought up a whole swath of land along northern part the of california along the coast to the southern part so it would not be developed durin. Really, really involved. Our east coast billionaires doing the same thing . Dan snyder of the redskins, maybe not so much. Hes been known to tear down a tree or two near his house. Betans at the table will airing tonight at 9 30 eastern right here on bloomberg. In a moment we will take a look at ishares when we go on the market. That is it for Market Makers. Thanks for staying with us. Tomorrow is my husbands birthday, and valentines day. True love means i only need to get him one gift. We will talk about the business of love with the ceo of spark networks, dating sites such as jdate, christian mingle. If you are jewish, christian, old, weve got someone for you. [laughter] birthday, iusbands married. She does not need to do christian mingle. To see who might pick me. Everyone is saying no one. I would love to have a profile and see if somebody gives me a us if you us tweet have suggestions. Olivia sterns is joining us right now. You want to make a profile and see who clicks on you . Not really. I dont think my husband would be happy about that. Right now were going to dive straight into derivatives with todays options inside. Were seeing a lot of actions in ishares. It attracts small cap stocks. Joining me is jerod leavy, managing director. He is in texas. What is the drive and the action in the russell index right now . It is not dating sites. It is the fact that iwbm is pressing up against the moving they average. It will not only be heavily traded typically, but much more volatile than Something Like the s p 500 and nasdaq. Lead markets in terms of sentiment. Were just seeing volume all over the place. The 113 level in the wm, a lot of traders positioning for breakout potentially, which is curious given todays retail numbers. We are trading just below that 113 level right now. Etf, what is driving that movement . X was interesting this morning. The markets were up slightly and the vix is rallying. The vix trading at 14. 42. 9 daily fluctuation in the s p 500. The s p has montmartre volatile been more volatile. Traderstarting to see take more bullish bets because of the uneasiness in the broad market and the fact that we are seeing this data. Do you think we might be seeing more volatility . How about orbit . Shares are surging on higher than average volume. What is your take on that action and what you see in the Options Market on orbit . This is the typical time for people to trade and one of the times you want to exercise caution. With orbits at around nine dollars, it is up 30 from where it was yesterday. Traders have been jockeying on all sides. Volatility is uneven right now. People are trying to see how this shakes out. Their guidance is weak. If it was me, i would probably take more of a bearish tone. You are also watching dan berry resources, the company that makes oil and gas products. Why are you bearish on this stock . For several reasons. I want to say i moderately bearish. I dont think the thing is coming to 10. It dipping back below 16. When you look at the company, they have a unique profit. The use Carbon Dioxide to coax old wells to reproduce. Theyre trying to restabilize and reinvent themselves. Whats the Options Strategy . In march, buying the 17 foot. Its a one dollar spread. You can do it for . 60. It will profit most of the stocks below 16. Were 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. All right, take a look at my menu today. And company, it is all about health and wellness from products to the balance sheet. In motors, how do you sell a 2 million bugatti e a highspeed est drive of course. Moving on and titans, life on the ranch. Why this x hedge fund or left wall street for ringer, and liquid gold. It is all coming up today on lunch money