Transcripts For BLOOMBERG In The Loop With Betty Liu 20141212

At the white house feels that the only way they can get a bill is to go along with this. Reasonuld be the only they would sign such a bill that would weaken a critical component of Financial System reform. The senate could pass the bill as soon as today or over the weekend. He price of oil keeps plunging oil closed below 60 per barrel yesterday, for the First Time Since july, 2009, when prices as 58. 80. Ow iaea says supply from nonopec producers will be bigger. Opec decided against reducing out what reducing output. The director of the cia aced the media cia faced the media to answer questions about the torture report. He said it is unknowable whether Harsh Interrogation Tactics produced results. The Previous Administration faced agonizing choices about how to pursue al qaeda and prevent additional terrorist attacks against our country, while facing our fears of other attacks and preventing other catastrophic loss of life. There were no easy answers. Was his first public appearance since the report was released earlier this week, a very controversial report. Google is transferring afterions out of russia moscow adopted new rules requiring more data to be stored in the country. Despite the shutdown, the company were plans to increase the Company Reportedly plans to increase its business there next year. It has made similar changes in sweden, finland, and norway. One of the strongest storms in decades hammers the San Francisco bay area. The system dumped more than parts ofhes of rain on northern california. It left more than a quarter of a million homes and businesses, including parts of downtown San Francisco, without power. It also produced widespread flash flooding. The wet weather continues today. The system is moving to central and southern california. The Senate Begins debate on the Government Spending bill today after turmoil in the house last night yielded a Narrow Passage of the house of the plan. It was not the sweet some people the sweep some people expected. Either cook has more on the drama that peter cook has more on the drama that unfolded last night. It was about as unusual as weve seen in white some time in quite some time. Lined upancy pelosi against the bill, alongside some tea party conservatives. You had the president of the united eights, john boehner, and states, johnnited dimonr, and even jamie calling for this. There is an extra two days. No threat of a Government Shutdown until saturday. It looks like it will move across the finish line. It was not easy. It gives a sense of what might come next year. What do you make of this policy against obama drama this pelosi against obama drama . It was a dramatic moment. Nancy pelosi has been relegated to an outsider. Not able to shake much of the debate in the last couple of shape, for sure to much of the debate in the last couple of months, for sure. Her ground,tand hold her ground with liberal democrats over this wall street division. She reasserted herself, to some extent. What about this bill in the senate . Is there going to be any problem being able to send this bill through the senate . Theres always the chance for problems in the senate, just cause of the timetable just a cause of the timetable, things like that. They have until midnight just because of the timetable, things like that. They have until midnight, saturday. Will ted cruz get to challenge executiveent over his action on immigration, as he has wanted all along . Will Elizabeth Warren be able to to a vote on her efforts strip out this wall street provision within the legislation . Will they be able to have those show votes . That will be tough those will be tough votes. We dont have a clear answer at this moment. What about a win for wall street . As you mentioned, jamie dimon calling late into the night. This is a big win for wall street, arguably the biggest win since doddfrank became law. Moving removing this derivatives provision was something a lot of banks had for, not only bigger banks on wall street, but smaller. These provisions have been hard on them. You also have raised a big issue. On this a big spotlight provision. I think they thought they could probably do it in the cloak of darkness. That did not happen. It could be an issue Going Forward. It could be harder for wall street because they succeeded in sticking this in the bill. Thank you so much. Peter cook. Moving and shaking this hour, mark mobius, an investing legend himself. He thinks it wont be long before we see oil going back to 80 to 90 per barrel on an expectation of low production of u. S. Shale. Have countries like china and india who are going to the oilenormously from prices, because they are net importers of oil. It varies from one area of the world and from one country of the world to another. Let me say this. I believe Going Forward, however, oil prices will recover , and by next year or that youre after, you will see 80 or 90 per barrel again next year or the year after, you will see 80 or 90 per barrel again. Has cut their forecast for Global Energy demand, a little bit different than what mark mobius sees. Julie hyman has been covering this cut in demand by the iaea. Cut theyressive continue to see an erosion in demand, particularly among the countries that are big Oil Exporters and oil producers, as you might imagine, with the drop in prices. The economies in these nations are suffering. We are seeing this cut to demand. This particular cut, by 230,000 barrels, thats the decrease in demand that the iaea is saying happened, versus its prior largely attributable to russia. We all know whats been going on there, between sanctions and these Lower Oil Prices. The russian oil demand next year is going to be 195,000 barrels smaller per day than had been anticipated. Overall, World Oil Consumption is going to be higher by about 90,000 barrels per day, a 1 increase over 2014. Itd keep its 2014 forecast its 2014 it did keep forecast steady. Did the iea say anything about u. S. Shale Oil Production . It did. Interestingly, it does not agree with mark mobius. They expect u. S. Production to grow apace in 2015 according to the iea report, an increase of thats going to be the output from the United States. Opec, despite this, supplies will be 200,000 barrels per day. Thats how much the agency is increasing its supply projections. Basically, to boil it all down, you have the same problem that you have now, that has been driving down oil prices you have higher production, particularly from nonopec nations, at the sign same time you have demand that is not increasing at a huge pace. That would question whether we will see 80 to 90 per barrel, as mark mobius is predicting. So far, traders are reacting how . In terms of how we are seeing oil trade this morning, we are not seeing huge moves your opec huge moves. Opec you have to put the longerterm moves in oil in perspective. Whether you look at wti or brent, weve seen decreases of more than 40 in oil prices from the highs we saw back in june. As you mention, wti is trading below 60 per barrel. The depth of the decline is kind of incredible. It is. Have to wonder you have to wonder, yes, you have these iea forecasts, but what would cause it to go lower . Where is the floor . Thank you so much, julie hyman, our senior markets correspondent, on oil and iea forecasts. Big banks get a slap on the wrist for how they gained business. We will hear from one of the top executives at finra, the financial regulator. And why chinas biggest Search Engine is taking a stake in a now controversial car sharing service. Some pretty incredible news out of wall street. Including j. P. Morgan, Goldman Sachs, and citigroup, have been fined 43. 5 million for promising Favorable Research just to gain banking business, which all stem from a case involving toys r us years ago. Five emails discovered in the case are pretty incriminating. One said, i so want the bank to get this deal. Another analyst said, i would crawl on broken glass, dragging my exposed junk to get this deal. With me to talk about this case is the head of regulatory operations at finra. Also, a former federal prosecutor with an expertise in whitecollar crime and securities law. I look at this, 43. 5 million compared to 1. 5 billion about 10 years ago. It seems like a pretty small fine. If you talked to the firms involved, it would not seem small. The Research Analyst global case was looking at many which this case involved the toys r us ipo, which never even saw the light of day. They never generated any revenue from this deal. , once they pay these fines about 5 million from certain banks. Once they pay these fines, then what happens . Behavior has to change. Theof the impacts, like action we issued yesterday, it changes behavior. Thats the goal of significant enforcement cases. Does this change behavior . There is a component of deterrence. Regulators do high there have their eye on that ball. We will see what happens. You cannot be promising Favorable Research down the road in return for promisingerent from Favorable Research. The other components, and i think susan would confirm this, one wing of the company has to police what another wing is doing as well. You cannot have an independent research doing things off the rail. Susan says it is a deterrent. As i point back to 10 years ago, we saw similar conflicts of interest. How do we know that banks are really going to change their behaviors again . Because regulators like finra are out there watching through our enforcement and examination arm. We will be following up to see the things have changed. You been following up for the last several years. You have been following up for the last several years. This has happened again under your watch, right . Roleey worked hard, base they did not follow the rules, and there were consequences. More ipos are out there. We have to make sure, as regulators, the behavior continues to comply with the rules. What could come out of this, doug . Could you see some prosecution of some of these analysts . Could we see more cases like this . You could, theoretically. We talked about the emails. You need words out of peoples mouths. Again, in really serious conduct, you could theoretically see that. How does anybody trust research anymore from a bank . This is not the first and likely will not be the last case where we see Something Like this. Does there need to be stricter regulation here . Something beyond fines and letting banks figure out their own policies . I think being vigilant and maintaining the independent of research the independence of research is important. We will have to be vigilant. We will have to monitor. We are always looking at the rules to see if they are changes that need to be made. Have you made any changes in how you monitor some of these banks . We made changes. We are doing exams, talking to firms, bringing enforcement cases. I think firms understand we are engaged in looking in this at this and we will continue to monitor it. The 2003his case and case, hopefully, the behavior will change. If not, we will send an Even Stronger message. How do you think the banks are going to react to this . In any number of ways. One, put in some internal compliance and address the issue. One part of the bank is coordinated with the other. Make, in point i would criminal cases, you have conduct that is legal, gray area, and flatout illegal. Smoking gun emails about how we are going to give great reports, that is criminal prosecution. Then you have ready areas. Then you have legal conduct then you have gray areas. Then you have legal conduct. This falls into where . Gray to bad. 43. 5 million is a significant sanction. We will continue to send strong messages and continue to police firms in the space. Do you have recommendation for firms on how they do put out that wall, as doug is talking about . It a lot about culture, respecting the independence of research, making sure the Research Analysts are not part of the solicitation pitch, which is what happened here. You cannot mix in the concept in connection with however we are going to try to solicit this is nice, by the way, the research is going to be a, b, or c. The research should be what it objectively should be. There is the should, but there is the reality, right . You can solve this will problem by changing human nature. Problemot this whole by changing human nature. Thats not going to happen anytime soon. They can keep a microscope on this and hope that there is some deterrent effect. Thank you for joining us, Susan Axelrod of finra and also attorney doug burns. Much more ahead. Former Florida Governor jeb bush unofficially prepares for a president ial run, possibly. Bearing a striking resemblance not to his dad, but to another face in the gop. Plus, an awesome deal with Dreamworks Animation. Another boost to the online video offerings. You are watching in the loop on Bloomberg Television. Buying a stakes in over uber, giving the it works toort as expand in china. Du is the owner of inner of chinas biggest internet Search Engine. The investment values Dreamworks Animation properties at 325 million. The Youtube Channels have 114 million subscribers. Dreamworks will retain control. In espn. So has stakes the chief executive officer is stepping down, so is the creative director, as the owner tries to revive growth at gucci, amid sagging sales. Inres fell just over 1 reaction to this. Bloomberg televisions on the markets congo as we are watching on the markets, as we are watching Oil Prices Continue to fall watching futures continue to fall. Inflation. Ure of we are on the markets again in 30 minutes. Jeb bush has been making the rounds and giving speeches, schmoozing with wealthy donors. This could eat, possibly, preparation for a president ial run this could be, possibly, preparation for a president ial run. He said he would make his decision in, quote, short order. He has been busy making new business investments, a move which is raising eyebrows that bush may run into the same problems that hurt mitt romney. Its the feature written by josh green, who joins us now from washington. First, walk us through some of the investments jeb bush has been making over the years. Basically, his last since last may, he has turned himself into a kind of writer Equity Private equity many mobile private equity mini mogul. He is theairman chairman and manager of an offshore fund that seems to be invested in Hong Kong Air services. To do shalee funds oil exploration. He is invested in a fund that is backing an oil shipping company. He has really been involved a lot in the energy trade, with a particular focus on china. All of which is very interesting, because he hasnt talked about any of this publicly. He has led most people in the political world to believe he is on the cusp of getting into the president ial race. This is a bombshell in terms of the disparity between what he is saying and what hes doing privately. Is it a negative, though, necessarily, for him, as he possibly runs for president , a man who has a certain stature and a certain amount of money, making these investments . I think you have to look at this in the context of mitt romneys president ial run in 2012. Careers private equity really ended up doing his candidacy, because he became associated with these offshore cayman funds. He would not release his taxes. He made his famous comment about the 47 . Its very strange. A lot of republicans in politics are shocked by this three this story. If jeb bush wants to run for president , why would you emulate what mitt romney did that was so damaging for him in a president ial Campaign Context . We will see if jeb can do a better job of responding to the attacks that are going to come his way. At least right now, it is a curious move to make if you have your eye on the white house. It is a curious move. Does it signal that, perhaps, jeb bush is think thinking less of a president ial run than the gop and press might think . I think it might. I went to a number of private equity lawyers and Fund Managers when i was reporting this piece, which is in the new issue of businessweek. I should than these documents and said, are these the moves of someone who seems like they are imminently going to jump in the president ial race . They are not. No, you would be winding down your business affairs. Investing in be funds that have a life span of 10 years. Its not impossible if he could walk away, but, within the last year, he has raised over 100 million from investors. It would be odd to raise all that money and then turn your back on the people you got it from to go run for president. Thank you. We have breaking economic news. We will get Producer Prices. Down 0. 2 . That is lower than what economists estimated. Olivia sterns has more. The month over month number is a decline of 2 10 of 1 . That is softer than economists we a survey we surveyed were expecting. 1. 4 , in line with estimates. If you strip out feud food and fuel, it was in line with estimates. This is not the part of the economy where we have been seeing inflation. The producer side of the economy, prices have been held down by falling oil costs. Crude has fallen below 60 per barrel for the First Time Since 2009 yesterday. Producer prices have been held down by a stronger dollar. The part of the economy where we are seeing a little bit of inflation, where the fed is watching for it is on the consumer side. You are seeing it in rent and services. Its the last major inflation point before the fed meeting next week. Thank you so much. Coming up, we will sit down with Southwest Airlines Ceo Gary Kelly to hear what the airline has in store for 2015, as airlines docs stocks are soaring to decade highs over the Lower Oil Prices. Take a look at this chart. Investors have been snapping up airline shares based on Lower Oil Prices. The Bloomberg Airline index is at the highest level in over a decade. One airline joining in on this rally is southwest, the largest discount carrier in the u. S. , which has Just Announced an international rollout, with nonstop flights from houston to four cities in mexico, one in costa rica, and for the first time to belize. I might go on that one. Its the topperforming stock in the s p this year to date. Ceo gary kelly is joining me, along with the next for on the Airline Industry along with an expert in the Airline Industry on the Airline Industry. Why are you rolling out more internationally . Is it because of the conditions youve seen this year . Is it time to move overseas . Southwest has become the Largest Airline in the u. S. In terms of the number of customers we serve. We are cried we acquired Airtran Airways in 2011, and that allowed us to finish out our 48state expansion. That was going to set you up for international, right . Exactly. International presence. We decided we wanted to make a commitment to prepare for International Service at Southwest Airlines. Its a great expansion opportunity for us. It opens up about 50 potential new destinations to the Southwest Airlines route map. Are you really benefiting from Lower Oil Prices . Absolutely. If you think about our operating costs, it is roughly 1 3 people, 1 3 fuel, and 1 3 everything else. Are down our costs significantly, 30 to 40 but you already had your oil hedge your oily costs . The vast majority. We will be generating a lot of cash. The question becomes what happens next with Energy Prices. We will want to be very cautious about that. But in the meantime, yes, weve got very strong profits. In an environment like this, where the volatility seems to be on the downside every day, how do you participate with the hedging department . What are those folks doing to capture some of this benefit for the longer term . Its led by our chief financial officer. Its a very small group of people, very senior in the organization. Our Vice President and treasurer spend a lot of their time thinking about risk and managing our portfolio. So, when prices collapse like this, its a scramble. Andehedge, in a sense, look for opportunities to rehedge as best we can. When prices fall, overall, the airline has far less fuel cost, and thats the big key here. We may have 1 billion less in fuel costs in 2015. Are you able to capture that for a longer term and they say, we are going to buy larbg positions large positis now . It is always tricky. I dont think weve seen the bottom yet. If you go out into the future, prices are higher in the future than they are today. Those are all things that have to be carefully considered. How far do you think we are from the bottom . I really dont know. It does feel like supplies will continue to be strong. They may actually grow from where we are. And demand is weaker than expected, and i think that is a worldwide weakness. It is china, it is europe. And if demand picks back up, i think you will see some arming of prices some firming of prices. If open makes some cuts, you will see if opec makes some cuts, you will see a differential. Is there a negative to these Lower Oil Prices, in the sense that you might start to see passengers who would take shorter air routes, that they would actually instead drive because of lower gas prices, or that ticket prices will start to come down . You dont have that Pricing Power as much as you did before . At Southwest Airlines, we do have a lot of shorthaul routes in our network, and we have always competed with the automobile. You make a very good point. I think customers will be looking at that savings with gasoline and will be looking for opportunities when they travel to save a dollar. We always have to be mindful of that. So, you might cut prices there, then . We have to continue to manage our business. It would be unwise, in my opinion, to assume that we have 2 jet fuel for the next 12 months. There are a lot of analysts predicting a hundred dollars crude oil by the Fourth Quarter of next year. Weht now, our estimate is, are paying for the Fourth Quarter, somewhere around 2. 60 to 2. 65. Gasoline prices are below that. That will definitely be competition for air travel. The Goldman Sachs Airline Analyst had a nice note about you guys and looking forward to 2015. One of the things raised was the issue of potential leisure traveler fare fatigue, given the increases of the last few years and stagnant incomes. Could you tell us about your thoughts on that, and whether you think there is a sort of ceiling, where the consumers consumer is the benefiting from lower gas prices, but the airfare for a family trip gets to sticker shock . I dont think there is any question, especially over the last 10 years to 12 years, using Energy Prices increase are medically, fares have gone up, and traffic increase dramatically, fares have gone up, and traffic has decreased. To the extent where fares are stable, one would hope consumers would benefit from that. I cant really speak to what pricing actions we will take in the future, of course, but we want to be americas lowfare airline. We want to be consumerfriendly. Its a very competitive industry. At the same time, it has been a long time since weve returned money to our shareholders insufficient amounts shareholders in sufficient amounts. We have to go. Before we go, gary, i heard this week a baby was born midflight on one of your airplanes . You will be happy to know the baby wasnt made on your we did not charge extra for that baby. Does the baby get frequent flyer miles . Does he get free flights for life . Anything . We will just have to see what kind of relationship develops between that family and southwest. Everything worked out fine. I understand the mother and baby are doing well. You just have to be prepared for anything and everything in the airline business. Clearly. Thank you so much, gary kelly, ceo of Southwest Airlines. From airplanes to cars, yet another legal scandal for cooper uber, this time in paris. Why the Ridesharing Service is in court again. Plus, how Jack Nicklaus is staying in the game. That is also next. Nicholasolfer, jack shattered records. He is considered by many to be the games greatest champion. Now he is busy digging building a golf empire, designing courses around the world. We met up with him at the opening of his latest course in cabo san lucas, to see what he is still bringing to the game of golf. Franco, if id have spent all my time playing golf, i have got frankly, if id have spent all my time playing golf, id have gotten bored to tears. I was a lucky guy. All of a sudden, people still wanted me to do golf. It was a natural extension. Youve build a lot of courses. Its been a couple of decades. In cabo, tourism is booming. This is one of the fastestgrowing cities in mexico. Can we attribute that you . Im known as the gu that to you . Im known as the guy who ruined cabo. You cant get out of the airport for that. My friends who came down here and said down here and did that said, when you did that, it changed the nature of cabo. I love the place. I used to come down here and fish. Now all i do is work. Which is not too bad. Seems to be doing fine with respect to golf, but we keep hearing about this global slowdown in golf. Its a little bit too expensive and too tough. Wepace of play is something hear about a lot. Is that something you think about when designing courses . Thats one of the things we think about, pay it forward, tx forward pay it forward, tee it forward. Hole concept. 8 how do you do a strong golf course, but make sure the average golf course golf player can play it . Where is demand right now . China is probably the greatest demand for it, but the chinese government, golf is rock not recognized as a sport. They changed the rules. They keep changing the rules every week, because they dont understand. Pressure is another place that is actually russia is another place that is actually they have people there who love to play golf. We have some in europe and denmark and latvia. We are working in iran and turkmenistan. The olympics, to me, has been a tremendous boost for the game of golf. I think the game is growing around the world. It made a comeback in the United States it will come back in the United States. I hear you dont like the word retirement. I dont have any desire to retire. My retirement is work, and i really enjoy it. Joining us now with more on her conversation with jack nicholas. What a fun assignment. Did you get to play any rounds at all . I got to shadow him on the golf course. I hope to play in a couple of weeks when i go back. He is incredibly handson. He comes in, he zooms around the course. Pcs all the changes he wants to make. He sees all the changes he wants to make. His name is on the course for a region. What is the pipeline project necklace what is in the pipeline for Jack Nicklaus . He talked about an ice cream, a wine. He has his name on everything tom apparel, hats and shoes, golf balls. He has two things he is really passionate about. It helps simplify the game. Balls haveolf numbers. He wants to use numbers. When you are playing from the red or blue tees, you use a blue golf ball. A lot of proceeds go to charities. Hes an incredibly charitable person. Hes a great example of blending business with charity. What did he say about the growing unpopularity, of the unpopularity, it seems, of golf, especially with tiger woods falling off the radar . Last year in the u. S. , we saw about half a million players quit the game. He is concerned. When he designed courses, he is trying to make the game more fun, more userfriendly. Hes all for anything that brings people to the game. Hes not trying to change the size of the golf hole, but he wants to bring players to the game. Its a game he loves. Thats his mission when he goes out to design courses. Thank you so much. Still ahead, find out how much jack ma is raking in off of his alibaba shares. Speaking of things on the rise, a public debut yesterday, with shares going up as much as 67 . Much more ahead. Stay in the loop. Isthe bloomberg big number 28. 6 billion, the fortune of alibaba founder jack ma, making him the richest person in asia. Alibaba going public this year, the stock surged 54 since its ipo. This is our billionaires index, which tracks all the worlds wealthy on a daily basis. See more online at bloomberg. Com billionaires. Bloomberg televisions on the markets Bloomberg Television is on the markets. Oil prices falling below 60 per barrel for wti. Prices are waiting on investors. Futures are down about 1 2 of 1 . We are keeping our eyes on oil this morning as the ice drops below 60 as the price drops below 60. Why now is the time to lift the u. S. Crude export ban. Netflixs latest original, marco polo, hits screens today. Will it bring the boost the streaming service is hoping for . You are watching in the loop. Welcome back to in the loop. November Producer Prices fell core rate, but the was unchanged. The s p index headed for its biggest weekly drop in two months. The Senate Begins debate on the 1. 1 trillion spending bill. The house yesterday narrowly passed the contentious plan, despite opposition from both parties. Nancy pelosi was among those opposed. Against a banking provision inserted by republicans and agreed to by the white house. Im enormously disappointed that the white house feels that the only way they can get a bill is to go along with this, and that would be the only reason, i think, they would sign such a bill that would weaken a critical component of Financial System reform aimed at reducing taxpayer risk. The senate could pass the bill as soon as today. The director of the cia faced the media to answer questions about that senate interrogation report, that explosive report. John brennan said yesterday, it is unknowable whether Harsh Interrogation Tactics used on suspects produced meaningful results. He described some soulsearching by the u. S. Government in the aftermath of the nine the 9 11 terrorist attacks. The previous of ministration faced agonizing choices about how to pursue al qaeda and prevent Previous Administration faced agonizing how to pursue al qaeda and prevent more catastrophic loss of life. There were no easy answers. The press conference marked brennans first public appearance since the report was released earlier this week. The price of oil just keeps on going lower. Oil closed below 60 per barrel yesterday for the First Time Since july, 2009. This morning, the price of crude 58. 80. As low as Global Demand will be weaker than previously estimated. Iea said supply from nonopec producers will be bigger. Oil is headed for its 10th weekly drop since opec decided to against reducing output. Breaking news on the real estate front. The real estate assets of blackstone. We go to the breaking news desk. Blackstone is continuing to reshape its real estate portfolio. Blackstone is going to sell its Retail Center stake to the largest u. S. Operator of Shopping Centers. It was a partner with blackstone on this deal. Blackstone bought those Shopping Centers in june of 2013. Forthey will be selling out 925 million, a pretty nice profit. Blackstone is in the midst of a sellingtransformation, real estate investments, trying to signify the portfolio ahead of raising a new Global Real Estate fund. Kimco is trying trying to reduce joint ventures. Blackstone agreeing to sell its joint venture stake in 39 Shopping Center properties to kimco. Thank you so much, olivia sterns. We are under 30 minutes away from the start of trade. Lets count you down with the top 10 headlines hitting our radar before the bell. Senior markets correspondent julie hyman and taking stock and taking stock host pimm fox. A piece of history unearthed in boston. Crews found a time capsule dating back to 1795. Historians it was put there historians think it was put there by they are not sure of the state of what is inside. They think there are coins inside. It was estimated excavated in the 1850s and in a new box. And put in a new box. You do this when you are a kid. You dont think of sam adams and paul revere. It has real, historical significance. There will be newspaper articles. There was a similar time capsule found at the old statehouse in massachusetts. I believe it had a letter from journalists to future generations. Very cool. Maybe they talked about government dysfunction then, too. Some things never change. Number nine, big lending big public debut yesterday. This is the first of the peertopeer lending Industry Companies to go public. It is setting High Expectations for growth in this sector. We havent talked about this area in ages. Formerly of morgan stanley, is on the board. Larry summers is a participant in this operation. About itnt understand is how rigorously regulated they are compared to traditional banks. We are going to talk about i think the regulation is tbd, at this point. We dont know where they fall under, right . Youve got these big, institutional, and some retail lenders. People who have money and who are willing to lend it based on a series of online questionnaires or some kind of online transfer system that assures them their risk is going to be capped. Its not that these loan rates are that low. They are just a little bit lower than what you might get at a bank. The rates are still 14 , 18 , 20 , for some of these peertopeer lenders. Said to bet, baidu buying a Minority Stake in huber in uber. Giving the company a boost as it expands in china, as the Company Faces a number of regulations and lawsuits, including in paris. Users can get rides with private cars. Do you know what this evaluation puts uber this valuation puts uber at . Something like 40 million. 40 billion. Gm is 52 billion. This highlights a disconnect theeen the bad press and companies willing to pour money into uber. You have a number of lawsuits against uber. You have european problems, not just in france. You have the alleged rape by the driver in india. And baidu says, here, have some money. It seems like a disconnect. There are going to be two issues for uber, privacy and background checks. The background issue background check issue is coming to light in much bigger ways for uber. Top in teslas china is leaving the company. Willead of development assume operational leadership. It is the first of several Management Changes that have taken place at tesla. It seems like elon musk, while peoplers love him, revere him as a ceo, he has a hard time hanging onto managers. She had only been there for nine months. She had joined the company from apple. Her successor left. She took over just in march. She wasnt even at the job for very long. This was supposed to be teslas biggest market. It is not right now. Their sales right there are diminished are de minimist. I like that. Thats an sat word. It fits. Number six, staying in autos, ford debuted a new dashboard tou chscreen infotainment system, think3. It was developed with a unit of blackberry and panasonic. What i love about this, if you have an iphone, you will be able to use siri, but who uses siri and John Malkovich in the commercials. I think he was the only person to use siri successfully. Apparently, the feedback from customers was so consistent and bad that they changed this. They are replacing you have no idea what to do with all the screen features. They are replacing knobs and bu ttons, getting rid of some of the screen features and putting back knobs and buttons. The lincoln mark, the aarp segment of the business, they found that using these touchscreens not great. Much more ahead. Our countdown continues. It is about oil again. The drop continues. Tom petrie will be joining me next. We continue to countdown to the opening bell. We are halfway through. It is time for our deep dive. Oil prices going lower. The timing couldnt be better for yesterdays hearing. Exportingban on american crude, a move that many feel would allow the u. S. Shale boom to continue. Tom petrie, chairman of petrie investors, a boutique industry that carriers caters to the oil and gas industry, author of following oil. The house and the senate were debating yesterday over this whole spending bill. There was this subcommittee hearing which talked about what you say would be an enormous deal for congress, if they were to lift this ban on exporting crude. Why . It is a very constructive it is very constructive, betty liu. We are coming very close to the limit of u. S. Capacity to refine the kind of oil that we have been increasing from the shales. This would connect our markets to the world markets, where there is more capacity for that. It is one of a number of factors that are important. Even with low prices we now have, i think it is really good for us to connect our u. S. Oil market to the world market. We know a lot has changed, right, since the 1970s, when we put this in place, because we were afraid of our own energy security. Do you believe weve gotten to the point where we dont need to worry about that anymore . We have more flexibility than weve had at any time in the last 40 years. Back in 1973, we put that ban in had pretty good evidence than that the oil business as we knew it then was in a reversible decline in the United States, but weve had this paradigm shift. We are now developing oil from source rock or tight rock, near expandsock, and that the potential in ormiston, probably potential enormously, so it is a transformed worls fod from then. How much could we see production increase from the shale area . If we keep the ban in place, we will hit a wall in terms of restraining it. But the potential down the road, because of the lower price, this potential will be deferred somewhat, the potential is several Million Barrels of additional capacity that can be developed. I referenced your m a background, your continuing m a work. We spoke with Mario Cavalli gabelli yesterday. He spoke about how oil at this price is going to make a lot of energy ceos rethink where they are going to put their capital. I want to play for you what he said. You have to look at the producers. We are coming in, within the next 60 days, a dynamic that we havent seen in a long time. Its going to be cheaper for companies to sit down with airports and say, we are buying oil on wall street as opposed to digging. We are not going to drill in marsalis. Marcellus. Lets go out and buy these companies. Would you agree with that, tom . There is a reallocation of capital in the offing. This price collapse of the last quarter or so is going to force that rethinking that mario is talking about. I think that will play a role. I dont think that will be the dominant or the sole role, but i think the case for looking at for buying your shares back in and by doing that increasing the value per remaining share is part of the asian the e quation. This 10hed something on years ago, and it really hasnt been relevant for the last decade, but its going to become so again. You were right 10 years ago. Now its coming to fruition. Thank you so much for joining us, tom petrie, chairman of petrie partners. Much more ahead on in the loop. Welcome back. Lets get back to bringing you the most important stories you need to know before the battle. Senior markets correspondent julie hyman and taking stock host pimm fox joining me. Staples, the world of Office Supplies. Does the world need both staples and office depot . Who can really tell the difference anymore . Estimate the merger could boost earnings by 60 and cut 100 billion in cost. Do you disagree with me . Who can tell them apart . They are very different. Are they . I havent been in either in a very long time, because i dont need to buy Office Supplies. I have Office Supplies at my office. Are you stealing Office Supplies from the office . [laughter] Office Supplies are like a 230 billion a year business in the United States. We know that Office Depot Sells Office Supplies, staples sells Office Supplies, but also amazon, walmart. You know who the number i believe the number three online retailer is . Staples. They have a huge online business. 45 of their business is online. The idea that these two would combine, i dont know. Hurdles. , potential number three is cvs. You could say less is more is cbs. You could say less is more. Les moonves has signed on tuesday two years on to stay two years longer than his previous contract. Wrong,correct me if im i believe the highest paid media ceo, or at least one of the top three. I would hope so. He is 65 years old. He is a baby compared to some. Another is 91 . Or 101, who knows. Double. This is interesting. It is a production Deal Associated with this. 2019 to does ascend in that super advisory role, there is the possibility that he will be able to have his own Production Company associated with cbs. It is the mostwatched network. You wonder what Reed Hastings would say about these guys and how much he gets they get paid. He declared that linear tv, socalled broadcast television, is that. Number two is dead. Number two is first. Is hearst. They paid for a stake in awesomeness tv, the dreamworks unit which operates the youtube channel. It has 114 million subscribers. Do we watch these . No. But they dont care about us. They want the young also 25 to 54. For awesomeness tv . No. 18 to 34. Nym is mcn, multichannel network. The original 25 stake was 8 mi llion. This is an 81 million deal. Bloomberg televisions on the markets. Futures look like they will settle lower ahead of the open. Our top story is next. \ welcome back to in the loop. Joiningman and pimm fox us today. Our number one story, the spending bill. 1. 1 chilean dollars of a debate 1. 1 trying dollars up for debate. A vote iskely come to Key Players Like massachusetts wornrats elizabeth and republican ted cruz can agree on immigration. It would not be out of the question if they were both against this provision in the bill or the provision that is getting rolled over that nancy pelosi was against. Theagine Elizabeth Warren, one that required banks to do some of their swaps and Derivatives Trading and noninsured units of the banks. Jamie dimon himself, peter cook told us, was on the phone lobbying for this measure to be rolled over, to expire, to be taken out. Which would have made Elizabeth Warren even more furious. You remember the movie the in an president the american president . One of the reasons this is all coming out, this is an omnibus bill, a spending measure and theyre all of these riders that have been attached. This is one that has been natasha to the bill. Has been attached to the bill. Republicans did not realize that the democrats, the mayor administration, or willing to trade on this whole swaps than, which is what were talking about. It turns out that were so many other things attached to this bill. 1 million set aside in this bill for livestock that is killed by wolves. For muscleset aside in the western United States are taking over these ponds. Theres a lot of stuff in that bill. You clearly have read it. 1600 pages. He was up all night. He was prepared. Chief to bring in the equity strategist who says by big energy. Like stone chairman would agree blackstone chairman would agree saying leo to a wall street guy to say, in this turmoil, this is the best time for us. Theres crude oil in turmoil, and i like both. It is a good time to buy. All agility is what traitors like. I like opportunities. Sometimes the market doesnt do what it should do and is a too quickly. Sometimes you have to be like a spoiled child and say im right and the rest of the world is wrong. When it comes to big oil, if im wrong, i will have a lot of wind at my back and some support. Im curious when youre going to be right. In other words, if you look at the drop in oil prices, more than 40 , in the s p energy index, a drop of about 25 . It hasnt paste the drop paced the drop in oil. You dont think prices will go down further and other words, how much pain are you in for . 5 toef to think about 10 of you do anything. This is particularly volatile. Oil corporations make their money on more than crude. Multiples it is interesting to go back. I dont know if it takes six months, 12 months, or 18 months, but one of the great factoids in the 1980s, the old exxon on a total return basis outperform the stock market. One of the worst decades for oil. One of the best for stock. The biggest will come in the world at the time outperformed cash flow coming buyback, downstream operation. Over longer time, they work up. Theyre great places to invest. I want to ask about the concept of opportunity. If you can husband your cash, set something aside and start waiting until the headlines cross that one Oil Production company is going out of business, another shill, this put in production on hold, you want to wait until you see those signs of pain . Someone elses pain is your game. You want to have some of your money. Buying on weakness is a bit of an arc but also a question of timing. You will never get it right. You will never buy at the bottom because you should be buying in increments. What i thought was going to happen may still happen and it is lower by little more. You try and get the roundup. You try to get somewhere near the bottom and try to sell somewhere near the top. If youre willing to give away 5 on either side, you did a do better in the middle, and my experience. You say to buy financials. Youre not worried by the fed raising interest rates. I hope the fed does raise interest rates. That is not tightening. When they start the up cycle in rates, they are recognizing the economy is stronger. It can stand higher rates. The economy gets better when that new jewelry goes up. If the fed doesnt do anything, theyre getting more stimulus. I think the first few rate hikes are maintaining the same stimulus. Meanwhile, very low short rates for Financial Institutions. Lending club coming out with initial Public Offering today. The valuation of the company sets it on par with cit. Peertopeer lending, big area for the financial industry, they get to Talk Technology to all of those potential investors. Is that also include when you say financials by now it is a big area, not just mainline banks. Im thinking more line of the traditional banks. A groupo visit experience, so i have some scars. I think these stocks can do will does well. I think regulation is not going to get a lot worse. With the spending bill, theyre doing may be putting in take away theould provision that prevents banks from holding swaps against insured deposits. This is something there is also always lobbies and interests in washington in the United States have lobbied to do that sort of thing. Im not the one to say it is good or bad, but i think we have seen the worst as far as regulation. I think higher shortterm rates allow banks to put in a few more fees if they have to. I think the fed is not really tightening. Theyre still going use the tubes of the Financial Institution to push money for the economy. One of the other distressed areas youre looking at is europe. Six months ago was probably more popular than it is now. You really want to mess with a hole in ecb wildcard at this point . I think i do. 10 is learning the business, i whenfrom a very good i was learning the business, i learned from a very good buyer. He said, find a stock that is cheap and dont do anything. When the reason it is cheap starts to go away, then start to full day into it bit by bit. That could apply to europe. It has been cheaper two years, but for reason. The germans want more fiscal austerity. I think that is starting to change. As it changes, i want to be part of it. I think the value then becomes recognized. Thank you so much, chief equity strategist at wells fargo , funds management. Thank you to julie and a special thanks to pimm because i hear it is her birthday . Yes, 29 all over again. You dont look a day over 28. Seriously. Love you, too. Still to come, netflix spent 90 million of production cost for the new original show marco polo. Will it pay off, particularly, overseas . Ragesny hacking scandal on. More on the newest exposed emails. Thishave they been fodder week. Stay in the loop. Netflix marco polo beginning today. The company hoping the new series will help gain global traction for netflix. This new venture did not come cheap. According to the New York Times they spent 90 million on producing this series. Is the high cost and the content going to pay off for netflix . Oining me to discuss more cory johnson, are you anticipating marco polo. I think we should do a crosscountry marco and you say polo. This is a big deal for netflix. They have launched a lot of original content. That weozen shows forget because theyre not the hit that house of cards and orange is the new black have done. At a certain point, these content costs start to look like they could be a financial time bomb for this company. They have so much guarantee to the producers of content Going Forward, and it is not content that is proven in the movie on the or content proven television. Increasingly, theyre going toward littleknown movies, movies nobody wants to watch. My kids were watching the 12 dogs of christmas the other day. That is kind of garbage filling up netflix these days. The time bomb of expenses we look at the content costs Going Forward that have guaranteed minimum of billions of dollars are escalating, even if the quality of the hits decline. Were looking at a chart or graph, and they have 7. 8 billion of these content costs. Is this a ticking time bomb for netflix . Ticking timea bomb. To be clear on the Market Performance of the stock, i am valuationsensitive. 425 target. If it pulls back, i get more interested. 4. 5ompany is generating billion to 5 billion of revenue. Most of it will cover the content cost. When you talk about 7 billion, they will cut that in less than two years. This is the core cost for this business. They are spending 90 Million Dollars and Something Like marco polo and 3. 5 million on content. This is a big stent for normal company. These guys are spinning so much that they can afford these bets that fit within their business. They scale. With netflix, you accompany going through maturation process. They hit the ball out of the park with house of cards and orange is the new black. You see now you cant always hit it out of the park. What you also see is these guys are capitalizing on the demand for an American Television internationally. Ton though the u. S. Is ready a steady state of content from the looks, internationally, there is great demand for what theyre doing. I think that is the next leg in the story. Get another step up when you think of the disney content, which is taken to another level when they get disney movies a couple years out. What do we know about their International Growth and whether it really is as big of a hit internationally as netflix has been here in the u. S. . International is an open question. They have had early successes, but have a long way to go. There spinning a vast fortune. There spinning a vast fortune. Typical mediake a company were earningspershare are bad. It is the opposite. They show earningspershare. When you look at the precash flow number because of the content costs and the not small those freecosts, cash flow numbers are just not good for this Company Despite the massive amounts of revenues that they generate. It is also worth noting the movie business in streaming business is really changing. It is not just about content costs, but about what content you can get. Competitors are signing up longterm deals. It is not just a matter of not getting the movies 10 months after they were big in the theater when the value of all of the promotional dollars that were spent when the movie went to the theater are there for the taking and streaming, 10 months later that value is not there is much. It sometimes they have to wait years for many years, nine years after the the ethical release and another streaming deal Theatrical Release and another streaming deal. Those deals are not likely to get better anytime soon. Netflix will be waiting more on the individual content but theyve had a lot of bombs besides the hits we know of. I love that point. Barton, that is true. And does the content costco even higher if this content costco even higher if no flex was to be a player and grabbing that shorter timeframe . And spendingtflix 3. 5 billion, theyre doing a ton of things. A lot of it is working well. You can see that any subscriber growth. Each million subscribers they add drives 109 of an criminal conservation cash flow to the bottom line 100 million of incremental cash flow to the bottom line. When they level that out, the trick is at the equilibrium point where the last kind of 12 million or 13 million go straight to the bottom line instead of the incremental contact. Are they doing things different . Yes, they are expanding the view of movies. They are signing just to get that i think is an interesting thing. I dont think it necessarily transform the industry, but it does fall flow into the very that subscribers are signing up for netflix. The business is very different than two years ago. The offerings they have are two are different. We cannot just extrapolate what they did in the u. S. We had access to a lot of cheap content that they dont have with their trying to grow in europe. It is a new game and a big risk. We will have to leave it there. Barton crockett and cory johnson. Staying with technology and media with the rise of social media, more and more consumers are cutting the cord. Advertisers are catching on. The global spending on Digital Media forecast to catch up with by 2019. N outlays next year alone, Digital Advertising expected to increase by 15 . We talked yesterday about how radio advertising is declining as well. Erik schatzker is joining us on this. Looking for to this. The director of Global Forecasting at magna global, division of the interpublic group, will be on Market Makers with me and scarlet fu today. Adio, i should point out, is revolving area in the advertising world these days. Print is falling off the map. Tv is kind of holding its own. But in a longterm secular decline, as they would say. Digital has been the new game in town for a while already, but it is taking off like you cant believe. As you pointed out on a global level, digital ad spending according to the magna Global Forecast will match television and spending by 2019. In the u. S. , it is happening even faster. By the middle of 2016, Digital Advertising spending will catch up with tv. Britain is what really shocked me. The British Television market as you know is vastly different from the american tv market. There are not as many ad dollars to be generated with the heavyweight bbc dominating the market. Digital adevision spending caught up with pbs been halfway through 2008 in britain. That is unusual. Are you going to talk also about advertising,igital i continued to be astounded by this summer, but up to one quarter of those ads are never even viewed by one single person. You cant say that about tv advertising. Thats true, provided you have the couch potato sitting there staring at the screen. That is the secret sauce, figuring out how to get digital as viewed, how to measure those impressions, pass that information on back to the advertiser, the company that is spending the money to prove there is a return on investment, the sort of magical r. O. I. In the digital ad business like you say, television may be passive, but at least you know people are watching. At least you know youre getting that influence. Thank you so much, Erik Schatzker of Market Makers. We will be back in two minutes in the loop. That wraps it up for us here in the loop. Weve a great lineup for you next week. Arbys ask the ceos of and wendys how theyre fending off the conversation. Billionaire restructuring investor wilbur ross is joining me. That is all starting on monday at 8 00 a. M. Eastern time. See you back here. Breaking news, Consumer Confidence from the university of michigan is out. The number is 93. 8 versus estimates of 88. 8. Clearly, the American Consumer is feeling pretty good onto dollar gasoline, 5. 8 percent unemployment. Retell sales rose, the biggest gain in eight months. Blowout number it is time for Bloomberg Television to continue on the markets. I am olivia sterns. Take a look at where the major averages are trading oil continuing to fall. Yesterday it broke through our west texas crude broke through to the low since july 2009. Interesting to see if markets will turn around on these incredible Consumer Confidence numbers. The person to ask is chief global strategist at wheaton and company and joins me now with this report. Michael, what a number. But that said, wages are not back to where they were in 2006, 2 thousand seven, even the consumer competence is. Do you think consumers are getting ahead of themselves . Weve had several numbers of 200,000 plus jobs. Last fridays member was very present. You have the gasoline and heating oil surplus. This should be generally constructive for a lot of key parts of the economy. Gotsentiment print we just was a very handsome print update post financial crisis high. It up for crisis levels, higher numbers, still. Does the fed cap about this number . I think it is one of the factors they look at but i think it will be more focused on the deflationary dynamics that we saw just this morning earlier with Producer Prices. Every time the fed feels like theyre getting out of the woods, thing start getting back to an old normal. There is one more war to fight and this time it is the Deflationary Forces from lower oil that will suppress inflation statistics here and around the world. We see the big Consumer Confidence number paring losses in the equity markets, sentiment is it is improving a little. Overall, we are lower today. For all the good things about Lower Oil Prices, the velocity of the oil move has been really extreme. If you look at weekly rsi levels, theyre worse than in the great financial crisis. Which is reflection the speed of this babe is tragic. A lot of big funds who may have been on the wrong side of the trade are getting tapped on the shoulder. You saw the vix move up to 20 yesterday. Now, which vix right is quite interesting. A bit of a reflection of this. On one hand, there is a disjunction between Risk Appetite and the ability for risk markets to keep propelling forwards against some of the good fight a metals we have seen in the u. S. You said you think equity markets could move 3 to 4 higher. Does this number change your mind . Stabilizeprices can unfortunately, we should at some point see a big squeeze higher in oil prices. Right now it seems like the velocity is to the downside. The markets are still processing the new opec. Thank you, michael purvis. Consumer confidence coming in at 93. 8. Market makers is next. How low can it go . Oil trading below 59 this morning. Were looking at the opportunities thats creating crash cash for investors. Uber is facing regulatory roadblocks all around the world. Fresh direct meet costco. The Delivery Service that brings bulk sized