Studyd that when a new says about the legalization of marijuana in colorado. Good morning. Im Erik Schatzker. Im alix steel in for stephanie ruhle. We totally called each other. Thats not true. This is time for the newsfeed. These the top news stories. Ukraine plans to block a convoy of 280 russian trucks. Ukraine says the trucks are really carrying military aid for prorussian rebels. They will not be allowed to cross the Ukrainian Border unless they are led by the red cross. The banks banks of bounceback. They have had the secondmost profitable quarter in 23 years. They are making loads of the fastest rate since the financial crisis. Consumer reports gave the tesla model s its best overall rating in february. Now the magazine is saying minor flaws showed up after more driving. Among them is the dashboard screen going black. There are probably the front trunk lid release. Tesla says those issues have been addressed. Faces crisiss on two fronts. A clinical stalemate in baghdad threatens to hamper the governments effort to fight back. On thatok has more situation and how the Obama Administration is responding. We would call a political standoff, there are tanks in the streets. Talk us through that. It is a tense situation in baghdad. Isre is no sign that maliki ready to give up power. Military to stay out of politics. He might use military forces loyal to him to stay in office. It this would be a coup detat of sorts. The elected Prime Minister is legally worthless. He is trying a legal challenge. Leaderalled the elected and offered the u. S. Support. He says the chances are that he will make way for a new government. It is not a sure thing. The military commanders, whether they will carry out orders that he might give an move against the president or move against parliament or move lawnst or declare martial or announce themselves as the political and military leaders of iraq. I dont at least things are probable. You cannot rule them out. He is from a shiite. This tells you a little bit about the canada support that maliki has. He has offered a more and uniting term the country is going to pose a large problem. The u. S. View is that anyone but maliki stands a much better chance of success. The army is distracted by what is going on in baghdad. This leads me to what is happening in the north and how pivotal in the airstrikes may have been. The crisis there continues. Haveind says 35,000 people escaped from those mountains in northwestern iraq over the last three days. As 30,000 areny still there. They have limited access to food, water, and shelter. Airstrikes, u. S. There have been 15 of them so far. You have those humanitarian missions, 14 so far. They are dropping food and water and helping the shelter for those refugees. Top u. S. Commanders say they have had a limited impact on isis. And have slowed the push help those people on the mound but they have not done much to contain isis as a threat. What happens . Will the u. S. Military step up its support if the government starts to take shape in baghdad . If the political situation gets resolved then the u. S. Might be able to offer more support. There are still a lot of maybes and ifs. Thank you so much. Financial innovation is alive and well on wall street. Derivatives are making a comeback. They are different this time than they were the last time around. They are similar enough to raise concerns. Abramowicz covers the bond market for us. This is trend spotting. This is not a new derivative that was created overnight. If you put the pieces of the puzzle together it gives you a sense of what is going on. We have some new products. These are new post crisis innovations. Have increasing numbers to use derivatives that are based on derivatives to offer people a hedge. Or a directional map. Amp it up. Levering up. Not just a hedge but a bet on a particular security. S is indicative of a yield low yield environment and people are getting complacent about volatility. Volatility has remained low. There is not a clear catalyst. Geopolitical crises have not created significant volatility. We heard came out, people say this is reminiscent of 2007. This is really scary. What are the main differences here . There are quite a few. There are some similarities. Any derivatives that inherently have leverage built into it, you have to put down last to make a bet that if you made a derivativebased that or a cash that. There is inherent leverage. If youre called on to pay out on a bet, you have to get that money somehow. If you have not put aside enough cash you might have to sell your assets. It there is a potential risk. There has been more regulation. They have made these contracts centrally cleared. There is a party in between. Two things in my be worth on the similarity side these are synthetic products. The risk is being created. It is not a risk that already exists in the credit product which could be alone or a bond. This is being built on top of that. There are two sides to risk. Is it concentrated . Side, it isrence difficult for banks to own this. Because of the Capital Requirements built into level three assets. The idea of correlation and effect in a selloff, if it does selloff and there is a shadow world derivative, how much does that play into how much the debt does selloff . That is part of the securitization market. Seeing the amplification. Lance are asking for this. Sayinges this wind up about how hard it is to make money at all in this market . At the end of the day, this makes it hard to make money and leads to more complex derivatives. It is not just risktaking. This is like a horse be the same drum. People want to get out of the market weekly. You dont have to go out and a source of bonds. You have to go out and sort of hedge. Of taperequires a lot work and there is friction in that market. There is no easy way to shortcut market. It does speak to peoples abilities to get in out quickly. And to express a view on the future of the credit market. We are coming to the end of the credit cycle. That longo hedge position with something short. It is not easy. The instruments that used to be the leverage loan index, that market is very dry right now. There has been an increase in the return swap market. That is a derivative product tied to a basket of loans earlier this year. It was based on the total return swap. This does not fall under the same regulation as the fret credit default swap. There are some differences. That gets to the idea there are not many ways to express views on leverage loans other than buying the cash. One of the symptoms of this trend is you are seeing more research about these new products. That harkens back to something vix, which was a Lehman Brothers report from 1995. This became a very hot market. If it played in the view of many a central role in the collapse of the financial system. It depends on where the risk is. If it lies in the Corporate Credit market, if you start having increasing correlations and synthetic thats that are overlaid on top of the cash thats, any downturn is just going to escalate. It could prompt people to have to pay and sell assets to raise cash. You have to sell something else. It spreads to other markets. In the happen tomorrow, that is not going to be a big deal. Is not a clear catalyst for what would cause a huge downturn right now. 7. 1unk bond selloff is billion from junk bond funds. They are up this week. We were talking about this earlier in the week and thank you so much. Richard kander moves to consolidate his pipeline empire. Investors may wind up with an unpleasant surprise from the irs. Reconsidering are their love affair with ratings. He built his Energy Empire on ending the passes most of it onto investors. The dividends of made them very popular. Ands ending his experiment raising a big question for investors and the industry. Is danr the question dicker. Landscapeented the there it did he tell it this weekend till it this weekend . It made the most money from it in 15 years. In the last five, all of his companies have lagged. He has become too big. This structure you lose your nimbleness. When you want to make money for investors, you have to continue to grow. With that much stranded that in he hasons, to make that much cash flow. At some point they ran those numbers and could not do it anymore. It becomes one big bond. In some ways that is not bad. In terms of his investor space and other mlps, he wasnt competing anymore. A sea change in terms of what these midstream businesses will do to bet on shale oil . I think you hit it dead on the head. The Tax Advantages of the mlb structure are worth less then than than building out the infrastructure based on shale gas and oil. The bigwhy he is making bet and i think he is 100 right. He had no other choice. That is why the stock market took so strongly. Best. S really the this is more on the infrastructure surrounding shale oil assets. That is a big that an a big difference in the industry. Some of the mlps are going to follow him in this. Theyre going to need the capital to buy and more more and more hype lines and processing plants. Is this a function of size . I think that is a great name. Energy transfer seems number one on the list. Enterprise could benefit. Were looking at numbers and talking about market caps in the 100 billion area. These are huge companies. As the lastthis possibility to turn back from an mlb structure. Why is there a disadvantage . It strands your capital that you would normally use to continue to build out the network. It continues to drop down assets and take your capital and turn it into debt in your sub corporations. It strands your capital and makes it more difficult to borrow. It does not get investors to come in and keep your cash flow going so you can build out. This happens as you get larger. As more of the mlps that you own, you own a bigger percentage and that leaves you cash constrained. Does it surprise you to see the Parent Company trade up 9 . This roll up involves them paying significant premiums. Things and atwo bit today. One is the increasing dividend. That will calm everybodys nerves. That is a big plus. When youre talking about a bond like stock, that will make it move. I think the market understands the strategy. He has been underperforming and changed back to a c corp. That is what they are betting on. I think it is a great buy. What are the chances that that is wrong . Five years ago we were talking about natural gas imports and now we are talking about exports. This can change on the diamond. Expects he is way in the stratosphere. If that happens the infrastructure is totally lacking. The second thing was the noble report where Chuck Davidson said this was a lack of infrastructure in colorado. These are cases where you know it is not about the production but the pipelines. The biggest winners wont be the emp players. The producers of oil the people that own the toll roads. We heard him in the call whos speaking to an analyst is not convinced he is going to go out with a blank check and buy all these companies. This is the kind of nimbleness that he needs to buy smaller. Smaller pipelines and maybe not something as large. It aer,e case of consolidation play . I think it is both. I think it is going to be both. To buy asst way is opposed to build. Where it needs to be built thrash, they will build. It is such a great pleasure to have you. Coming up, all their worries have gone up in smoke. A new study looks at what happens when the colorado made pot legal. The fears of flying high. A new study looks at the legalization of marijuana in colorado. Alwaysxecutives have lived and died by ratings. They may have to change that thinking. Live from bloomberg headquarters in new york, this is market makers. With Erik Schatzker and stephanie ruhle. I am Erik Schatzker. In for alix steel stephanie ruhle. No longer issue analysis in regards to ratings on alive day basis. One days rating does not capture the entire audience of the show. They did data credit we did data crunching like they like to do. I know i watch tv on my apple tv and hardly ever in realtime. Of measure will encapsulate that . Most people are still watching live but there is a big job. When you look at the numbers, and that is why they said they will not do press releases, not even talk about it. At a minimum we will wait three days. So if you look at their ratings in particular, we have a chart , theyhows among channels are right behind the broadcasters but when you look fx increase over the next seven days, there is a huge Rating Increased by not talking about the life rating. Obviously abc, nbc and fox the big rock casters, most of which they show you do not need to watch it those days, especially dramas. It makes sense for them to lead the way and say we do not even want to talk about it publicly at all. Makes sense, but are the advertisers buying it . A few years ago nielsen introduced the rating. Most deals are getting done on that basis. When you look at the day of the tuesday, thaton a is the show where highest percentage of recorded watching for shows. Saturday shows are most likely to be watched live. From thursday is still the weekend. Three days from tuesday is not the weekend. If you are trying to drive people to watch your movie on opening weekend, it matters what day they watch it. If you are a Fast Food Restaurant and retailer, the day of the week matters, to. Why shouldnt we some point get 360 . Less value to the advertiser if i watch it on month from now than if i watch it tomorrow . The tens on what it is. Is not in street theaters anymore so it is late for that but there are not there are Tech Knowledge ease. They can swap out the commercials. Is a different movie opening now and have the movie opening at the time of the show. That is where it is going. Days than 30be 20 days. Trying to get it as far as possible. If you are someone like fx, you want maximum money. You do not want them getting free commercials. The question i only watch tv on apple tv, how quickly are they watching those streaming networks right now . That is all part of it. Basically . Right. Watching apple tv but not a streaming product delivered to you through apple tv, it does not really matter. If you are buying movies and getting advertisers those are fastforward. Like watching 24. Usually you cannot fastforward through those. It is better to have that version. They would rather have you watched that it does they will not dvr. They can change the commercials. Whatat about live about live events like sports . Live events tend to be the not watched live but it is automatic like you think. It is not zero percent. There is a huge pickup of people recorded and watch it later. Fascinating. What not about that. Appreciate it. We will talk about the changes ining to tv with jeff jarvis the next hour. Some people think that is an oxymoron, entrepreneurial professor. He is thy god. Protecting profits. Those involved in the Legal Marijuana trade have to look somewhere other than the banks. This is market makers. I am Erik Schatzker with alix steel. None other than the brookings institution, one of washingtons top thing tanks is calling colorados great experiment with legalize marijuana a success. Taking a close look at how the state did it in is with us from and there are a number of different ways to define success in colorado. You did not look at that way. Tell us why you are calling it a success. There are a lot of different ways to look at success. A lot of people are using data right now about a lot of public statistics. Afety the data on that are early and cannot tell us much from it. I looked at implementation. How is the government putting together what they need to do, types of institutions and rules they need to roll this plan out. Failed implementation and rollout. I said lets take a look at how colorado is doing at rolling out this neat and innovative row graham. A you are talking about framework and execution but just the policy framework. That is both. The framework him at the structure around the policy, the structure that arounds industry and government and consumers to access what the law allows them to access. Through enforcement policy and the like. In your study, what was the biggest, most important part of the rollout process. Part, the governor wants being opposed to marijuana he said the voters have approved it and we need to go to work. He created a task force targeting implementation and used that task forced throughout the process to make sure all voices were heard and all viewpoints were taken into consideration at the end of the day the regulations, laws and policies surrounding Legal Marijuana were the right ones. What is interesting as you highlighted the impact the industry also had on implementation. It seemed like the state wanted to limit the size of the industry so they could understand it, control it and have a Good Relationship going forward. That seems pretty rare. It is rare but so is the policy itself. The senseis unique in that there are a lot of people who understand how it works, what the market looks like but there are traditionally illegal actors. The industry had a lot to teach government because there were a lot of people that had been growing and selling in the past and accumulated a ton of knowledge about this. The state did not have this because it was offlimits so industry closely with to engage, meet them and understand what the needs are, and as a result, the rollout was fairly successful because they were as interested in information as information gathering. What will it take to look at the experiment with Legal Marijuana and call it an unqualified success beyond implementation and the rollout we needut it . What to do is take a waitandsee approach. I caution against anyone who points to a certain data point or amount of time and say marijuana is working, not causing this or that and it is causing this or that. The data is still early. As someone who works with eta all the time, i am not comfortable doing the analysis necessary to see if the policy itself is working. Down the road in six months or two years we will look at metrics from Law Enforcement, Public Health and other areas of Public Safety to say either conclusively, hopefully conclusively that different a positive moving in direction or negative direction, and hopefully tie that to legalization. That is not stopping the critics for the time being. Are there c