I dont now. If anyone in my family or anybody you know where shopping this year it sure sounds like it were at nike. They killed it yesterday. Lets start with the first word. Vonnie thank you so much, human Rights Groups russia could be guilty of more crimes in syria. They are dropping unguided weapons on densely populated areas. The group says hundreds of civilians have been killed. Government troops are fighting Islamic State forces. He was spokesperson says and a rocky victory is inevitable but once the greg or easy. American drivers up at 1. 6 billion back into their wallets during the holidays this year and it is all thanks to cheap gas. Prices are under two dollars a gallon. Bloomberg newss power 24 hours a day in more than 150 markets around the world. Firste a look at off futures. Up across the board. Back again back to sticking off the week. Could this be day three . 0. 2 . Ht now dow jones up about a third of one percent. Upe a look right now at wti, for a third day. Big gain yesterday we started the week at 3450. Pretty good week so far for a commodity that has had a pretty rough time of it. Thehart of the day is convergence. Take a look, i have graphed the two over a month. Comean see, they have together in price. The rest typically a spread here, why have they converged . It is likely that opecs gambit to push u. S. Out of the business is working. Is dying off,n that is holding the u. S. Price steady as brent crude dives down. Today. Fascinating stuff also, nike, take a look at the shares in the premarket after coming out with our earnings that beat expectations. 25 to revenue was up about a billion dollars for the quarter. Defying the rest of retail. At othereen looking retailers, and have all done pretty poorly. Nike is up 37 . Stephanie retailers have done poorly, but not specifically in Athletic Apparel and footwear. Clearly, nike killed it. Up 35 . Lready whether we are talking nike, adidas, under armour, compare lauren, tommyalph hilfiger, any of the department stores. You are looking at a tale of two retails. Kyle you can only where so many pairs of shoes during a day. You push the envelope. Stephanie but, more and more we are wearing Athletic Apparel. Nike is proving this time and time again. Live events and sports are what you care about the most. In the world of connected fitness, more people are wearing Athletic Apparel. I do try to push that, more people are wearing sneakers. More than just trainers, it has become lifestyle apparel. 19 of their sales is running, 40 as basketball, the rest is amorphous. Regular workout close, streetwear. Stephanie what is driving this . It is fashion, it is style. They had a huge quarter in china. This quarter particularly, i think the mild weather helped. Toward summer where, so i think the fact that it was a warm fall jason, one of the things that the jump out at me is the china numbers. What is the consumer doing . This would indicate is doing pretty well. Jason china also plays in as know into this megatrend synthesize this with some of the things people are talking about with this active lifestyle. The to china from an athletic outpacing north america. The chinese just bought iron man. This massive middle class in china that is pivoting towards a trend weve seen in north america which is athleisure. Way we dress is fundamentally changing. Stephanie think about all the basketball players, and the impression they have. Remember linsanity. China shit do thisut down to watchi guy play. Kyle they will love it. David something struck me with the numbers is all of this, the move to athleisure wear gave them pricing power. Son what do you think its them in the way . Kyle i think his big push to direct to consumers in like a great idea. Is a lot of low hanging fruit. They can just open web stores that is easy to do. That is easy money. Ban theckly, i will term athleisure. The rule is only stephanie gets to ban terms. Nike is the runnerup when you look at the big athletic wear stocks. I will stick with that. A 37 again. Adidas soloman, i made a chart here for stephanie, how has nike been doing . Versus regular retailers, i put in nike iin white, then my my favorite, lululemon, and using Michael Cores which makes handbags and ralph lauren which makes the preppy clothing that he never thought would go out of style. That is doing the worst. The athletic wear it has to be the shoes. Stephanie ha ha ha, thank you. Matt are they making money for wearable tech, or compression underwear . It is really the shoes that differentiate them from the other guys. Stephanie i spoke specifically about wearable tech because they stopped producing that. An apple watch. I continue to do that. I am excited about where the apple watch is going. I know that is a huge priority for the company. We will see that grow and develop more and more. Nike will be a part of that. Stephanie this is what is interesting. Number how closely tied nike is to apple . Theyve made a very clear that connective fitness is what theyre focused on. The fact that it looks like nike has pulled back, could there be something between those two Companies Call it hardware for a reason, it is hard. Both of these Companies Love locking people into the proprietary system. I think people that work out these days they might want their own data. They might want their heart rate and the straight facts which they can get at other companies. Or underit bit, armour. David you asked earlier what will knock them off this quest for world domination. Are up 20 . They will have to spend more money on marketing with the new lebron james deal. Mattis had indicate that this is a crowded field. This is not this is not just there to take forever. I personally would keep an eye on lululemon. Down, inen up, and terms of the stock price. But they have a lot of people nipping at their heels. A lot of Smaller Companies coming after this. On, do youhold believe that is why nike signed a lifetime deal would lebron james . Just a few years ago nike had no competition. If you remember kevin durant nike was giving do you think that is why they signed lebron forever . Ason they are thinking about not replacing jordan, but that legacy of a franchise player. Stephanie what would motivate them . There inas just out portland, apparently lebron came there and sat down with a couple dozen people from their Marketing Department and said ask me anything. Them sothat made comfortable with who he was as a person, and an athlete, that they said lets do this thing. Nike invented the idea of the branded athlete. Have someone like under armour that is right in their scrapping and out. They have to make these big deals. , wehanie the one category talk about is so much. Workout we want to go out and experience and these of the companies that facilitate. About ane nike ads are experience. Stephanie all of them. David thank you for joining us, kyle. And jason, you will stay with us. Vonnie welcome back to bloomberg. Ec says demand will continue to slide into 2020. The annual World Oil Outlook says they need 30. 7 Million Barrels a day by the end of the decade. And a million less than the group pumped in just november. Consumer purchases climbed in november by the most in three months. Economyd in the u. S. Was gaining momentum into the Holiday Season. The spending match the median forecast. The u. S. Movie industry is on crack 11 billion in annual ticket sales for the first time ever. Thanks to blockbusters Like Star Wars the force awakens world. Assic that surpassed the Current Record of 10. 9 billion set in 2013. That is the Bloomberg Business flash. David now lets take a look at some quotes around the world. Have jason kelly with us. And matt miller, would you like to come all the way over here. We have to let jason talk some. This first quote is from a fantastic story. This is a businessweek cover story inside to pull lays crisis. Crisis. Tles there is no e. Coli integral like, it is a very exciting time for us to be pushing the boundaries on food safety. We are embracing this as an opportunity. [laughter] stephanie that is an aggressive headshot. It was jarring. We are pushing the boundaries on food safety. I dont want to be involved in the kind of boundary pushing involving the safety of food i put in my body. Good luck with that. David you love chipotle. A delicious lunch, or an e. Coli weight loss. That is not a strong way to start the quote. Matt i talked to some of the guys who worked on the show yesterday and did a whole, almost all of us have gone to chipotle. Look, it is kind of a roulette thing, but it is there and fast and accessible. , i and never, no going to be in a situation where culinary roulette. If you go back a year everyone was saying mcdonalds was over because of chipotle. Jason it is amazing. Stephanie i cant, i cant. Jason this is from the head of m a at barclays. He says there they are in the late stages of the cycle. We will see higher number of deals next year. This year has been dominated by the megadeals, it is likely that will slow down. It will come from suffering. From oil prices dropping, we will see m a by default not opportunity. Manyve balance sheets, how are going organically. We will see it for a very different reason that you. Jason what is consistent throughout the story, they do a great job of breaking lots of news, they make the point is that it is much smaller deals that we will see. So, the stress and debt, high yield, this is from the head of the hedge fund talking but the distressed debt trade. It is like a cancer spreading throughout the body. Mining,s, metals, and health care, they are all impacted. Stephanie this is the question are they going to be in fact outside the world of high yield . So far, we are seeing it somewhat contain. The real issue is high yield is trading at 6 and that december the wrong number. Now possibly we are getting things right. Jason price action is the cancer. Nothing to do that the fact that they have taken loans at higher Interest Rates than the fed. It is just the fact that the price the floor has fallen out for prices. That will hurt any of the debt they have held. Jason doesnt really get into the equity market, to your point . Stephanie or was it unsophisticated investors suddenly buying highyield . Jason and matt arent going anywhere. We give a shout out to one of just added to the management committee. That is a big deal. You are one of the richest women in america, what are you want for christmas . In million ski chalet of course. We have some amazing amenities, a heated driveway and a spa with a private wine shaft. House,phone operated maybe a special place to earn some Weight Watchers points. We will be back with more just a few minutes. Stephanie some of the biggest headlines in 2015 where the drug industry. These trends are not going anywhere. Analysts just published the 2016 outlook for pharma. Sam, in your 2016 lookahead, is pharma please and poisoned . Anwell, i think that is interesting phrase numeral the drug companies. See theyoull probably rhetoric will continue into 2016. I dont think there is any opportunity that will be lost by politicians if they can. I know another example to use potentially on the price rises and some of pharma the Liquor Companies have a putting in. We haveity is that quite a bit of indepth analysis on this. The probability of changing the law could bring in more control by the government and the drug prices. At least it is low in the near future. I think what is reality is that doing a lot better than they have been in terms of curing patients and meaningfully significantly enhancing the survival of a cancer patient. And Pharma Companies are pricing in a way they think is relevant. That is where i think payers are more interesting in terms of what they will do. David this sector has done very well over the last several years compared to the s p. Where does the growth come from . Saw during 2015, i think that rerating of pharma took place. Somewe started to see stocks specifically moving. If you look at the gulf between losers, 53 on a total return basis compared to novartis. You get very wide disparity. The same happened many u. S. In the u. S. Same will be the same story 2016. Jason are there specific areas where you are seeing a lot of investment . Sam i think, again, we will a replay but on a much bigger scale of the oncology revolution taking place. Pharma and the science has figured out how to remove the invisibility cloak of tumors own immunetients system. I think we will get a lot of news there. There was an outcome studies where they are really trying to ae whether their drug makes huge difference to the mortality of their patients. Drugsare some new lipid that will be about that. That is the areas where we could see a lot of excitement. Stephanie we will leave it there. In our london bureau. When the come back, were talking brexit. David welcome back to jason kelly is still with us and tom keene is joining us here. Lets check first with vonnie. Vonnie robert durst will face a murder trial in los angeles. They have agreed to and next tradition by mid august extradition by mid august. Prisoner releases are suspended in Washington State until a computer glitch that freed inmates early is fixed. 3000 prisoners have been released by mistake since 2002. Some inmates got out nearly two years early. Holdout, Universal Music Group says the songs will go online tonight and minutes after midnight. David that is a very big story. Original uproar a million years ago and neil young screaming about the fidelity of streaming, that is a big deal that the beatles will finally be out there. That is a real landmark announcement. David totally right, totally right. Stephanie lets talk come and listen, what is your must read . And radio, coming out of his kitchen. Theyre making christmas cookies, adding the first one was 40 proof. [laughter] lets do Larry Summers hit with christmas cookies. Byry talk about this in due dubai. The geometry of john hicks from 1939. Which is all the deflation and disinflation around the world coming back in and effect in the u. S. Economy. David, this is a mustread. David i totally agree with you. For those of you that dont know much of a the i. S. Curve, what i took away is that we are in a new world of zero or low growth. We have a lot of people making decisions based on the old models. Phelps it is very important speech seven years ago, we are looking for the new new to jumpstart where we are. We are in paris with climate control, maybe that is a new new. That is there, that is what we are searching for. Stephanie you mean tom Larry Summers is your a respectful to the optimist criticizing him. He is not doom and gloom. He is just saying theres a new dampened tone. Stephanie when i think Larry Summers, the first thing that comes to my mind is respectful. It was interesting to try to figure out what he thought the fed should do. He was calling into question the latest action around raising Interest Rates. They are doing this, it is not the end of the world, not that they are wrong. What the probability of where we are next year and that huge risk that they raise rates a couple of times that have to go whoops, like the japanese did. David it is not theyre doing a good job, but they may be the wrong people. At some point, was in the Central Banks cant do it. It is clear Monetary Policy cannot do it. Tom in our discussion, secretary summers three times r ipped into the Port Authority for not rebuilding jfk. The leadership of the United Arab Emirates was there, and we cant fix jfk. He kept circling back to that as a kind of funding that would help. David that is fiscal stimulus. Stephanie he has been calling for this for years. The fact that it is now playing saying is sitting there how do you like me now, because he was right. Tom are there any christmas cookies here . David only with a lot of bourbon in them. Jason do you think the fed is listening to Larry Summers . Yes, whether you agree with him or not, everyone listens to him. What is so great about him is he respectfully disagrees. You know what, they both listen to each other. Stephanie he wanted Janet Yellens job. David he was a candidate. He was a candidate for the big dont want the job, they wait to be called upon. Professor summers was not called upon. Stephanie i think he wouldve liked it. Lets get a quick check on the markets. Lets take a look at the markets here. Up across the board if we open up and close out it will be the third day in a row for the s p. , an interesting stories agreement reached over a drug to sell it. He first and 20 22 the first in 2042. Take a look at bed, bath, and beyond. They had some disappointing forecasts out, and preliminary earnings reports. Samestore sales will be down. Its not a gain there, but how much can you buy back when it is ng at it to gains for the third quarter. We hadlook at micron, sales miss estimates. Analysts expected the company to miss their own estimates. So much. Anks we will return now to a story with covered quite a few times on this program, the story of syrian refugees. At least 13 migrants tragically were reported dead this morning at a small plastic boat sunk off the coast of a greek island. These were some of the more 4 million registered refugees seeking resettlement from syria. The International Rescue David Miliband joins us now. We know this is a big problem. What are the specific actions that can and should be taken to start addressing it . David the three things that are absolutely paramount now, syrian is the humanitarian catastrophe of 2015. First, the sheer mass murder and terror going on inside syria is driving people out of the country. 37 of the people arriving in europe this year, they came straight from syria. Away from the barrel bombs and the terror of isis. Thendly, there is no top of organized routes for these people at the moment. They are in transit, those that live in lebanon, or jordan. There is in the organized resettlement in europe or to come to the u. S. Or other richer countries. The third and final thing is europe must play catchup. The refugees are germany and are not being redistributed. The real threat is that germany gets overwhelmed. Issue is, when you see europe youre talking about a number of countries, none of woman is their sole responsibility. Who is responsible for addressing this crisis . David the European Union is a block of 23 countries that do things together and separately. They do need to get the agreement of other countries to redistribute some of these refugees. Has good claim to be the person in 2015. She did step up in an extraordinary way. These people are coming, frankly, the stretch in the neighboring state including incredible, myis organization has 400 people on a greek island were more than half the refugees arrived. 3500 coming a day. Now, used to a very large numbers coming. Tom this was the number one topic for Henry Kissinger when i spoke to him two months ago. Nothing asre is great as this overwhelming event for all of europe. The focus is on chancellor merkel, but how will this change brussels . Impetusbe enough of an to really make for a more united david the euro crisis is not over, tom what is brussels . David it is easy to blame them, they have less Civil Services than the new york state government. An accumulation of 28 countries. The only get their authority in the end from the consent of the National Leaders in the commitment of those countries. What you see in europe is an eastwest to split. The great story of the last 10 years has been Eastern Europe coming into the European Union, now there is a split. Question for brussels is to fix that and the refugee problem at the same time. In the end, the Political Authority still comes through the National Leaders. One of the interesting points is an economic one. The worldsed role of bank, what is the Global Financial institutions need to do and what can they do to solve this . David you were talking about the mismatch, what could be more ridiculous than the world bank not allowed to do its full work in jordan and lebanon because they are classified as lower income families . An obvious change is demanded of the world bank has to say these fragile states are bearing an unconscionable share of the burden. 80 of the refugees are in countries, not the rich countries. Oureans updating International Institutions of the hundreds of the u. S. And the u. K. Have a role to play as well. Also, we can set an example by taking in refugees. Avid today, there was Bloomberg News pays out that surveyed a large number of economists about the largest economic threats that great britain, and number one and number two were brexit. David and number 3, 4, 5. David telestrate thoughts about this. There was a governing party in the u. K. The conservative party who have defined their politics in opposition to the European Union. The Prime Minister is trying to negotiate his way through it. He wants to have it sooner rather than later. With the situation in a wider crisis and refugee greek crisis continuing it is not the best circumstances. I wouldnt say it is a likelihood, but significant risk. An economist i would say you have to take this seriously. If you are taking it seriously, what action do you take . What does that actually mean . You have tond adviser on supervisors and authorities that this is something that needs to be planned for. A Business Needs to speak out. Globalization has been good for britain, europe, and part of the next ordinary wave extraordinary wave will stop i am based in new york, so i am out of politics. It is not my game anymore. Is till a british this citizen. Want my kids lives to be part of europe. ,om it is easy from new york how many syrians and should make the pilgrimage to canterbury . Within the scope and scale of what were dealing with, how do you perceive x number of people andfamilies and Children School expenses going to a small shop like canterbury . David miliband the most important is that the most desperate get houston rich countries. That would be 400,000 of the 4 million would be widows and orphans that they should be rehoused and relocated into the richer countries. Syrians,has taken 2200 you know the debate about the security. It is harder to get into the u. S. As a refugee than any other way. I represent a constituency decides of canterbury, roughly. Moment, if the u. K. To 25,000 people a year, that would per constituency. No one will tell me that 40 people would overwhelm my constituency. U. S. , if it was taking its share, if it was living up to the said joel liberty will be taking 100,000. Tom given the scale you see any experts say, 40 people end up in the emotion of every single town. Our districts are smaller than yours. Arehe thing is, the 10 those that lost everything. They lost family members, they need a new start. Y wont find it and missed amidst the chaos into many parts. The numbers and lives, at the moment our allies in the middle east feel they are on their own. Symbolically, as well as insubstantial terms, Refugee Resettlement is part of our bargain. Jason this has become conflated in the u. S. With terrorism, and National Security. That a solvable problem in an Election Year . I hope so,and because i have great faith in the american system. The truth is, the line but the syrian passport in the terrorist attacks caused enormous damage to this debate. The people fleeing refugees are running away from terror, not trying to cause it. They have the most heavily vetted entrant into the u. S. , you have to prove youre entitled to become a refugee. 750,000 people left of the 9 11 through the Refugee Resettlement program. Proven american Success Story that it would be a tragedy if you step back from. David given the size of these problems, you were a major leader in the united kingdom. At some point, you must think maybe i should go back. David miliband in the end, it is the voters that choose and we lost the election in 2010. , running an doing ngo founded by einstein in 1933 to help rescue people from around the world. We know work in 30 countries. I feel i am doing good not just according to statistics, but individuals. David do you rule out the possibility of going back and standing again . Meid miliband people say to that college can say what should i do in my life. I say i am 50, and i havent figured it out. That is a question like should a third runway at heathrow . David is were lucky in new york, doing the work that he is. Tom, we will let you go back to radio. We have more in just a few, stick around. It is december 23. David retailers going on a Free Shipping frenzy. Will it hurt their bottom line . That is coming up next on bloomberg. Producers are just messing with me. Retailers are feeling the sting from a weaker Holiday Shopping season. Some say it is the warm weather. Both percentone to this year. Compare that to the first week of december last year, now some stores are pushing more and more Online Shopping with Free Shipping as a way to boost sales. Ofare here with a little bit store wars. Can niceu with a weather, everyone will go out to the store. Instead, traffic is down. I think this is really surprising how far traffic has fallen. How quickly the shift to online is going. What of a doing . Shipping because customers are demanding it. They see it on amazon, but there was a perception that you can get Free Shipping from amazon. On, forgethold amazon, bloomingdales, home depot, they are all offering Free Shipping. 90 of retailers will offer Free Shipping. A lot of times you have to get some minimum. The problem is, this costs them a lot of money. It is not free for them. They are already operating on razor thin margins. Dollars toend five send a teacher they mightve only made two dollars on. Stephanie matt miller is going nowhere. Matt if you offer me Free Shipping, that everything on your website just went up . 30 in price. Stephanie did it . Matt unless they are morons. Shannon they cant increase their prices though. David but why is this happening . For theirpaying less gas, the numbers have been down for some time. Im told online sales are up, what is going on . Salesn so far, retail are up to be about 4 . But if you break out amazon, they are only up 1 . Online,e shift to amazon is taking so much a business from everybody else. Under certain to dig into this, a lot of competition for those gas dollars. Restaurants, tech, entertainment, housing costs, all of that money is being sucked away. Stephanie does this mean fed ex and ups will have a great quarter . This has been good for fedex and ups, there is talk about the tension between amazon and ubs. For a wild this was a symbiotic relationship is to but now amazon does not like having to give such a big share of their profit, they are trying to find ways to bring that inhouse and control that. Jason we are also talking but a blowout quarter for nike. The blood buying shoes and going out running instead of going what is happening . And losers, irs guess. In this retail environment it doesnt seem like everyone is going to win. , youu have a hover board will be a winner. But there is not money to go around for everybody. If you have a sweater that doesnt fit well that is kind of passe, like a j. Crew, you will be a loser. The money is only going to very set places. Stephanie i love my j. Crew sweaters, help us understand the discount these companies get. Isan ship something and it 75. How much does it cost them to ship . On target can get a 30 discount, amazon maybe 65 , they do get a discount, but it is expensive. When you see a huge box coming to you, it came out of the bottom line. And more i shop more online because it is so easy. Bloomberg is not leaving, thank you. We will be back with more just a few minutes. David will the fed surprise 2016 . Ipos and if possible booze for the outlook with tom farley joining us live. Recordbreaking Holiday Travel the ceoted this week, of Spirit Airlines joins us to talk about how the lowcost carrier is handling the load. Stephanie welcome to what will be the second hour of bloomberg go. Stephanie we have a packed our and aipac table. Here with us, Bloomberg Contributor and author bill cohen, jason kelly sticking on. Nd and richard yammer david we are still overmatched. Stephanie lets get you some first word news. Vonnie Amnesty International says russia could be guilty of war crimes in syria. The Human Rights Group says russia is dropping cluster bombs and unguided missiles on heavily related areas. York s in new investigators say type the email accounts of what it 100 celebrities and offers to sell scripts and private sex tapes to undercover agents. He is being held on Identity Theft and Copyright Infringement counts. Gas, gas to cheap buddy says prices are under two dollars a gallon in 70 of u. S. Police stations. We are powered by our journalists in more than 150 50os across the world euros 150 bureaus across the world. In a will be the third day row, s p many contract up 7 . Crude rightow you now, take a look, speaking of gains, this is another one that has three days in a row. It may not seem a lot, but we start the week at 3474. Oil has had a fantastic three days, but it is a really interesting chart. I want to show you the convergence of wti and what this means is that opecs gambit of producing more oil is working to drive u. S. Oil producers out. The green is brent crude, there is a spread between brent and wti. This converged on 21 and we have numbers out saying u. S. Stocks are falling, but i also charted the Baker Hughes Rig count. Very interesting chart over five years, it falls off a cliff and continues diving down, so this is what happens when opec produces more and more oil. Part of the reason a lot of people will say it is a ploy to stop or hurt iran, but its also an attempt to get u. S. Producers to phase out. That is holding the price of wti and that is why brent has now converged with wti. A very interesting look at whats going on in the oil patch. Thanks, buts 2015, lets look at 2016. When it comes to the fed, will be bowls or the bears when the day . Mark gilbert is with us with from london. Best e he rocks the the vest. That there defeats could be an upside, one of which the fed and the others like greece at the landmines and the grenades and the potential try to be optimistic and find some things next year that might turn out to be surprises. Larry summers had for more reasons why the fed is mistaken in moving rates so early, but i was thinking if he landed from mars and all you knew was what gdp is in the u. S. , the fact that economists expect inflation to trend back to 2 and you saw what was happening in the housing market, would you think that a quarter percent fed funds rate or even a half percent fed funds rate is appropriate for the u. S. Economy . I dont think you would, so that got me thinking, that only is the fed right, but maybe the path Going Forward will be a steeper and quicker one that people currently think and that the fed will turn out to be exonerated in raising Interest Rate this month rates this month. David it is interesting to note how steep that path will be. Like 3. 5 bymething the 1. 35 by the end of next year. There is a difference between the market and what the fed is saying. Mark it is partly because we have been at zero for so long. These are not your normal Economic Conditions and the textbooks are not working. People are missing the compass, if you like. To the if you came fresh situation and have not been through the past 10 years and were asked, just be based on the data, i think there is a strong argument that it would not have believed until i talked myself into it, that the fed has done the right thing and the market will have to accept higher rates going into 26 team that 2016. 2016. Stephanie what do you think . The fed rate increase was done with respect to economics, therefore, i think there is Something Else behind it, maybe it can receive every that you would probably like to write about. It is not done for economics, if the fed cuts is Inflation Forecasts for 2016, they dont see it that is core inflation reaching 2 until the end of 2017, why are you raising rates now . In addition to the gdp being very slow and sluggish and not bear, a specially a woman for a woman who is a big dove. Why is she forcing . Something does not feel right. But it is notwhy, kosher to me. You look at something along the lines of Larry Summers, appearing a lot more in the press. Bill i cannot agree with him more, i feel like it is the economist versus the practitioners. A practitioners in the markets, otherdge fund managers, people who have been warning for a long time that the fed has created a credit bubble, i think they are right. I dont know why the economists like Larry Summers continued to insist that the fed is making a mistake. It is hard to argue with Larry Summers or paul krugman. Stephanie he did say the internet was a phase. And larry probably thinks he should have won. I think this is long overdue and i dont see any conspiracy. Interest rates have been at the zero bound for nearly seven years. I have been on the show with David Stockman and we talked about this several times and it makes sense at this point. The economy is strong and this is long overdue. The effect is pretty much zero at this point. David is this anymore it has not worked and so Larry Summers is saying maybe the world has changed. Jason this disconnect is interesting because summers has gone pretty hard again. This is not like Something Different, slightly he is saying this is the completely wrong approach. He says the Interest Rates will have to go back down and this is the guy who was almost the fed chairman. Stephanie mark, do you want to weigh in . Mark there was an argument that all of the Central Banks are nervous at the zero bound, that they want to raise Interest Rates as well as economic justifications. Feds in the camp that the should not raise, but if you look at it with fresh eyes without having known the history of the past year, i think that gives you a different picture and i think we all spend too much time listening to these arguments among the practitioners and the economists. If all you knew what the facts, i think you would believe the fed acted correctly. I read his piece here and it was excellent and you cite jack lews comments saying that the economy is doing well and consumer demand, record sales and auto sales and housing. They are the two most Interest Rate sensitive sectors of the economy. We are raising rates and making it more restrictive. The only thing in washington that democrats and republicans agree on is that fiscal responsibility should be more restrictive. Democrats want to raise taxes. Republicans want to cut services. That is restrictive. That policy, Interest Rates going up, that is restrictive. Matter what policy we have enacted, there will be some combination of restriction. David the fact that they agree on it does not make it right. That we do need a stimulus is stimulus. The fed generally engenders recessions and i will not be too surprised to see this. Citibank scoffer a recession and stem cells you also have politicians, sort of circling around this, we are going into a major electionyear were clearly, the economy always sits at the center. It will be interesting to see i know they are not supposed to react in politics, but we are all grownups. Stephanie great conversation. Thank you mark, helping us take that off take that off kick that off. This years look at holiday hottest hottest holiday toy. Im thinking about getting it. It is a hasbro game, high face pie face. Players have whipped cream front of their face for a mere 1999 19. 99. This is a game well that might be for your grandma or your toddler or a group of teenagers. Donald how many extra whipped cream canisters you want to have around your house i dont know how many extra whipped cream canisters you want to have around your house. Back. L be right stephanie welcome back. Here is your latest business flash. Data compiled data compiled by bloomberg show more than 70,000 deals completed this year. More retailers are using Free Shipping to jumpstart sluggish sales. Acres the advisory says 90 of retailers are offering free delivery this year. Target, best buy and others providing it on every purchase. Some retailers are requiring a spending minimum. Starbucks is expecting gift card sales to hit records tomorrow. Last year, they sold 2. 5 million cards. One in seven American Adults will see one this season. Ceo said s bill and is here with us. You have written about the subject quite a bit. This is not been confirmed as i understand. He is often in touch with his daughter, but its not clear what is the nature of their relationship at the moment. Some say it is better, some say it is not so good, but it is apparently a Smart Business deal in my opinion between sherry and les because he has done a very good job at cbs and it makes sense. David nothing would happen right away because Sumner Redstone is the chair. Of both cbs and viacom, so this is a theoretical. David the terms would have sherry standing up if something happened to sumner. Bill as well as a separate contractual agreement between les and cbs about what would happen if he does not become the chairman. That might give him an opportunity to leave with a big payout. Bill there is david there is an alternative candidate . Can you walk us through that . Les, can yout, walk me through . Is guys get paid a lot and have been getting paid a lot for a very long time. Philippe has made Something Like 30 billion since he has has been made the ceo. One thing that is clear is that they both get paid very well. What is also clear is that Sumner Redstone will not live forever, he is 92 now and increasingly in firm. David lets talk about that. Jason shakespearean immortality. Palace intrigue is nothing new in the media world or in corporate america. Bill this one has it all. Jason it also has some serious governance questions in terms of visibility and transparency and people not seeing sumner and not being allowed to see him. Iraqi vanity fair piece in may and they would not let me see sumner. By the viacom people, he did provide written answers to me, it is not clear that he actually wrote them and that is when he had his two girlfriends around. They have both been jettisoned from the premises and now one of them has filed this extraordinary lawsuit against that hebasically saying was incompetent and infirm and none of his right mind when he threw her out of the house and took her out of his will and that he needs a full medical examination. Inid my understanding is terms of the board, they do not see sumner, regularly. Believed among talk to him once a week, reportedly Philippe Dumont reportedly talks to him once a week. Bill memo mr. Said that that was not and while mr. Set that that was not reportedly true. Very important governance decisions are being made. Stephanie by takeaway is more money, more problems. Up next, the top stories you are reading on the bloomberg, this morning. Matt crude oil has been in a bear market for some time, but its starting to show some signs of recovery. Is 2016 the year oil makes its come back . Joining me now to discuss it is philip from rko futures. Trys a little bit silly to and call this a bottom, but the question is, how long until we feel normal about or feel it is safe to call it bother bottom because at some point, there is just no more supply. We see the rig count dropping, inventories falling. You are nailing it right on the head, we have seen the rig count drop, inventory start to its the number on the inventories fiveyear movement average, once we crossed below ,hat 100 million barrel mark oil prices it is early to call a bottom, i think it will get a small january left off. Seasonally, we start to see people prepare and as an allocation occur, a lot of Money Managers are going to look at different Asset Classes, a lot of commodities have been beaten up quite a bit. Lowend target is 32, you may see that as inventories get a builder today, but abi showed a nice little drawn out and you have some sideways action. Resistance point still at about 45. , i yearend 2016 target, closer to that 40 level to that 48 level. Opec is turning to tighten things up a little bit. Matt thanks so much for joining us. A 10 10 30, inventory numbers and at 1 00, we get the rig count. Now we are taking a look inside our terminal at the hottest stories of the morning. You can find these using the across theor board, lets look at what people are reading about. Clearly they care about the distressed market. I like the first one, blackstone and citadel, also lennials having a massive the reason this backup for me is because these are not funds with high constant ration. The wrist with some funds with five trains on and they are too big. Millennium,that they are 38 p with different strategies and diversification. Jason blackstone is a fascinating story. This is a business that did not exist 15 years ago. Banker, getgendary handed this business by Steve Schwarzman and has built it into the Largest Hedge Fund in the world and now, not only are they the biggest, theyre one of the yearperforming, 23 in a where a lot of hedge funds were saying volatility and that this is a tough market, they killed it. Stephanie it is somewhat of a copycat strategy because to the dell paid huge payouts to get the best of the best. Citadel paid huge payouts to get the best of the best. There is a credit cycle here. When highyield bonds were yielding 5 , people who bought highyield bonds yulia 5 , another they have backed up, 300 basis points, they are feeling a lot of pain and i feel this is really amazingly interesting and probably the story of the next year in the credit markets. Stephanie there were a lot of investors who were negative on highyield who went short last year and they were getting carried out. Their pieces was right, what they were unable to have was patience, guys like blackstone have patient money. Jason this ability to truly hedge, god for bid hedge funds do, which is to read the market in a certain way, place that across the board and stephanie the problem was, if you could not beat them, join them. There were people who were fundamentally negative on the market and it is kept losing, and now what what happened. Jason is not going anywhere, when we come back, tom farley is with us. Stephanie look at that beautiful morning in london. We are noting focusing on london, we are focusing on new yorks, on new york, bloomberg headquarters where we are. , jason kelly and a friend of mine, stuckey change president tom farley Stock Exchange president tom farley. Here is, in the flesh, welcome. Tom thank you, it is great to be here. I get twitchy when i go north of 14 street. David we will get you back. Stephanie lets dig into the news of the morning. The real estate air agreed to extradition by midaugust. In jail in new orleans since march on a weapons charge. Matt breaking news on personal spending, up 3 10 of 1 , staying in line with the estimate the survey for personal income was 2 10 of 1 and we exceeded that. Personal income up by 3 10 of 1 . Pce deflator, yearoveryear, court number, because that what that is what the fed looks at. They close at 1. 3 , in line with the estimate, but as everybody pointed out, far off of the feds 2 target. Futures right now, but a lot upmovement on that report, about a third of 1 and across the board, futures are doing , we havetrong gains substantial gains in s p futures and down jones many contracts and nasdaq futures. If we are up today and we continue up throughout the day, it will be the third day in a row. Stephanie, i cannot believe someone from the new york Stock Exchange likes you. Stephanie that hurts me. On that note, we will end matt millers segment. [laughter] andident tom farley is here tonight he takes the crown it again as the Global Leader in listing the raising 19. 1 billion in total proceeds. As we head into 2016, the more and more unicorns this Companies Worth over a billion dollars, are we going to get them to go public . We are now in a situation where youre not just competing with the nasdaq, how are you going to get companies to want to go public . Tom before we go into 16, let me provide some context on 15 because there is one underreported story is that which is that investors are very focused on their own portfolios, manifested by the fact that skin transactions, splitting a company in does go, they were the most common type of transaction in 2015. In the u. S. , there was the greatest amount of announced the old value in terms of m a announced deal value in terms of m a. Stephanie we have breaking news, it looks like norfolk is rejecting the deal. I have Norfolk Southerns price up here on the terminal. Canadian pacific has been pursuing Norfolk Southern and has made three offers now, all three have been rejected. This one unanimously rejected by the board of Norfolk Southern. You can see when the offers started coming in and they got rejected, but the stock price still climbs, it cannot climb that much because it is fighting a week cold price and commodities prices which is hurting rail across the country. That is why you are seeing this push for consolidation that Hunter Harrison is leading the charge on. Norfolk southern rejecting the bid and think they can do better by its. Health the question is, will shareholders agree . Over the last months, they had not agreed. They have not agreed. Stephanie we sat down exclusively with Hunter Harrison last week and he said he is going to be friendly that he is willing to be friendly he is willing to be friendly. You cannot activists knocking on your door you can have activists knocking on your door. Matt a fantastic month for stocks at large. He said it Erik Schatzker that he thought a proxy fight was inevitable said to Erik Schatzker that he thought a proxy fight was inevitable. Stephanie tom, you were talking about the year you just had in 2015. Tom greatest amount of deal volume, ipos were down significantly. If you look at the numbers of ipos, it was the fewest numbers in a decade. Similar with tech. Not unique, it followed the overall market and investors focused on improving their own portfolio. When i look at the tech deals that were done and the market deals, you think of a square, fitbit, go daddy, these great companies, they are doing really well. Each of those companies is treating 40 up in the aftermarket or greater. I dont think a message from this year is we will not see these unicorns able to go public in 2016, investors were focused on Something Different. Will they couldnt their attention to adding to their portfolio and if so, there will be the ability for companies to go public. Is not investors saying they will not buy a deal, they are not being offered. If they could get into uber, they would. There were 20 ipos that were announced to go public in this year that just did not. Many went on the roadshow and went to investors and investors said they had enough to worry about. Stephanie that is a great point. David go back to stephanies question because i do not know the answer to it. We interview the ceo of airbnb and said the you want to go public and he said not anytime soon. A number of from ceos of Successful Companies who say they have enough money. Is that a new phenomenon . Tom i think it is turning event. I have heard that now for a couple of years. Kind of funny coming from me, hey, you should go public because they assume i am biased. Areer voices like saying if you are a tech unicorn, there was a lot of benefit to going public. You can do acquisitions, you have the ability to raise money in a new way that you do not have. Uber and maybe three other companies are in a class by themselves. They have credibility, private markets are flush with cash, they have the ability to do acquisition, you have to put them in a different conversation from the other 130 tech unicorns. It makes sense to go public if possible. Stephanie its also the only way to monetize. If you are an early investor, how do you get your money out . Do you think that part of the problem is that maybe the ipo process it till is woken . Fitbit has had a great go, but for every fitbit, there is a gopro and that is not near a Stock Exchange company were the chart looks like Mount Everest where they go way up, then way down, even of the company is performing very well. We wonder if there is something inherently broken in the ipo process that might get people to say they are not sure they want to do it. Tom the valuations you just described were quite high for companies, that was mirrored in the private market. Were saying these companies are getting valuations north of where they would get in the Public Market. What i think we have seen is these companies, they are fairly valued, worth about 4 billion of capital. Perhaps those investors who went a year ago i noticed not making as much money as they had hoped. Matt im looking at 12 years of ipos here and there is a great function on the ipo go for you can search by sector and year, but the big dip into 2008 and 2009, right after we popped up, a little bit of a low and now, are we headed down into 2016, yearer whole year lul or does your team tell you this is going to go back up . Tom it depends on what you think volatility in the market is going to look like. The relationship between volatility and the market inverts correlation of nearly one. Volatility continues to beand be continues to heightened. One could come up with a theory that volatility will reduce and i would expect ipos to be back on a previous timeline. Bill if they can get the capital they need from private market sources, they do not need to go public but if the Public Market becomes the only viable source of capital, i think people would quickly turn. Tom what im hearing from people who are in the private market, whether its bankers or some of those public Market Investors, is that the market , these fakereduced it has turned off and private financing in particular has dried up dramatically. Bill beyond tech, as you talk with investors, what other sectors are the eager to buy into . Tom it is a cross sector, there are some sectors that are on their proverbial keisters. This year, our representation from tech was actually a small representation, a very tiny subset of what we get and shows opportunity to do ipos across all sectors. Stephanie how about International Sectors . When we talk about volatility in the market, china, europe, these are volatile times. Tom in some ways, that benefits companyse if you are a that is not comfortable doing an ipo in your home market, you will do your ipo on the new york Stock Exchange, you will not do it large on a Global Market. If you look at International Markets the common list in the u. S. , 90 of the list in the you 90 ofck exchange them list in the new york Stock Exchange. To some extent, we are a little bit hedged. Stephanie thank you for joining us. Nyse president tom farley. Bill and jason are sticking with us. He was running laps around the floor of the nyse, this man was running the bases at georgetown. He finished his career with 12 home runs. Talk about a superstar. Merry christmas. Up next, airlines gearing up for the Holiday Travel rush. We will hear from Spirit Airlines bendel does a. David more than 100 million americans are expected to travel this Holiday Season, that is nearly one in three and 1. 4 more than last year. What are airlines doing to prepare . Spirit airlinesceo joins us live from d. C. What are you protecting for spirit in terms of this Holiday Season . Ben it is great to meet with you, this is a busy holiday for us. We are 30 bigger this year, so we will be carrying a lot more customers and our planes are very full. Some people are leaving today, some have already left, some are not leaving until the weekend. Stephanie 30 somebody good number, but the last time we spoke, you said you had your sights set on the model of ryanair. They kill it, where are you in terms of your goals . Business started their well before we did. We will end the year with 80 planes. We are at a pace to grow 15 did that 15 to 20 per year. Tell us about costs . Beginning at benefit from the reduce fuel cost . Ben it is a mixed bag. On the one hand, it lowers our largest costs and allows all airlines to be profitable right now. On the other hand, it invites more capacity into the industry, so all carriers, even those with less efficient cost structures are growing. That poses a little bit of dampening in the event that Energy Prices increase over time, but overall, it is a good story and obviously great for consumers. Bill is it fair to say this is the best of time for the Airline Industry . I can imagine a better scenario airlines. Your competitors, low fuel costs, highcapacity, all planes are full, can it get any better . Ben it is among the best, but there are still there is there is uncertainty in terms of overall capacity. It could be a little better, but its pretty good right now. You talked about capacity, what do you worry about from a competitive perspective . Who is coming at you and who you worry about. Competitor isst amazon. Com or someone like that because the reality is we carry the truly discretionary traveler. The customers have a little bit of extra money and are deciding how to use it and we want them to use it to take a trip. We dont think of the rest of the Airline Business as much as a competitor, we have a very large cost advantage against everyone we fly against, and i, it is more stimulating that discretionary traveler. Above inanding front of a graphic of your Stock Exchange. Only delta is gaining here, they are up about 5 , but you were down more than orton percent year to date, what do investors see that they dont like or what is forcing more sellers and buyers . More sellers than buyers . Ben the core Business Model fundamentals are strong. What is happened is we went public in 2011 and for the first couple of years, the industry was dominated by low capacity and highoil prices ticket prices and people understood the role for spirit in that model. A halfe last year and with low fuel prices and lots of Airlines Offering low heirs, i think it has put some apprehension in some investor minds about where spirit fits in. We are still posting really great returns with a terrific third quarter. Our margins should be better than the rest of the industry and 20 growth next year, as the model proves itself out in this environment, investors will come back. T you are at 10 competitors are at 112, 120, is that not the best measure to look at spirit or is that headed up . Ben its not the best measure to look at spirit, for most of the industry, looking at unit revenue is a good metric for margin. If razan is up, margin is up because cost structures are relatively flat. For spirit, we are seeing improvement in the unit cost structure, so unit revenue on its own does not provide the best metric or spirit. We have been able to grow our margin with a big reduction in you a revenue and we actually like that because that means lower fares for customers and even more chance for more customers to take travel and with our lowcost structure, we can be profitable. David as you look at these large competitors, what is the secret sauce for spirit . Where do you get your advantage . Ben it comes from a couple of things. A very large cost advantage, we are 20 over southwest, which is a very Efficient Airline in its own right and 50 over the bigger airlines. David that was a question, thank you. Ben we are able to do that because we dont cater toward business travelers. We try to set the airline up to be profitable at low fares. Have more seats, we fly only one or two flights a day in the markets we lie and that caters to the discretionary traveler. We keep everything simple. The other advantage is simply that we understand who we are and what we are. We joked that we have very clear mirrors. We know who we carry and we dont carry. We are not there for business travelers we are there for the customer who want to take that extra trip and go see a baseball game with their friends. Stephanie the last time you sat down with us, you say you are catering to more business travelers because businesses who care about costs are changing and people are not just line business anymore. What is the economy looking like . Who is spending and why . We see it, we dont see the whole elephant because we are carrying just a small segment of the travelers in the u. S. And the most pricesensitive travelers. In terms of what we see, demand for low fares and the lowest fares we offer is off the charts. The intent of that travel could be business, it is more likely leisure, visiting friends and relatives. The way we put it together is if the customer is paying for the ticket it themselves, that is whose irrigators to who spirit caters to. David what drives them to spirit . Ben we have a fourpart proposition, the lowest price, and ontime flight, a clean airplane and to be friendly. If we can do all four of those things, better and better every day, we think we will get lots of customers overnight overtime. David thank you so much for joining us, we are back after this. David welcome back, you are watching bloomberg go. In 35 minutes, we will have the opening of the bell. A lot more to cover on bloomberg go. Stephanie Sumner Redstone, bill cohan going into 2016, what do you want to write about . Byl i am always fascinated stories about people who are not behaving the way they should or the way you think they behave. What happens to sumner is one of those great stories. Stephanie you can write a story about my life. Jason kelly, thank you so much, bill, we are not done with you. We are talking john kerry, point man on energy. David we are now 30 minutes and 25 seconds away from the opening bell in new york. This is bloomberg go. Stephanie we will have a great our. The ceo of macro risk economics is here and my friend and sometimes adversary, bill, if youre reading editor contributing editor is with us. Bill no, dear friend. Stephanie sometimes, we have differences of opinion. Im glad he is here. Lets check some first word news. Vonnie iraq says its troops are getting the upper hand against isis in a key city. Says its forces are fighting isis in ramadis central district. Prisoner releases are suspended in Washington State while a computer glitch that freed prisoners early as fixed. The errors were small, but a few got up nearly two years early. Military Officials Say a streak of light seen the western u. S. Last night was debris from a russian rocket. 24 hours a day, howard by bloombergs 2400 journalists around the world how worried by bloombergs 2400 journalists howard world by bloombergsed 2400 journalists around the world. Matt Canadian Pacific is not had a good year as far as investors are concerned, but right now, it is up about two and 2. 75 . Another stock involved in some m a talks is that boys have boys pepboys. Carl icahn and bridgestone have been going back and forth in a bidding war. Offer . 10 he will more than whatever bridgestone 1810 up to a cap of 18. 10. We will see them rise on that news as well. Celgene, anat interesting drugmaker that had been in a fight with matt over one of its drugs. They finally sell that settle that fight and not go so that matt 2022 and a lot of retailers are having a tough time going into this Holiday Season. 6. 25 th beyond is down because the Company Released limitary figures below its estimate in terms of profit, samestore sales and earnings. Bed bath beyond said their samestore sales were down 2 10 of a percent because brickandmortar shops, Internet Sales are up 25 . Nikeout yesterday china revenue in the quarter of 24 , almost 1 billion. This company is firing on all cylinders but it is the shoes. I was quoting Mars Blackmon when he said it has to be the shoes. The shoes make up the lion share of their property profits. Stephanie it is the margin on those shoes. Jordans, the Golden State Warriors question, it is the number one issue out there. Shoes . Ho makes those who puts those shoes together . Operate the machines to build the shoes in malaysia . Stephanie thirdparty factories. Matt im wondering what kind of people are making those shoes. Stephanie youre getting into a whole conversation about manufacturing. Nik is now doinge more manufacturing in oregon and under armour making the same argument. It is time now for the three stories that matter to markets. I will give you number one, i try not to ever do negative ones. Opec announced that the demand for its crude will continue to 2020, but the slide will be less steep than previously expected. I will not say that is a huge positive. Around 70oil to be by the end of the decade. Crude oil is trading up 1. 8 . That is bloomberg doing its best to be positive, but honestly, opec giving us an announcement, at this point, went to the even control . The cartel is not setting the price these days, you have a globalized Energy Market and i think for us, it is interesting to step back and think, just about how linked so many Asset Classes and asset price outcomes are too crude. Perhaps this massive program that they put in place does not need fulfilling, but the fed is watching. On the other side, we talk about credit markets, even if crude goes sideways, the credit markets will see even more pain than they have seen now. Crude sits at the nexus of all these outcomes. David did anyone see this price plummet coming . It is interesting to think about crude in the context of 2014. All the debt that was built around this notion that crude was at 90 and would stay that marketd now, the housing meltdown and all the things into the five, i find it really instructed to think about all the debt that was built around housing because the market had disputed housing prices were going to go up, just like this latest in crude, the view that 80 was sustainable forever. You have so much debt built around it, that is the dangerous part. What is the effect of these Lower Oil Prices on alternative Energy Sources . We all know in our gut how important it is for us to move beyond crude. We did not leave the stone age because he ran out of stone and will not be the oil age because you ran of oil. When need to spend less on carbonbased products than we prices, ith these unfortunately dean that is a disincentive to something that the Global Market recognizes. Do theim supposed to next one, but i will not do it because stephanie does not like to do negative stories. This is the positive story. Stephanie i love overpaid bankers. 2015 to go down in history as the year of m a. Trillion and completed or pending deals, according to data compiled by us, there have been 37,212 deals this year, roughly one for every employee of Goldman Sachs. Advisingthe leader about 1. 4 trillion deals. The head of m a just got named to the he does have a big year. This . What do you make of bill i was a former m a banker for 17 years. M a goes in cycles and there are times when their bankers are streetside and nobody cares about them, not that anybody should generally, but in terms of the Investment Banking culture. Are, ascended again, at the top of the heap. It goes to show that there are times when people think m a is dead and not coming back and now there are times when it is ascendant and people think it will go forever. 2016 will be a great year for them. Dean it is interesting to look and a at an alltime high only parts that global Investment Banking community is doing so poorly. Sales and trading, fast closures of different businesses, credit oriented businesses, very difficult. Hopefully you have a bloomberg terminal. That is how you get the year to date data. Cap the deal count in green, so we are looking at 10,500 or so and the value in blue, 1. 7 trillion in the quarter. Not just the year. Look at this mountain m a has climbed. Hopefully if youre a bonds guy, you switched over to the m a side of the firm right around that time. Aboutpart of the thesis the golden age of wall street is that m a revenue is huge margin business. No capital, it is not upset the regulators. It does not upset the regulators. Part of the golden age is the resurgence of the m a profit. Stephanie in the last after the financial crisis, people were so excited in the last couple of years, people etc. Do not have inventory. It. Core, they kill people muchr more profitability per person and if you are one of the private boutiques, hello, blair efron. Stephanie someone just gave Hillary Clinton a huge donation. David i will retreat because were going back to the dark hedge funds year have barely make money this year and are heading for their worst performance since 2011. A handful of multibilliondollar firms have minister to post doubledigit returns. Blackstone, Millennium Partners and citadel, so what is going on with hedge funds . Dean a couple of lessons, one is we should appreciate the wrist in crowded trade. When your capital sits alongside capital that could russia the exits, you are vulnerable to that and we saw a lot of very highprofile single stock, the reconstituted equity. Stephanie the opposite of citizen dell and millenniums citadel and millenniums strategy. Dean lets do a quick review of macro, you had euros was unpacking, you had the bond market tantrum. Volatility andf we advise people on long volatility strategies. It has been a great year for long options, not good for example in 2013 when the market goes up to sideways, but when you get these markets atoms, that is when buying options, betting on these uncertain outcomes. David any world of slow growth or no growth, youre looking at does the model work at all . At 20 , it makes sense. Dean does it work for who . Stephanie the investor. Bill it is never great for the investor. One of my favorite traits of all time, and i dont love her like an, but he thought he bought netflix at 60 and sold it at 300. Anybody could have done that trade. That is five times your money just being can. And youre thinking, those deals are there, every day. Two and 20 is a great business. Stephanie if you are an investor and you believe one of those managers will consistently outperform, it is worth it to you. Bill two and 20 is an expensive all weit may not work at talk about 4 returns. The numbers just dont work. Bill of course they dont and if you are if you have a year like bill ackman, two and 20 does not work. Returns overund the last five years, normalized against the s p. It is not pretty at all. Ive got macro here in magenta, i have activists in light blue. Funds dont even come close, they are barely breaking even. Stephanie there is the answer, be the best. No one says the hedge fund model across the board works. They were higher than two and 20. You why be the best when can just buy the index fund and double your money . Sol this year, not so much, it goes to show is hard to pick, even the best, you are a if longterm investment investor, investing with guys like bill ackman or when you could, it may hold hackable lot of sense since [indiscernible] matt how confident are you that just that you just pick the best Hedge Fund Manager or that you put your money in a Vanguard Fund . Which one will people be more confident of . Stephanie it is endowment. There are people in endowment and pension funds, it is their job to take the best hedge funds out there. Maybe their jobs have gotten harder and maybe they should have. Matt look at endo go on the bloomberg, harvard at the top, the smartest people in the world. Haveanie hamburg might the best students in the world come of the dont necessarily have the best endowment in the world. Davids remsen who runs yells endowment has been one of the most wellknown investors in terms of choosing hedge funds. He chooses the biggest and best hedge funds and has the most discriminating requirements and it has worked for him. Dean he has, it is then 10 returns for him. David if you do hedge funds, you better make sure you have the best. We have consensus. Stephanie those are your top stories, the ones that matter for the markets. We had to the opening bell in the next 15 minutes. Here, we haveare the markets, stick around. Matt a quick look at futures, gaining about a third of 1 after backtoback gains on monday and tuesday, could be redays in a row. The dow up about 100 points. Nasdaq futures gaining as well. Picking up three days in a war in a row, take a look at crude oil. Out of nowhere, a climb of 6. 1 this week, the best week that ended today sent early october. Crude oil doing fantastically well. Currencies, very important as we begin more discussions in just a moment on oil and commodities. You can see some euro weakness. Buynese yen, you can now ¥121 for a dollar. Lets take a quick look at treasuries. 10 minutes away from the open, you can see the 10 year yield up a little bit. The twoyear yield also gaining, investors taking money out of bonds, selling bonds and pushing up the yield, they will look money to work in equities. Very interesting look at the markets as we head into the open on the new york Stock Exchange. David congress has just reversed in 1970s ban on u. S. Exports of crude oil. Just as Oil Prices Collapse and Energy Companies raise to recover assets. Secretary john kerrys point man on energy joins us now. Welcome. Weve talked about oil a lot, a fair amount of export, windowless why the export ban matter explain to us why the export ban matters . The lifting of the ban is a historic day. The band was set in place in the context of the 1970s, when we had the eric oil boycott and has been kept there as we were looking more at oil scarcity pictures, rather than where we are today. I dont know that the ban will have a tremendous impact in the short term from a physical perspective on the market, probably quite a Significant Impact psychologically on the market, both on the oil markets as well as the geopolitics of energy. Stephanie when the you think we tweetedually see you we will not see much happen, so when we will that when we when will we start to see that flow happen . It is a big deal that the man lifts happened and it was a big issue across the board and across the spectrum of energy. I dont think we will see a lot of exports in the near term, it will be quite some time before we will see deal flow on Oil Exports Rise to significant levels. We will see some, but i dont see it happening in the shortterm because of the nature of where Global Markets are today, as well as what is happened in the u. S. , specifically on how oil is being used by local refineries and the fact that they have adjusted to the inefficiencies of using crudes that are now being sold at such a significant discount. David i find it interesting that you reside in the state department and that john kerry would have a special envoy for energy. Is this a matter of National Security . What is the interest of the secretary of state in this . It is what you said, what we realized over the last several years on the late time is that will on the late side is what we all known for a long time, energy and oil are a key factor in National Security. Oil and gas affects us in the most basic ways. No economy can grow absent access to affordable and reliable sources of energy. That means that we see countries that use energy as a weapon and tool, look at how russia uses its energy resources. Other countries depend on their survival as consumers. Is notled energy plays like the role that energy plays is not like any other. The u. S. Is close to becoming a superpower in energy across the board. What is our position in the world as it relates to the geopolitics of energy . When i look at is less a domestic picture but more on how this affects how it affect our National Security imperatives into that, the state department plays a Critical Role around the world. Matt me get back to the discussion of oil craves oil grades. Refineries, that at do we have a product that we can sell overseas, even we are allowed to . That goes to the crux of the matter of the ban. We traditionally use a lot more of the heavy sour crude we saw, a buildupe in the shale oil space and a lot more light sweet crude coming onto the u. S. Market, we had that disparity. As a result of the fact that refineries were able to buy cheaper crude, they were that was able to do the deficiencies. Stephanie we have to leave it there, thank you for joining us. When we come back, we dig in with dean in 2016. Stephanie welcome back. You are watching bloomberg. 30 30 minutes and seconds. That is card. You know me, Public School new jersey. Across the board. Moments from now, the new York City Ballet is going to i actually think i might hear the bell. David ballerinas. Stephanie matt miller learned ballerinase, mail known as ballerinos. The nutcracker, may be a sugarplum fairy or a toy soldier. We have brave for years. Capital market professionals with us. The book of 2016 kobe filled with chapters on Central Banks and in volatility in credit according to our next guest, but what will it look like . Brian is a Portfolio Manager at tcw and macro risk advisor dean is still with us. Ill come back to the east coast. What do you think 2016 looks like . Brian 2015 was about volatility, credit spreads, oil, metals and mining. 2016 we think will be a story about the repercussions of those widening credit spreads, meaning weakensee default rates up significantly, particularly in the height yield area and it could weaken to other areas. And the question is going to be, when highyield default rates, which have been around 2 for the last two years, pick up to 5 , to 8 and windows glosses start flowing through portfolios and howart reading it will they react . , in thesedamage areas, be isolated or extend to other parts of the market . David are you talking about energy or beyond . The most hate will be in the energy sector, pain in t middle and mining sector, but the most pain willbe in t energy sector, pain in the middle and mining sector, but when investors start seeing losses, it changes their risk preferences and they start pullinback on the capital and they stop lending to not just Bad Companies to goocompanies. That is how can isolated event can become a contagion and leak into other parts of the market, the bond and equity markets. Dean i concur. It pays as an equity Market Investors to understand these costs as that signals and it is energy, but it is widening. Credit markets are saying something about economic growth, the fragility of the default cycle that here we are 3 or 4 from an alltime high in the s p 500 and you could argue it is three stocks before stocks driving it. That is where we see a reckoning, which is the credit markets are ahead from a risk standpoint in, so what i would be well for is to hedged, be thoughtful about the risk you are taking and use hedging products. Stephanie what will it do to Market Dynamics and outflows continue . The fear around highyield markets and what we are seeing, what will happen in 2016 and what will that do technically . Bryan it is a bigger risk than we have ever seen. We had the news this month at 3rd avenue ny that is and how that is indicative, it is very different than most highyield funds, but when credit spreads start widening and we see these glosses, we have the Capital Market environment that is unlike any of us have ever seen, haveng that brokerdealers agents and went volatility picks up and there are. Of losses, brokerdealers pullback with their capital and you have and investors that are left to trade with each other. A lot of these investors have taken a significant amount of risk because they have been looking for yield. Yields are so low and they need to move out the risk spectrum and take on more credit risks to get that enhanced yield. What they do not realize, there is less liquidity. When these events and corrections occur, you could see them start to flee in the quicker manner, and that will lead to fixed income, equity Portfolio Managers in a position well they will have to meet daily with liquidity requirements with liquidity requirements of assets that might not trade with that data liquidity. Stephanie our dealers calling you with entire portfolios that they need to move and they do not want to do it publicly . Bryan that is an ever increasing part of the business. It used to be a part where dealers would see an opportunity and they would buy their product desk or their trading desk or what have you, but that is not the case. They have risk departments that do not allow them to take that risk, so instead, when some investor who was having a run on their fund or their hedge fund is closing down, they cannot rely on the street. They have to rely on the street to make a phone call to the other end investor who may or may not be willing to provide that. Stephanie how much longer are we going to meet the street to you . At for right now, all the street is doing is saying, clearing road has 1 billion of redemption and they have to clear out. So they are picking up and calling Goldman Sachs and they are calling tcw, fidelity and blackrock, how much longer before you all do not need goldman to do that because they dont take the risk anymore . If they are acting as a new broker broker, why get paid the big . Ifan i would be surprised we ever see a market environment where we dont need the intermediary because when happens, we, tcw, other peers of ours, competitors, we have relationships with these brokerdealers. They have an obligation to us to provide some sort of liquidity and service. We and competitors, we dont have any obligation to each other to provide that service. There are electronic Trading Networks and you know what . In the good times, those networks work. Not in the tough times. Liquidie for example, networks here saying, the new world, everybody will be trading on these platforms and you wont need these individual brokerdealers anymore, is that not the case and in tough times, do you need them . Bryan maybe not in treasures, but anything with a hint of credit or could widen in terms of yield for spread to treasuries, in our opinion, you will need them. I do not think you can have an electronic Trading Platform or something similar that will replace that old humanhuman contact. In theou are either movie business, brokerage, or storage mrs. , which you are taking this stuff on your books. The value to storage has gone less appetizing over the years, whether it is regulation or the risk in warehousing of books, but the movie business, finding and playing a real role in intermediation, where one counterparty once to dispose of particular type of press, credit, duration, volatility, and finding the other side, i think that continues to be a vibrant business. David david listening to the conversation, the market will have to clear. They will need adjustments. We may be in a world where the market has not cleared with these mechanisms before. We are not exactly sure how it will work. Bryan that is one of the bigger risks. Is a littled robotic in terms of, we are going to try to did this four times. I do not think they appreciate on the ground the risk, specifically in the credit market, of liquidity and try to move out of the concentrated position where we would like to think in a textbook where there is a market at 90, how about 90 and there is no pirate all . Stephanie that is what happened to Franklin Templeton in energy. They cleared at 19 and things are at 27. If you think 2016 is a buying opportunity, here we are in your end and their people who need to get on a brisk. Using risk is appetizing but not yet. Carl icahn says next year, but when happens for the next six months . Bryan our approach right now, if you exclude treasuries, real high quality assets from the picture, we like to divide the world into what we call bendable unbreakable assets. Bendable are called Agency Mortgages and the diversified has Corporate Bonds and at 160 basis points over treasuries from a longterm perspective, highquality investment Corporate Bonds make sense to add to portfolio now. However, the breakable category, high yield, emerging markets, we dont think this is the time. We think there will be a better buying opportunity and spreads dont just widen the gap. David we have to check in on the markets. They have been open for nine minutes. Matt . Matt i am taking a picture of my screen and sending it to somery at home because insane things are going on in the markets. Hillary clark, my producer, is on vacation, so she is missing the action. Take out the indexes. You can see the major averages, up across the board. S p 500 index at 2051. It will be the third day again if we close like this. A real power in the s p 500 as we head into christmas. Maybe it is a santa claus rally. If you look at the imap it breaks down winners and losers by industry. We are all indeed winners. Energy is leading the pack, and that is the nuttiness that i took a picture of an sent to hillary. I will show you that. Let me go through individual stories. A killerp after quarter. Beat the street estimate and showed real strength in china, 24 growth in revenue there. More than 30 growth in footwear, so it is definitely the shoes bernanke. Check out pep boys, carl icahn is involved, bridgestone has made an offer for pep boys, but they basically close the deal almost. Once consolidation in the space and he has already bought another auto parts supplier in canada, so this has been a bidding war, between 15 dollars, 15 dollars and 16, and now he says he will offer 10 cents more to it bridgestone bids, also, freeport has been doing very well. 6 . , up seven and incredibly volatile stock because copper is up over five days, 2. 6 . Revenueut 20 of the comes from oil, look at my screen. I know you want me to wrap up because you have to go back to the anchors, but oil is insane. West texas intermediate in yellow, climbing higher as brand comes down. West texas intermediate is trading for more than brent crude and has flipped over. I want to go to bloombergs Abigail Doolittle live from the nasdaq looking at fed and beyond. Abigail it has not been a happy Holiday Season for bed, bath and beyond. The announced corridors and expect to make between 1. 70 and 1. 10, down from 1. 20. They are printing negative and we have price target cuts out the, including bank of america at a street low target of 44. This stock may move down by another 10 on top of an already difficult year. This is true for bed, bath and beyond competitors, including pier 1, he of sonoma, and restoration hardware. The question may be, whether or not this preannouncement will weigh on those other retailers. More bloomberg go next. Vonnie welcome back. I have our latest business flash. It has been a record year for acquisitions. They show more than 37,000 deals completed this year. Goldman sachs had a big year as well. Trillions ofon dollars. More retailers are using Free Shipping to jumpstart sales. 90 of retailers are offering free delivery this year, up from 78 last year. Target, best buy and others applied it on every purchase. Different retailers required minimums. Starbucks is expecting gift card sales to hit a record tomorrow as they look for christmas stocking stuffers. Last you, they sold 2. 5 million cards on discover 20 four in the u. S. And canada. One in seven of adults received one during the last Holiday Season. Stephanie . Stephanie thank you. Dean,is still with us and but i went to dig in. Bryan, you think the fed could take a positive dear. Bryan if we see the volatility we talked about, they will have to. They showed us that hand. They said outright that had we not seen the volatility we saw in august and september, that they probably would have moved in september but they waited for december. Whole but they saw a did it anyway because they were backed into a corner. Bryan not internationally, so if we get into next year and we see that volatility start to be home,nd pick up more at most likely i think they will have to pause because whatever volatility we see at home will spread to International Markets. Stephanie what would that do to the markets . The United States is still the prettiest girl, ugly dancer, whatever it is. Cleanest dirty shirt, the dollar is only getting stronger. If the u. S. Is the strongest and the u. S. Shows maybe not so strong, what could that do globally . Seen it will most likely credit for a period of time. We have been three years where, we will call them bad leverage bars, will or have been able to take out debt. That happening in emerging markets, taking out not dollareir debt, but u. S. Denominated debt. We see that happening in the u. S. And it spreads internationally. That is certainly going to spread internationally. David to stephanies point, if the only goal which is to reduce volatility would not be following through work reduce volatility, it might increase volatility. Bryan i think what we have learned is when you have this trend that exist for a long time, where the fixes that 10 for three years or four years, this is 2005, 2006, 2007 or crates are pinned to the floor, that is a danger. That is a Financial Market access tens to build up. Maybe to your question on financial instability may be the fed is supposed to manage 18 to 20, where the market is constantly guessing. This is not fun for investors. You want to lean against the trend and you want forward guidance, to be told what will happen. I think 2016 will be one of those the years where at each meeting, you are not really going to have a strong sense to what the fed will do or is not going to do. Me, that says more volatility. It is disruptive and challenging. You cannot micromanage the Capital Market to keep volatility low. At the same time, you cannot be data dependent. Something has to give. Next year, if we get the disruption in the Capital Market or Global Growth rates come down, the federal have to change their course. Not going from 25 basis points to 50 basis points on the fund rate, but it is the communication around that path. Sometimes, the miskicking vacation is what causes the disruption. Dean i wonder if the market is reading into what the fed is looking at. If the fed is looking at the phillips curve type, and wage growth has started to pick up, these are the things that matter to the fed. You could see for hikes. If they are more concerned about international volatility, credit market, uncertainty, then the pause is higher. Bryan i agree. David you all will be staying with us for a few more minutes. Fourtime world cup champion avoidedircher daily being hit by a camera drone during his second run, the drum crashed under the slope just a few centimeters from behind him. Despite the incident, he finished in second place. Pretty amazing. A behindthescenes look at bloomberg , coming up next. Stephanie can we have a photo finish . Get it . David look at that. Like out of a movie. Going to doe Something Different and taking behindthescenes of bloomberg we have been asking legends for insight. What advice would they give to their 18yearold selves . Stop reading the papers. If you are an entrepreneur and you want to make your business grow, there are lots of reasons to come up with what it wont happen, but i encourage people to focus on why it can. Have a little more fun. I was so focused on ruling the world and our 97 hours a day and probably left a little fun times on the table. 10 the 18yearold, spend more time working then you are enjoying the money you make working, so find something you really love to do. As long as a campaign of the bills, forget about the money and think about the enjoyment. People want to help you, they want to invest in you. I would thomas up to engage, seek opportunity and to lacked often and do not judge yourself so harshly. Everybody fails. There are people in the hall of fame who only hit three out of 10 times at bat. The advice i would give is the same advice my dad gave me, probably once a week, and he said, girl, you have been given gifts, use them to remember you could fall on your face tomorrow to never get too full of yourself. Stephanie the advised my 18 euro self the advice to my 18yearold self would be to not have as much fun because i would be on my face today. Ean mine would become at there is a lot of free advice out there, but you have to go through what people tell you and openmindedness has a lot of value. Bryan professionally, i would tell myself, to not ever believe it is different this time. Do not ever believe that the investors or the Federal Reserve can delay the inevitable. That companies have to fall to go down and it may take longer than you think, but the fundamentals and research you do at the bottom level, that will have to come through rising levels. Lastly, sandberg said you dont need an mba, if you want to work in tech in the valley, it might be a detriment. What about wall street . You dont have an mba bryan . No, i started doing what i wanted right after undergrad and i stuck with it. Enjoy what you do and just worked very hard at it. If you are on the path, there is no need to take a detour. Stephanie when Charles Sandberg said that, people and graduate schools panicked. What are your thoughts . I would even take it down to the college level. My business is sales trading. You can teach people the techniques of have to cover accounts, listen, develop ideas and i think you could teach them that out of high school. Thing to is not a bad do if you are on the wrong path. If you are doing something out of school and the world opens up a little and you realize, i want to do this, but to get into this, maybe i have to go back to school. I think that is a good reason to get a secondary degree, but if you are on the right path at 21 years old david so push a little further. We had a senior google official who said he had three ceos and none of them have graduated from college. Stephanie uber told us that. David i beg your pardon. Ean college is very expensive. The value of graduating from college is not what the golden eight we once thought it was. I think colleges need to focus on the personal interaction, poise, presence, how do you build trust and relationships. Bryan small town upstate new york, so when i came out of high school, the world was small to me. Dean when i went to college, they broadened it up. Bryan that is what i took away from college. I think it helped me in my professional career. Stephanie in 2016, what is the number one thing you want to do . Bryan continue to build the business and spend time with my family. Dean maintain the balance. Enjoy what i do at the office for go home to see my kids at night. Stephanie just like paul ryan. He said, i am not losing my family. Remember that. David kids come first. Stephanie gentlemen, thank you us so much. Tcws ceo, see what bryan did . You are next. That is it for bloomberg. We will see you tomorrow. Betty it is 10 00 in new york, and 11 00 in hong kong. Welcome to bloomberg market. Here in new york, good morning. I am betty liu. Here is what they are watching, the fed, is janet yellen doing enoughhelp the u. S. Economy . Hubbard joins us, saying the fed got a few things on about the economy and he will tell us what exactly. Then, lower for longer. Oil demand will keep sliding, does that mean Lower Oil Prices . What is ahead for hedge funds after a rough year that saw a growing number of liquidation . Still, there are quite a few winners to talk about. We have breaking news. Out. Of economic numbers you home sales and consumer sentiment, those numbers are out. I went ahead to r