Transcripts For BLOOMBERG Bloomberg Go 20151211

Businesses. Jason joins us from princeton. What can you tell us about the deal . Jason firstly, the name is fascinating. The name is downdupont. That is the sign of the temporary nature of it. Is dowdupont. That is the sign of the temporary nature of it. There is very little that the market did not expect versus what was originally murmured what was originally rumored. It is going to break into three bundles, in a very tax efficient way, the way folks had thought. The synergies look like we have been told as well. There is 3 billion, another billion dollars of operational cost savings they are pointing to. Timing will be the key question. This all needs to get done relatively quickly or it will start to fall apart in peoples minds. Stephanie according to the news breaking, we will see a 10 jobs cut. Put that into perspective. Jason that will be in the thousands. We have not run through it from an Employee Point of view. We hope that the benefit comes from the synergies. The focus is a little less on cost. If you create three new countries if you create three little if you create three new companies, you will add a little of it back. Agriculture and the crop chemicals space, while it is easier to point to a cost number, management does that up front. There is skepticism around revenue synergies. In this case i think theres a growth synergy. Stephanie and a lot of people say this is Financial Engineering at its best. If this is not a sign that the ket is hitting the Top Companies merging so that they can break up. What does that do . Will help the shareholders p you have to think breen had aen ed terrific track record. Nelson peltz has been pushing for this. Really sophisticated about how these large conglomerates should not be together and could operate more successfully. David from an operations point of view, as jason said, we are hoping it is a lot of synergies. But on the costcutting side, there is a b i report that suggests they can save as much as 4. 5 billion a year. They are talking about a writeup of 780 million. That is a good deal. Amazinglys an creative financial structure. We have not seen, as far as i split, twony Companies Getting together and making three out of it. If there is precedent, i would love to know about it. What is going on at yahoo , they thought through in advance a lot of these tax issues. So you do not see that downward pressure, what taxes might bring. David jason, there are a lot of positive things being said about the deal. What is the likelihood that it will go through . What about antitrust challenges and other issues . Jason one of the surprising things about the deal is how little overlap there is, given the way the headlines look. Large Chemical Companies. Given the way they have restructured themselves over the years, and even up to this year, shedding units, there is little overlap. And s vertical there is vertical connection in the markets that they serve. After this, it creates another strong impulse where there already was a lot of m a fervor. You talk about sin genter with cam china you talk about sin le the overlaps are not as significant as you would think. It seems to me very likely that this will go through. It is a very logical deal, and it will create stronger competitors on the global stage. David josh, you have spent a fair amount of time in washington. Chemicals companies, that is not the way it is looked at. Josh this is partly about the real substance in the individual markets where there is overlap, then the politics behind it. There is no question that the spin will help with the politics, not to have one huge company at the end of the day. Alan normally you do a merger of giants as a condition of agreeing to sell something. In this case they have agreed to create a third company. Stephanie what are the stocks doing . Matt lets not forget that we knew about this deal he couple of days ago. We are getting verification now, but we had the scoop. That is being priced into the shares. Dow shares are up 12 . This morning you are going to see less followthrough in the actual share prices because we had it all. Massive moves yesterday, for 60 billion dollars stock. These are both 60 billion companies. A 12 gain in one day is very substantial. This is a chart over the last eight years or nine years, and you concede to upon and dow, dupont in green, dow chemical in white, have both outperformed the s p. Over the last few months they have both shot up here from a drop they had earlier in the year. David there have been activist shareholders involved in both sides of the deal, and they are doing all right by that chart. Thinks danbloomberg loeb has made almost 150 million bucks on this merger. It was december 13 that his hush order expires, and i am saying that the timing is not a coincidence. Jason miner, are there really sizable roadblocks that could stand in the way of the deal going through . Ison iraq my brains wracked my brains. It comes down to the regulatory front. Ou may have pushed back perhaps even subsequent to the deal there will be push back on g fronts. On the a worrying about changing concentration if you are bundling things like seeds and crop chemicals, which will come from these two businesses. They really are pretty minimal. What you are going to need to do is look at the merger agreement, and get a sense of whether the executive see the risk. If there is a big breakup fee, the expectation is you will not see risk. If the breakup fees are low, one begins to wonder, maybe they are concerned. Reading the document will give us a lot of color as to how executives and advisers are thinking. Stephanie we will be speaking and eddrew leverett breen. Jason miner joining us from princeton. Thank you so much. The other thing we have not spoken about this morning is oil. Prices are continuing to slide. Matt miller, you have got to take us into the terminal. Yesterday the South African president booted the finance minister. This is a country that is completely commodity dependent. If you look at Commodity Prices, currency, Commodity Prices in south africa, we are starting to see the democracy crater there. Who is controlling that country . When you see Commodity Prices fly, you see emerging markets panic. That is absolutely what we are seeing in the markets today. Take a broader picture of oil and where things are. Matt just to touch on what stephanie was talking about, i have grasped the dollar versus i have aasped graph on the dollar versus the rant. Really oil is what is driving the market over the last few days. Here you see futures have come down, taking a substantial leg lower. About an hour ago, s p futures and Dow Jones Futures are down 1 . T 2 3 of take a look at crude oil right now. The glut that we are seeing, the supply glut will continue until at least late 2016 because of the demand growth not accelerating. It is decelerating. And you are seeing opec countries ratcheting up supply in a bid to put everybody else out of business, including maybe each other. We look at wti in the u. S. , the brent mobile benchmark of oil coming down well below 40,. Ight now 39. 07 remember, it has been a rough couple of days. Havethe last few days we seen a real correlation between oil and the equity markets. Here you see oil in blue. This over the last 24 hours. Futures are in white. They are very well correlated. That has not been the case if you look over the last year. If you take a look at the chart over the last year, you have crude in yellow coming down, and the s p in orange coming up. There is real divergence that october. In September Stephanie amazing. David it is quite a story. Josh, it strikes me, not being in oil expert, that what is going on here is that it is going down, but there is a hope that it will turn back around and companies are coming to terms with the fact that we may have low oil prices for a while here. The economy goes off the cliff in 2008, 2 thousand nine, and the expectation is that it will recover. That is a cycle. For the first time in oil for a very long time, we have supply shock. That is not a quick problem to solve. Opec is willing to continue to produce to remain tame to maintain all to maintain market share. Stephanie the 10year yield today, just this morning, has gone from 8. 8 to 10. 5 . The impact of Oil Prices Drive bring the impact of Oil Prices Dropping david also it is a certain unt of uncertainty because we do not know anything about him as finance minister. Theseyou see a lot of emerging markets, which are heavily commodity dependent. When they see the downward pressure on the economy, you do not know how they will react. We can see how the united its react during an economic downturn. David if that is not enough, next we will talk about Falling Oil Prices in russia. Decision tot the keep rates unchanged their banker that is next on number go. David welcome back. We focus on russia. This despite battling the first recession in six years and a slump in oil prices. Ryan chilcote has covered russia for decades now and joins us from london. For those of us who have not been following closely, this is stagflation in the United States years ago. They have high inflation and a slow economy. Ryan that is exactly right. Russia is in a recession. The economy is set to contract by more than 4 according to the central bank, and they have inflation around 15 by the Central Banks own admission a few moments ago. They have all kinds of problems. David what are they planning on doing about it . Is this the Central Bank Governor talking or is it Vladimir Putin talking gecko how independent is he . Ryan i have talked about that before and interview to her and interviewed her a couple of times. She is independent. Stephanie of course she says she is independent. What else is she going to say . It is fair to say that the kremlin has a significant amount of influence. I think it is the case that they probably see pretty i try and that the russian president , who is thought of as the autocrat dictator who hands decisions down from above i think he probably really respects her view and listens to it. He certainly did when she was economy minister. As to what they are going to do about the troubles in russia right now, the answer is, they are both concerned about inflation at the moment. They are concerned about the economy and contraction, but there is nothing they can do about the oil price. She could help by lowering rates, but the fact that inflation is at 15 and you have oil continuing to fall, which in a country where the import a lot of things means you get a weaker ruble and higher inflation again is something that she has to be focused on inflation right now. It surprise you when we see big investors that are bullish in russia, when you look at the credit default swap over the last several months, it has tightened. Are they longterm bullish or is it shortterm trading . Bonds,ussian dollardenominated bonds are the best performing bonds in the world. That is a no brain are from a shortterm perspective. Nobrainer from a shortterm perspective. Longerterm, it is the biggest Consumer Market in all of europe. Tell you,sses will irrespective of what is going on with bonds and stocks, that not only should they be there, but they have to be there because it is such a growing economy. Naturally this recession is a hiccup in the plan. David josh, they have some problems in the russian economy. Whether it is ukraine or the sanctions on imports from turkey, there are geopolitical actions that they are taking that are not helping their economy. A balance between Vladimir Putins desire to be a major actor on the world stage how does it balance against getting his domestic economy growing again . The big thing to watch is foreign reserves. Those are still quite significant. As long as they have that offer, get gives them room for a long period of time to maneuver. Alan do not dismiss the average russian consumer. There are signs of discontent, and they have been more vocal than they have been in a long time. You cannot dismiss that. I think that is right. David and i were talking about this on the show. Russianally, the consumer has endured a lot of pain for a long period of time. The russian government is counting on the fact that oil prices will increase and Vladimir Putin will maintain control of the government and they will suffer for that long period of time. If supply and inventory keep going up, even storage costs to say the price will turn around on oil, come on. When . Josh i am not making that argument, stephanie. You see Long Term Oil prices close to you could produce today, you could store, and sell it in the future at a higher price. That trade has disappeared. So the market is not anticipating a quick turnaround in prices, and that has the russian government scared, as evidenced by the fact that there they are not longrun Interest Rates further. Stephanie our own Ryan Chilcote joining us. We have more to cover. Next, the stories that matter to you most on the bloomberg terminal this morning. Stephanie you are watching bloomberg. We are giving you the top trending stories. No surprise excuse me. And missing billionaire from china, stocks are going down with oil. Barclays ceo is freezing hiring. Stephanie good for you, josh. This is the most important to me, not just the belgian billionaire behind him. We should probably talk about oil. Josh you do see that people are not just financial machines. What do they think about . They are thinking about the markets but also their passion. Their passion is football. Everyone around the world loves football. Stephanie but they get so frustrated that they cannot make soccer a big enough sport in the u. S. David you have got to college football. Alan it is changing. We have several teams opening, so we will see a lot of activity happening in that area. We talked so much about the surplus that is coming. How do wee costs factor in the cost of storage . Nextcould send prices down year. People have not even factor that in. Slowing down. Saudi arabia has their foot on the gas. Josh if you look at the Second Derivative story, you have to look at chipping. Think about the impact on the people who own the search the super tankers who store it here it look at what is happening at the storage of oil there. Stephanie man. Alan i am looking back at the 1970s and 1980s. Stephanie sorry, we have to leave. We have more bloomberg. 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 welcome back. Alan is still with us and tom keene is joining us. We are following two big stories. Falling Oil Continues to fall dupontt they dow and merger, but first, first word with david. David republicans discussing the contested president ial Convention Next summer. They would be forced to challenge Donald Trumps nomination if he gets to the nominee. They discussed the issue at a dinner on monday night. Russias president warns that any threat to Russian Forces in syria will be eliminated. He spoke at the Defense Ministry and set the base in syria has been beefed up with more planes and antiwar craft weapons. For russiandown airplane at the Syrian Border last month. In saudi arabia, women will be able to vote for the first time and they are also on the ballot. Almost 300 municipalities have women on the ballot. You can get more on these and other stories 24 hours a day at the new bloomberg. Com. David thank you. We are joined by tom keene, but we will also be joined by jason. That will give you a hint about what the morning is about. Tom we looked at the annual reports of dupont and from dow and this is written by the people this is what you do when you do m. D. And a. This is the executive chairman we believe the dell of tomorrow is here today. I work is not done, 2009 was the year of investment in our transformation, and while it is well underway, it is not yet complete. I will say. Annual reports are a work wonderfully constructed hot air. That hot air came to rest today. The bottom line is this is about the lack of growth. Martin was all over that today, as he should be. I talked about it is ago. Growth . Hat is the jason you are looking at gdp growth and you have two factors coming together. Dupont has been so long and broad. Dow has the energy volatility, so his oil were to double, my answer would be higher. That is the 1. 1, 1. 2 times gdp growth. It is still too difficult except area wherescience they will be more synergy on the growth side and more excitement in terms of new products in the markets. There is a fair amount of cost opportunities. Alan isnt there a solution of the dow . Cornering the situation tom that was out earlier. Jason i think dow will become dow. Tom you and i are the only guys who understand the romance of dow. They make a lot of the glass, stephanie. Stephanie how about innovation . Thing majorly companies on the Balance Sheet can do right now . You if you look at r and d, cannot do that unless you have growth. You have got to have the topline growth to afford the technological progress. Jason,tom is right, but there is a school of thought that you cannot have innovation unless you have focus. As companies have gone more diverse, they have become less focused. About the arguments is focusing on particular areas. Jason when we go back to the nelson and dupont battle, one of the only use unifying stories, the dupont is so dissonant that the notion of science was one of the only unifying themes they could argue that stuck together and made sense. Frankly, focus does matter. In this case of a mature industry with market feedback as well, so having a sales force and an r d team that committee kids and looks at when you need in the marketplace is something you look at these leaner and more logical segments and it will boost r d. Tom remember when we read dodd the second time . The bible of the business and it was all about westinghouse and seven other companies and this is Creative Destruction going on in real time this morning. They are on the modern cusp of modern technology, what do you perceive among the Dinosaur Companies . Do not think they are all dead and this is necessarily negative. I look at this more positively. I think this is a constructive aspect. It is breaking up into three pieces. Either you are going to get a lot more energy out of this, and i think it is a positive development and maybe other Major Companies or think along similar lines for business opportunities. Stephanie matt you will take it to the terminal and we had to look at market reaction. Heres what this special about bloomberg, our stories move markets. Matt true. Movetory on dow and dupont the market yesterday. We talked about this earlier. They saw a 12 move yesterday because we knew this was coming and as jason miner pointed out, we knew all of the details. Your not seeing a lot of movement in marcus, the dow jones up 1 and do countdown thesepont dow, but Companies May 12 years in the cash market yesterday. Futures right now, markets are down and futures are down across the board. Even can see the drop on dow jones. The contract about 1 , largely because of oil. Dropdown thiser morning. Right now, we are trading at 36. 23 and we were about 40 on friday. This week, the sixth down day today, the worst week that we have seen in one year, down 13 this month. With that 13 drop this week. Out today and said the glut will continue until at least may 2016 because the demand growth is slowing and supply just keeps coming. Opec producing at a threeyear high right now. Lso want to point out stephanie has been keying in on this story and it is important for global commodity markets. The rand has weakened so much. Canou type in wcrf, you change the base currency to the rand. Then you just see, it is underperforming every single currency in the back of this year with the exception of the brazilian real. Stephanie i will take you to puerto rico. I would like to thank justin minor jason minor. Is all over the headlines. But lets focus on puerto rico. The u. S. Senate is negotiating of the potential aid package. Meanwhile, the islands next Interest Payment is due on january 1. This is a massive problem for business. We will talk to one of the biggest myths businessmen on the island, all hundred alejandro. Welcome. Congress is still divided. We have less than 10 days before the Christmas Holiday and the payment is due january 1 and there is no resolution. What is going to happen . Problems is the size, 900 million. Puerto rico had trouble making 350 but hundred 50 million last week and they had to use callback provisions. They made it at the last minute. On the other hand, the package proposing comes, in my opinion, a lot of pills. This is called the puerto rico assistant act of 2015, and the 3 billion that congress will give puerto rico really comes with a lot of tieins. Therell be a fiscal control authority. Similar to detroit. Stephanie that is ok. Alex but puerto rico sovereign status will come into play, it is a colony, territory, commonwealth. It is so dependent on the united sotes decisions in congress, the way that it is issued, this is cocontrol authority has the authority to issue bonds, so it is not federal bonds that the authority of puerto rico. They will be pledged by the security interest of revenues of the commonwealth. Stephanie you cannot assume the u. S. Government will send money down there and say, good luck and do whatever you want. Alex i agree 100 . Part of the situation that puerto rico is in, it is the present political status, it is not a state so you cannot declare bankruptcy under chapter nine like other dependencies. And it is not a sovereign country tour you can go to the imf to get a bailout or get access to capital. It is an a very extend area quicksand area. Tom tell us about the change calculus of what i would call the northern caribbean or the entire Caribbean Sea with cuba becoming a new economy. What does that mean for puerto rico and the elites like you and puerto rico . Alex it is hard to predict. Tom i will go with that. Alex i am a member of the American Security project, and recently in june, we had a meeting with people who had been lawyer for cuba, the the cio imperative tom but for so many americans, it is stereotypes and it is a new puerto rico next year and it is in trouble. Alex yes, but i dont think cuba will have an immediate effect. It has a romantic appeal to it. There successful cubans. Tom you could write a broadway play. David ultimately, this is not to get resolved at some negotiating table and someplace. I wonder whether congress was called it out this possibility and the Supreme Court says they will take up the question whether puerto rico should have their own statute for bankruptcy. Whether they are making it better or worse, because they are giving some hope to the puerto rican authorities that the calvary is on its way so they dont have to come to terms with the hard decisions. Alex the reality is the Political Community in puerto rico is confused. Like you said, we are getting mixed signals. The Supreme Court is rejecting 99 of all appeals that i see this as a longshot. On the other hand, we cannot declare bankruptcy but it is bankrupt. We have a bunch of shortfalls in the last eight months of 500 million, so at the negotiating table, it will be hard. The bonds that were almost being negotiated with the Supreme Court has been thrown into trauma thrown into turmoil so were hanging by a live. David alan, you know how these things work. How this play out . Alan at the end of the day, you have to pay the piper. Puerto rico is operating at a deficit and has created the situation today. On and younot go cannot expect someone to bail them out every opportunity. I think the time is coming and we are coming to a moment in time that this has to be faced and we have seen other places in the world that have come to similar kinds of situations. We all know who it is. The fiscal problems come to roost sooner or later. Pay our debts,to but on the other hand, there has to be a process that is organized in which you can file for bankruptcy or make your payment that youre not unable to make. Puerto rico has a budget over 1 billion a year and a dead at 72 billion a year, so how are we going to pay that . We need the Supreme Court or congress peleus the ground rules. Stephanie thank you so much. Jandro, and youa have to get back to radio, but we will be back. Today is the yearbook game. This famous professor graduated from having Park High School in chicago and he had a paradox named after him and has been investing in foreign investments. Tweet us or instead bloomberg west the answer. Tell us a little about the person. It seems like everybody wants a piece of the hottest startup. We will talk about have to get out if you are an early investor and how to monetize it. You are watching bloomberg. David welcome back. I have your Bloomberg Business flash. The biggest deal in the Chemical Industry is official. Dows chemical and dupont has agreed to a merger. It will be split into three separate businesses, agriculture, Specialty Chemicals and commodity chemicals. They have been dementing a break for some time. The biggest deal repeating that, they raised more than 5 billion in share sales and about 97 of british banks exercise their right to buy stock. Build winters plans to cut 15,000 jobs and scrapping the dividends to restructure the exit risky assets. In manhattan, the biggest parental will open their doors, the sky tower will have more than 1100 units and two outdoor pools. Rent starts at 3000 for the studio and the building sets manhattans vacancy rate in more than to the highest level in more than nine years. David thank you. We spend a lot of time on the program talking about private investors in text from startups to multibilliondollar unicorns or decca coins like snapchat and uber. Alan, has compounded the view of these, but you have been involved in a lot of these. How difficult is it for an early stage investors to get out and is it more difficult and changing . Alan 10 years ago or 20 years ago, everybody always talked about i am going to go public, and they exited as an idea and i think the reality went away in the last decade. You look at the number of tech ipos this year and the number is 24, so there is no ipo in your future normally. He had the unicorns and they are a special case and theyre only exit is through an ipo. The other exit is through a merger or acquisition. The usual suspects because i speak to all of them from google to adobe, facebook, apple a little less, but they are bombarded every day. I was with the Development Person yesterday and they see so many deals. They are Young Companies cannot find in a city and are coming to them to be acquired. Ifphanie is the issue also you are google or a potential acquirer, the valuations are skyhigh. That they are not valued companies, but when you look at the valuations like uber, they are so high at this point. Alan that is the whole point. They will not take them out. Stephanie what happens if i am an early investor and i would like and how do i show something for it . Only i dont the state exit, because nothing is only, but in my opinion, the most logical or 95 reality is that Companies Like that has got to be through an ipo. There was no one to can afford for a company who had lost on it 60 billion to get taken out and give anyone a return. Is we have a new phenomenon, the ability, because of the jobs act and whole change in the ability to sell secondary positions that has opened up, that there is liquidity coming up from selling a private situation and selling to another person who wants to buy into a private situation. There is much more activity for limited number of companies. David coming back to stephanies question, i we going to see more and more down rounds as you get the liquidity coming in at a lower valuation rather than higher . Alan the only way they will come in is it they are in a position where they have to continually go back and raise more capital, and if they have to do that, and there is not capital around they will take down rounds. We have seen, for example, the situation with square. They had their last round at one price and window at a public price and they have come back to square which is encouraging, but i think next year when a lot of the companies are a larger size, they will try to go to the Public Market and we will find out that the Public Markets will take as opposed to what the last private round. A lot of private money in the later stages is what we call the c rounds. Stephanie we have to take you to matt breaking news added alibaba. Jeff not to be outdone by bezos, but alibaba is buying the south China Morning post. Product bought 12 years or three years ago now, but alibaba is buying the south China Morning post and other media assets from the morning post. I just put out a chart of and amazon the grain. They track each other pretty well over the last year and about decent games. Interesting media headline. Jeff personally bought it and not amazon where is what you just said is that alibaba the company is buying it. Matt that is because the billionaire founder of a Chinese Company can disappear at any moment. [laughter] stephanie it is the most read story on the bloomberg and we are following the story of a chinese billionaire who has gone missing. Matt look at my feed right now. The most viewed person is the second most viewed person stephanie actually, the first. David alan, you will stay with us. Stephanie you are watching bloomberg. One hour has passed already. An and we arel talking about the largest deal ever in chemicals today. At 9 45, we will be hearing from dupont and dow ceos. Stick with us. You used to sleep like a champ. Then boom. What happened . Stress, fun, bad habits, kids. Now what . Lets build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing. Enter the sleep number bed with sleepiq® technology. It tracks your sleep and tells you how to adjust for a good, better and an awesome night. The difference . Try adjusting up or down. Youll know cuz sleepiq® tells you. Give the gift of amazing sleep. Find our best buy rated c2 Queen Mattress with sleepiq. Only at a sleep number store. Know better sleep with sleep number. David a merger for the record books. Dupont has a great to combine into the largest deal of work carried crude has not been this low since 2008. The new forecast says the glut will not be going away, and the future of forward. Monster pickups and higher margins. We will hear from the ceo mark fields. Welcome to the second hour of bloomberg. I am david weston. Stephanie i am stephanie ruhle. Points already. We have an allstar cast, chairman of tumi and former ceo of books brothers, we need a kelly okelly and we are following this they deal. The sure to watch our interview a. M. He ceo at 9 45 we just sat down with patrick and he pointed out something amazing. 60 billion worth the two companies combined and uber currently valued at more than that, more than dow and dupont create i am also and dupont. Chinas Strategic Oil reserve is doubling to 190 billion in the First Quarter of next year. The government is now involved in storing the tankers and the glut is only getting bigger and another sign that oil is moving in one direction, down. That is affecting emerging markets and matt miller is following the rand. How about first word with dave. David the conference has been a senate that one more day and frances foreign minister will present a final draft tomorrow. Among the issues, how to get deeper cuts and feel pollution and how to help clean up the air. Congress is playing beat the clock with budget. The spending of ends at midnight and have agreed to extend it to next thursday and the house is expected to do the same. They are trying to come up with the bill that would extend a series of tax breaks. The governor of connecticut terroristan people on and nofly list from buying guns in this day. He is working with federal authorities to get the list. Projected aate similar proposal last week. You can get these stories and more at [indiscernible] at bloomberg. Com. Matt a lot going on in markets. Take a look at european stocks getting crushed, the doubt the dax in germany down more than 2 and the trajectory is lower throughout the morning. Check out futures, a large trajectory. The dow jones many contracts were down at one point more than 200 points and are looking at the drop of 1 across the board on futures. Is crude oil. Take a look at oil fight now. First off, the live trade with 36. 28, down one third percent but it has held a better picture of the story, down about 10 in one week, 13 percent this month. If you look at the technical indicator, the relative strength index kind of tells you if it is oversold overbought. We have just crossed below oversold, so oil is below the line, below 30 on rsi and considered oversold by technicians. It fell below two dollars for the First Time Since april 2012, i believe, and the gas is trading down 2 . The entire Energy Sector is getting hit hard. Stephanie mentioned the rand. I pulled up a chart on my bloomberg South African tenure debt. Stephanie look at it. Matt it goes parabolic, like al gores Climate Change hockey stick. That is the interest skyrocketing as people sell out. David just a little over one hour ago, we learned he official announcement of the dow chemical dupont merger. This is the largest merger and on the phone this the cofounder of global valuations. It strikes me that this is a big merger but also a big break and a lot of folks are asking what will happen with the breakup. Absolutely. Rather interestingly, we could use we heard this on wednesday and a lot of the details that were given on the news report that came out on wednesday seem to be correct. In terms of structure of the deal, and the two companies coming together as a merger of equals. Synergy numbers being close to 3 billion, that was confirmed this morning. Growth synergy numbers being around 1 billion in the new news this morning, and beyond that, the story meaning the two companies coming together and then doing a taxfree extend spin to 24 months and forcing the deal closing in the second half of 2016. Is new news,major but the structure was announced on wednesday. David you were with us on wednesday and you are positive about the early reports. Is there anything you have learned since then that has raised questions for you . Hassan my estimate in terms of synergy and numbers is close to 4 billion. The new news, like i said, was a number disclosed this week. I think that is a lowball number can do morethey than that. To be more specific as to what i think that, it is around 2 billion and dow chemicals is 1. 6 billion, so just there, the expenses could be cut dramatically. Why i think a phone number should be greater than 3 billion is that even beyond the r d cuts, dupont alone is on a costcutting program along one points explained dollars and a onelone dow is on billion costcutting program and you at the numbers together and you get a synergy number which could easily be over 4 billion. Stephanie sounds like antitrust will not be a big issue, so lets go broader. What does this mean for them looking at this saying, what do i do now . And nowcannot in front around the the came out in front and out around them, Chemical Companies are merging and that raises the question of what do they do . Ceohey look at it and the has been out saying, we will after that approach. David to stephanies point, to avoid any antitrust levels. Brooke it is a complex deal and you have to bet on the government willing to say they will split it up and there will be request for remedies that we have not seen how extensive they will be. Soybean season is a huge in the u. S. And theyll be looking at those markets. The stc may look at this and say, that is ok, but maybe the s p 500 wants to look at them combined. Eu books that deals little with set deals little bit differently than the u. S. Does, so this is not an easy walk in the park because of the complexity. In it. , each of the three units could be viable and it could not dominate the businesses but dominate sales and they could be acquisition targets. Rook that is something brooke that is something to look at. Is that something they would want to pick up. Have egg ono they their suits . It was not until we stop an activist stepping to both of the companies that we are all saying, it makes perfect sense, look at all the synergies. Where were they 1. 5 years ago . I think the investors move on quickly and there feeling good about the move. I think right now, everyone is coming out looking good. Ceoke and the dow jones was saying he had been to get so thatis since 2006, is what he is saying, he is planning on wanting to do Something Like this. Joe i think the only loser was the former ceo of the pond. Of dupont. Stephanie i dont know. Im guessing she still has shares and she is saying, how do you like me now . I did not do the work but i got the game. Hassan, thank you for joining joe, youe,winnie, and are not going anywhere. Later, we will be speaking with dupont. Of dow and we turn our attention back to oil which is headed for the biggest weekly decline since march. Reaching the lowest price in nearly seven years after opec essentially abandoned Oil Production and basically said, we are off to the races. Now, people are starting to say, what are the storage costs going to be now that we have the glut . We are joined by andy from houston texas. Iran lift,s against will we see the situation go from bad to worse because there are no clear signs of a turnaround . Are as a goinge to 2016 and Oil Prices Remain under pressure. It is estimated that iran has 30 million to 40 Million Barrels of oil sitting on takers that could be immediately sold, adding pressure to the market. At the same time, refineries going to maintenance in the First Quarter and things are looking bleak. David what is going to take production offline . We are not going to get priced firmness until we get people not producing as much. Andy we are starting to see be affects with the lower rate counts in the u. S. And the client production in texas because in the permian face where they are investing less, but in north dakota, october had production up at 6000 barrels a day, so we have not in a huge affect their, which really pressured prices earlier this week. See whattt, we like to the markets are telling us. What is bloomberg saying . That theis showing us trait is not hot this time. Last time oil climbed up and 2008, soan dive with what we are grasping is the premium of the threemonth foreign contract over the current contract. It was huge. Me more for the threemonth contract and i will hold the oil in the shiprock new orleans and you can pay me later. They are not doing that now point, to stephanies the cost is so much more expensive, so they are not taking advantage of the trade and contango is so much lower in 2015 then it was then. Stephanie what does this mean for the shippers with storage becoming a bigger priority and cost coming up . Contangost of all, the demand storage is really on land storage is good for anyone who wants to store oil. Earlier this month, we saw an option for storage in louisiana really been completely taken, so expect that inventories on short continuing to rise. As far as the ship owners are concerned, we are seeing oil pileup on ships, especially diesel supplies in northwest europe and singapore. As a result, we are seeing tanker rates rise because some tankers are being taken out of the pool for the storage play. Even though it is not apparent on the futures market, we are seeing it in the cash market. Stephanie thank you for joining us. Joe is not going anywhere. Retail sales are coming out. And when we return, we will be hearing from mark fields and fords plans for electric cars. When oil prices are down, why not spend on electric . Bloomberg you are watching. You are watching bloomberg. David welcome back. Ast night, ford announced 4. 5 billion investment in collected in collected vehicles in electric vehicles. Over thanksgiving, i was home in ohio and i got to fill 1. 81 ard truck for gallon, so the pain of using a big truck did not affect me and i have not thought about buying electric hybrid. I asked mark fields about that and here is what he had to say. Mark when people actually drive electrified vehicles, they really like them. Right now, from a cost standpoint with gas prices the low, it may not be as compelling, but they really like it. The second consideration is the regulatory requirements we have to meet, so both of those are driving this investment, but it is around building our electrified leadership because we have the second largest seller of electrified vehicles in the u. S. , and is a leading provider in seller of plugin hybrids. Matt you have been leaders as well in the mobility front. You have opened a big office in silicon valley, experimenting around the world with different forms of mobility, and now you have this dynamic shuttle service. It looks like an experiment, but it looks like you are trying to take uber headon. Mark we are looking at our business as the core business which is designing, developing, and manufacturing utilities, cars and trucks. Underese we are managing our Smart Mobility plan. These days, when you look at customer requirements, particularly for urban and young people, a lot of them want access versus ownership. As the company, we are looking at this and say, how can we satisfy customers by getting around . A lot of that comes back to thinking like the Mobility Company and another company. Matt you said 2020 by the time economist equals will be on the he said someuber, daytoday monotony drivers. He has a 60 billion market 60 billion million a 60 billion market cap and you have a 50 billion market cap and the cars . Still you win the battle . When thecomes down to of great cars and trucks, and then you have the foundation that we have, which is being good in the core business, it opens up opportunities Going Forward. Yes, there is the ubers, getting back to how to make peoples lives better and it is spurring us on to do innovation in the company and look for ways to satisfy customers and as i mentioned, create a Good Business opportunity. Matt the industry is on fire and shows no signs of abating. Your finance unit is doing great and shares are down for the year. Why is it wall street valuing this company the way a layman would see it from the outside . The way i see it . Mark we think we are focusing on those things that drive value and the valuation of the company which is around growing revenues, expanding operating margins, and making sure we have a healthy dividend. We are not running the business stock price,e the we are running it to have a healthy and growing enterprise. Over time, we will get recognized. Matt you have been able to list the dividend to reward loyal shareholders. Are you expecting to do that year . This mark earlier this week, we raised our diffident and the approach is to make sure we have a dividend that is sustainable to the economic and business cycle. Matt you have met with Federal Reserve governors and spent time at janet yellen, what is the sense that you got with the lift into thousand 16 . K Interest Rate is interestrate rises is an indicator of the healthy economy, but we expect the rates will rise gradually and we do not see a huge impact. When you look at the Auto Industry and the age of the vehicles out there and you combine that with the state of the labor market, wage and income growth, we think that is a great recipe for continuing to support help the industry level sales in the next years. Matt people talk about subprime auto loans and terms are getting longer. Is there any concern for you or ford credit if Interest Rates rise that it will be affected . Mark we have been prudent, particularly around the terms of in theand we have seen industry, terms extend overtime which is a concern for the industry. We have been in a tight range in terms of offering credit in the subprime area, so i think our team has managed it terry well and i think it will serve us well Going Forward in an era where Interest Rates are going to rise. Matt i cannot wait to get behind a mustang with a 5. 2 liter v8. Destined for the museum . Is it going the way of the v12 with ecoboost, twin charge v6 engine . Of demande is a lot for that engine. It is iconic. When you look at our mustang sales around the world, we expect it in places like europe where they would more prefer are engine, butoboost in actuality, the majority of the orders are the v8. They want that iconic five leader v8 engine. I will never say never, but i think it has quite a life left to it. David a lot less interesting to me, but go back to uber and lyft. If you cannot beat them, join them is what they are saying. We need less cars. Matt absolutely. I think their intention is to beat them. Ford has thought about this for a long time. If you look at uber and all of these businesses, in the end, it comes to where you get the cars, who owns the cars and who operates the cars. If you are making them and you think you can make them thomas, you have a real life out there. David tijuana. Retail numbers are coming up thank you. Retail numbers are coming up. More bloomberg is coming up next. Stephanie i do not have to say it twice, a huge morning following the markets and oil. The largest deal in the Chemical Industry ever, doubt dupont dow and dupont and retail sales coming up. Joe is here. Heading into december, do you think online has hurt resale or made the number bigger . Joe it is cold and retail up. It is Holding Retail up, without online, it would be in the tank. Stephanie do you think youll have a better Christmas Season this year than last . Joe sure. I think the typical christmas bounce will be up about 2 or 3 . Everything is on sale, but revenue will be up. Stephanie we will be back with those retail numbers in a few. You are watching bloomberg. Are stephanie how about that. Whats more beautiful than a central park . Were talking retail sales. Were getting the retail numbers covering. Were we are getting these numbers seconds from now. We have them . Matt up 05 . Thats good we were looking at 0. 4 . Its a gain of 5 10 of 1 , beating the estimate. If you look at just a straight a headline number, you see little bit of a mess. That number has a lot of thesient issues, especially gas prices and car sales have been off of. You can see futures coming up a little but after that. They are way down, heavily by oil. Substantiallydrop once again this morning. Stephanie the impact oil plays globally on so many markets, it works retail numbers. Matt that if you fact are an equity investor, they dont have to be off the charts good they just have to beat estimates. They have to be better than expected. Stephanie jcpenney was in peril. Bill ackman was in from high point. To knock dont have the ball out of the park. They just have to do ok. Things are moving in the right direction. They are positive. Stephanie there is still a lot of pain. Joe all of the ecommerce players that were doing very well, when you think about the ecommerce business growing at 15 , its rising at 15 . Thats a big deal. The other 85 is probably flat. When you add that together, youve got a positive. That is making the season. Some people are going to be up and some people are going to be down. Some people say the weather hit us really bad. Some will say we had a Great Holiday season. David amazon is having a phenomenal real year. Stephanie do i look at labels . Do i say perfect, keep suffering. Column yesterday. They have not made an acquisition. This is the longest they ever gone without making an acquisition. Some companies are just right for the taking. What is lululemon. There is a bite sized company with a lot of rand equity that gets hammered in the past couple of years. A bunch of private Equity Companies have brought up a lot of brands they are looking to sell. This is a good time for you. David you talk about a retailer like lululemon. Its basically a manufacturer. They do have a small retail component printed its a very different business model. Stephanie the manufacturing cost are very high. They never focus on pulling down the manufacturing costs. Given what their margins could be, when you compare them to columbia or under armour, they can get their costs down. Matt i think they would be brilliant on the supply side. Thats very different in man nearing managing a manufacturing company. Joe i cant think of any that have done it. More often than not, its the reverse. The Apparel Company goes into retail. They Show Department stores how to do it. Get thehat sense do we pdf has been down this long . Shelley we are not sure. One thing is they have their hands full with a bunch of this is that are not necessarily doing that. Joe they have taken the last three years to reposition the business. They have done a brilliant job. The work is about a status symbol again. I think they are really on a roll. Stephanie except the stock is down 16 . Joe that is good in this sector. Stephanie by comparison its positive. Joe they are a Great Company and they are doing the right stuff. The small company. Its not going to move the needle. Its such a small business. At least the temporal and thing made sense. Timberland thing was making sense. Thats a good thing for them. Thats what they should be looking at your it shelly if they put that into Department Stores. Joe you would think that would be very easy. Vertical retailers dont the same way. They work much closer to need. You need line to sell six months in advance. You have to get a date thats closer to the way they write their order. Shelly under armour does the same thing. Joe they have a small retail component. Stephanie rather than by so many shares back, now you can look at how much money they have good maybe lululemon should have been just by nike. They have not had the impact lululemon has had. It seems cheap. Theyve got new leadership. They started a competitor. Shelly they keep doing really well. The stock goes down. It seems cheap for people. David i want to talk about these numbers. Youve got encouraging numbers. That came up higher than expectations. In october. S down it was all on the service side. Service prices were up half a percent while goods prices were down at 10th. Its encouraging overall. We think higher inflation is bad. You dont mind. You like to see a little inflation. Its not going to knock at the expectations. Matt it would take global thurman of your work to get the fed off the rate rise. Int rate increases really do relation to retail sales. This is a great function you can activate on the bloomberg terminal. We put in every rate increase from the fed from 1993. You can see it doesnt seem to affect retail sales growth at all good this is the zero line. You see a rate increase and we go from negative one positive two. This takes us from positive three down to zero. It does not seem like the fed moves have the effect you would expect on retail sales. David you had time to listen to us and absorb this, what do you think about whats going on . I think consumers are in healthy shape right now. There are good car numbers out there. People are fixing up their homes. I think the consumer is strong. I carry cover a lot of power companies. Scenes, ak behind the lot of that was whether given this year. We had a cold spring. We had a warm bread were going to have a warm holiday winter season. In terms of the winter, they and been victorious secret under armour. 2016, some of you will companies have been hit hard. By weathere helped conditions. Stephanie what is going to happen to Department Stores who do sell those brands but Consumers Want to go to the brand houses . Randy they are trying to get or leverage in terms of the brand trying to become more cautious with upfront buys. They are taking a lien position going into 2016. Some of the manufacturing branding, the whole so manufacturers may have slower sales growth in 2016. Those companies that have the brands that will sell in their own channels online or in their own stores, under armour should be able to be fine. Stephanie we blame everything on the weather. We cannot control it. Randy we had a very cold spring. We had the warmest fall in 30 years. The weather experts say were going to have a very warm spring in 2016 and a very hot summer. Were going to have a more temperate climate starting in the spring. El nino has been a big monster. Its going to be going away. We think thats going to create more seasonal temperatures and help all of the Apparel Companies sell more tshirts and matt was talking earlier about expectations. Expectations for apparel are extremely low for holiday. Matt who benefits in particular if we get a warmer spring . Randy the teen retailers. They have done a better job this year. Abercrombie is down to a Good American eagle is getting hit. Were starting to see this little bit that will help the spring of next year. Warm temperatures will help the coverof golf and we callaway. They will benefit. They can golf early part of spring next year. We take a thermonuclear bomb to dissuade the fed. Peter i was looking at the function and thermonuclear war the bloombergon terminal. We have Michigan Sentiment coming out later today. We have business inventory. We have the Consumer Price index. We have housing starts. Those numbers are anywhere within the bounds of expectations, its not going to stop the fed. It might change the tone of the statement. David thank you very much. Thank you for being with us. Welcome back. I am glad to say we will still be here. We are following a big news deal. Dow chemical and dupont, there is a Conference Call going right now. This is what we heard a Conference Call. This represents a tech tonic shifted industry that has been evolving. Its a call nation of a vision we have had for more than a decade to join these two science leaders. Ceo of dupont will be the new ceo of the company. We will hear from both ceos at 9 45 a. M. Eastern. Stephanie we are bringing you a very special series, the experience economy. This is what americans are buying. They are investing more in experience. Trying before you buy. Atare bringing in our editor large, cory johnson. Retail is changing. Tell us about your business. We are a try before you buy service for just. We started with cameras. Then we went into drones. We have the largest fleet of drones on the west coast. We expanded to apple watch and audio. Headphones, things like that. Stephanie how you make any money . Its great for me. In terms of consumer electronics, i have a graveyard in my house of things i bought and never used again. We are looking at consumers who are investing in experiences rather than things they would rather rent them. If they are going to buy, they want to commit. There are so many options today. What we do is we charge a fee for you to try items or three days to months but did people usually two weeks good we ship to them. It reaches them at home. If they like it, they can send it back and we will ship them a brandnew item. All of this goes towards just. David it was interesting to me that the people who were doing , it seemed to me that you were running more of a rented then trying to have a test and go. Stephanie its great for consumers, there are concerns that they arent making any money. Its a slightly digit different space for gadgets. We think of ourselves as they know former retail. Customers, there are notminant number of people interested in walking into a physical store and looking at everything. They would rather have them shipped. They can try it and then they buy it. What is your Conversion Rate . Apple watches more than 50 . People use it as a rental service or in a we have a small fraction of them, some will convert from trial to just but its usually want to run it as they are going on vacation in hawaii. We work with hotels and we ship to your destination. David the sharing economy, how important is that . Cory johnson there is an economy that has changed and people are taking things for a little while. They have longer between pc purchases. Fewere people with drivers licenses. People are getting their drivers license . I dont believe that. Cory johnson its absolutely true. I just met with a couple yesterday who have been here for eight months. They just take over and thats how they commute during cory johnson the Car Companies know this. Different kind of notion how the economy works. When matt was talking to mark shields, they were talking about going into the business. Joe its a premium. Anyplace else its a days cap. We dont get to see that here. Cap fair here is taken for granted. In san francisco, you cant find cabs. Cooper is a godsend. I am taking a flight tonight. I am getting there very early in the morning and you wont find a cab. Johnson they are not the buy it and keep it types. The household formation of us have been very low. The number of people buying houses and starting a family, people are pushing that off and thats part of the issue. Stephanie they are backed with student debt. They are in start up environments with are not making billion comes good they dont have the money to buy things. I think that could be true for highend items. Year, itsotography good for most occasions did you can rent it. You dont need to buy a 2000 camera for five days out of the year. Is we havepart of it seen the pattern where even if they had the money, they would rathers it on a pair or a flight to an ecstatic exotic place. They would rather have instagram photos of the destination. Stephanie i am that consumer. I am that consumer. David thank you for joining us. Stephanie we are not going to wrap up the hour without playing the year but aim. Its friday. He obtained a phd from m. I. T. In 19 anyone. 1971. The dupont and dow ceos. David welcome back to her go. Areaoomberg stephanie were joined by brendan greeley. Its friday. Byndan we are joined julian. Our head of everything. Stephanie our global head of first word news joins us. David the russian president said more planes and antiaircraft weapons have been sent to syria turkey shut down a russian jet last month. The majority say donald trump is not likable, compassionate, or honest. Eight in 10 called him decisive and copper. Taken down in dubai. Are pushing and a scuffle broke down in parliament. You can get more on these stories 24 hours a day at the new bloomberg. Com. Matt were down about 1 . The s p futures are down about three quarters of 1 . The same story we have an seen for the last five trading days rid crude oil took a big dive , 6 00 in the7 00 morning. Because of that, futures followed shortly are after. We have seen crude. 36. S hit there is also a drop natural gas it this is a milestone in has fallen below two dollars for the First Time Since 2012. Its a big equine. It is causing a big decline in stock you can see chesapeake is down 2. 5 . We want to touch quickly on the this is a merger of equals. Its hope this works out at her. Chemical, lets bring them up. Morning is also affected. Down tell you that is 5. 5 . Is up and percent. Their interest is getting taken out due to be merger of equals. Stephanie matt miller does not believe there is such a thing as a merger. Brendan you could hear the air quotes. Were going to continue that conversation, wondering how low oil can go. Andrew cosgrove is joining us. We are looking at data from the international agency. Looking at the possibility of a better deal with more subtype what is the next shoe to drop . Andrew its about expectations. Investors are watching the dollar. You could see something of a pause in the dollar. I think another leg up good anymore cause for concern on the ice. Crude price. Think currency is coming into play as we look toward the end of 2015. Brendan what is it a completely competitive market and the price is depended on demand and not supply . Andrew its been that way the entire year. The open meeting solidified that. Market expectations of not adjusted to that reality. Now, you needeing to see these lower prices want great of time. In censuses, if you look across weve been expecting that to be doubt a bit more. I think they solidified that view this morning as they release their forecast that the market will be oversupplied to the next year. Stephanie if were going to use this out beyond 2017, what are going to be the affect of that . The effect on currency and the effect on shippers . Thats a long time to be going in one direction. Andrew consensus expectations, who will average. Thes about 10 above where curve is right now. If you look back at the dollar, the previous market lasted seven years. Thise only a year in to dollar bull market we have been in. To get some sort of pause over the next quarter, if you look at what Central Banks are doing around the world in europe or japan or these other emerging it does make a case that you could see a stronger dollar in the year ahead. David i am running any kind of oil related company, ive got to be looking at my balance statement and my operations. Do i need to write down . Least, we the u. S. At will see 140 5 million in impairments so far. I think you will see assets and third. Youll see core assets sold off. Talks hear about merger you had the big halliburton deal. You had some other merger talks about smc. Weakness persists, more of that talk and consolidation start come into view. If we dont get any sort of christ every, its going to be a stressful time for some of the Smaller Companies that are more thank youin david very much. Turning back to the other big story, the dow chemical and dupont merger. The merger. Sed lets listen to what he had to say. This is a real game changer and Going Forward, it will poster poster. It will help her shell holders. David you were talking to us european cupraised titian laws competition laws. How long might the regulatory process take . This is a really complex deal. Sensen say that this make and there will be competition. Has attempted Something Like this before. Youve got to get approval and then take me four months to the mop. It will be a combined company for that length of time. They will not have anticompetitive pressure on the landscape. The European Union will have to being able tou. S. Execute that in a way thats fair. That is what the market is focused on. Stephanie the reaction is already priced in. People like it. Address this on the Conference Call. This should clear any antitrust views. It would be very limited where there are product overlaps are in greed we have analyzed this in detail. It would be very minor if there is one. Stephanie lets talk of the market. The fact that it will happen for another 18, does the market the attention to these details . If weve learned anything, there is no such thing as a foregone conclusion. Stephanie we never learn anything in the markets. We try. We tried. Emerge the pressure to because there is cash on the ballot sheet. Revenue growth is difficult to come by. There are activists in the marketplace. Situation as well as the need to rationalize because of the commodity price situation. To us, it makes sense now. The regulatory landscape will 2017. In is the value of the brand . Julian that is a big challenge. One of them had he for with consolidation many years ago with another marquee brand. These are difficult marketing choices. Consumerls from the be mixed where they should much stronger than they are because of the oil price decline. Stephanie were going to talk to both of these ceos at 9 45 a. M. Today. This is a historic deal. We will be right back a lot more to come. David negotiators are closer to a global china mcleans agreement. Climate change agreement. Caroline hyde is at a summit. Brought everybody together for 15 minutes. Youve had a chance to read it. Hyde they have had to ship back. They had to push the deadline back to get the deal over the line. There are areas of optimism. This is powerful stuff. You are getting the ambition levels to cut temperatures to that toand further than 15 degrees. Nationswhat the island who are under threat by rising sea levels, they really want this. Aviation and the airlines, why are they not in this . Getsabout ensuring this tougher and tougher. That something yet to be ironed out. The second thing is cash. How do we get china and the arab states to give money to developing nations who can afford these changes . Brendan the goals are supposed to get more ambitious overtime. That is something john kerry has whenis most important area the disagreements . The disagreements seem india,alaysia, china, countries that feel this is going to hurt their Economic Growth if they have to lamp down on carbon emissions. These seem to be where they are not seeing eye to eye. President obama has been on the phone. They are ironing out some of these differences. Every so taken up by bodies sleeping. They have pulled to all our use all matters. Nighters. Preview we will have a of the fed. People take a look at what we think is going to happen after what we know is going to happen. Stephanie youre watching Bloomberg Stephanie . Dow jones is reporting Chinese Central Bank will loosen the peg to the dollar. They are not offering a time table. This is big news. What is your Immediate Reaction to this . David i am not surprised. They need more stimulus. They have talked about different ways of stimulating a heavy. Janet yellen once less stimulus. There is this linkage between the two currencies. From thets to decouple u. S. Monetary policy. Its managing it against a basket of currencies. They are not dropping a peg altogether. Brendan is this the way to do it . We have seen the currency. We have seen it weaken. It is not a huge surprise. Regime inolatility markets that investors need to be more, china opened up the salvo. We think that something youre going to see a lot of. David the market reacted in a negative way. They said it must be really bad in china. There is a lot of unintended consequences that china has to watch out for it. Julian it points to the fact that we are going to have to see how markets respond. With the depreciation of further in the commodity market, there is more downside. China trade data out this week. Rotate, but exports are lousy. They need a weaker currency. They are trying to transition. They need that engine of exports to keep firing. But the currency moves. U. S. Is the biggest economy in town. The mexicans, the canadians, the europeans, they were left out. They need to let the currency move to reset things. David they are in uncharted territory. China has not had to do this before. Other economies done this for decades. They dont know what the reactions are going to be like. Stephanie they dont know what they are doing. Matt its amazing. Is dropping. Ield you can see reaction in the euro. I will let up right now. Move lets see. Offshore. E the a jump there. Its telling you right now its buy dollar. Ou on to futures, this is from the mini contract. I am looking at futures dropping down about one and a quarter percent. What i want to show is what happened the last time. I put up this chart over six months. This is the august 11 devaluation. Crater thatwed by a none of us is going to forget. When we just take a look at oil. Oil has really been moving markets. Its not much of reaction. That has its own reaction earlier this morning. David we are being very cynical about this. Stephanie weve got to jump out of here. We have a lot going on. To speak tore going the new ceos and we come back. Stephanie we have got to focus on these markets. The dow is now down 255 points. Jones emini contracts are down. Futures are down and we are about to open in about two minutes time. Futures, dow p jones futures. They should be closing up relatively soon. Down because obviously the chinese news in august sent the s p following, really creatoring. There is concern that can happen again. A currency strategist said it is sending its own currency down the tubes. Basically again. That is exactly what happened last time. Take a look at any of these Financial Insurance you want. I will bring up the 10year, which is probably the most interesting. You can see the gip of that. You can see the yield coming down. So investors are piling into debt right now. Investors are looking for safety. Any port in a storm, right . This is a pretty darn good port because you want to be away from risk. It is a risk off trade today. So you will see investors looking for bonds are looking for cash basically. Stephanie but you know what bonds they dont want . Highyield bonds. Matt those risky. Stephanie we have the head of highyield at alliancebernstein. Yesterday, the announcement that 3rd avenue is taking their 800 Million Mutual Fund specializing in high yields and dating it. Crack. S a seee starting to restructurings get bigger. Are we seeing yet another sign, news out of china, oil markets, highyield, notice that the market is truly in bad shape . That is not the whole highyield market. They do Something Different than most highyield or junkbond funds. They invest in the distress part of the market, the part where you are not likely to get all of your pencil back all the time. The rest of the market is only down 4 . They were very concentrated. That hurts with liquidity. Investher funds we much higher part of the junkbond market and we are much more diversified. Stephanie that brings us back to 2008. They have hercules offshore, a bankruptcy driller. When we see Retail Investors are start to be involved in risky markets, this isnt just a oneoff. This is a sign that we could be in a very bad position. And who is potentially to blame . The fed for keeping rates where they were. Guest i think thats what investors they have to do their homework. Not all bonds are the same. 60 40 still thinking the world. Bonds will do particularly bad. They are different parts of the market. There are probably investors who are investing in distressed securities who shouldnt be. David is this a canary in the mineshaft . Guest we remember back to the signals that the credit markets are giving in early 2007 when we saw some highprofile blowups. Is that they look and feel here or is it Something Different going on . It is like 2002 where you have a distressed sector. It is different from the telecom sector. And that is pulling down the rest of the market with it. We dont see the systemic kind of risk we saw back then. And we surely dont see the kind a lot of the names you mentioned were the big sponsors. We see leverage creeping up in the system, but they are more organic. Companies are buying back shares and spending more on capex. That will eat more events in the future but it will not drag the whole market down. David you saying it is not a canary in the coal mine. Youre saying sell equities and by highyield next year. Guest the question. Overtime highyield has a most the same return of equities but a lawless downside. I am the first person to say never say never. But if we have significance often high yields and equity does a lot worse, it would be the first time. Does that mean high yield makes sense today because it is finally right priced . Because a trade got so crowded and ounces mixed skated investors with and unsophisticated investors were pushed into the market and how you were Training Like corporates, today, when they are finally priced correctly, cost 30eans when they look terrible on me. The one they are amazing. [laughter] but when they are 80, they are amazing. [laughter] guest when it comes down to is rethinking of psychology. Youve got to be prepared for more volatile marketplace. That means, if youre going to put 10 in your portfolio into highyield, maybe it is only 5 and see how the market trades next year. David out of equities into highyield 2016. Are not there. In our view, the divergence you have seen between the s p 500 in highyield in the last two months certainly space to the idea that there is a contagion effect going on in highyield, that energy is clearly catalyzed. But when you look at the s p 500 level, you still have positive trends in terms of m a. You still have the potential for Earnings Growth coming off of recession. And the majority of that space is really investmentgrade. We think stocks will still work out. Stephanie the 10year yield on u. S. Treasury started the year 20. 17. And that is exactly where it is today. What do you make of this . If you look at the treasury market, the fact that we have come full circle . Guest it is to completely different markets. I do want to respond to the point in the equity markets. What is driving the problem is energy. Are more brother, commoditybased sectors. It is only 10 or 15 . Stephanie how can be the largest with only 10 or 15 . Is diversified. What we forget is that the very thing that is making that part of the market distressed is what makes the rest of the market more attractive than otherwise it would have been. A used to be the low Commodity Prices was a good thing. A company make something that lowers their input costs. David so we are not just measuring highyield. We are measuring core. Guest there is no question that the fortune of energy will be dependent on what the price of oil does. The other part of the market, while we might see more default than in the past few years, i think thats a can competently say that the defaults would be lower than they otherwise in had Oil Prices Remain high. A fund like ours, we dont get caught up so much on energy that is 15 of the market. Portfolio managers turn over the keys to their portfolio to the issuers. The more debt that gets issued, the greater it is on the index. When you take the probe the approach of lets just provide income, you dont necessarily have to go big energy just because there is a lot of issuance there. Guest so the linchpin to us is this entire notion of does the Energy Market cause contagion, which we have seen to the to a certain extent, or more parlay come are we finally going to get this idea where the consumer actually starts spending the ghastly dividend more aggressively the ghastly dividend Margaret Sibley and therefore the rest of the sectors of make up the market will have tailwinds when we think about revenue going into next year . Stephanie if i and janet yellen today, i was planning on Christmas Shopping over the weekend because we are raising rates. Now i look at the market. I look at what is happening to currencies globally. The news out of china. Oil istinued news that continuing to drop. Obviously, she pays attention to this. But does this affect the Rate Decision . Saying, rates are raising next week, move on. Guess the fed is in a bit of a box. It just got deeper in the last half hour. No question about it. You would need very severe market dislocation on the order of eight to 10 or Something Like that to get the fed to reconsider. Newsther aspect of that the messaging of not hiking could partial the markets even further. Stephanie j nk and hyg are both down. We are only seven minutes into trading. They are both down around 1 today. That is a very a very big move. Yes we look at a daily performance, not the longterm performance. A terrible had performance since 2007. Active in pastre indices. Stephanie we see retelling investors want to get out of highyield. Is this the day, the week when we will see liquidity get tested in highyield etfs . You have underlined assets that are now liquid and a product that is marketed super liquid. Down 1 last ats week also. They tend to be more volatile. That is one of the concerns we. Ave on the fed, we still think they will end up hiking rates next week. But we think the significance is a lot less than others do. The fed has been in a tiny cycle for 18 months. Tapering is a form of fighting. We may be have to to two thirds through that cycle. This argument had before. Everything is already priced in. Stairstep digital rise. Four quarters from now, does this dynamic change . Guest everybody always talks about what is priced in. I dont expect it to be a smooth ride at all. I tell investors they should expect a lot of volatility. But i go back to equities. Please are more volatile. They should be more volatile. Guest the should also return more than highyield does and they dont overtime. David matt, bring us uptodate. Matt down is where the markets are going right now. Massive declines, but we are looking at the kleins of 101 across the board. The Dow Jones Industrial is looking at a drop of 221 points. If you look at the bloomberg seeh in the s p, here you markets again. Take a look at the s p. It is coming down. A little bit of a bounds. We are only 10 minutes into trading. Pull up the bloomberg chart. You can see all of the Industry Groups are down. The biggest losers are materials and energy. They were the biggest winners yesterday. But financials and i. T. Are getting crushed as well. Utilities and telecoms, consumer staples, those are very defensive groups. I will say it again. Investors are running for safety. If they are not getting out of equities and going into bonds, they are at least going to the safer parts of the market. Move functionhe to see what is up and what is down here. Obviously, most everything is down. 487 stocks are down right now. Only 18 are up in the s p 500. The biggest losers you would expect, the big energy names. Southwestern, chesapeake, range. Esources you do see dupont here as well. Dupont is coming down 5. 5 . Yes, it gained 12 yesterday. So did dow. But definitely is up and dupont is down. S p up almost 5 . It has been a lot more. Everybodyhen almost is following, it is interesting to see who the gainers are. Our folk southern, csx, so csx, sosouthern, railroads are in favor here. You can see the move down after those headlines can across from dow jones saying that china is considering another for the devaluation. Important to point out, we havent had that verified. The Chinese Government hasnt told us this. We are still citing dow jones headlines. Stephanie that is correct. And the market is moving off of this. An historic merger coming up next on bloomberg go. David americans are starting to spend some of what they are saving on gas. Retail sales in november was the best in four months. Clothing, sporting goods, and internet retailing led the way. Africa in south increasing. The finance minister wanted to control government spending. South africas economy faces a downgrading to junk. Stephanie we are covering so much. We will be sitting down with the ceos of dow and dupont. Billionaire who is currently the most feared person on bloomberg has gone missing. He wasattentional assisting in some investigation. This has more people asking questions. Where exactly is he. Is he in hiding . We dont know that. Offshore,ching cnh which is at its lowest since 2011. This is a very big story that the markets are following. There are some allegations in the past that he made deals with chinese officials that were not kosher, so to speak. There is a huge Anticorruption Campaign going on. Matt there was a report that 12 years ago he had offered favors to a regional leader in return for other favors. I think it is important to note that the company he runs, which many othered, among things, a 6 billion company, says he is in fact assisting in investigations. So it is not that he might be in hiding. By the way, assisting in investigations, you can interpret that how you like. In china, that means you are being held by the government. Stephanie he is currently the most the person on the terminal. This is a story of interest. We will continue to watch it. We are going to talk about the fed in just a moment. We getting more more negative news. David two days ago, fed fund majors had the likelihood of a move. It is now at 76 . We can quibble over those percentages. But what the fed has in to do is get the cash get that above 75 to get the permission get that number above city five to get permission. Is now that time . Is it volatility that we are seeing to delay move . Julian potentially. We do not believe so. There is no question about the fact, whether you measure it with the vix trading through 20 this morning or you measure it with stresses in the highyield market, there is a lot more volatility and that is something that investors need to be prepared for very but the consequences of not hiking, given the way the fed has painted the situation, and when you look at that reading in the isn last week of below 50, that sends out a negative message just at a time when the consumer is starting to spend that gasoline dividend. David that is a crucial point. If the fed doesnt move, it could be taken as a move of noconfidence by Jenna Lenin Janet Yellen in the fundamentals of the u. S. Economy. David i generally hate confrontations are about to the Kenneth Fisher and strategy and credibility. Good ability means the fed is not doing what i wanted to do. In this case, they have made such a clear horse, rolling people out one by one, yellen, fisher, to make it clear that this is their intended move. Do you think this time there is a problem with credibility if they dont make a move . Julian no question. And it goes back to the bigger issue. Is there something that the fed sees that we do not . Thats why the most important data point in our view is going to be january 4 isn. If you edge down towards 45 and that reading versus 48. 6, you are talking about potential thoughts of the r word, recession. David when we are red zero in at listen 25 basis points, th is still pretty loose. What is your rubicon . Julian there is no number so good this has never been done before. We have been on zero for seven years now. The whole point of looking at the discourse over the last year the fed has asked for flexibility. Clearly, the market is telling you now that that flexibility is something theyre going to need. Stephanie the fed pulled back last time specifically because they were uncertain about what was going on in china. Guess what. It is not good. Matt we have to figure out what is happening in china, if they are really considering another devaluation, another and loosening. That is definitely going to move markets. We already see markets down. 200 semi five points. Moving down to session lows. You see it on some decent volume as well. I am looking at svs, a function of bloomberg. It compares volume of this time over volume of this time in the average of her 20 days. We are already doubling training double the volume in telecoms, in materials, 30 higher on consumer staples, 30 higher on i. T. Just at theis not drops are big right now. The sizes big. We are talking about real volumes here. It is key to look at that. Obviously, we have been looking at the 10year all day long. Investors looking for safety in government debt. So people are buying bonds right now. David thank you. Now we are turning to the story we have been anticipating for three days, they dowdupont circle. The largest merger ever in that industry. And edow, andrew livers green. Welcome, gentlemen. Please explain to us a fundamental underlying rationale behind this merger. Maybe it was a moment in time when this could happen, but both of our companies, we have known for a long time strategically put together fit together. It just so happened that are stocks are basically trading on top of each other from a market cap standpoint. Taxwe could do a very efficient transaction to our first,lders by merging capturing all the synergies and then doing a threeway split up. So it is very efficient from that standpoint. What really ended up happening was, we did not create the World Leading Company out of this, but we get a company that trades with smart multiples and hide growth. Parts ofusiness gets dupont that we fit with. We only strategically created three platforms that for together. And then all of these synergies on top of it. It was a pretty Incredible Opportunity for both our companies. Stephanie where did the deal come from . Did you bring this up to the border did it come from the activist investors on both sides . Ed the dupont board was looking at this. Obviously, andrew said this publicly. We have been looking at this rate long time. I was pretty versed on this topic when i took over ceo. But andrew actually called me my first down the job. I teased him couldnt you wait a couple of days . [laughter] together thatot sunday and spent the afternoon together and started laying out his thoughts, my thoughts, and we got to the point of doing the threewe split. So we both kind of new at our end of the board that there is a lot of industrial logic to this. It just took the right to people i think to get together and make it happen. Andrew the industrial logic of this is so powerful, very obvious to doubt from the beginning. The coincidence that we are here this weekend not just announcing this deal with dupont, but also haddow corning go, we have activists in the stock. Few have activists in the stock. This is great for all the shareholders. Stephanie our radio listeners have joined as well. How involved were those activists . December 13 is the date when dan loeb is allowed to be public again and speak about the company. Andrew you are quite right about the standstill. There no magic in her ability to pull this off. It has nothing to do with anything. This deal made sense for 10 years, nine years, five years, three years, three months, and the deal is being done. Our dow boardd has voted unanimously on this deal. It is a game changer. For voters. Brought try in three weeks ago. They are obviously extremely supportive of this deal. They feel the way andrew and i do. This by far was the most value creating opportunity for dupont shareholders. David take us forward into the future where we have these three companies. You wouldnt have done this deal that having your financial people run the numbers. What kind of costs savings are you rejecting for the combined entity, the three entities together . A hugelyhat is important question. We cannot do this apart. The numbers we have come up with, the 3 billion, we put 4000 manhours, people hours of work in in the last several weeks. Our teams have been together detailing every single aspect of the cost synergies that we had on the investor webcast. We both feel confident that they are very gettable. We are differently banking on the three. We are very incentivized and motivated to go get that three. And because you bring the two together, grab the synergies, newte new in the death ibda. Then you go out there and say to the market, look at these three entities. Those synergies are powerful because we can do this deal together. David the key to the synergies, it is under our control. We think we get most of the synergies done by the time we separate. Because the teams are going to be very organized. Weve got the next set of months to get that very specific. So we can get most of that done before they all spin out, which is incredible. Stephanie add, use of the first ed, you said the first sunday is when you first started talking about it. Thate kick started it sunday and went from there. Ed broughtbe fair, something to the deal that we were thinking about on the dow side but crystallized it, witches the which is the Specialty Products group. The industrial logic played into these new businesses, especially products that ed will run or at least lead you in this period of time. That was new thinking brought to the table to the dupont board by ed. Ofid given the thousands people are hours studying this, have any jobs will be cut . We havent figured that out yet. There will be job cuts. Whenay, when we dude we did gna area. It may not be as much as you might extrapolate. The way we are putting these companies together, we have a lot of cost to take out on the cost of goods side of the house, which is not people. It is procurement, management, throughput. There is a lot of opportunity, especially on specialty and on the Materials Science side of the business. There will be head cuts. We were also very careful not to go deep at all on the r d side. We do not want to affect the growth of these companies. So what we took out in r d is truly where there is duplication. And we will fix that. Andrew the performance material business from dupont is a natural fit for us on both the inputs, lowcost feedstocks, and we can bring it where it was not there before. We now have all the layers of a packaging film for medical safety where the businesses are together. Countl see ahead reduction in the back offices. Ask, have i have to either of you spoken to the department of justice yet . David no, we have not, but our legal teams have been coming this, and as big as our two de anies are, there is very minimis overlap. We sell into the same markets and they will be picking up some of our oil, but the actual products