Transcripts For BLOOMBERG Market Makers 20141205

On yourself. She has a better haircut. Do i was going to say you arr is flattering. No one was predicting a jobs report like this one. It exceeded the most optimistic production of the Bloomberg Survey and was the most jobs created this january 2012. A few minutes from now, president obama will introduce his choice to be the next defense secretary. Carter, who spent two years as the pentagons number two civilian official and he has also been the top weapons fire and has a phd in theoretical physics. Republican senator john mccain says that you should have no trouble being confirmed by the senate. Delia saysretailer it will file for chapter 11 bankruptcy protection. The Company Plans on liquidating all of its merchandise after failing to find a buyer or buyers for its clothes. Delia caters to teenage roles and has been hurt by sluggish multiethnic and more online sales. In louisiana it may be democratic senator Mary Landrieus last stand. She is in a Runoff Election tomorrow. Polls show bill cassidy leads by double digits. Has been trying to distance herself from president obama and other democratic leaders. Would give the gop 54 senate seats next year. It has been a successful first test flight so far for the orion spacecraft. The mission is seen a critical step in the west to carry astronauts to mars. Maria is scheduled to splash down on the pacific about, what, an hour and a half from now, and we will definitely watch that life when it happens. I think it is super exciting and im glad everyone is finally getting kind of turned on for a nasa event. You . Turned on . Those are the words i would choose. Not when you see that phallic rocket shooting up there . Peter cook is standing by at we need to talk more about the employment report. The job growth is strong and everybody is stunned by the headline numbers. Jobs. Talking 350,000 new what ought to get everybody even more excited, wage gains. I am still worried about matt miller and the nasa launch. This has been the missing piece of the jobs puzzle. Everyone has been talking about the fact that wages arent rising and americans dont feel good about the economy because they dont have as much money in their pocket book. Percent month4 over month in terms of wage gains is the best number we have seen since june 2013. And the yearoveryear gains, 2. 1 . With expectations for the first time. That may be the most significant thing in this report. Certainly the most significant thing for the Federal Reserve and janet yellen. Do you get a sense that the building expectation is that the continue . Will if in january we are down to the 0. 1, 0. 2 neighborhood, a lot of the optimism is going to evaporate . You can make the case that given the job hiring were seeing right now, there are a lot of economists who wait to see the wage gains and they expect this to continue but you cannot make too much out of one report. We have been disappointed before in terms of wage gains and you cannot that the ranch on this one report. Should bering itself to to higher wage gains. We saw in the beige book that there were widespread job hiring across the country. That should lead to greater ranges. Well see if this means we finally turn a corner. Strength of this report suggests that certainly something is changed here. Manufacturing, 20,000 jobs. The best since november 2010. Financial sector, 20,000 jobs last month. Health care, best number since august and construction, best number since july. If there is hiring across the board, wages have to move as well. Lets look at where the jobs are. With us via skype in atlanta, thanks so much for joining us. There is concern that the last jobs report and todays is temporary and going into the holiday season, that would make sense. They taken seasonal factors. I think it is broader base and stronger than we expected it we were always expecting a stronger 2015 hiring. This would support that. There is a lot to be optimistic about. I think overall it is a strong report. This may be higher than what we are running at. It does show that the labor market continues to improve and that will continue into 2013. What kinds of trends have you seen developing on Career Builder . What kinds of jobs are they hiring for . Some of the things that we reference in the survey are really positive. We talked about earlier manufacturing. I think were seeing some improvement there. We are seeing movement in job and therejob titles is particular movement of the survey captured, Like Health Care and technology, positions like sales and finance. Also strong today. How about the size of companies. Do you find that the jobs are overwhelmingly created by Large Companies and the case has been made for the last couple of do you see the small and mediumsized businesses stepping up the pace of hiring . The small andn mediumsized businesses pick up the pace of hiring in the last in months and the survey may be related to that. I think that is a positive sign. We have seen better hiring , which is been missing in the recovery. I wonder about who is getting paid here. Registered nurses one of the far. St jobs, biggest by those people arent making much money. Probably not as much they should at least. Marketing incentives are getting paid the most. We need people to help us spend money. There are positions being created on the higher end. We have lower wage positions. How do we get the middle wage jobs growing again . Still a question not only for our economy but economies around the world. The middle wage jobs will create the wage increases we would like to see on a consistent basis and the middle class jobs we have been so accustomed to. Wage growth is the biggest concern whenever economists look at these reports. Example, are, for you seeing wage increases for Truck Drivers . Have you seen it for registered nurses . Ofwe have seen it for both those categories because the positions stay phil for longer and longer times. Truck drivers have been hard to are for companies and we wage increases as a way to bring new people in. Care, generally, like registered nurses, wage increases have continued and they will accelerate for 2015. Do youmuch visibility have into the hightech economy and do you see evidence of what people in Silicon Valley complain about, that the jobs that they have for higher often are highpaying jobs, but are very difficult to fill . Right. Ink that is we have to look in our immigration policy at our immigration policy on the high end. They can fill some of those jobs that will create for middleweight wage jobs middle wage and lowwage jobs. We are seeing that around the United States. Find difficult to professionals on that side. May be anecdotal evidence might help. What percentage of the jobs posted on Career Builder are requiring advanced Computer Science or engineering or math degrees . I dont have exact data. It is a smaller percentage of the overall jobs. Even if they wanted to look for ,omeone with an advanced degree so that they can get in position filled and the products or services that they need to meet their market demand. Thinking about how to get them here, how to keep them here, have a graduate more of our own people, that will help create more middle wage jobs lacking in the recovery. Careertilde, thank you for joining us on this all careerbuilder, thank you for joining us on this allimportant jobs david day. Jamie dimon says there is no sign of cancer in a recent scan he underwent. He was diagnosed with throat cancer earlier this year and he underwent treatment in the summertime. He was back on the job is the cfo said at one point even when he was being treated. He was alarmingly present at j. P. Morgan. In a memo to employees updating them on the status of his health, these scans show that the situation is extremely positive and he will continue to be monitored for several years. No signs of their cancer in jamie dimon. I love to see news like this. Cancer is obviously so widespread and such a horrible disease and it is great to see. You saw Michael Douglas beat this and now you see jamie dimon bidding its a piece of big names beating it so these big names beating it has to be assigned. The people happiest of all, his family. I dont want to make light of this at all, but the stock is up as well. Investors are also happy because jamie dimon is seen as the king of wall street, the savior of wall street, and the shares are up 2. 5 . Maybe some of the news leaked out this morning and took another like up after the headlines across the ticker. Airline stocks are soaring this year. Of course, you give much of the gratitude Lower Oil Prices but also to consolidation. What do you do with a windfall . New york has a problem it hadnt counted on. We will tell you how we are spending it. What a year it has been for Airline Stocks. ,0 , more even this year outpacing the s p 500. Lets talk about the higher how much higher these stocks could go. Thanks so much for joining us. So much fun to talk about Airline Stocks flying high, but normally we are not saying that. It has been a great call so far. Are you done with it . No. With fuel accounting for over a third of airlines operating costs and margins in the high Single Digits and low doubledigit range, a Material Impact on airline earnings. The one combat would be that while fuel prices are great for youll price volatility does add complexity to planning for management teams. Targetunited your price is 53. For legion, you start stock target is 1. 32. , the stock it all your targets have been met and analysts are the job of targets, are you going to give new targets today . Those targets are based on the 100 grant in 2015. As we revisit the numbers, looking at the 2016, we will be updating our estimates. Fuel prices are well over 25, 30 below where they were when we set the targets. I know you and not going to give us the new targets and we get that, how much earnings leverage is there for each of these airlines for every 10 brent . The price of significant earnings leverage. United has the most leverage the drop in fuel prices. If you move the earnings from 100 grant to 70 brent, all else equal, you can get 80 increase in the etf. Significant leverage. , you coulde caveat see average fares coming down a little bit from the global perspective. . Doesnt it cut the other way it was also cheaper to drive my pickup truck from here in new york since the gas prices are so low. Mattsme just add that truck is 12 miles to the gallon. Shortfall, i think that prices are going to have to come down to compete with vehicles but the convenience , and as long as demand is strong, you might see airlines discount more because it is still profitable to do so. You might see fares decline but in certain time frames, certain markets, but in general, the demand remains strong. The impact of fares may not be the pullback. Consolidation left three big players in the u. S. Market. Record prices led to only one thing, a in prices and a lot of undisciplined behavior. Cycle havethe we broken the cycle . So far. Saying this time is different is a scary thing to hear but at least management teams are continuing to be disciplined. Fuel prices have been very volatile. They are not ready to react in a big way to where fuel prices are today. That when you buy aircraft you are buying it for 15, 25 years. You cannot make the decision based on the shortterm pullback. Any concern about backlash from consumers . Airlines are nickel and dime you in a way they never have before. Theyre demanding you pay for luggage until you get to the gate and then they say they will check it for free. Does anybody have anything to do about that or do you just have to fly with these guys . Market and you have some who offer free bags and depending on if you are an elite member in some of these tolines, the airlines tried customize that offering based on the passenger. But if you are very price sensitive and they can offer you a lower fare by just by not bundling some of the services, the customers benefit as well. We are talking about high single digit and low doubledigit. Rofit margins thank you for joining us. President obama is going to make it official this morning, nominating ash carter for defense secretary. It is coming any time nasa lets take you to washington and our White House Correspondent Phil Mattingly to set the stage for us. We have kind of known for the last week or so that ash carter would be the defense pick. He has a really interesting background joint degrees from yale in physics and medieval history and is also a theoretical physicist, rhodes scholar. The academic is there, but more importantly for the administration, knowledge of the pentagon, indepth knowledge of how the building works. He has worked in positions there since the Clinton Administration including the number two position. Managing the building on a daytoday basis is not an easy job. The president has decided to go with ashton carter. No shortage of issues he will be dealing with the second he steps into that see if he is confirmed. From syria, the Islamic State, to russia, major issues after he is eventually confirmed by the senate. Any awkwardness given that president apparently had other people in mind first . He was in the running for the job when chuck hagel was chosen so he understands how the game is played. Phil, pardon me for interrupting you, but the president is about to speak t. It is wonderful to be able to announce not the creation but at least the filling of one new job. But before we do [laughter] i wanted to make a somewhat broader statement about the economy and ash is willing to indulge me. Americas businesses created more than 300,000 jobs. Yearkeeps pace so far this that we have not seen since the 1990s. So far this year, over the first 11 months of 2014, our economy has created two point 65 million jobs. That is more than in any entire year since the 1990s. Our businesses have created 10. 9 million jobs over the past 57 months in a row. That is the longest streak of privatesector job growth on record. We also know that the pick up the pace of job growth this year has been in industries with higher wages, and overall, wages are rising. A welcome sight for millions of americans. We have an opportunity to keep up this progress if congress is willing to keep our government open, avoid selfinflicted wounds, and Work Together to invest in the things that support faster job growth and high paying jobs. That means exports, infrastructure, streamlining our tax code, immigration reform, giving minimumwage workers arrays. It has been a long road to recovery from the worst economic. Risis in generations we still have a lot more work to do to make sure that wagesorking americans are growing faster. The United States continues to outpace most of the world. We will keep at this until every single american is willing and to not work, confined just any java but a job that pays a decent wage and a lot of them support their families. It is worth us every once in a while reflecting on the fact that the American Economy is making real progress. If we can continue in this trajectory, if we continue to and if we make sure that the companies are seeing profits that are higher than any time in the last 60 years, they are also making sure that the workers are sharing in the growth, then we can get a Virtuous Cycle and get a critical component of. Trengthening National Security cabinet positions on fake twitter accounts. This is not the case. [laughter] a year ago when ash completed tenure, chuck hagel said ive known as carter for many years and all of us have benefited from his hard work, his french it, his inspiration, and his leadership. Chuck went on to express his gratitude to his partner for what ash has done for the country and will continue to do him anyways. Could not have said it under myself. Cannot have said it better myself. Today im pleased to announce my nominee for secretary of defense, ash carter. Ash is rightly regarded as one of our nations foremost National Security leaders. As a top member of our pentagon years of my first presidency, he was at the table in the situation room, he is by my side navigating complex security challenges we were confronting. I relied on his expertise and i lie on his judgment. I relied on his judgment. Attemptsay that in your to retire from public service, you failed miserably. [laughter] but im deeply grateful youre willing to go back at it. Ash brings a unique blend of Strategic Perspective and technical knowhow. As a student of history he understands United States im quoting him now the single most vital provider of security in the world. And he devised strategy to advance that security. He is also a physicist, which means he is one of the few people who actually understands how many of our Defense Systems work. Serveas allowed him to with extraordinary breadth and depth in a whole range of work we have had to do. Hasne way or another ash served under 11 secretaries of defense and has dismantled weapons of mass destruction around the world and reduce the threat of nuclear terrorism. He is a reformer who is never been afraid to cancel Old Organization weapons programs. He knows the department of defense inside and out. It all means that on day one he will hit the ground running. Ash is known by our friends and allies around the world and has served republican and democratic secretaries. He is respected and trusted on both sides of the aisle. Withs been a close partner military leaders and is admired by civilian leaders because he is a mentor to so many of them. There is one other quality of as hs service that gets overlooked and that is his true regard, his love for the men and women in uniform and their families, his leftist dedication to the safety and wellbeing. His relentless dedication to their safety and wellbeing. When he cut out unneeded systems, he did it because he was tried to free up money for our troops and make sure they had the weapons and the gear they needed and the quality of life for themselves and the families they deserve. In iraq andops afghanistan were struggling against roadside bombs, he moved heaven and are to bring new body armor and vehicles. There are countless americans who are alive today in part efforts. F ashs when our forces sat down at thanksgiving dinner far from home or as our wooded warriors covered in the hospital or Fallen Heroes returned to dover, ash was there, often on his own time without any publicity or fanfare. I know that he will be there for them now as secretary of defense. We face no shortage of march challenges to National Security. We have to transfer to a new mission of advising and assisting Afghan Forces and going after remnants of al should we have to keep degrading and ultimately in iraq andsil syria and we have to develop new platforms and we have to continue the fight against ebola and west africa and continue to strike in our alliances including native and continue to rebalance the defense posture in the asiapacific. The forces will need to be leaner. As commanderinchief i will make sure we have a military that is second to none, that continues to be the greatest fighting force in the history of the world. That means, though, that we will have to bolster some new capabilities our cyber defenses, how we deal with our satellites, how we are adapting the military and investing the new capabilities to meet longterm threats. We will have to work with congress on a more responsible. Pproach to defense spending including the reforms we need to make the department more efficient. That is how we will preserve readiness. That is how we will deliver worldclass care to our warriors. Ash will be critical to these efforts. Job,we talked about the smart choices precisely because many are out there and we are going to have to squeeze every thing we have out of the resources we have in order to be as effective as possible, and i cant think of somebody whos more qualified to do that. His career, ash has been confirmed by the senate three times, and if it were entirely up to my dear friend carl levin, who is sitting here, i suspect it will happen really quickly. Because that is the kind of guy carl is, and carl has added chance to work with ash in the past. We will get similar speed and dispatch. By the way, we will miss carl levin. I just wanted to mention that. [applause] one last piece of critical information that may tip the scales in me wanting to promote is a big motown fan. [laughter] one of his favorites is a classic by the four tops, reach out ill be there. Toash, i am reaching out you. You have been there for our troops and our families and the nation. I also know he has been there ,or his lovely wife stephanie, sometimes by skied because he has been traveling. But the sacrifices that stephanie has been willing to make this is a team effort for our military families and we are grateful to stephanie. Ash one a lot of trips to see our troops and at the bedside of Wounded Warriors and she knows the sacrifices they are going through. Stephanie, we thank you for your service. , whoank will and ava couldnt be here, but we know they couldnt be prouder of their dad. With that, i want to let our hopefully soon to be secretary of defense say a few words. [applause] that was, of course, president obama nominating ash carter to be the new defense secretary, chief of the pentagon. Lets take you back to Phil Mattingly at the white house. Clearly a challenge for ash carter, the budget. No question. The president pointed out that ash will be inheriting a lot of difficulties and spent four or five minutes listing off those difficulties. That is the situation he is going into any has to square with the fact that starting last year the pentagon was going to attendyear process of the of 500 billion in the budget because of sequestration. Squaring that with the needed to address the Islamic State and the need to advance new weapon systems will be very difficult challenge. It is one that the white house thinks carter can deal with but will take a lot of effort. Thank you, Phil Mattingly, our White House Correspondent where he should be, in front of the white house. We are going to take a quick break here. When we come back, we will talk about shadow banking. Stay with us for that. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. I am Erik Schatzker. I am matt miller, in for stephanie on this friday. Time to shed light on shadow banking. Lending club is set to make its trading debut next week. The Online Platform edges consumer borrowers and lenders. Public nextk to go month. It targets the credit starved. Mall businesses the securities filings have given us a window into how these companies operate. People from a distance might be inclined to do the same thing. Similar in some ways in different in other ways lending to people who dont have access to easy process and good rates through the normal Banking System is the similarity. They function very differently. ,ne of them is a marketplace find someone else to put up the money. They raise capital. Capital in different ways they raise capital in different ways. With lending club some analysis on the hook. It could grow into something uberlike, big. To say that to Lending Companies are easy to compare to one another. Lending club looks a lot like and alibaba in the way that it functions. Uber solve the problem of car service, just like a alibaba served getting goods efficiently to china. Alibaba, obviously, was the biggest story of the year for financial markets. What is it going to take for lending club, what is the spark going to be to get people to not only borrow money but to that money into it . On the investor side you could say that it already happened. Investorsndividual like Goldman Sachs are saying we want to own some of that. Lending club has gotten the mafia of good investors already in it. As most of the new over into a market solution, it happened uber. Ly with y thingted as a niche and now people talk about it as a utility, like a human right. Points happened quickly with these marketplaces because it is a very good model. The rates are really competitive. You can only take a comparison so far, though. Use is something you might several times a day if not alibabatimes a week and is a platform you might find yourself using as a consumer or as a business. Often. Whereas with lending club you are probably not going to cap credit more than once or twice a year. Size that gets put up against ube is a 100 billion. Pportunityr it is a bigger market, and all of it together you can have fewer transactions and still have a very powerful business model. The Acquisition Strategy for new customers is sufficient. It could be a much more profitable business than when you have to walk into what is the time in your head it is going to take to pick up . If i want to borrow money i dont think about lending club right now and if i have money to invest i dont think about it easier. Dont think about it either. How is that going to change . Can we use this as an opportunity to bring up the peter thiel slide . Lending club is on the lefthand side redesign. Things like viral marketing are virtually free. The higher up you go in the value chain, the more expensive it becomes to operate. Ing club is in the bible down in the viral the point that peter thiel makes in this book is that you can do it relatively inaccessible he and with aircraft carriers it is a big, complex sale. That is a sticky contract. He says there is a dead zone in the middle but selling to a business is harder than selling to individuals. He seems to think targeting the dead zone. He thinks they will solve the problem. Fascinating. Uberwanted to bring it to before we get. To the important stuff, lets talk about the interesting stuff. You bring up the fact that people think it is their constitutional right to get uber without search pricing and regulators seem to fall on the side of the people. They have stopped against this problem staff against this problem. Nicest guy in government, david plouffe. Table is like this but i dont know how old you guys were when cable they went from an absolute luxury to a necessity. Internet is like this. That is good news for the business. Even if they are regular did regulated, tied to something considered a luxury it is difficult to imagine having uber confiscated from you in new york. Search pricing is designed to bring in more supply when there is excess demand. As supply comes into the system the problem solves itself. It makes perfect sense as far as the market is concerned. Uber onant gruber new years eve and you cant get one, you think it is a good thing. If you call on new years eve when it is raining and ask for the car they just laugh. It provides it readily available and at a price. If they have transparency it is perfectly justified. If all of a sudden you got your nanny is paying seven times lets talk about the valuation. A lot of people are tied to make sense of a 40 billion valuation for uber. We had a slide that had it at 18 weeks ago. Investors right now think it is 120. The goofy back of the napkin math is that if you think theyre going to do 10 million and five next year which is the rumor number, 20 times next years revenue is a crazy value for this company . Not for a Company Growing that quickly, that is what most people would say. Directlymbers are not compared to facebook and twitter and other highgrowth, sexy companies. All right, i will look into it. I will borrow some money. Thank you, my friend. Probably the most interesting kind of research you could be doing as far as Market Research is concerned. Fighting over 5 billion, money that politicians had it counted on having in the first place. We will tell you how new york is going to spend it. New york state has found a way to plug its budgetary holes. New york has next to 5 billion and lots of ideas on how to spend the dough. It is the settlement cash receipt from deals with credits we stand b. N. P. Paribas. From Credit Suisse and bnp party ball. Keri geiger has been doing what good reporters do, following the money. Given that there is so much money, no doubt lots of people are happy, but they are probably fighting over it all the same. This was a fascinating story to report on because we had to get into the nittygritty of state forfeiture law. When it comes to a 9 billion make sure we dont run that as a banner. I think it has become for9 billion settlement section violations, which you and i have talked about many, many times. Money laundering. Terrorist financing. All those good things. Half of that went to the federal government. It goes straight into the u. S. Treasury department and a multitrillion Dollar General accounting find. Not hard to track where that goes. The state was involved with this because saipans, district it attorney ofstrict new york, did investigation for bnp alibaba. Half of the money was going to go to the state on this. Under regular for fragile under regular forfeiture law, they would have split the money. 6 billion. At the last minute Governor Cuomo was a little bit unsure that all of the money should go to these two, particularly cy vance, the das office, so there was lastminute negotiations to ring a big chunk of that money back to the new york state budget. Shareholders paid for about 2. 6 of the year state budget this year. They did that by designating new york state as the victim of the whole case. Want moneywhat you to be used for is to reimburse the people upon whom these crimes have been perpetrated. If you look at new york state as the victim, how do we pay new . Rk state back some of this went to the city of new york. Some of it went to Law Enforcement things. Towards stuff property tax reductions, that sounds good. Typically the set of money gets involved. The reason this is getting so much attention, this has seven many times, where we have the fines go to various entities of the state. This is a lot more money than we are used to seeing being divvied up. Tablet computers for new york city cops . Seems like a lot for tablet computers. This is an issue. There are questions about the bad incentives. It was a subject i brought up with someone who isnt getting any of this money, the u. S. Attorney for the Southern District of manhattan and he works for the federal government and this is what he had to say in september when we batted around this issue. Sharing forfeiture rules were promulgated and the arrangements i dont know the in fully appreciated the future you have these multimillion dollar settlements. It is consistent with not creating an incentives and mercenarytype incentives. To figure out for the federal government who is bringing all this money to the treasury to directed for some good cause that is good for Public Safety and for Law Enforcement. Eet would clear that pr like new Office Furniture as well. At a good price. But prosecutors still get the money from the settlements. It is hard to follow where the money goes, by the way. Should be more transparent, right . All right, thank you very much. Keri geiger, following the money on Asset Forfeiture for the multibilliondollar foreign bank settlements. Matt, you and i will be back. Live from bloomberg headquarters, this is Market Makers. This jobs report coming. Carols boosted by the most in honest three years. Wages are starting to rise. High energy m a, plunging Oil Prices May lead to more still making in the drilling sector dealmaking and the chilling sector. We will take about the startup that is like airbnb from annes best friend mans best friend. I am a chat square i am Erik Schatzker. Nobody is sharing anything. Disruptors can be called innovators. Groovy of the decade. Matt miller will be rewriting the english lexicon. I am in for stephanie ruhle. Business and finance stories at this hour, there hasnt been a jobs report like this one in almost three years. The economy added 321,000 positions in november plus octobers job creation was 29,000 for grand total of 350 thousand. November, the most jobs created since january 2012. So far this year over the first 11 months of 2014, our economy has created 2. 60 5 million jobs, more than in any entire year since the 1990s. 10. 9usinesses have created billion jobs over the past 57 months in a row and that is the longest streak of private sector job growth on record. The on implement rate is at 5. 8 , the lowest in six years. Jamie dimon says there is no evidence of cancer in his body. Earlier this year, he was diagnosed with throat cancer. Saidmemo to employees, he his prognosis is excellent. Doctors will be monitoring him percent or years. Theon is getting into diaper business. It will start producing its own diapers and baby wipes under the new brand which will be inexpensive and available only to members of amazons prime service. Taylor swift among those picking up grammy nominations. Her shake it off was nominated for record of the year. On grammys ceremony is february 8. Oh, taylor. More on todays jobs report. This 2014 is officially be best for job growth since 1999. Thoughts on what it means for the economy. Who would you have nominated for a grammy . You mention that song shake it off because that is what theyre going to try to do with this report and policymakers always remind us one report does not a trend make. Segue. November is a bit of a new norm for the labor market, if we are finally up shifting, this will be a very complicated first half of next year for janet yellen and the rest of the doves on the fed to slowly tip toward for that first rate increase without rolling the markets. You raised an important question. If. Do you see signs in this labor market and the jobs report that gains in excess of 300,000 a month is sustainable . I am a little skeptical whether this is sustainable. If we look at all of the labor market indicators going into this jobs report versus last month, lets say october was an a, this would have been an a. Of wobble in the data. Might beme think this an outlier. That being said, i do think we will be able to break out of this trend going into next year. Everyone is still forecasting a 2 growth rate in the economy. If were up shifting to 3 or 4 on a sustained basis, we are going to see on the strength of what . On the strength of the domestic economy. Housing output will be better, business spending outside the Energy Sector will be more robust next year and consumer spending, all of these folks rejoining the labor market are going to have a lot more cash to deploy into the economy. Wind we put these zero hedge concerns to rest that there is no participation in the labor market, everybody is longterm unemployed, wages are completely stagnant if not falling . These are the concerns that have been voiced during this entire recovery. And they have been valid in the early stages because the economy was just hobbling along. If we are reducing slack in the , the market, which we are National Unemployment rate stayed steady this month but it has been in a downtrend. Slack is being reduced. Eventually, that will give us more wage pressures. We saw a whiff of that today. I think as we get into 2015, we will see a lot more normalization in the labor market and therefore the broader economy. I was looking at some forecast yesterday from a lot of your colleagues and thinking, they are nuts. Something fed funders will be 1. 5 by the in of next year. Say 1. 7 . Is that even a possibility . Is it likely . Anything is possible, but lets remember who is on the open committee. Never number of hops rotating off the committee we have a number of hawks rotating off the committee. To dovish and policymakers, are very cautious it aint gonna happen, is what youre saying. Baby the november report is a hint we are moving in that direction. It is a much bigger mistake to go too soon and too late. They dont necessarily know how to fight deflation. What is your forecast . I think we left off midyear and have two or three fed fund rate increases. So many economists were hing out their forecasts because theyre just forecasting for a couple of weeks. Literally, a month ago. People say, i think never is a good forecast. Zero is not an appropriate stance of Monetary Policy in an economy with unemployment around 5. 5 and job growth over 200,000 for many months running. One point you noted earlier, the grand total of payrolls. If we think about the grand title, the number we got today plus the two revisions plus the change in the work week this often goes unnoticed the increase in the length of the work week meaning all of the workers out there were just 1 10 of an hour longer, that is an equivalent of another 250,000 jobs. If we take todays trends and add in the back revisions in the increase in the workweek, the grand total is actually closer to 615,000 jobs. As we look at the report as economists from an income perspective, we should treat that 650 no differently than 321 with an increase in the workweek and revisions. Would stay home an hour longer, we could employ to more people here at bloomberg television. Thank you very much. Brandnew economist here at bloomberg. In media, still no deal between cbs and dish network. A cbs back down from its threat to take its programs off the air last night. Alex sherman is here. I always love it when they make these threats but it is not as cool when they do not back them up. What he probably means, cbs and dish will strike an agreement. That is what you would think. Close to one, cbs would probably go through. Really, the deadline is sunday because nfl football is on sunday. How important is this . Obviously, only football matters when it comes to these discussions. Thats true and that is why cbs has the leverage and why when cbs and Time Warner Cable went through the same dance last year, cbs got the increase, more or less, that it was looking for. That is certainly going to be the same leverage this year. Nowonly difference here, you add in his element of what is called in the lingo, overthetop tv. I just want to draw a little attention to the lower 1 3 of the screen. What a horrible pun. How much football was that your idea . I didnt make it up. Last night wouldve been a problem the nfl network had it for the first half of the year. What do they control for dish . The only reason you get dish is to get the nfl. Every quarter almost, the founder of dish network comes on these earnings Conference Calls and says, one of these years theres going to be a paytv provider out there that caters just to the nonsports watching audience and doesnt take the enormous increases that all these programmers want because they control sports content. He says it out there, but it isnt dish network. Dish is of the one that does it. If youre not watching sports or bloomberg television, you dont need live television. It is going to be a smaller company. Dish has 12 million subscribers. Theyre not going to eliminate a watchmount of people that nfl football. They just arent going to do it. It would be they would have to completely change the model. All of their viewers. Not all, but many. Is this part of why cbs is going over the top . Football, no. But on the disputes . Yes. Has the leverage. I think theyre going over the top because they really think they can live within the Current System and then get some additional subscribers that have opted out. Have their cake and eat it too. Dish is trying to do the same thing. Dish wants to have the very first of its kind internet tv product where it has a bundle of channels and trying to get cbs and turner and all these other programmers to sell them some of their networks, but not all of them, so they can offer 30 a month product to people that dont currently buy cable tv. 18 to 28yearolds. They want a product by the end of the year. It is something i think youll see a team of reporters that report more on in the coming weeks, what exactly will be in this dish bundle. That is one reason why this dispute has lingered, because cbs has its own overthetop product and dish once cbs in its bundle. Te andrybody wants ala car nobody wants to give it. To some degree. Football is not in the package of cbs. Cbs realizes the value of football and are not going to give it away ala carte. Thank you, alex sherman. When we come back, we will be talking about merger mania could be coming to the energy business. Of course, you would have to blame those falling oil prices. It is friday, so time to play the yearbook game. I forgot about this. He is a financier who graduated from Birmingham High School in. Alifornia 1964 that is all our producers are telling us. Who is he . Tweet your answer. The great oil shakeout, that is what some people are predicting with crude at 65 and so far this year, it has been a record for energy deals for the 154 billion of energy m a and 2014. With prices plunging anew, we may see more deals born out of necessity as opposed to desire. Smaller and mediumsized drillers being forced into each others arms. Saenz same goes for the service companies. Look what is happening with halliburton and baker hughes. Bobby, lets how much of a catalyst is 65 going to be for him in a and energy m a and energy . Typically, theres a delay between when prices move and sellers expectations change. I think we would certainly expect a slowdown in activity in the First Quarter as people recalibrate their budgets and their Capital Needs going forward. Ultimately, if we hang around the 65 price for some period of time, it should be a catalyst toward activity because peoples access to capital and ability to drill effectively will change dramatically and force activity. Where are we going to see it . Smaller producers buying smaller producers or will this be a field day for private equity firms and credit opportunity hedge funds, which have an opportunity now, for example, to buy up distressed debt, take control of creditors committees, etc. , etc. . The people with money are the big advantage in this environment every environment. Right. The unconventional world is people tend to spend money automatically higher levels than in conventional resource. The vast majority of independents and he was outspent their cash flow by some significant amount youre on year on with less capital availabley, peopleear. Equity. They tend to be International Firms with Balance Sheets and 10 to be the major oil companies. Bobby, youre not old enough to of been in the business then, but back in the 1980s, a lot of my neighbors were guys who drilled vertical wells. When the price war happened and prices dropped, they basically were forced into retirement and cannot do anything about it. The same thing happened during the shale boom. They could no longer afford to give people and get any land to drill on. Is that going to happen again but now to the shale guys . The cost structure is going to get driven down quite dramatically, whether youre drilling vertically or horizontally, for that matter. We are already beginning to see it. The conversations that are going on between the Services Company and the customers are quite Difficult Conversations at the moment. The way we think about it, 70 is the new 80, which is to say, as costs come down, the breakeven price for most drilling activity will also come down. Will this force people out of the business . Sure, some of the marginal players in a 65 dollar world will not have access to capital and not be able to drill effectively. All, our expectation is the industry will calibrate its cost structure and be able asproduce effectively certainly, 70 and oil 70 oil. 65 is a much bigger leap. That is the big debate in the sector. 70 world or a 60 world. Lets say we are in either. The First Quarter is a little slow because people are recalibrated, as you put it. Is that ais over, foregone conclusion the rest of the year will be epic for dealmaking and we will see new record set for energy m a . I dont think that is a foregone conclusion at all. Recalibrate the Capital Needs in a many paces places, slow down quite dramatically. What is going on in management meetings today is that people are saying, well, lets take our Capital Budget down 15 to 20 for now and we will revisit that at the end of the First Quarter. At those spending levels, the vast majority people can survive. There a large number of independent companies doing unconventional work in shale that are facing a troll or dropped sort of situation . If they arent active on their leaseholds, they have to give them up. There is some of that, but people will do what they have to do. If they have to give up please hold to survive, they will. People can adjust their Capital Budgets dramatically. That means they wont grow. What weve seen in the equity markets is an independent sector in the u. S. Has been price for growth. The reason those stocks were off 40 and 50 is the market is correctly understood that in this environment, price environment, the growth rate is going to look dramatically different. Companies that expected to grow your production 30 to 40 can now only grow 10 and in some cases, may be hope to keep it flat for the next couple of years. That results in very different pricing scenarios for the companies. That is why equities have traded off quite dramatically. We think in the credit market, a punch of the cell down is quite overdone. That people are expecting distressed to be at levels we dont expect, and that is a great place to make money right now. A summit who has his finger on the pulse of this industry and on the broader march toward Energy Independence or toward the possible future of exporting crude from here, what is your take . Theres a lot of oil and gas around. Theres no doubt about that. But it will come out of the ground a lot more slowly at 65 but it did at 85. That being said, the ultimate source of hydrocarbons in north america broadly defined, which is, say, canada, the u. S. , and mexico, does point us toward a much greater degree of Energy Independence. We would expect some level of liquids and oil exports to be in the cards for the next several years. That is good news for the industry. But the world has changed, no doubt about it. And the commodity price moving from 85 to 65 doesnt change the fundamental fact. Bobby, thanks so much, great having you on the show today. We will take a quick break and be right back. Write infor our your book and. Tell us for o if you know who that financierur from california is. Did in bc go back to the future last night echo Live Programming in prime time. Just like they did in the 1950s. I know what you are watching last night. Grown men like to see dressed as young boys. Have a look at this financier who graduated from birmingham, california in 1964. Who is this man . This unusual looking black shot is from inside the orion spacecraft which launched successfully earlier today into orbit after oneday delay. It is about to splash down into the Pacific Ocean the camera is inside the capsule or that camera was, now nasa is sending a something from their control board. It is so exciting to watch this capsule to basically test it out it looks like it splashed down now. Some day not very far off, this kind of capsule will take people to mars. The coolest thing about that is, the first people who go are not coming back. I would volunteer for that. I dont know if anyone once doubt me get there, but i would go. If you what met to volunteer for should which he never returns, tweet us. All right, folks watching television on demand, tuned in in droves last night to watch peter pan light on nbc. Success of events like this one is making some secondguess whether traditional tv is really dead. Olivia sterns watched the three hour special last night. She survived and is with us now. I even more mint green. You watched the whole thing . Almost the whole thing. It is very cool that met one day couldnt go to mars and never come back. Because it is like tv, live tv is where the money is at. Life teacher tv is the future for broadcasters. They have to get your eyeballs back from facebook, youtube, netflix, snapchat. They want you back on allison williams. The tallest peter pan ever perhaps. Event. Nt is, live tv award shows and sporting events and this new genre of musical spectaculars, they did it last year with the sound of music. It brought in 22 million viewers, about double what brian williams, allison lims father, gets on his grave as night on nbc. I tend to watch one live event on tv every year, assume i did not get tickets that year. And it is the victorias secret annual fashion show. Thats true. It was in london last year. I think was 20 million to throw. We spoke to the head of the event. Heres what he said about why it is worth it. Iowas get the question, is it worth the dispenser much money on a fashion show . Is it worth it to be seen and 192 countries for an hour in december . Its like, yeah, i think so. Nobrainer. With a fashion show, there were not a lot of people hate watching that. With musical theater this is what olivia told me. I told her, the peter pan thing was horrible. I dont like to watch grown men dressed as young boys dancing around the stage. Allison william is not a boy. But the pirates tossing their legs . Crossing their legs . You said hate watching is just as good. Love it or hate it, nbc doesnt care what your the critics thing. They just care that you tuned in. For example, on my twitter feed, the former fcc chairman weighing and saying, peter pan blewett. Cute without charm. I would have to agree what hundred percent with Arthur Levitt 100 with Arthur Levitt. You are not the target demographic for peter pan. But theyre watching and theging, getting a viral on internet. That is what they want. So youre saying, nbc doesnt care as long as someone is watching. Right. Walmart did a very big Advertising Campaign wrapped around the show. ,hey had Melissa Joan Hart sabrina the teenage witch, using some cut of tigger bell special effect to link back to the programming. When Christopher Walken knocked his hook against his boot, it was the sound of a cowbell . No, i didnt. The problem is, there wasnt enough cowbell. You need more cowbell for sure. Ive got a beaver and the only prescription is just ive got a beef and the only answer is more cowbell. We could talk about the hunk of metal, but we wont. When we come back, we will talk about startups and a dog the latest addition to the on demand is economy. An onlines marketplace for just about everything. You can get rides with uber, a place to stay with airbnb, and a new app that lets dog owners find someone to watch over spike instead of sending your beloved canine to a kennel. Great idea . Perhaps. Is it worth 12 million . Menlontly so because ventures, that is how much they invested in this idea. , menlo ventures. What is the idea . I have a dog, i go on vacation, would love to have someone watch over him. Is this where i go . Yes, you do. Au can leave rover with friend or Family Member. The good news it is cheap, the bad news is your emotional guilt for the rest of the year. It is called rover. Or uber for my dog . At theooked transportation market, it was 10 billion. Dog grooming is 5 billion. The alternative, which is a kennel, is terrible. Forr is a great option people, specially the holiday season, to find someone who loves your pet and takes care of him. If we extrapolate or extend, lets say, the comparison to uber, does it work similarly . Independent contractors, like drivers for uber him a few now become dog sitters . Absolutely right. Independent contractors essentially get on the marketplace and come in and dogs it for you. U likeber, rover connects has sitters to pet owners. How many dog sitters or pet sitters are on rover right now . People have a of pet sitter available to them within five miles. It is in over 9000 cities. This is a phenomenon that is taking off. So my dog, steve, is probably more important the most other peoples dogs. I would not be willing to let him stay anywhere with someone i did not personally know. That has to be common. Very common. Pets are like our children. You want to know your dog sitter. Rover does background checks. They allow you to interview the person. You need them ahead of time. In addition, during this day, they send you photos and you have insurance and that access to a veterinarian on oh 1800 line. That is what you can feel comfortable knowing the people at rover truly love and will take care of your cat. Pet. Is this just a dog thing worth or nubber to do to extend rover or is there an opportunity to extend rover to other pets . Goldfish . Imm wondering, what fishing for, is an idea of how big this business could be . Being a 100 uber billion opportunity. Sittingrooming and dog as a 35 billion market and the alternatives are very poor. When you take your dog to a kennel, it is like taking her child to an orphanage. You dont like that experience. What rover will do is expand that opportunity. Today, most people leave it with her Family Member or their friend. Rover will make sure you actually have someone else. You can do it without the guilt. Guys at menlo are smarter than i am, but im not buying it. I can imagine but some people will. A lot of people felt that about uber initially. My dog goes to my mom or his trainer, and that is it. We felt the same way. When i first heard it i said, theres no way im investing in it has sitting service. You look into the data, it is surprising. It is a huge market. Definitely, a big market. I would spend any amount of money on steve. I have another question, which is about really the thispt that underpins industry, not just rover, but also uber and airbnb and other models being built like it. Lots of people want to call it the sharing economy. Correct me if im wrong, but nothing is being shared. Everybody is getting paid. We were talking about this earlier. What do you call it . Ive taken to calling it the ondemand economy. Is there a better terminology for this industry . We try to use the phrase the right now economy. The reason why think people call it you have these stranded fixed assets. You can think of the extra room in your house as a stranded fixed asset or your car and your Human Capital which is not being used as a stranded fixed asset. That is what these technologies are doing, taking advantage of that stranded fixed asset in getting productivity to them. There are lots of people who love taking care of pets and never knew they could build a business around it. Rover is helping build a business just like uber is something people earn an income by driving a car. What you think the size of the on demand or the right now or preferably not sharing economy is globally . I think it is huge. We have done a bunch of translations at menlo. A 300k this is between billion to 400 billion revenue market. We put a stat out that we think it will be one million jobs created by this economy. I think it is wrong. I think uber alone will create one million jobs in a two years. Lets draw another comparison. Uber takes 20 to 25 of what the driver collects. Is that the same in rover . To 25 ofs 20 whatever is being paid to pet sit the dog . Yes, they take a 20 cut. Generous commission. Is an example, they will raise the commission a lot unilaterally. They do a great service. They do the validation. They make sure if something goes wrong, there is someone available in customer service. Much. Nk you very managing director at menlo ventures, who have made some incredibly Intelligent Investments and profitable investments in the past. One thing they will find out soon enough is how big rover is during the holidays. A lot of people travel at christmas. Will you find will you call matts mom or use rover . That ambitious project to bring the internet to those who dont have access and therefore, facebook. Mark zuckerberg wants to bring internet assess access to the masses. Internet. Org, partnership zuckerberg forms between facebook, samsung, ericsson and others is try to do just that. The facebook founder spoke to emily chang and talk about some of the challenges of connecting people who may never have heard of the website. It turns out the biggest hurdle isnt it a technical or afford ability, it is the social challenge where the majority of people arent connected are within range of network, and can afford it but dont know why they would want to use the internet. Emily is with us from san francisco. Lots of people talk about the value of a connected globe. You do the same thing from there she meant, for example, at google. He believes passionately in more or less the same kind of thing. Every time i hear from their schmidt i think, of course, because google wants to make money and needs a larger marketplace. Is that the same thing with facebook . I asked him why this makes sense for facebook that business. Is facebook going to make money on this. He practically laughed. He said theres no shortterm model i which this becomes profitable. But over the long term, he hopes it does. Facebook already has one billion users online. There are billions of people out there who are potential facebook users who dont even have an Internet Connection but just getting them the connection is the first step. This certainly easy to think his be skeptical about motives. When he talked to zuckerberg, you certainly do believe he really wants to do this for good reason. If it helps facebook and a longterm, thats great. But thats not what theyre thinking about right now. Will he try to get the internet not only to people who cant afford up to people who are being blocked by oppressive governments . China, i want to say that there are so many others. North korea . Iran. I asked about china specifically where facebook is currently blocked. He said, were not focused on working with governments that dont want to work with us. We want to work with governments that share our values so theyre focusing on africa and countries in Central America and southeast asia. China is something that down the line i think will be a much bigger question, much bigger challenge for facebook. We know he has been working on his mandarin. The had a Facebook Messenger said facebook will only get back into chinas part of a companywide effort, potentially involving partnerships. A right now theyre very focused on the easy win because those arent even that easy. It is free difficult to work with these governments. For example, in zambia, theyre doing test in kenya come a india, and it will be one country at a time. Thank you for sharing, emily chang. See her at 1 00 p. M. Eastern time and 6 00 p. M. And 11 00 p. M. Eastern time and on the internet, bloomberg. Com or with your bloomberg tv app or on amazon firewood rack before we run out of time, it is friday. Time to play the yearbook in. Lets show you todays candidate. Have you figured out who it is yet . Us. T your answers to we play theday, so yearbook game. We show everybody a financier who graduated from the class of 1964. We can now tell you who this is. Take away the hair and it makes it easier. The smartest and most successful men often lose hair. Really question mark really . Theking of junk bonds in 1980s. In that picture, he looks like john ninkovich. If theres a movie about michael milken, i predict john up of it will play him. The chief Investment Officer at a caliphate state teachers retirement system, otherwise known as counselors, who nailed it. , it was close. Y is 11 14. All i have i want to point out that the cio at coasters will be my guest host here on monday. It will be a huge day. Is that the prize for the yearbook game . If you win the yearbook game, you will be the guest host on the following monday. It is also a big day because the ceo of wells fargo will be with me at 10 00 on monday morning. Looking forward to that. I will tune in. I wasnt going to watch, but now i will. Something i would never, ever miss is bloomberg on the markets. We forgot to say something. Have a great weekend. Oh, yes, have a great weekend. Have a great weekend. U. S. Stocks are in the green. They have turned higher and have built on their advance heading for their seventh straight week of gains after better than estimated jobs report boosted optimism about the u. S. Economy. The dow is creeping ever closer to 18,000, not 17,990. Now at 17,990. Mark sebastian joins me. We saw some confusion, some muted response to the jobs report initially, but investors and traders have taken it to be positive news for equities. Why the delayed reaction . I think it is an interesting story. One of the big stories i think for stocks in 2015 is if Interest Rates stay really low. I think if they stay below 2. 5 , 10year, which would be housing picking up with the change in the rules to fannie and freddie, that was a potential growth story for 2015. I think the markets took a minute to figure out whether or not they liked this. Out, yes, stock buyers are buying the market. They bought it and there is not going to be big money coming in taking money off the table. It has given us to move back to what has been the story did last couple of weeks, which is this amazing slow grind higher after what was such a really volatile october. Were going to continue to focus on a couple of Asset Classes including commodities. You have been keeping a close eye on oil prices. What is your strategy . How are you looking to take advantage of this continued decline. Crude is killing the nondiversified oil company, those who have specific sectors of oil they work in. The drillers, python, services. Where i think there are hidden strengths in the diversified vertical oil companies, the chevrontexacos, exxon mobils, royal dutch shell, bps of the world, those that go from drilling all the way to selling at the gas station has shown some resilience and strength. And are now at levels i think theyre starting to look really appetizing. Royal dutch shell trading around 67 a share. It pays a dividend yield close to 6 at these levels, i really like it as a longterm investment. A trade i would do is to sell the january 67. 5 put at two dollars, allows me to take delivery on the stock. Mark sebastian, thank you very much for summing that up, joining us on our options update. We will be back in 30 minutes. Welcome to money clip. I am olivia sterns. In markets, the jobs report crushes expectations. Oil slides and chinese stocks really like it is 2009. In the 85th anniversary edition. In media, the business of peter pan live. Love it or hate it. That is tuned in and all nbc cares about. Changing your diet. The end of cheap chocolate