Transcripts For BLOOMBERG Bloomberg Go 20151208

Harvard Business School is here. Nejra cehic joins us now. Republicans and democrats are condemning Donald Trumps call for a ban on muslims entering the u. S. Trump wrote a Statement Last night at a rally in south carolina. Donald j trump is calling for a total and complete shutdown of muslims entering the United States until our countries representatives can figure out what the hell is going on. Jeb bush called trump unhinged. Chris christie said this is the say whenhing people they have no idea what theyre talking about. Beijing haven raised in air pollution alert to the highest level. The smog is seven times the level considered dangerous to health. Beijing has suspended schools and banned outdoor barbecue. Oscar pistorius is now free on bail. Under housein arrest while appealing his murder conviction for killing his girlfriend. South Africas Supreme Court of appeal overturned his lesser sentence of manslaughter and convicted him of murder. You can get more on these and other breaking stories at bloomberg. Com. Matt breaking news. Canadian pacific is revising its offer for Norfolk Southern. Say Norfolk Southern sure get shareholders will stock in the new company. Norfolk southern shareholders will have a 47 stake in the new Company Rather than a 41 stake as was previously the case. Be Cash Consideration will 125 to 140 per share. There are a number of other they are willing to make. Norfolk southern had rejected this bid a few days ago. Me can see futures behind down across the board. Off. 67 . S take a look at asia. That was a real issue going into the trade and that has carried through europe and here. On the hang seng. Oil is bouncing back a little bit. Oil fell down through 38 and is holding below that level. Barrel for west texas intermediate. Take a look at the s p versus oil. When oil comes down this low, does that mean that the s p has to come down this low as well . You can see the yellow breaks away. Beginecoupling actually began back in 2014. S p is in yellow. In orange. Ge we will be talking a lot more about oil today. David how about right now. Around 37 a barrel yesterday. The lowest price and almost seven years after opec eliminated its output ceiling altogether. Im not going to ask you to predict whats going to happen. Are there any signs that oil has bottomed out . I think we need to start looking at historical examples to know where prices will go. The first potential bottom of the market could be the 2008 Global Financial crisis. We need to see it going another five dollars down. The other parallel is what 1997, the other big crisis that opec suffered. It went all the way down below 10. Im beginning to hear people telling me that we can really at some point see those kind of levels. Stephanie peter, we immediately think everyone is losing because prices are going down. Rarely thats not the case. Who are the winners . The people in stacked basins. When you think of shale, think of it like a layer cake. Stephanie thats how i think of shale. [laughter] can access multiple layers from a single piece of land, that changes the economics for shale. David whats the marginal cost of extraction . It varies wildly based on geography. Weve heard numbers as low as 30. David but not 10. The world is going to be in pain if oil goes down to 10. You are going to see wealth shutting off. What measures if any should we be expecting out of opec between now and june . And june we will see a lot more production. Were going to see iran trying to ramp up production the moment the sanctions are lifted. Thats between january and early march. We could see half a Million Barrels a day mostly coming here to europe. We should not discount that saudi arabia may also increase production. Qatar intoing a new the market. The response from opec is going to be a lot more production. David if you are a ceo of exxon or shell, you cant affect what saudi arabia is doing. What do you do . You have to really buckle down and get the marginal production that you have in your portfolio out of the ground. You have to recognize that oil is a 20 year business. Its not built for twoyear cycles. The reason we have that Big Companies is because they can whether these kind of stores of storms. Se kind i think they are going to lose money. We shouldnt rule away the possibility that big oil will survive this downturn. At 20 think oil remains or 30 for any more than three or four years. Once we get through it, these companies will do well. Stephanie that is a lifetime for investors. But not for an oil company. [laughter] is where we will see divergence between investors who will get hurt in the short run, but these companies will survive. Stephanie what about their ceos . The companies will survive. But if you are a ceo, will your shareholders and board have the patience to let you ride this out . The question at this time is not going to be whether you can do well. The question is how will you do relative to other oil players . If you are a cao ceo, do have to ask, how am i going to do in comparison to other ceos in the industry . I think we will see good managers rise. Great leaders are able to manage in a downturn as well as management things are going up. David show us what bloomberg has to say about u. S. Production versus opec. Matt we dont always have to look at absolute production. Sometimes its interesting to look at momentum. The speed at which a company or country is boosting or reducing production capacity. You can see opec versus u. S. Oil production momentum. A continues to boost production to get more barrels of oil out of the ground. You can see u. S. Production. What the saudis are attempting to do allegedly is drive these u. S. Producers out of production. It looks like its working. They are slowing momentum down to almost a full halt. Stephanie Caroline Hyde is joining us in london. You have been speaking with Major Players in the oil market. What have they told you . Chief executive of the seventh Biggest Oil Company in the world. Executive of the first European Oil Company to inflict pain upon their shareholders, to cut the dividend. Hes been telling me, the price is too low. It incentivizes us to invest too little. He says this year, the same will happen next year. This is where he says the price wants to go. Price whenthe right , we are cash 60 neutral. 55, 60. I think thats the right price for the average in the industry and also for the producing country. Horror. , he says the right price isnt actually 80 or 90. It is 60. Stephanie Caroline Hyde, thank you. Actually joining us from paris, not london. What with the impetus for higher prices be . What would the impetus for higher prices be . Weve got more fuelefficient engines everywhere. What would be the catalyst to have prices go up . Theres really only one thing. People thought demand would be able to bail out the market. Its not likely the case. The only way you are really going to see Oil Prices Move higher is the supply response. That is likely not going to come from opec. To the focus is shifting nonopec producers. People like canada. U. S. Shale. Att pain has only been felt the margins. In 2016 you are going to see massive restructuring of the u. S. Oil business. Stephanie refinery restructuring. We need to take people to actually slow down production. Growth installing. Is stalling. That needs to stall further. Is there any trigger that would cause opec to reduce production . If you look at the decision they made on friday, it was no surprise to the marketplace. They said, were not going to go under the pretense that we control supply. If you can move forward six months in time, by then, you will have seen a lot of supply response coming out of the u. S. Then it makes more sense for them to revisit that question. Stephanie there you go. Thank you. We have to take a break. Later in the show, my exclusive sitdown with nba superstar and luxury lifestyle icon dwyane wade. I met up with him in miami on his own personal basketball court. Heres what he had to say about his love for the game. If there was no basketball in life, what would you have done . God would not have made me. He made me to play basketball. David welcome back. Revised ancific has offer for Norfolk Southern. Last week Norfolk Southern rejected that offer. The new offer is said to be for more than 30 billion. It also gives shareholders more ownership. Shares of Anglo American fell to record lows after the company scrapped its dividend. It reduced its workforce by almost two thirds. The company has been hit hard by the slump in commodities. Nike has signed nba star lebron james to an unprecedented lifetime contract. It could be worth up to 500 million. The deal could be somewhat similar to michael jordans. Sold 2. 6 brand billion of shoes and apparel last year. Stephanie joining us is president and ceo of melon crop plc, mark trudeau, along with drew armstrong. Mallon crack came under fire after this tweet. Now big pharma is back in the hot seat. Welcome. Thank you so much for joining us. Please set the stage for us. Not only had we never heard of his first report that came out was riddled with spelling errors. What he has had to say has rocked the global market. He has had a longstanding opinion about one of our particular product. On our fourthed quarter earnings, all of andrew lefts allegations turned out to be false. We are really describing the opportunities we have in our portfolio. Strongk we have a very business with great cash flow coming forward. David co is he pointing towards a larger issue with drug pricing in this country yet we have Congress Looking into it. Pharmaceutical industry is value for a lot of diseases. Some of the diseases we are going after our particularly challenging. Pharmaceuticals have been a solution to this product. Problem. Can we talk about your Business Model . Help us understand acquiring drugs and the increase we see in drug pricing. Thats the big issue. Our Business Model is quite different. We havent acquired to invest model. Durable products that serve patient populations with relatively few alternatives. We invest in these products and modernize them and update the manufacturing. We look to drive opportunity through volume. Many of our products serve patient populations where our products have relatively low patient penetration. So theres clearly an opportunity to invest in these products. All of our growth was driven by volume in the fourth quarter. David i know a lot of the price increases on this came before you guys acquired it. Youve had a lot of issues with costs saying, this drug 35,000. It used to cost far less. They have tightened reimbursement. Some of them saying they are only going to support it for one or two indications. And you guys have been if you look at your stock from june, you are trading around 125 in june, you are around 175 right now. You are more vulnerable to some. F those questions theres a lot of misunderstanding. Our primary indication which is infantile spasms this is a drug that has an incredible effect on infants that dont normally develop without axar. Drew people say they do pay for that. Its the other categories that they say theyre not going to pay for. Patients with Nephrotic Syndrome will progress to endstage renal disease. Those patients from progressing. The alternatives are often much more expensive. We believe this product has tremendous benefit for patients that have very few alternatives. Stephanie we have viewers asking us questions. 1000 times the price it used to be . The price reflects the value of the product. Stephanie 1000 times the price . Axar has been on the market for quite some time. It really works were a lot of other products do not. Presented on a trial in lupus were a lot of products just dont work very well. Conveys additional benefits to these patients when they have few alternatives. Thats the thing you need to take away. It makes a difference in the lives of patients were many other products have been tried and failed. Why are you forecasting an increase in sales when Insurance Companies are dropping it . Insurance companies are not dropping it at all. It gets reimbursed across the spectrum of 19 indications. We are working very closely with payers to make sure it is wellpositioned for appropriate patients. Opportunity to have many more patients benefit than is the case today. Patients that could benefit from it are currently treated today. We want to make sure its available to more. How can the markets at a price for something protected by patent that is lifesaving . In some ways, the value is infinite. This is going to be a huge challenge for the pharmaceutical industry. We are living in a moment in which the anxiety about Health Care Cost is causing governments to raising of drugs. I think we are living in a moment that may be the golden age of drug discovery. I think the next 20 years will be remarkable for the pharmaceutical industry. We see that in our own students. With the amount thats going on thisem cells and genomics is going to be a period of remarkable discovery in health care. If we dont allow companies to benefit from these discoveries, we might control costs but we might harm the very thing that is the most important thing where innovation is needed in our economy today. Stephanie we need to do fantastic rmb. It is saving lives. We need you to do fantastic r d. It is saving lives. Ofthe fda did a full review indications. We continue to invest in this product. We continue to develop this data. We just did one of these trials in a very challenging patient population. We have several other trials that are ongoing. Stephanie thank you for doing that. Mark trudeau, president and ceo of mallinckrodt. And our own drew armstrong. Sure, tv has evolved over the years. Its gotten squarer. Brighter. Bigger. Its gotten thinner. Even curvier. But whats next . For all binge watchers. Movie geeks. Sports freaks. X1 from xfinity will change the way you experience tv. Tand thats what were doings to chat xfinity. Rself, we are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Stephanie we are here in new york city. You are watching bloomberg go. With us this morning is nitin nohria, harvard Business School dean. David this is about donald trump. Lets play that. Donald j trump is calling for a total and complete shutdown of muslims entering the United States until our countries representatives can figure out what the hell is going on. Tom my morning mustread lets bring that up. This is an Associated Press article. Of course the internet blew up at this. This is from somebody that actually knows what theyre talking about. Nancy mara with at nyu law. Awetz at nyu law. I took this back to george. Ashington at newport and made the american speech on religious freedom. There is no difference from 1790 to what we witnessed last night. This is critical. When you take euros of office as president , you pledge to uphold the constitution of the United States. This is lately unconstitutional. Tom we will see the fallout. I dont want to have an editorial opinion other than what is so important within this nation is a debate. I spoke to a Second Generation hindu out of Southern India. Those are the people. I was an immigrant. It was a few years ago. They brought turkeys over with mashed potatoes. Talking about that effective being from Southern India and hindu and the insult that hes yours in these words. Anas somebody who is immigrant myself of hindu faith, it is extraordinary to me that this country which means so much to people like me that has created opportunities and deliver the example of the american dream, the fact that mr. Trump would say that on religious grounds we would prohibit immigration is just a me unimaginable. Stephanie how about worse than that, its not just donald trump saying it. Look at how hes doing in the polls. Its the American People who are backing it. It just proves that human nature is not to be relied upon when people feel fearful. There is so much fear in the world and we have had historically time and time again people recoil in very bad ways. Mr. Trump is playing into the fear that we experience globally. David i want to know. I want to note. Steve jobss father was syria. This country is full of stories like that. Stephanie human nature cannot be relied upon when people are fearful. Thats excellent. Tom keene, we will let you get back to radio. Kellogg. E talking Companies Need to attack practices that are Climate Smart. Chairman and Ceo John Bryant joins us now from paris. Welcome. Companies tong for be Climate Smart when a lot of people are trying to be held smart. Gluten smart. Sugar smart. Help us understand your angle. Thank you. Its great to be with you today. Obviously the environment is critically important to kellogg. Were taking strong actions to protect the planet longterm. It comes down to the values of the company. Consumers care passionately about food, where it comes from, how its grown. Think about a businesslike kellogg. Grains isbility of essential to our company. We are here in paris talking about our sustainability goals. Stephanie how important are those goals to the average person buying froot loops and frosted flakes and pop charts . Pop tarts . John people care deeply about the environment. Tarts actually have a very high index to millennials and millennials care passionately about where their food is grown and how its handled i. Just want to buy great food. They want to buy food from companies with the same values they have. We are making a longterm commitments out to 2050 to reduce Greenhouse Gas emissions in our company by 65 . And supply chain from the farm to the breakfast table by 50 . There are some reports that the breakfast cereal business is a little bit under stress. You had a great acquisition of pringles. Tells us where your business is growing toward. Business in the u. S. Has been under some pressure from the last couple of years. It got back to being stable today and we believe we can grow serial longterm in the u. S. 10 years ago, around 20 of all serial was consumed outside the breakfast occasion. Serial is 30 of all consumed outside the breakfast occasion. People are snacking on serial as a healthy alternative for an afternoon snack or eating it as a meal alternative or a dessert alternative in the evening. Pringles has been an outstanding success. We are feeling very good about that. Stephanie are you officially bidding for boulder brands . John boulder has undergone a transaction with someone else. We are not part of that deal. Is there something specific you have done in terms of how you are responding to Climate Change . Many companies are looking for specific initiatives. John one of the big differences you go back for five years ago, we have all the commitments within the walls of our facilities that you would expect. Greenhouse gas reduction, waste reduction, water production. Water reduction. Responsibility from the farm all the way to the breakfast table. We are getting back into the supply chain. Greenhouse impact on gases the farm itself. We are working with farmers around the world to put in place Climate Smart agriculture. Inking with corn growers india to put alternative crops between the rows of corn increases the productivity of corn by 20 and improves the biodiversity of the soil and provides cash crop and improved livelihood for the farmer. Stephanie and pringles are delicious. John, ceo of kelloggs, thank you for joining us. Largest dualhe revenue stream Country Company in the world. Now its expanding into kids and sports. I sat down with ceo david says lave yesterday david zas yesterday. , subscribers time were growing. We are seeing subscriber growth through latin america. Western europe and the u. S. For the last two or three years were flat. The u. S. Started to turn down a little bit. The First Six Months of this year we started to see down a little bit. We thought it was going to be down 1. 5 . Million . Sed on 90 98 million or so. The question was have we made the turn . We dont know yet. We havent seen it yet. In this past quarter, the in some cases they increased. Household formation is at an alltime low. We dont know whether this is a or whether its going to stabilize or turn a little bit. One of the things you mentioned was going directly to consumers. Discovery go is not quite that. We like that name at bloomberg go. Its a very good name. Everywhere is a product where you can get anything that you want for your cable box and the commercials are measured. Very big cheerleader for that. Comcast is one of the leaders doing a good job with that. Other distributors have an lead forward with the same platform. Over time i think it will. Calledched a new product discovery go. Is nine of our challenge nine of our channels. Its about 30 for the u. S. You can download and watch them on a linear basis. You can also watch a number of shows. Its very early. Its like a tv everywhere platform but we developed a relationship directly with the consumer. What about the fios . We are very aggressively with comcast on tv everywhere. Together thats about 50 of the universe. Pointhoping we get to a where between tv everywhere and our platform, we will reach everyone. Its going to take some time. The u. S. Is probably on the furthest and of slowing. End of slowing. There is still a lot of growth left for everyone else. In tv there are a number of markets that have tv everywhere that are doing extremely well. I hope thats the model the u. S. Follows. They have been very slow. David what about other digital we have seennies . Nbc take an interest in busby. Disney and hearst took in his interest in vice. We bought a Digital Company in San Francisco and we built it up. We have 90 youtube challenge channels. Its all in our categories. Exploration, science, adventure. It aligns with our brand. We are making a little bit of money or breaking even, but its a big millennial generation. We think we can continue to grow that. Eventually we will have enough scale that we will be able to monetize. Us is thatentiates weve done the majority of our distribution deals here in the where about 80 of the way through for the next five years. We have doubledigit or high singledigit guaranteed. Wey i view the u. S. Have 14 channels. About 12 of the viewership in the u. S. And almost all our distribution deals are done at double digit. Even if theres universal we will have growth in the u. S. Forhe next four or five years almost no matter what. Its like a bond. Our International Business is the big differentiator for us. Weve really stabilized our u. S. Business as being a growth business. David you are more internationally distributed than any other u. S. Media company that im aware of. We are the Number One International paytv media company. It goes across all metrics. We have more than 60 of our revenue is international. We are truly local in 220 countries. Weve been able to get doubledigit and midteens growth and we are that Sustainable Growth Going Forward. As we deploy capital, we are fighting back our stock lying backour stock buying our stock. If you go across europe, we have 10 or 12 channels plus three sports channels. what does that mean when its a strong dollar . Hurter has been a big for us. But we can control currency. We were the first we cant control currency. We were the First Company to make over 1 billion internationally. People are spending more time with their content on more platforms our content on more platforms. Ive been a discovery long enough that for a number of years it was a helper. We cant predict where fx will go. Dive. Aken a precipitous it has made buying content in europe cheaper. I dont think its going to drop the way that it has in the last two years in the next year or two. That was Discovery Communications ceo david zaslav. He has questions about losing subscribers and he admits that the international is actually hurting him on the dollar. Stephanie hes got great tv shows. David by the way, he owns them. He produces all those and he owns them. He has a huge wealth of content. Stephanie hes really good. David lets get back to harvard Business School dean in the area nitin nohria. Where graduates going from your school . Go tohave People Consulting and banking as their first job. Many of them will spend their first three or four years in their career there and move on to other things. Have many of our students are now going into Smaller Companies . Last year almost 50 of our students went to companies that were 500 people are smaller. Tech companies, health care, media. Students are interested in going to work for a company where they feel they can make a difference and where their work feels many. Thats more important to me than the sector. Stephanie but theyre not shutting shunning banking or consulting. No one wants to work at Goldman Sachs anymore. Nothing could be further from the truth. About half our students begin their careers in those industries. Many will stay in those sectors. But we find that people have an interest in working for the smaller private Equity Company or the hedge fund or to find the Niche Consulting Company Working in energy or health care. Its not that theyre are moving away from consulting or banking. In those sectors, they are more interested in smaller firms. Stephanie is that because they want the equity upside . Certainly thats part of the story. This is a generation of people who want to feel like when they go to work that their work has meaning. They can move the needle in some way. They are working with colleagues were they dont feel they are invisible. David has that changed . Back a generation, with a have stayed with the big banks . Our students move a lot more. Many more of them will become entrepreneurs. Out of the 250,000 alumni we have around the world, one third of them started company at one point in their career. So this entrepreneurial energy, at some point they decide to do their own thing. Is very true of harvard graduates more broadly. And you see how the oil they are to harvard given how much money comes back to the school. Business those students ever call you and say, why doesnt our endowment perform topnotch like we are . Were coming back to manage that money. David like for example, y ale. I wish our endowment was doing as well as yales has done. More than anything else, we feel quite good in terms of our competition when we think about the other ways we make a difference in the world. And football now. Nine years in a row. Matt is dying to show you this. See endowments. This is a good way to rank endowments. Harvard is obviously the biggest. 37. 6 billion. Yale falls short. But harvard has returned 5. 8 and yale has returned 11. 5 . Year return. 0 7. 6 . Harvard ranks number 41 of all the colleges that we look after. The average is about 17 . David and a response . We need to do better. Matt i think stephanie makes a great point. You have the smartest people in the world going to harvard. Tell them to come back. To a little good business. I want to welcome a very special guest. Beth comstock. General electric vice chair of business innovation. Welcome back. Ge is gearing up a brandnew project called current. It delivers clean energy. We love to hear this. Right now, Big Companies get painted with a negative brush because people dont understand all the good work you do. Most industry wants to do the right thing. Its hard. What weve done is provide onsite power and efficiency for business. Weve seen what happens to consumers. You can get solar and energy in your home. Iness has been able to get hasnt been able to get as many options. With solar,leds energy storage, electrical vehicle charging, onsite power. We are offering it to businesses. Already getting some great precipitation participation. Walmart, walgreens. Its quite interesting the array of businesses that want to have more onsite power. David one of the things that helps is that the cost of these things are coming down rather dramatically. What is causing that . It will continue. Take Something Like batteries. We have been developing these for a long time. We are just going to see them scale and be more efficient. Have been incubated incubating leds for more than a decade. Years ofn 10 investment from us and other people to get it to scale. You can save up to 30 of your energy by just lighting with leds. What do you expect that a consumer like walmart or a customer like walmart might be able to save . They could save 30 of their energy if they started with just lighting. Layer ontarts a software on top of it and they can better manage their energy use. They can work with utility in a better way. Theres all kinds of future services they get in addition to the immediate savings. Is this one of the examples of the promise of the internet of things . I love the current and lighting examples because they are things we can understand. The ability to think your light get smart it means that i can monitor the environment. Youve seen what happened in paris. A lot of cities have come forward and technology has caught up. You can use your light fixture to manage traffic. Its pretty amazing. David 30 savings is great. Whats the payback period . How long does it take me to make that money back . You are seeing financing being a part of these packages. Its not just the hardware and software. For Something Like led lighting, most businesses can get a two or three year payback. For this disrupts the power sector . I dont know that it disrupts them david sorry i use that word. That is a buzzword. Theres a lot going on in the utility sector. Theres a lot of flexibility thats needed. Go toies have to businesses and say, can you go offline now . This should help a lot in the transmission and make energy more efficient. You spent a lot of time in Silicon Valley. You want to take ge to the next chapter and to be looked at as a digital industrial company. What is digital industrial . Its new to us, too. Its the marriage of software and hardware. Sensors and controls and every piece of equipment we make. A jet engine need Something Like 20 different sensors. You can start to send data and analytics back to the home base. Massivee ge is a company. How are you moving into this generation when we see other companies that cant seem to find their group in the new world groove in the new world . Thesetion all lives in new Cool Companies that we are excited about. How does ge become new and cool when you are old and reliable . I think you dont become old unless you know how to reinvent yourself. I wouldnt be your talking to you if we didnt know how to reinvent ourselves when we needed to. I think Old Companies know how to stay alive well. I try and remind my students that these 130yearOld Companies dont rule them out. Real fascination these days with the young people who are the best and brightest going into other sect errors. How do you make yourself more attractive to the talent . I think we are attractive already. We hire 100 plus mbas every year. I think they want to work here for a couple of reasons. It is this interesting marriage of software and hardware. Its a new we are forging. Center a Great Software in Silicon Valley. We are changing how we make money. They dont just want a jet engine. They want fuel efficiency. There are a lot of interesting challenges every step along the way. Labe had an event at our and it was quite an eyeopener to many students to see how much is going on at ge and Companies Like that. There is so much fascination with Silicon Valley but people would be well served to look at the innovation occurring in Large Companies as well. Stephanie way cooler than light bulbs. Thank you, nitin nohria. We will take a broader look at ge when we return. You are watching bloomberg. You are watching bloomberg go. Sure, tv has evolved over the years. Its gotten squarer. Brighter. Bigger. Its gotten thinner. Even curvier. But whats next . For all binge watchers. Movie geeks. Sports freaks. X1 from xfinity will change the way you experience tv. Tand thats what were doings to chat xfinity. Rself, we are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Stephanie ge is changing the way we think about factory work. Companies offer dream events like playing catch with joe montana. Marissa mayer still hasnt fixed yahoos core business. Issue one of the people who can is she one of the people who can still keep it together . We will find out. Welcome to the second hour of bloomberg go. I thought the first hour was pretty good. Im stephanie ruhle. David im david weston. Beth comstock is with us. Republican president ial candidates arent announcing Donald Trumps call to ban muslims from entering the u. S. Jeb bush calls him unhinged. John kasich says its another example of why hes unsuited to lead the u. S. France wants the rest of the eu to speed up attempts to cut off funds to terrorist. Inance leaders are meeting brussels to figure a better ways to track transfers and control people a prepaid bank cards. Authorities in beijing have raised in air pollution alert to the highest level. The smog level is seven times the level considered dangerous to help. More on these and other breaking stories at bloomberg. Com. Matt a quick story. Fairchild semiconductor says it has received an offer for more a share. 70 almost 160 billion in semiconductor deals this year. That has not helped futures at all which are seeing a big drop. Take a look at the futures this morning. S p futures down more than 1 . Thats because of energy prices. It has turned around. Nymex crude oil is below 37 a barrel. Brent crude is down as well. Natural gas is down as well. 6 yesterday. S are not being spared. Gold is down. Copper is down. Gold and copper have really hit the freeportmcmoran price. Premarket. Yesterday it got absolutely crushed down 8 . The we see the same drops at minors over in london. Glencore is one we talk about all the time. Anglo american is down 10 in the premarket. It said it would have to cut its dividends and its going to fire two thirds of its workers. It has 100 30,000 workers. Its going to end up with 50,000. Thats huge. We are going to talk more about ge. We started this conversation in the last hour about how you are trying to transform the industrial world. Im mindful of the cost of oil. Looking to save money on energy. The cost of energy matters. Obviously we have a very Important Oil and gas business in ge. This is a time for software and services. You are maybe not going to invest as much on capital if youre in the oil and gas industry. The idea of the industrial internet is really going to be big. Stephanie what does industrial internet mean for factories . What is the factory of the future going to look like . You are seeing the change even now. Factories just getting your things connected. Do you know where your machinery is . Some people arent even able to manage their assets very well. Stephanie what does that mean . Do i know whats online and when it breaks down so it doesnt bring the whole line down. Things States Running longer. Its really that simple. You get a lot more productivity. Over time you get more cloudbased design. Everything gets designed now in the clouds and developed all the way through the manufacturing line. And robotics. Thats what im very excited about. David what does this mean for ge . The you sell a lightbulb, person who buys it screws it in. It sounds like what you are talking about requires more training and teaching and even consulting with the customer. It does. Thehtweight is just a lightbulb is just a gateway now to data and analytics. You are getting the installed base and then the ability to just layer on all kinds of services. Stephanie how about educating your factory worker . Whos going to work in this factories . Do the people who work there today have those skill sets . Youd be surprised. Its a very digitally savvy workforce in general. Its a lot of interesting digital already happening. You have a workforce that wants to do more of it. Oil and gas are actually aging out. You have a lot of workers retiring. Its probably a good thing that these industries are being digitized. It will appeal to a new wave of workers. David do we have a workforce to supply that need . As you are looking at more software, yes. You are looking at it more software capabilities. People to become more digitally savvy. We of the Robotics Companies are parted with is rethink robotics. They have this robot that has gotten a lot of attention. It helps people on the line have better jobs. Its a very easy interface to use. More ofoing to see much that simple to use interface and then peoples jobs hopefully get better as it goes on. Stephanie if ge didnt grow, five years from now would you have more or less employees . I think the jobs change. There may be some shift in the shortterm but the jobs change. We are hiring a Record Number of software engineers. People who know artificial intelligence. Data analytics. User interface. You want something thats really simple to use. The kind of jobs are changing but there are new jobs being created. David we have to talk about electrolux. Of viewfrom your point what happened and why it didnt go forward. We announced at about 15 months ago. There was a lot of hope we could get the deal done. It didnt move in the u. S. Justice department. So yesterday we announced we were walking away from the deal. Stephanie we have seen you selling assets in the last couple of years. The Regulatory Environment is getting more difficult. Are you going to change your strategy . Weve changed our strategy a lot even in the past decade. I think every piece is a different kind of strategy. In this case it was unfortunate. We are going to continue on. We just to be mindful completed the acquisition in europe and france. We worked through that one. It used to be the case but as long as you accommodated the regulators you would get through. Is this a change in the Regulatory Environment . We have to work together. This is what i hope regulators appreciate. The problems we are trying to solve are really complicated. You need and big business and Small Business working together. Sometimes i wonder if regulators are keeping up with the pace of change. Youve got problems to solve. Had you see the china slowdown affecting you . China is a big market for us. They are doubling down. We look at the global aggregate. We are still wellpositioned in china. Its an important market and it will be. U. S. Growth is going up. Developing markets not as much as we had hoped. Stephanie thank you so much. Vice chair of business innovation, bet Comstock Beth comstock. We need to take another look at oil. Matt look at this graph. Its really unbelievable. Oil just dropped precipitously about five minutes ago. We are looking at 36 and . 95 a barrel. Oil has just come crashing down ever since the opec meeting on friday. There was news that they scrapped any production ceiling at all. The cartel has effectively become ineffective. Thenitely cannot control price. The worst threeday slide in crude we have seen since july. Stephanie there you go. We have to take a quick break. When we return, are regulators getting tougher on deals . You are watching bloomberg go. David welcome back to bloomberg go. Canadian specific has made a revised takeover to Norfolk Southern. Newdian pacific says the bit is financially more attractive and reduces regulatory uncertainty. Norfolk southern is less than the bid the railroad had already rejected. Tmobiles popular Advertising Campaign is deceptive. The new York State Attorney general is looking into the promised to rip up Service Contracts and and hidden fees. Most tmobile customers are locked into loans. The biggest u. S. Luxury homebuilder says profits rose. Earnings missed estimates. Thanks very much. We have seen two major deals challenged by regulators. Ge dropped deal with electrolux. And the merger of staples and office depot will be blocked. Cory johnson is joining us. Is this a new wave for regulators . Year this is the biggest in the history of mergers and acquisitions. But all these deals arent great for consumers. Thattc is stepping up to responsibility and looking at what would happen. In the electrolux deal, they would have owned 80 of that Specialty Appliance business in the u. S. Which would have given them so much pricing power. Comstock saysh her hope is that regulators can keep up with the pace of change. Thats a big hope. Are we ever in a scenario where regulators can do that . Do they even understand the problem . I think the ftc is actually really sharp. They do the work. These very big mergers in health they are looking at the dynamics of the marketplace today and trying to understand whats happening. What the market is, take airbnb and hotels. His airbnb in that market is airbnb in that market . Airbnb certainly says they are. Depends on if they are trying to get a big merger through or not. Cory thats exactly the point. The ftc is trying to look out for consumers and places where prices like it just prices might get jacked. They are looking out for the better aspects of the economy that might allow for competition to continue to exist. Stephanie were there deals that you think will get halted because of the threat . Look at the breakup fees. 175 million. Cory there are a bunch of mergers in health care that have been proposed that the ftc is going to take a really hard look at. We see what has happened to Health Care Prices with competition. There is competition, great concern about what that might mean for people. Stephanie you are going to stick with us. When we return, the experience economy. If only could play tennis with or get front row seats to a Christmas Concert with mariah carey. We will bring you a company that is making these events attainable if youve got the dough. Thats next. Stephanie you are watching bloomberg go. Consumers are voting with their wallets and they would rather invest in great experiences than material products. We are continuing our week long series on the experience economy. Joining us now is if only ceo trevor train of and cory johnson. Its all about the desire economy. Trevor, tell us i think this whole thing is an experience. Imagine what we could charge for this. Cory this guy has the coolest business. David i think corey would do a better job. Recognizing that people want to live experientially. They want to spend their money not on things but on experiences they can share with family or friends or whatever. If only is a marketplace where experiencesnd get from your life onceinalifetime bucket list. Stephanie but its for rich people. We have things starting at 25. Stephanie what costs 25 . Just bucketug listings. Ballooning over mount everest. Tennis with andre agassi. We do simple things locally. You can have a really accomplished chef come to your home and cook for you and your friends. You can do pizza making. Chocolate making. Wine education. Simple local things with the top talents in their field starting at 25 or 30 a person. Stephanie what has changed that we want that . These type of things were filled at school auctions. How has it gone from a Charity Auction item to a real business . The experts would say this is part of a multiyear trend towards experiences. My own theory is that the downturn of 2008 really made people rethink what was important. Want to when you didnt see anybody on madison avenue carrying a logo back . People thought, i have enough stuff. Id like to spend it experientially. Cory theres also a thing about the world of technology. You have a lot of Big Technology investors. It keeps us a little more distance from people and places so theres a lot of talk about the boom in the conference business of people wanting to make actual connections with people. Having actual experiences as a human has a different context when we have so many virtual experiences. I couldnt agree more. We sell stories. Thats what people want. I want to connect with someone inspirational and then tell that story afterwards. Interpersonal connection is great. What we find when we work with very famous people is they enjoy connecting with our consumers as well. They are in a bubble. They want to be able to talk about their craft and what they do. And engage with people. Weve been working with chris hems worth. He has a great film coming out. We took two customers to the premier and they flew from australia to meet him. And he was so lovely to them and they smiled like this all night. Us through some of the items. I know you have a mariah carey concert program. Isnt that something people could just buy . If you can buy it somewhere else, you are not going to find it on if only. Front row tickets can be a great experience if you are available if they are not available somewhere else. Stephanie why would they do this . Two or the diane von furstenberg headquarters and have tea . Why would she do that . We support over 200 different charities and causes. Very famous people like diane von furstenberg use us to raise money for their cause. She is lovely. You can go meet her at her studio. She is very welcoming. You go up and you have tea. Its not that expensive in the scheme of things and the money goes to a wonderful charity. Stephanie ok. Your best one. That you love the most. The most crazy one we have is ballooning over mount everest. It is 5 million. But it does come with a 70 chance of living. Which i think are good odds for that experience. Cory who does the money go to . Percentagere a major of every transaction go to a charity or cause. David you require that. We require it. An andreork with agassi or a paul mccartney, they give it all. If we work with a chef or something, they split the money with the charity and we give them that destruction discretion. Stephanie for the superrich, there is no cost. They just want the experience. I think there is a price for everything. When you have the right price, people will play it pay it. Stephanie there you go. We will be back with more bloomberg go. When we come back, we are talking verizon may be buying yahoo . David welcome back to bloomberg. Cory johnson is still with us today. Stephanie we going to get some first word news. Congress may have to extend fridays deadline to pass the bill to let government keep spending. The talks are company get by to extend tax breaks to Small Businesses. Research and development maybe another extension for another two years. In venezuela, the opposition faces struggles by president. The country is suffering through an unprecedented recession. The president remains there until 2019 and the courts in the Central Banks are packed with this appointees. The jordan government allowing 12,000 people stream just inside syria. The agency praised jordans contributions by hosting 630,000 refugees from syria already no word yet from jordan yet on the proposal could you can get these stories try for hours a day on bloomberg. Com. Ow over to matt miller oil has come down and it is trading at 36. 88 a barrel. Not seening to lows since 2009. We are not far from 33 dollars . 98 to desperately dollars and . 98. We are not far from 33 98 mat. 98. It waycks having down to affidavit if you pull up day. You can see exxon mobil all trading down 2 in the premarket. It is a big story. There are other big stories however. Last night another case of e. Coli was discovered at boston college. We are now looking at 10 chipotle has e. Coli link and does not yet know where that is coming from. It worries me about my lunch, but i will still probably go there. A bid that tops the Semi Conductor bit. It is looking at 21. 70 a share. Its rising onto a premium with on coming down 3 . Finally, Norfolk Southern coming with Canadian Pacific coming with a revised bid for no foot southern. Norfolk southern. We will continue to watch Norfolk Southern and Canadian Pacific. Im hearing breaking news on pep boys. Andeard pep boys yesterday that carl icahn had taken a 12 stake in pep boys. He has offered to take up the 0 sure. Hare for 15. 5 richard, what are we hearing now . Let me pull this up. A superior proposal. Matt carl icahns offer may result in a superior proposal according to pep boys. Carl icahn would say that, but its interesting that pep boys would say that. They have been talking with carl icahn for six months. They were concerned about the thirdparty that he was developing. He has friends that holding 19. 3 in have boys and its adding up to too much. Stephanie i will doubt that he is friends with gamco. He is a brutal investor. It does not matter whether he is your friend or buddy, its all about business. Pep boyss is what tab means. They are concerned about other players that carl icahn could team up with that could control a stake in the company. He is pushing heavy for consolidation in the space. He bought a canadian autoparts retailer this year for 300 million and wants to push further. Stephanie that is different than saying they are buddies. Time going to cocktail parties because he has offended so many people over the course of the last 30 years in terms of his investing. Matt i feel it mario might say the same thing. Stephanie they can both come to my house for a Cocktail Party any day. David ok, boys and girls. Matt, i think you have Something Else to do. Buts to our morning meeting. In light of chipotles recent stock dive, we turn to restaurant analyst john glass to discuss this and the impact of writing wage costs in the Restaurant Business and the retail spectrum. John, thanks for joining us. Chipotle, you about having nothing to do with this fascinating report coming from Morgan Stanley. Case of e. Coli discovered here. For disclaimer i love their burritos and go there all the time. A lot of consumers are not going to pic. John we stick to the facts as we know them today. The company has been transparent on how her that has been impacted. We have changed our forecast accordingly. Based on our experience in every case is different, we have seen a couple quarters were consumers fully come back. I expect that will be the case this time. I think the first step is to get the news flow ending and were not seen that quite yet. Matt they make texas as well. They do not even open until 11 00 on lexington avenue. Lets talk about the report that Morgan Stanley put out. A very thorough report on rising wages. This has been a discussion and debate going on bloomberg. Rising wages help the Retail Sector . Or hurt the Retail Sector because walmart now has rising costs across the board or mcdonalds or take your pick, anyone who employs tens of people in this payment 10 or more dollars an hour . John the first place you start with is that retailers are paying higher wages first in the spending may come back later. What we did is look across the retail spectrum at the impact of rising wages wages are going up for several reasons. Is the tightening of labor markets and changing roles around overtime. The premise is that wages are going up and what do retailers do about it . People make men on wage and work in the Retail Sector. We looked at the areas around minimum wage going up. That is a real thing that will happen. Theres a step function going up led by states in california in the case of fast food. We look at scenarios like walmart paying 10 having ripple effects across retail. It is not happened yet, but that would have a much more adverse impact across retailers. There is a benefit which is that you get incremental spending power particularly at the lower end. We calculate that to be about 17 billion in incremental spending capacity. That is 1 5 of what youve got from lower gas prices. It is about the 1600 household benefit. They have a high proclivity to spend that money right away. This benefit to spending at the lower end, but not the benefit that we as seen from lower gas prices. Matt john glass, thank you for spending time with us. David, that to you. David time to talk digital. Verizon ceo says it would explore and and acquisition of yahoo if it makes sense, but it doesnt make sense. [laughter] stephanie if it doesnt make sense, we are all about it. Investors onng to monday, while it is still not clear what yahoos board has planned, verizon would take a look at it if it were offered for sale. Lets take a look at what he had to say. It is way too premature to talk about yahoo . Their board and investors have not decide what theyre going to do with that asset. Right now, theyre kind of figure out exactly what theyre going to do. Its like everything. It is just like with aol. We look at everything across the spectrum. Sure digithere is a fit and it makes sense for shareholders and we can return value, we will look at it. At this point, it is way too premature to talk about that one. David for more, let us bring in piper and gene munster who hasnt overweight rating on yahoo . We do not want to speculate too much about yahoo . It sure seems that they are going to have to do something, doesnt it . Gene keep in mind about the big part of the valuation is alibaba. Yahoo court has been struggling to rest of my has been around for three years and it has not been fixed. The savior is Tim Armstrong prefixed a lot. This lines up in a lot of ways for verizon to be more of a play when it comes to yahoo . Stephanie when you think of yahoo in terms of overweight, the reason is because its an target. Ion gene the text treatment around the alibaba spent. Youre brushing the entire valuation of the company aside. 90 of the value around yahoo is around alibaba. David and yahoo japan. Stephanie if that is what the value is, once it is sold and once the tax treatment is buttoned up and all wrapped up, where is the value in yahoo . Is it overweight as a trade or an investment . Gene the court is struggling. Be a made a bet to Technology Company when Marissa Mayer came. And arthur and the in our opinion, yahoo is a content company. And acquisition of the Huffington Post and made it a media company. How do we feel as yahoo as a standalone . If they got back to a core of content, we would be excited about that. If not, we wouldnt. Aol spent vast fortunes around creating an ad network that worked with their content. It was accommodation of the two. Same thing do the around yahoo , but it seems like that kind of given up. Gene the search has done through thing. Some of the acquisitions that have done around at tech side has not really been a catalyst for their content business. They have not had that same effect that aol enjoys. Stephanie do you use bing . David i do not use bing. Gene munster, thanks so much for joining us. Cory johnson, you ares still staying with us still staying with us, i hope you up next, venezuela has elections there and they are signaling a new feature to the company. We hope its also for its economy. Thats on bloomberg. David change is coming to venezuela. The question is how big a change it will be. Final tallyit the from the election council, venezuela opposition leaders say they have captured two thirds of the seat in congress, seeking a powerful mandate. We are joined by her latin america experts. Welcome both of you. Break this down for us. What do we know about where the seats in the legislature are . The official results are that the opposition has 107 seats. We know that they would need 112 seats to get a two thirds majority. With 107 seats, they have a 3 5 majority. It is a super majority, but not like the golden price. We know that there are five seats that are a little bit unclear whether the opposition could still get them. It looks a little difficult because they would need all those five. Cory two thirds is important because why . Anything that you can do with a super majority, you can do everything. You can officials and change the constitution. You can change enabling law. You can center top officials. You can really make big changes. Stephanie i know i said this yesterday, but you can make big changes. Are we not throwing deck chairs on the titanic . It is oil prices that has venezuela and a time of crisis. Does that actually matter who youre voting for or who is in power . Are betting on venezuela right now, youre betting on oil 100 . There is very little they can do right now to turn that sinking ship around. At the very least, we can maybe see after this is stronghold within the opposition. In these countries in latin america, you do not just have two parties young 24 parties within the opposition. That is really hard to get a central leader to get people to real change. Maybe after this if they come out with a strong supporter on the opposition, we can see a unified leader of the opposition really take hold of the future. David strong support for what . My understanding of this election was lets throw the other guys out. It was not that we were voting for into a from of the plan. Jimena it was primarily a punishment vote and serving power to the opposition. I think the opposition would have room for making changes. Venezuela is getting a huge trade shot as other latin american countries are its part of the economic success. Similar to argentina in the case perpetrated a lot of economic was. A new economic course would be able to undo some of the economic problems. Stephanie hold on a second. Want to go to matt. We have not just seen them dropped yet again. Matt, take us inside. Matt we are seeing brent fall below 40. Brent and wti are at february 2009 lows. Typically we look at west Texas Intermediate Oil here in the u. S. Overseas, brent is more used as far as the actual product is concerned and far as the trade as well. Brent is what europeans look at and its now at 30. 98 a barrel. Very interesting that oil prices over the last half hour have collapsed. A real problem for the venezuelan economy as well as many others. Andreason is that Venezuela Iran and other countries cannot get saudi arabia to agree to its productions dealing on oil. Stephanie well cover that throughout the hour. Thank you very much for joining us from bloomberg intelligence. Next, im so glad there are two tall guys you me. Mice was of interview with dwyane wade. Mikes was a vanity with dwyane wade. Y exclusive interview with dwyane wade. Look at this. Maybe we lower the basket. Recommend mentioned. Well be right back. Stephanie you are watching bloomberg. I dwyane wade is not just known for skills on the best ball court, but for style and business. I decided to learn why he partnered with Companies Like cuba. I wanted creative input with everything im doing. Ive teamed up with the right rinse to allow me to do that. When it comes to the watches, i wanted to go more lecture. Lets talk about what the band looks like. Lets look at what the face of it is going to look like and how i want my signature or logo in place. It is difficult process. Stephanie when you talk about decisions you have made in terms of style, many athletes spent a lot of time in china because it is a big market. Example, to not have a classic shoe deal like we see some of the other basketball players do, why make a Chinese Partnership . Nike and i me, i had bought congress when i was with congress and then went to jordan. I was with that family for nine years and it was amazing relationship. I was at the point of my life where i was turning 30. I said, you know what, i want to leave a legacy. How can i build a legacy for my kids . Stephanie kevin durant shoe deal is a lot of money. That is a legacy. Dwyane i was not getting that money. Not at 30. [laughter] its a different kind of legacy. At 30, how do i build a legacy . For me, it was more so of looking at the Bigger Picture. It was not the shoe deal. It was not about the actual contract. It was about what i can build with my brand growing globally and how that opens doors and windows. Stephanie what is it about the style of basketball . When i see you after the game or other players, youre turning about. That is not the case in baseball. That is certainly not the case in hockey. Star basketball players, they do not bring the heat just on the court for a press conference, you are delivering. What is it about the game . Dwyane its the competitive nature. When david stern implement to , itdress code years ago became the dress code heard around the world. It became a competitive thing for guys. We were in the right space and the right time for mens fashion. It just happened to be met up at the same time. We are respected and accepted into the fashion world. Athletes havent really been because were looked as lanky and too long with no style and afflicted play. We now have been able to open those doors. Tephanie what does kobe brians retirement mean to you . Dwyane youre the next era of. At his press conference, he said he was a triple og. And now we are the old yes. We are the next ones up after the kobe bryants and the tim duncans and the Dirk Nowitzkis retire. Its scary from that point. From a guys career and someone i admire and someone who is a aom al role model to me and friend, his career to me is amazing. Stephanie what do you want to do next . If style is important to you, do you wanted take that in a different way . Dwyane i want to be a renaissance man and do it all. If im not owning it, i dont want to be a part of it. Ive made it very clear that when it comes to the game of basketball, one day i dont know when that day is, but one day i will love to have that ownership for sure. Stephanie i the end of last season, you cannot go on vacation. You did not take a break. You went and enrolled in a class at harvard Business School. Why . Dwyane i want to be educated in the fields i want to go in. For me to be able to go and talk andt business and marketing all these things, it was great for me to go in and be in a roomful of people from different walks of life and Different Companies that have the same amount of money or more than i have be able to pick their brains and get perspective from an athlete standpoint, but also to hear from another side too about how they think of equity and talent and how they think about marketing and all these different things. I wanted to kind of stimulate my brain on the other side and how people think. Stephanie i was thought og was original gangster. It is old guy. David very impressive. What a role model. Stephanie but as you think . Time around a lot of athletes and dwyane wade is very introspective and thoughtful. Stephanie and i got a basket right there at his house. Cory johnson, thank you. Im leaving. David will be back. See you. Sure, tv has evolved over the years. Its gotten squarer. Brighter. Bigger. Its gotten thinner. Even curvier. But whats next . For all binge watchers. Movie geeks. Sports freaks. X1 from xfinity will change the way you experience tv. Tand thats what were doings to chat xfinity. Rself, we are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. David we are just 30 minutes away from the opening bell in new york. Welcome to bloomberg. Stephanie im stephanie ruhle. Brendan greeley is with us. Brendan good morning. David also with us is dan. I see that you have 60 years of experience and asset management. Can that be true . Dan not quite, but that would be close. I got a few years ago. David lets get some things that are correct from david gora. I carrier received a threat from a jet. It landed in montreal. To air france flights diapered at month after terror attacks due to bomb threats. Donald trump is defending his plan to ban muslims from entering the u. S. He compared his plan to frank internment of japanese during world war ii. From trying criticism republicans in its disagree on who is the republican president ial front. The cnn survey gives trump a lead of just seven points. A Monmouth University poll shows ted cruz leading. That service those who vote regularly and revoke in primaries. Now over to my friend and colleague matt miller at the markets. Matt futures are seeing drops with 1 still on futures. Take a closer look at the s p futures for the day. You can see that we have been down all morning. With the decline in oil around it started to release slide precipitously, futures have come down. Here is brent crude right now. It is really considered a Global Benchmark here in the u. S. Slowly below 40 a barrel for the First Time Since 2009. If you look at west texas intermediate and nymex crude, you can see that has come down precipitously as well starting around 7 00. 36 68 a barrel is what were looking at right now. The spread between west texas intermediate and brent crude has gotten very tight. This is a fiveyear look here. Here is brent crude. Heres west texas. Heres the spread. Tighter and tighter the correlation here in the bottom of this chart. You can do that on the bloomberg with the function. Take a look at how this is affecting energy stocks. Big oil names will be down. Chevron and has are big losers. Single out morgan down for nine consecutive days. Tobe they will not be able afford their dividends anymore, but they will have to look at other ways to pay their bondholders. To have lost executives. Candor morgan down 5 right now to 15. 60 a share. Oil has really had a strong effect on this market. It has been negative unless you are short, in which case it has been great. [laughter] david that is obviously the story of the morning. Im going to bring in the managing editor for energy and commodities at Bloomberg News and the author of has the last oil bearing. Aron. I went through the news to see what is moving it. What is driving oil this morning . It seems to be a continuation of what we saw yesterday. Opecs decision, if you can call it that, came out on friday. Also early today, we have seen a new low in brent that the market is struggling to come to grips with what this means and that opec no longer really has the ability to curtail production. David there is a new reality. Tina absolutely. David were going to bring in stephen short. He joins us on the phone from pennsylvania. Marketslso see digesting a new reality . The decision was well expected and well telegraph it essentially confirms what we all knew. We are looking at the new year and the concern is obviously going to be the casualty between the sunni shiite the shia side of opec. If you are saudi arabia, what choice do you have United States has signaled its intent to lift the sanctions on iran. We do not know the impact of postings and barrels to the global market. Why would you pull back production when you know this oil is coming to the market . Therefore, you supply oil and war to iraq next year. It will remain well blended because all the growth globally in oil demand is based in asia. This is where everyone is focus. You look at following or stagnant demand in china. Japan is in its fifth recession since 2008. The demand is simply not going to be there to compensate for the supply and that is why we are getting the plunging price right now. Stephanie nothing that you are saying is a surprise. Why does it look like the market is in a panic situation . It takes two sides to a market. If i am a seller, i need someone to buy it from me. If we look at the wall street net, they are still bullish on oil. Youre getting a lot of that taken out. Are longrn now if you on oil is that prices are falling well interest is rising. That means money is coming into the market as prices are falling. That is bearish money. Right now, we are disconnected from the fundamentals. Even your most productive and efficient producer is going to struggle like 37. Once we are now disconnected from the fundamentals, the market is trading on momentum. Similar to 2008, it is in reverse today. Low prices are the excuse for even lower prices as we now set our sights on psychological targets. The next target at this level is the 32. 40 love that we saw during the implosion of the great recession. Is the newhis reality, start unpacking that new reality. What does it really mean . Peoplear you saying selling now, is there real danger of overshooting . Stephen absolutely. This is the beauty of markets. We are never centered right in the middle. We are to the right of the pendulum or to the left. When we correct what happens, we shoot right past equilibria and we go the other way. Absolutely, we are setting and sowing the seeds. The concern now up trying to buy oil is that demand is record stronger now. The gap between prices are so great that refineries are tripping over themselves to barrel every one they can. Prices were not moving higher despite the demand. Now because of opec they are moving lower. You ask yourself, if prices cannot rally when there is record demand, what is going to happen in february or march when refineries go to make midseason and they are filing fewer barrels . Whenear is now that construction occurs and the lighter quarter of next year that you are sowing the seeds for lower oil prices. Hearing this were kind of profound. He said unto the from the fundamentals. You are not looking at structural targets anymore. Were not even doing technical analysis. We are looking at psychological barriers. Tina oil is an emotional thing to some extent. If you feel like any driver could move it, stephen is right. Ow oil prices lead to lower oh prices. We had people earlier this year and last year, and for 20 oil. Theres a real sentiment now that that was not a ludicrous call and it may actually come to pass. Stephanie you have been the markets for 58 years. What you make of this just another cycle . Dan yes, with a geopolitical cause an injury of Political Risk on the supply of oil. And a geoPolitical Risk on the supply of oil. What you have right now is that when you had a problem in the past, you normally think that opec is want to get together and raise the price. What happens if that for whatever reason, the iran and thing gets to another level, now how do you feel about the supply going through the streets of hormuz . That is in the back of my mind certainly. Money andee borrowed , do iving to liquidate want to buy some insurance remote but real hazard out there, which is that the middle east goes to another level between the shiites and the sunnis . Thats a simplification by the way. I cannot imagine anybody wanting that, but there is so much shooting going on in the area. What would it take for an iranian speedboat to come out and torpedo a tanker . , that kind that kind of thing do you ever want to worry about that . Definitely not, but i do worry about that. Stephanie these guys will talk about it. Thank you, stephen for joining us on the phone and tina davis, the managing editor firm energy and commodities at Bloomberg News. Ss thealso author of he ron. Oil ther ba these men will be here. I have a ballet recital to go to. Harcourt journalism from me. Brendan we will look at what is moving up and down in the premarket and what is going on at ballet recitals. David are we going to get a full report when you come back . David g. welcome back. Heres a Bloomberg Business flash. Lost millions of dollars since the paris attacks. The company says they could take six months before bookings returned to normal. Tmobiles Advertising Campaign is being claimed as deceptive. They promised to rip up Service Contracts and end its fees, but critics say most customers are locked into loans after buying phones. The tmobile chief stands by the ads. The former Federal Reserve chairman was a Senior Advisor for the fun group. It also added others as advisors. Now to matt miller. Matt oil is driving the markets today. This is a look at s p futures. It was down all morning, but really turning more sharply down once oil started coming down. Take a look at rent crude. It has gone below 40 a barrel for the First Time Since 2009. It has come back up a little bit. 40. 19 is what we are looking at for brent. We look at west texas intermediate and nymex crude coming down. A little bit of a bounce the between 36. 85. That has not changed from the drop that we have seen premarket in the big energy producers. Exxon, chevron all big losers. These two especially our big heavy dow components. They will really weigh on the Dow Jones Industrial average today as well as the s p. Take a look at some of the companies that will weigh on the s p. I think that candor morgan is the most interesting story with that precipitous decline nine days in a row of drops. It said it will not be able to maybe pay its dividends. Coming up next, the force may be with hasbro as star wars hits theaters next week. Speak with the hasbro ceo to see how this blockbuster will drive toy sales. Matt star wars opens next friday. Theres probably a buzz of how could be a big win for disney and another company that stands to reach benefits is hasbro. Their ceo joins us from Providence Rhode island. Brendan i love to geek out about star wars, but we have to talk about logistics. There is some concern that after the initial open of putting the toys on sale that you might not be ready to actually ship what is demanded when the movie opens. Are you ready . We are ready to ship. We have been shipping lots of star wars since of timber for the we will have september 4 and we will have plenty in stores around the world in time for the holidays. David put this on some sort of scale on how important this is for hasbro. On a scale of one to 10. Star wars has been a perennial for many years since the 1970s. Obviously, this movie we are very excited about. It takes the whole brand to the next level and its more global opportunity than ever before. Our partner brands and are licensed brands and total represent me 5 of our total revenues. Star wars is a part of that. We also do the marvel toys next year. We will start Disney Princess and frozen. Setting, nation, that is 25 on average. Its a very Important Initiative for us. Its in context with a great portfolio that owned and operated brands as well as licensed brands. David give me your dashboard. Withis your success respect to hasbro . Brian we have lots of experience with star wars in movie years and nonmovie years. We are seeing a more global footprint with this movie around the world. We have seen movie theaters being built along with malls and multiplexes being built in emerging markets around the world. You have seen the Global Box Office become more global than ever before. China has become the secondlargest Global Box Office market for movies. We are going to see the performance of brands continue to be even more focused outside the u. S. Those are benchmarks for us. We are very excited about what fers forrs of 2015, but you also 2016 and the Home Entertainment window. The important thing for investors and the company is that we will have more star wars entertainment over the next five years the last 30 years. Down to this comes quality for investors as well as moviegoers. You rat hasbro for the last three movies. I will not say it for you, but they were not good. How much does your bottom line depend on the quality of this movie . Brian we are already seeing that materials are great. Jj has done a great job with this film. It is very exciting. David thats jj abrams, right . Brian jj abrams, yes. Well seen this great combination of all the materials of the known and the new with the characters that we have grown up with as well as lots of new characters. If you go online today, the fans are talking about different hypotheses on what is in the story. Think very excited and we this will be a highquality movie that will play exceedingly well. David you are in a particular good position to answer this question. You are a movie producer. You have done this. Have you seen the movie and how good is it . You do not have to tell us the whole plot, but how good is it . Brian im not seen the movie. They have obviously been under wraps. We know the plot very well. I cannot comment except to say what i said, which is that we think it is a great combination of the known characters that we have grown up with and lots of new characters with lots of new twists and turns. Opens up thehis world of star wars for the next several movies and opens this audience to new several worlds theyve never seen before. Brendan one thing that has changed since the last three movies and absolutely since the first three is the way that these products are shoulder. Walk us through the differences between what you are selling online what you are selling in stores. Brian overall, our pos has been iod. Strong through the per we talked with investors that our pos has been double digits and quite strong throughout the year for Franchise Brands as well as licensed products. We are seeing about to ask a 2x the rates of sales, whether its an online retailer like amazon. Very robust growth in online sales come at about twice the rate of growth that we see on nononline business. David brian, thank you for joining us. Im excited about this. Im a big star wars fans. Brendan that is stunning the news. David why highyield may be great for the decade could we will talk to dan about his ears. Why highyield may be great for the decade. We will talk to dan about his theories. Sure, tv has evolved over the years. Its gotten squarer. Brighter. Bigger. Its gotten thinner. Even curvier. But whats next . For all binge watchers. Movie geeks. Sports freaks. X1 from xfinity will change the way you experience tv. David welcome back to bloomberg. Lets talk about highyield. Commonest fly columnist. Chairn fuss is the feist of limit sales. He is still with us. It has 232 billion under asset management. Why do you think this is the best opportunity in more than a decade when it comes to highyield . A Second Opportunity within the last decade. 2008 was a classic. That was the most attractive time to buy highyield because you have no bids in the market. This is like 2004 or the year 2000 except that in the last few ins, excluding the Energy Mining areas because they are in the absoluteld, yield and the ability to buy at reasonable discounts. The thing to look out for in most of the highyield offerings is that you have a loaded contract with the company. South, you are stuck with it. If things get better and the price goes up, they will call it back at 102, 103, 11. That is why you have to look out for it. Energy and mining, you have got a lot of bargains out there right now. Lisa one of the things that strikes me is that i look at is that highyield bonds are poised for the first annual loss since 2008, down 3 in this year and energy space. Its a whole world of pain all its own. It is down 16 this year. Well, they are happy. [laughter] as i talk about the pain and carnage in highyield energy. David that 60 refunds what happened to the market today in oil. Lisa the pain is certainly deepening and there is a lot of concern about contagion. Because people are getting nervous about what they are seeing an energy and because they are seeing defaults actually start to kick up, will this cause a weakening generally of credit markets that will influence other companies . Yes, highyield might be a bargain, but it might be a bargain even more so in six months. Dan it might. I doubt it. Future s know the none of us know the future. You have that. Not too many people who individually own highyield bonds are going to the tax law scholars. I agree with that. Or theon a mutual fund etf, they will. Its very easy to do. Should they . Thats up to them and their particular situation. There is another component that is coming into the market right now a little earlier than you ld and dissipated that is anticipate. That is from the institutional side. You go back energy and mining. There are fantastic burnings in their if you know exactly what you are doing. Lisa earlier this year, i heard a lot of big investors say the same thing. Energy looks fantastic. It looks cheap. ,e are coming off an era of 5 below 5 yields on high bonds. That is not highyield. That is a treasury bond yield. For is what we are getting highyield bonds. All of a sudden, we are starting to see a percent, 9 , 10 yields could the average yield on energy junk bonds is about 13 . That is on average distressed. All of a sudden, it looks really appealing. And yet, the people that went earlier this year got their faces torn off. The carnage just continued. It has been a very tricky market to time. Dan absolutely. There is a lot of leverage money in there. In the background of what were talking about is centralbank movements. Ultimately, this is a bet on where rates are going to go. We are also realizing that janet yellen is not the only player in driving this globally. This also affects currencies. We know that in the last year that you made some bad bets on currency. How do you reverse those . Looking at Central Banks and aske in the next year . Dan good question. I dont have an answer for you. Once you get to the currencies, you have to go one by one obviously. You have an overlying thing thats going on not with the price and oil but with currencies. If somebody in the content of their portfolio is levered to ordollar or levered to oil gas, theyve got a problem. Lisa do you think theres more leverage in currency bets right now than there has been for a while . Dan no, i think it has come down. But it is still high. That is just instinct, lisa. You cannot get numbers on that. Extremets an concern for the central bank. Brendan weve been talking about these funds. Matt, you been looking at performance. Matt i remember when morningstar was thinking bond fund manager of the decade. Between dan,ff bill gross, and jeff good luck. They ended up taking bill gross. He runs pimco. I looked at the five years since then. He was with pimco, but pimco has massively underperform. The yellow line is good luck. The white line is dan. You connect after five years. And that after five years. Youmuch does it matter to and how do you want to beat jeff Going Forward . Styleou know, matt, our and you have missed some real doozies if you backup before 2010. That has been the pattern for a long time. Lisa mentioned the decline and a number of the Energy Credits with the hca along with energy. Same bonds, new prices. The bonds still, if it can, the company will pay interest in prince when do. Imprints when do. I much prefer to buy things went on sale. Thatis the tradeoff for and the tradeoff is money matchup against an average or. Ny general distribution you dont look like it. That concerns people. I understand that. I wish we could print these numbers on average, but we buy the bonds when they are cheap. And then you hold them. Sometimes something happens. You continue to hold them. If they get really cheap and if you have any money left, you buy some more. There are two components and im going to use a rough term to describe it in the market what is happening now. The longerterm institutional pensions nonlevered funds and a lot of the offshore money, they come in when you hit certain levels of attractiveness. That is happening now. People concerned with their own financials at the end of the year they see something that is selling at a loss. They will do the prudent thing. Other people quite frankly do and with the etfs, they are easier to get scared. It doesnt necessarily help your returns. Period like this, 2008, which is not on the chart, was a gift. It did not feel like one. It felt awful. It really did. It felt awful. These are people savings. Over time, it makes money. Brendan let me jump in here because we have some movement. We saw the bell a second ago. On thenow down a percent s p 500. Were taking a look at this. Can you take us into the terminal . Matt the s p 500 down 1. 1 . The s p 500 has gone negative for the year. We are looking at crude oil behind me. This is the reason we are seeing the chops today. 2 tocrude down almost 36. 96. In the last three days, we have seen a precipitous decline. Brent has gotten tighter and tighter. It did drop below 40 a barrel. If you take a look the index and what the breakdown is as far as winners and losers in it, pull up the imac function, which we all know and love. It is right across the board. The biggest losers are energy. The energy index down 2. 8 as you would expect. Everything else is down today. The drop in oil doesnt just weigh on exxon and chevron. Those are both down about 2 right now, 3 even. Exxon and chevron down 3 . Industry on the entire sectors it looks like. Kinder morgan down 6. 5 . I should not say it weighs down all the energies. If you check out airline stocks, i bet they are doing quite well. The s p, the dow jones, the nasdaq altered drops because of the drop in oil. Not enough to lift it up today. Date,day, we year to we saw this in the dow couple days ago. Was it yesterday or friday where turn negative yo year to date . Becauseis noun negative of these drops that we have seen in oil. Lets go to abigail doolittle. She is live at the nasdaq and she is looking at United Natural Foods at the open. Abigail this is the company that distributes the well popular kind bars to shares of plunging after the company missed its fiscal first c quarter earnings estimate. Become me mate . 60 relative to . 60 a year ago. Its a decline at no investor wants to see. Citedephen spinner increasing competition and shifting dynamics and the Health Food Marketplace as a reason for the disappointing performance. All this was enough to cause top ranking analyst Meredith Adler of bartletts to cut a rating to underweight and the price target to 39. The stock opened below that level. Shares are trading cheap relative to the cost. We will see if this turns out to be an Inflection Point of some sort for a stock that is down more than 50 yeartodate. Brendan abigail, thank you. The s p down on the session so far. 1. 17 . Thanks again to lisa who was with us just now. Next, we will have the chief Investment Officer of the secondlargest pension fund in the u. S. Weighing in on the fed and has Market Outlook for 2016. Stick with us. David g. welcome back. Heres the latest Bloomberg Business flash. Mexico against a pair up a more than mccourty Million Dollars on u. S. Goods. This says that u. S. Meat labeling rules hurt mexico and canada. That put 780 million in tariffs on u. S. Good. Canada has not said whether it will do so. United airlines is promising its top corporate clients that it will be as reliable next year. The carrier is offering credits on upgrades and feeds if it is not as functional as american and delta. It still ranks fifth among the top 13 carries. Amazon is unveiling a slightly bigger version of its tablet hda. Bluees a lower level of lights of nighttime readers will not be kept awake. It comes with a free year of Kindle Unlimited for 250. Brendan markets are trading down right now. Christopher aleman is with us on this are short in a tie. Along with his extraordinary e. Pi he is the secondlargest fund in the u. S. And dan fuss is with us. I want to talk about psychological barriers. We saw them in Oil Last Week and this week again. We were just hitting one with the s p 500 it is down your today as well. I know that the pros last these, but you have to Pay Attention to them. How important is the psychology of moving through a longterm number . Investora longterm and what you saw was four years of bull market and now it has been rolling over. Ofistopher we set the start 2015 that we thought it would be a flat year as the market ran out of momentum and its continuing. Brendan you started a program at callisters that you call risk mitigation, looking at much shorter term horizons. What is causing you to do that . Christopher trying to balance our equity portfolio. If you step back and look at us, we are 80 exposed the global gdp growth. I want to balance that with some risk mitigating strategies. ,ere using some long bonds which the long bond the u. S. Is not the new gold standard. Were using some shorterterm trading strategies. They do not generate returns correlated to the equity market. It bounces our portfolio and that is what were looking for. David given a longerterm perspective, you thought 2015 would be flat. 2016 look sort of flat as well would you say . Christopher im worried about 2016. If you take everybodys gdp estimate right now at 2 3 , i am sad to say that you can cut a full percent off of that. We will be hit with this full year of a political campaign. , can youy to people imagine a whole year of donald trump and Hillary Clinton going at each other . It just takes the wind out of people sales. I think it will be a drag on our economy. I am worried about how well we do. Corporate earnings are going to grow. Just a smidgen, not much at all. Brendan how important is political silliness . Can it do damage . Dan major. Particularly if it starts to influence outside of the country. In the u. S. , political silliness influences other parts of the world. I was over in asia just for a couple weeks just a few weeks ago. I heard a lot of commentary on the u. S. Political scene. People thinkligent is the press over playing this . I believe the answer to you guys. Brendan we are sitting here is the press saying is the press over playing this . Trump, when he opens his mouth, a river o it reverberates outside of the u. S. And it bothers people. 70 of the u. S. Economy is the consumer. If consumers are taking a backseat and they are not enthused, i do not think we will get good gdp growth out of it. Dan the frustrating thing to me is that i respect a lot of good economists, particularly our own. Christopher thats good. Dan i have never in my experience, to my recollection, found an economist who really did predict a negative gdp. If you look at the 12,008 forecast 2008 forecast, they were slightly positive and did not predict the decline. We will not have a 5 growth rate. We will have a very slow economy that is going to be i hate to say it choppy. David what does all this negative talk do for the investor . Does this mean cash, longterm treasuries, real estate . What does it mean in a practical manner . Christopher what im hearing is that people are looking at real estate in the secondary market. Say like as they nashville and other places. Private equity even though it has been bill nice is still going to see some profit opportunity because of laws of investmentse made in 2000 and 2009 are coming to fruition a lot of areas are priced to perfection. Im looking at low retention next year. We are going to eke it out by Income Opportunities and look at other assets. Outside the u. S. , maybe an opportunity to it sounds crazy to say that europe may grow. At least it is cheap relative to the rest of the world. Brendan you have been by virtue of your position at the villa nation doesnt go on is asian of private equity. Are we going to see you release information on the fuse it is paying private equity . Christopher we have released the fees that we pay. The big discussion is what is the carried interest number. The carried interest number is 20 of our profits. I can figure out our profits and i can figure out the 20 . Everybody in the industry wants to now start collecting those and disclosing those the. The question is not about us and the money but how it is taxed. Brendan do you think increasingly that we are going to see Pension Funds demanding this information be reported Going Forward . Christopher no question and its not just pension plans. It is all the investors. We talk to our friends and theyre asking for this information. The industry is changing its disclosure. Youre going to see new guidelines coming out of the industry. Its changing the standards that we can have easier reporting and we can track it and publish it. This is the real negative attitude outside of new york and outside of this island. There is a negative attitude toward wall street. It centers on private equity and on hedge funds. David christopher aleman, thank you for joining us. Dan fuss will be sticking with us. When we come back, highlights from today show on bloomberg. David welcome back. We are going to look at some of conversations in as heard on bloomberg. Its its ordinary to me that this country that means so much that people like me that has paid opportunities and his example of the american dream. The fact that mr. Trump would religious grounds that we would prohibit immigration is unimaginable. How he is th doing in the polls. As you make and people backing up your it is the amazing people backing it. Occurs that human nature can be you can get anything you want from your cable box. The commercials are in their and their measured. It was looking at the Bigger Picture of my brand. It was not about the shoe deal. It was not about the actual contract. It is about what i can build with my brand growing globally and how that opens up so many doors and windows for me. Stephanie how does ge become new and cool on your old and reliable . You do not become old unless you know how to reinvent yourself continually. A 130yearold company, i would not talk from this purchase we do not know how to reinvent ourselves. Do regulators keep up with the pace of change . That is what we are staring into. Pace of change is crazy fast. David lets get a final thought from dan fuss. The final thought i have is our conversation this morning has mixed in some domestic and global side. The market worries tend to be domestic. We are focused on stocks and bonds here. The real worries or the real concerns and the opportunities are on the geopolitical side. I think they are becoming dominant. They show themselves in the price of oil. This have a trend through that starts to pick up, which it has not, a more peaceful demeanor, it is going to be good news, whether the markets react i dont know. Up to now and for the last couple of years, it has been a negative trend on the geopolitical side. I hope that ends right now. Its not the way to that. David have the markets been good at pricing in geoPolitical Risk . Dan no. They have not. [laughter] david thank you, dan fuss. That does it for bloomberg. Tomorrow, we are following for the drop in oil with an investor that manages 14 billion in energy. Plus, we will have to Export Import Bank chairman on bloomberg. Welcome to bloomberg markets. Betty good morning, im betty liu. Tumbling as the commodities slumped defense. Iron ore prices falling to a point where they threaten the profits of the worlds biggest miners. Prices keep dropping with brent below 40 a barrel for the first time in almost seven years. Bottom in sight for commodities. It is bonus time on wall street, but should executives expect a merry Holiday Season compared to last year. Why one executive says guys like him are paid too much. Lebron james signs a lifetime deal with nike. What kind of return is nike