Transcripts For BLOOMBERG Market Makers 20141219

I am stephanie ruhle. Friday is here. Not just a bloomberg, everywhere. I hope you are paying attention , not the next two hours your christmas shopping. We will guide you through how and where to get the best stuff. The top business stories of the morning. U. S. Stocks may be taking a timeout. They have been going back and forth between red and green for the first half hour of the trading session after an extraordinary trading session that added more than 4 to the s p. , withp is up slightly numbers like that, it basically looks unchanged. It is a slight positive. Stocks in europe have turned down after being up earlier in the day. And blackberry comes up short in the struggling comes up short. The struggling smartphone maker posts revenue that fell well short of estimates, generated positive flow earlier than promised, but shares are down 9 . We will speak with blackberrys ceo john shannon at 11 30 a. M. Eastern john chen at 11 30 a. M. Eastern. This guy cannot get out of the headlines. He loves drama. According to a person familiar with the matter, charney is working with a private equity firm to make a bid for american apparel. They fired him earlier this week over allegations of misconduct. Instagram has purged millions of accounts believed to be posting spam. The problem stars who lost tons of followers. Millionieber lost 3 1 2 followers on the protosharing app. Rapper akon lost more than half of his followers. Instagram tries to prevent users from buying followers to see more popular to seem more popular. We need to take a deep dive into the equity markets before we head into the weekend. The executive editor of Bloomberg Markets and the chief investment strategist at Wells Capital management, joining us now from what do you make of this rally . Well, its pretty strong. I will say that. I dont know if its as much a rally as it is just volatility. We had three sort of somewhat significant selloffs now since the summer, when we first reached 2000. And every one of them have had these dramatic and very aggressive recoveries. I dont know if we are making a lot of progress. We are up about 3 from where we first broke 2000 in the summer, but it is certainly eyecatching , if you will, and i think it is being driven higher a lot of the times by active managers that are behind year to date. And when the market takes off, they are caught in a bit of a short squeeze, trying to stay caught up with the market through yearend. If you are a fundamental strategist, should you be ignoring this rally, if it is simply guys trying to race so they dont underperform the indices . I would stay focused longerterm, i really would. I would take advantage of this maybe on one weakness to add to positions you are interested in on days when things are getting beat up, and maybe go quiet or selloff on some other things you were looking to sell on the strong things. I think i would be looking into next year, basing more of my strategy on that then what happens between now and yearend. What do you make of this . A lot of people have been trying to connect this to yellen and the fomc announcement. Did you hear anything in the press conference that would explain this . Im struggling to understand what would be the real connection there. I didnt. I really didnt. But i never understand why Falling Oil Prices were so not bad for the stock market. I really think that, at the end of the day, we are massively stimulating the Global Economy with Lower Energy Prices and lower sovereign yields everywhere across the globe. And to me, thats a pretty bullish sign that the Global Economy, including the united eights, if anything United States, if anything, does better next year. I dont understand why you would sell stocks in the face of that. I dont understand the selloff, let alone the rally. There are so many people trying to play catchup. 2015 what do you think its really going to look like . I think its going to be more of a struggle next year, stephanie. I have a kind of broad range in the market, but i think its going to be volatile to roughly flat. I see the market facing three major challenges as we go into 2015, that we really havent faced until now. One of them is, i would argue, the sentiment today is the most calmest, confident it has been in the entire recovery. The premise of this market has. Een climbing the wall of worry i dont think thats nearly as dramatic. People are more confident, noticing mainstreet is getting better. Sentiment is a little strong. I think valuation is up a lot. We had a 50 increase in the price earnings from about 12 times 18 times. We are now above average. Thats a little stretched. The biggest thing in the room for next year is that we are going to start raising Interest Rates in this country. We are going to start to reconnect Interest Rates back to the economic cycle, both the fed and bond yields. And most of the times when that process begins, the stock market struggles. So, i suspect that we may go somewhere higher than we are today next year, but i think we might also have a 10 correction along the way before next year is over. How about europe . You seem to let your more than the u. S. Like europe more than the u. S. Thats anything. Two years ago, we wouldnt been saying that. There are some strong wall street things i would tilt against in portfolios. The u. S. Is the only place to be. The u. S. Has outpaced everyone in the last couple of years, making the rest of the world sheet cheap. The dollar is only going to go higher. I expect the dollar to go lower next year. Everyone is suggesting that, because the fed is going to raise rates and europe is lowering them, that means the currency is on a oneway train, but i think it is going to be more important what the impact of those policies are. So, if europe is easing and to pan is easing and japan is easing and it works, i think that will bring a bid to the euro and the yen, rather than a sell. If the fed tightens only when people believe they are behind the curve and they are trying to play catchup, i think that will bring a sell to the dollar. One way to deal with a more volatile market in the u. S. , one that is honorable with high valuations vulnerable with high valuations is to diversify with some of these russia is in the news a lot. When you ask people about risk and geopolitics often comes up, is that anything people should care about or make Investment Decisions on . Should we worry about russias effect on the stock market . Thats one thing i agree with janet yellen on. I dont think its that big a deal. Almost everyone is already invested for geopolitical risk. Its called diversification. As long as you maintain some diversification, thats what you do that, for unpredictable geopolitical and other events. Beyond that, i think you ought to ignore them and stay more focused on fundamentals outside of unpredictable sort of events. In this case, i think russia is pretty small. Of net benefit to the globe 50 drop in Energy Prices far outweighs a meltdown in russia. I think the surprise for next year, we go into next year with most people worrying about the deflationary spiral. I think we are going to get a bounce of growth everywhere across the globe. We are massively stimulating this thing with lower bond yields and Lower Energy Prices. We are worried about whether the ecb is going to do quantitative easing. The impact has already been done. Sovereign yields have fallen across the eurozone throughout this year. I think you will get a bounce in europe, japan, better growth out of the emerging world, and we are going to worry about overheated growth before 2015 is over, at least here in the United States. We have to leave it there. Do you agree . I think theres a lot of sense in that. All right. Jim paulsen from Wells Capital management. When we return, lessons learned. What companies are doing to prevent a sonystyle hack attack. Plus, how to get you off the computer and into the shopping mall. Great prices alone are simply not enough. That and a whole lot more. You are watching Bloomberg Television. Welcome back to Market Makers. Im stephanie ruhle. Sonys decision to cancel the interview could cost the Company Millions of dollars. There are lessons here for movie studios about preparing yourself for this kind of doomsday cyberattacks in real. Talking toas been the experts, trying to gather some of those lessons. And peter singer is an expert on cybercrime and has consulted and activision. Lets start with peter. What can we learn from this . Dont make a movie in north korea . And dont cave in utterly so that you cant even make lemonade out of lemons out of this. There are couple key lessons we can take from it. One is obviously, take Cyber Security seriously. In this situation, sony has been repeatedly hacked, going back to , byeast 2005, yet the way all reports, this group got in wasnt with incredibly advanced techniques. It was kind of the cyber equivalent of accrued pipe bomb of a crude pipe bomb. Dont just think that your exterior line of defense is enough. It doesnt work for eggs. He doesnt work for major corporations. It is really shocking the way it doesnt work for major corporations. It is really shocking the way, once they got inside, it was as if they had the keys to the kingdom, the gossipy emails to Financial Information to legal information. A lot of this stuff should have been kept separate and encrypted. Third, it points to the way that you personally operate, both as a private citizen to a business executive. The way these people within the firm were emailing to each other, it was like theyd never been on email before. They were badmouthing business partners, other people. Teaches know, your mom you not to do this, but also everyone from enron to Goldman Sachs has paid a legal and financial price for the kind of things they put what they thought was in private email. Guess what . Email is not going to be private in these days, and you have to act responsibly in these ways. When i was speaking to analyst, they said analysts, they said you should identify your crown jewels. Nice ring on your finger. You probably have a safe at home. You know what is important for you and where to hide them. Why this sony not know where their scripts, passwords, insurance plans are . They should have those in safe places online and in the physical world as well. They should have those places constantly changing, so that its not in the same area every time. Is this a case that we have gone online and become digital and no one is prepared . If you think about who works in i. T. Departments at any sort of company, and im guessing a movie studio would be one, those people probably dont get paid very much. They probably dont get a lot of respect in the company. There is a lesson that applies whether its in the physical world or the cyber world. If you can spare to lose something, cannot bear to lose something, prepare to lose it, whether it is your birth certificate for your electronic crown jewels. Birth certificate or your electronic crown jewels. Whether it is the nation and our Cyber Security, your own Cyber Security, or fortune 500 Cyber Security, its not just about defense, but resilient. Resilience. What im getting at is, even if you have some of the best Cyber Security people working for you, if they are honest, they are going to tell you i cant promise you 100 security. At some point, the bad guy is going to get in. They may already be on the you on the inside. The u. S. Militarys biggest troubles have been insider attacks, manning or snowden. The key is not keeping yourself 100 secure, it is never going to happen. It is how do i get back up quickly when i am not down. Knocked down. How do i not cave in, give the attackers everything they want and more, incentivizing every other attacker in the world to come after me . When you think about i. T. Managers, they are not incentivized to have a good roi. They cant figure out which system they want to buy and then make a case to their cto. If i buy this system, it is going to prevent 1 billion of trade sick as it of trade secrets from exiting our system. They cant make a Good Business case for it. Ultimately, many of them have been saying why dont we wait until after the Security Breach happens and then deal with it then, rather than investing the money upfront and having to protect it, which isnt the right mindset. On Companies Like sony going to have to lose or spend so much money arent Companies Like sony going to have to lose or spend so much money after the fact, when it was preventable before . Ben franklins saying about the about an ounce of prevention is worth a pound of cure applies in this space. One of the thing that matters is how we measure the cost of a cyber attack, which then shapes what we are willing to spend to prevent it. So far, businesses have typically when they think about the potential cost of an attack, they think about how much time and i going to be theked offline, and then cleanup costs, whether it is technical or legal. As we are seeing from the target breach, or, in this case, sony, there are all kinds of kick costs. Impact to your brand, your customers being upset with you, your business partners. There was a survey taken of over 500 business executives. When they asked whats the cost of a cyber attack, only 39 of them wait impact on brand them weighed impact on brand, only 25 on lost an election property. Thats the wrong way to go about thinking about it on lost intellectual property. Thats the wrong way to go about thinking about it. Reuters is reporting that United States is thinking about making the official statement that north korea is responsible for the cyberattacks. Seeing the are making a Statement Like that, how should we react . Its not just a bunch of hackers. This is official. Peter . That, challenge here is in these incidents, Everyone Wants to focus on attribution, who did it to me. And the real problem is accountability. What am i going to do back to them so that they dont either to punish them andor to punish them and or to prevent them from doing this in the future . It takes it from being a cyber incident to the problem in north korea in general, which is theyve done everything from nuclear test, Nuclear Proliferation nuclear tests, Nuclear Proliferation. They sank a close ally ship and killed 46 of their sale ears their sailors just a couple years ago. Its not like we want trying to sanction we were not trying to sanction their economy before. This is not an act of war. We are not going to go to war over this. Now we are looking for other tools. The problem is, when you are about north korea, weve been using most of the tools already. Its not a cyber problem now. Its the north korea problem in general. Couldlysts have said this change the Way Companies behave. Companies have to focus on the bottom line. Shareholders to answer to. When i. T. Professionals have been asking them to make the big spend, they simply cant. They say i have other fish to fry. Now that it has become this serious, could we start to see a shift . Analyst, a crisis manager, said he anticipates companies to spend more money and not on i. T. Systems, but on isis management on Crisis Management. It is easier and less expensive to put her dollars on it afterwards rather than beforehand. You saw put your dollars on it afterwards rather than beforehand. You saw they are willing to take the reputational hit. It is too expensive to take care and ensure you have all the right firewalls in place to prevent an attack that might happen. chance it could happen. Is a too expensive . If it happens, it could take you down. I would disagree with both parts of the premise. The first is the idea of it or any kind of low level. Of the top 500 companies in the world, 97 of them have admitted theyve been hacked at some point. The other 3 have been, too. They just havent admitted it. Alls true when you talk the way from Large Companies to small cupcakes. If you are online, you will deal with cyber threats. It is simply a reality. As we were talking about before, the nature of the cost it is a lot more effective to focus on preventing and being resilient to the attacks than focusing on the cleanup afterwards. Thats true again whether you are talking about anything from cyberattacks to the same argument could be said about fire or theft in general. Again, if people think their way out of this is to hire Crisis Management or good pr, they are setting themselves up for a world of hurt. Thank you so much for joining us. Our own mia saini and Cyber Security expert peter singer. Out. S a new book ive been saying since i was six, never write it down. If you have anything bad to say, dont write it down. Market makers will be back. We will hear from the ceo of td bank in toronto. And how to get a complete makeover in your own home. Putting in a call to glam squad. Welcome back to Market Makers im stephanie rule. We have got breaking news out of washington. The f. B. I. Is now officially accusing north korea of being behind the sown ji hack attack. Pete center this is something stephanie he had been reporting all this week about the government leaning this direction and now we are expecting to get official word according to u. S. Law enforcement official that they will spell out why they think north korea is ultimately behind this cyberattack against sony. That is the big news today. We wait to see exactly what evidence they will put forward. The big question after that is how will the United States respond . What are the options available to the government . We will hear president obama talk about this as well. What are some of the options . Obviously this is a big wow and its official, but what does it mean . Well, the options are limited at this point, and again we have to wait and see what evidence they put forward and see whether it originated within north korea itself or if there were sur gas outside of the country, but its very hard, for example, to target the north koreaen infrastructure because really theres only one real pathway out of north korea. Would be easy for the north koreaens to see a u. S. Cyberattack. And the aim to name shame the North Koreans and embarrass the North Koreans as best we can and even if there were a response we wouldnt officially hear about it for some time. Thank you, peter cook for breaking this down. And you will be able to watch the News Conference at 1 30 p. M. Eastern or streaming live at bloomberg. Com tv. Moving on. Were moving up north. Canadas biggest banks, they are taking a hit. The countrys top banks face earning results falling 6 over the past three months. One of those banks, Toronto Dominion bank and t. D. Bank. Erik, my partner spoke with the c. E. O. Earlier this week, and he said he is ready to adjust to bankings new era. Its adaptable. You should expect t. D. To adapt to the environment. We are not the type of company that ideologuically looks like at the environment we find ourselves in. If nothing changes, you will see t. D. Do the same thing because it has worked and been very successful but if it changes fundamentally, t. D. Will adapt. Is the environment changing . I think in some ways, because what you have now is what i call less Market Growth available. So i think banks not withstanding the financial crisis, have benefited from a Good Environment generally, especially in the model that we have with Retail Banking and all that, to where as now we go true an operating cycle where its more and hence i see a fundamental shift coming there and successful banks like t. D. Will adapt to that environment. Whats happening now . Is it just oil . No. Its a combination of events. When you see some of cheesehead winds have been there for a while. The old analogy that you can compare as prepare as much as you want for a cold shower, but unless youre in the water we see the uncertainties in the deflation narrow pressures in europe and china certainly seems to have slowed to where it was before and after few years ago when people would say, well, it will slow down at some point. And with the u. S. Dollar its interesting to see the impact. Because theres two ways to look at it. On the one hand low andy prices, 70 of the u. S. Economy is consumer driven. U would think it should be not such a challenge. What about exporting . It might not feel as great as if you were on the other side of it. I think in short term canada will see some regional differences. Theres in canada where oil prices will help Consumer Sentiment and there will be more dollars in consumers pockets. But in alberta you will see some impact and depends on how long this us is stains, but there will be a mixed reaction in canada. How will 60 oil affect your earnings and the quality of your Balance Sheet . So, the direct impact on t. D. Is quite minimal. We, you know, are lending our book exposed to the Lower Oil Price with our customers and the like. Its relatively muted. Which is to say either you have very little exposure to the oil patch or you have hedged that exposure . Well, where we lend money, especially forth more junior players in the industry, we lend on something where the availability of credit is dependibility on what our view of the market is and tv is generally conserve. So we think thats a more manageable situation for us. I think the part we worry about is indirect impact. When you have sustained low prices, what happens to the oil servicer is what happens to the rest of the economy and what happens to Consumer Sentiment in that part. What do you think is going to happen . Well, this remains low for some time and obviously will have an impact. Youve heard some companies thinkinging about cutting back on capital expenditures. I dont think the current production will be as much as perhaps new supplies coming on stream. What about housing . The bank of canada says housing prices are as much as 30 overvalued. I was thinking to myself when that came identity on december 10, imagine if the fed said that about the American Housing market. What does can za say . Well, if you took three or four centers out of the equation, you would say oh, that doesnt seem as bad, and thats toronto, vancouver, calgary and the like. If this oil remains low, calgary may correct itself. There may be pockets out there. But in canada, i dont see a major disaster like what is experienced in the United States just before the financial crisis. I grew up watching a parade of c. E. O. s. At the head of canadian banks all pretty similar to each other. White men, oftentimes in their 50s of anglo sexson or european extraction. Youre different. What does that say to the canadian economy and Business Community and the future of canadian banking . We are reflecting the margins in which we operate. To put it simplistic, we dont, as a big, we dont make cars. We dont make computers. We actually dont make anything. We are in the business of trust and meeting peoples as operations if they want to buy a home or save money for their kids educations. So people matter. They make something. They make money. Perrott ma sonny with my partner Erik Schatzker. When we return, connecting with consumers. The stores that know us more than just price. Its all about experience. Thats what is going to get you in there, shopping, spending and injoying the holiday season. You are watching Market Makers right here on Bloomberg Television. Welcome back to Market Makers im stephanie rule. Holidays are the time when retailers are focused on deep discounts and door buster deals to attract shoppers, but they can no longer compete on price alone. The founder of story says the experience in the store is becoming more important than ever. Rachel, what does that even mean . Were here on 58th and left and i see the gap 70 off and theres no experience just deals. Well, i just think for years and years and years you could always compete on price, quality and service and now the nice to have is a need to have. So i think about it a lot as whats the surprise and delight factory . A couple examples are blooming details. This year they did videos focusing on Customer Service and these hysterical funny videos about getting rid of your holiday angst and turned their windows into a fun, nainling game to where it was much more, and i think that was really important. Do you think retailers are actually starting to think about that in a big way . Retailers, big ones out there are walmart. None of that, girl. Of ll, theres a glut any product that you can buy anywhere and everywhere. Theres a store that has a starbucks and on black friday ant Police Stores gave away gifts that were poppers that had Gift Certificates in it and different toys, so the future of retail in brickandmortar in my opinion is going to be about entertainment and community. Because when you look at rent and how much people have to pay for space, you have to think broader experience per square help d what are ways to gs exploit that . One has a sushi counter. Is that whats going to change . Because unfortunately that the point i shopline. I go home and click and dont go into the stores. Am i doing into the store when i know theres going to be a food truck and also get a sign for my kids . Thats the only way physical retail is going to survive. There has to be a reason to go. I think community is important. The o day we had a snowglobemaking workshop and nate berkus came and there was a making of the product that they sold of his in target. Can retailers afford the experience . What about the people that come in and make the snowglobe and say, smell you later, im going to target. We are the same people that liveline as offline and the birch box funding. Im pretty sure ewan any glow is not giving starbucks the space. Im sure the coffee isnt being given away for free, so i think its thinking about not just the front End Experience for i sumers but how are you mon footage . E per square is there a retailer that needs this reinvention . Almost all. And why havent they yet . Are they simply too old school thinking discounting will get the customers in . I think with anything, it takes times. I could name startups that dont exist anymore. Because when youre first movers often doing new things, it takes time on the Consumer Behavior and on the Business Model side of things. So i think the same thing is going to happen with the physical retail. Me great examples of kind of trail blazers were build a bear workshops and American Girl places and its obvious because its kids. But as consumers and adults, we want to a higher return on investment for our time. So if im getting an experience in the store, give me something i cannot get on my couch or at my desk. So how did you become involved with target . Because i wouldnt think of target as an experience. I thought i can buy a coffee maker and chose a hipster like you to change their snune were you ever a target shopper . Ive always been a target shopper. The first time i shopped in target was high school then there was one 2350eu6 miles away when i went to college in colorado but we partner up with different brands to help them tell stories in this outside space like a Living Magazine so this year we went to target, found our favorite things, over 20 brands and merchandised them in our store with over products. What does the word merchandise mean . What it has meant and what it will evolve to mean. I think we have always thought of merchandise as selling. But a huge trend thats only going to be bigger is merchandising as an advertising tool and dont. I mean, General Electric had sneakers. So so its bhk an active term . Right. Youre sticking with me. She did such a good job. Im going to make her coanchor with me while eric is out. She and i will sit down and talk glamour. Speaking to the founder of glam squad. Welcome back to Market Makers. Im stephanie rule. The cofounder took the 200 billion bite industry on and launched the on demand industry glam squad that brings hair and style to your door. Lets bring in alexandra. And i didnt let my friend rachel leave. She saw you were here. Eric is out so youre working overtime. Well keep you. Alexandra, we all got to know you with the extraordinary endeavor. Glam squad launched in january of this year. And three of the cofounders were working on something really exciting and innovate. I started to advise the company the minute i heard about it. I got sucked in as an entrepreneur and angel and adviser and this summer the team came and said we want you join us as a cofounder and lead this company into the next fades. Is this off the success of blow dry bars and the fact that they are open 6 00 a. M. To midnight . Well, what we are finding at glam squad is the common denominator of all our clients. Doesnt matter the profession or age, they just dont have the luxury of time. So we come to your home or office or hotel and within 45 minutes to an hour we can transform you and bring you self confidence and make you look and feel your very best self. Rachel, do you think this is an extension of experience shopping . Well, i think its about experience shopping but if you also think about it, Online Platforms are about enabling people to be sellers and kick starting businesses on kick starter, and i think where the big trend is about democratizing the physical world and thats exactly what it is. So i can discover a new Makeup Artist but also giving meac access to something. Do you consider this our Hair Services are 50, so for someone who might be a little as operational but the ame client thats doing self cycle and starbucks. Its only 10 than your average blow dry bar. For other clients who are highend luxury consumers, they are finding 50, thats a no brainer. I might get my hair blown out two or three times a week. U got beauty book, style steep. Other ladies entering this party. How do you protect your franchise . Well, im no stranger to competition. When we law firmed there was a lot of competition early on, and i honestly like it. It invig rates me and it forces our team to get keep innovate. We got 7 million in october so thats enabling us to really be strategic, hire an awesome team and think about what were prioritizing for 2017. New markets and verticals and theres so much to do whether it be product lines and do you man you will now have your artists become sales people . When they are done doing my makeup, they will sell it to me . Right now were in the phase of building the brand in new york, l. A. And miami. We want customers in those three cities to have an incredible experience, and as were building our brand, i think we will have the confidence from our client base that will want products for what we believe in. A lot of it is this timestarved customer who wants to multitask and needs things to be effective but also quick. All right. Ive used glam squad. Do we have it . Theres glam squad and you got two customers that night. My husband and me and we used it for halloween. We have that . There you go. Thats probably not your proudest moment. You probably rachel, have you ever used glam squad . Not yet. Would you . I actually have someone who comes out to my house to bow out my hair. What happened is i went to a popular chain and a woman i loved so i said i cant always get over here or the times dont work and she said all right. Heres my fone number so i kind of hacked together my own beauty squad but its much more expense i have than glam squad and i would much prefer new york, l. A. , mime. Are you going to have a new years eve special . No. Because we are expecting tremendous think it will be the biggest night of your career . Yes. If youre interested, youve got to book now. Will blackberry bounce back . Well be speaking with blackberrys c. E. O. Just what melissa mire doesnt need. A gossipping piece about her rocky tenure at yahoo. And if you have one of these, no one will get in your way on your morning commute. Battletested humvees welcome back to market marnlt im stephanie rule. And im matt miller in for Erik Schatzker tie. Matt wasnt going to join me but all of a sudden humvees are in the news and he came running, racing to the set saying humvees tested by the u. S. Government . Yes. Im going to bid often one. Lets start with the bulletin top Global Business stories of the morning. Seems like stocks are taking a timeout after the last couple of days of major rallies. The index is barely in the green. You can see there are still green arrows after the two biggest rallies in three years. The dow at 17,800. Yesterday the dow was up 400 and change. It is now official the u. S. Is pointing the finger at n. C. F. C. The at north korea. The u. S. Will release a report blaming the sony hack astack on north korea. We will bring that press conference to you live when that happens. In russia the ruble gained 34 against the dollar. The ruble is still down almost 50 from a year ago. All that underscores the roblem Vladimir Putin has. He is a guy who was born on third base and thought he hit a trip. 67 but standing here on third base here he was 110 for a barrel of oil and suddenly its 50, he doesnt look like a genius anymore. My view putin is a guy, a leader who at one in the same time is taking on the market and Mother Nature and you can watch that interview with tomas friedman on charlie rose right here on Bloomberg Television or as i like to two, you can listen to it on bloomberg radio. More legal problems for uber where in taiwan the government says it is breaking the law. It says it will appeal. Nu delhi and other places have banned uber. And its a wrap for the mock conservative cohost . Last night colbert said farewell to the colbert report on Comedy Central. Another bush governor is running for the white house. We are sending troops into iraq when this show began i promised you ooh revolution. And i have delivered because technically one revolution is 360 degrees right back to where we were. And then dozens of celebrities came out to sing goodbye. Everyone from willy nelson, brian cransen, james franco, Kareem Abduljabbar and even as you just saw there. Big bird. Of course the list goes on and on and on. Yes. Cyst jan only on pore. Alan alda. Wow. Bill clinton. A lot of serious celebs there. Who is your number one there . For me it would be willy nelson. I like franco. A lot. He is a super freak. I love him. Great. Pineapple express. All right blackberries turnaround plan hitting a roadblock. Dropping 34 from a year ago, that overshadowed one piece of good news. The company was cash flow positive earlier than c. E. O. John schenn had promised. John butler covers the company and is here now. So john, what do you think about this Earnings Report . Initially we thought oh, this looks pretty good. And any company can gain earnings share report . In fairness to blackberry, this is a company in transition. Its a tech company in transition no less, so they are really reliant on new products to get that line growing again. John schenn who has turned companies around before is now at the helm of blackberry, and he has managed expectations saying Revenue Growth is coming next year. It never was supposed to be a thisyear thing. I will say i expected is it a company in transition or a company in distress . I think its in transition, but that could change if they dont turn things around in the next couple of quarters. But what i mean by that is i think they have made all the right moves here. They have really right sized the expense structure and came out with products that look very good to me. Most recently this week they unveiled the classic based on the iconic design. I picked one up so ive got the blackberry one here. Im an iphone guy but hows it gone so far . Well, i literally just turned it on like 10 minutes ago. Have you used it at all . Not. But obviously they have had a rough time in the smartphone markets. I think market share dropped is globally. But xn qnx is now the Technology Used by almost everybody in the Auto Industry and they are also trying to roll out a software on services business. Yes. Theres assets here. Hes tried to move this company away from being perseed as just a Device Company to a company that has a huge portfolio of wireless patents and terrific enterprise mobile Management Software sweep. So when we communicate with the bloomberg system through a smartphone, were actually talking through one of those software gement systems. And thats in transition as well they are changing the licensing model there and its made the recent revenue a bit volatile, but at the end of the day i think they need a couple of quarters to get licensed revenue coming in from the enters enterprise side and then i think they have a chance at a turnaround. How much do you believe in john schenn . A lot. I think he is the right coach for the right team at the right time. That was a great endorse mean. Ere looking at a 10 shock. What do you think about the shares here . You know, i dont cover the stock per se, but i will say this. Tock price movements reflect optimism. The turnaround is youre betting on management so in the case of blackberry, it would be a bet on john shannon and he really exudes a lot of confidence. He has come in and met a lot of promises and then some and really i think has set the right strategy to get this ship back on a straight course. Well, you know im a blackberry enthusiast. John butler of bloomberg intelligence. And stick around. 18 minutes our on emily chan will be speaking to john chen at 11 30 a. M. Eastern. All right president obama will enter a News Conference before he applies off with his s for the who would for the holds. Peter cook is with us from washington phil, how does the white house feel as it heads here into the new year . Like they have got momentum. They will acknowledge that 2014 was rough and every time they thought they were taking a step in the right direction, there was a Foreign Policy that would flare up that often beat down what they were trying to do. Obviously the midterm elections were pretty devastating for the entire party, however, what they have done in terms of reaching a climate deal and then immigration action, the cuba announcement earlier this week. They feel like they are moving into this new year even though there will be a lame duck with this momentum that should try and help them solidify a legacy. Peter, obviously phil normally is in washington, d. C. With you. He is visiting you mean here with you in new york this week but what do you think his own party thinks about president obama . Because he is trying to make moves that will ruffle some democrats. But he is also energizing democrats mentioning the immigration act alone. Certainly something democrats have been pushing for this president to do and eye lou home the flex their muscles if you will but this is a president who heading into his nal year has to keep democrats whether its trade, taxes, one of the areas where they might be able to find Common Ground, there may not be any Common Ground in which the president would have to look to democrats and valley the base and nonetheless he wants his legacy that a democrat proceeds him in the white house. And immigration got a little more help but not much. So its going took interesting when you talk to white housal officials, the idea that they have figured out a way to anger both parties ith that 1. 1 spending while also upsetting the republicans on the immigration issue i think their view is they are not trying to apiece one constituency or another but lock in a legacy for some of the promises made in 2008. I think youre going to see a lot of executive action through the e. P. A. But to peters point, i do think you will see the president on Corporate Tax reform and trade to move republicans on that. Dont expect peter, is the key here that he is taking 1345u8er bites . Because he hasnt angered anybody in obama care like one and tax reform is something Everyone Wants to do. Trade is something Everyone Wants to do, right . Well, the reality is cuba is no small bite and the climate deal with china is no small bite there either, matt. So theres there are some bigticket items where the president can be not a lame duck. And he is pushing his f. C. C. Chairman to do something republicans in congress adamantly oppose. So there are some smaller items on the Business Front that could make a difference. Tax reform it would be a huge item but this president still has small areas where he can make a difference. But i would not put those major items off the radar screen congress is to be controlled. No matter how difficult they are. Net neutralty seems like a nonstarter. Its a nonstarter. Look, theres bipartisan, toplevel bipartisanship on tax reform and issues like trade. But they have never moved forward. I think some things have is to shift. Some dynamics have to shift. Theres some optimism on the hill as peter said, but there has to be a change right now, and nobody is sure if that change exists. Thank you for being here in new york. Peter, when are you going to come visit us here . Come and well go ice skating. Well talk cars. Thanks very much. You will be able to watch the president s News Conference at 1 30 p. M. Eastern time here on bloomberg. We also have it streaming on our website on bloomberg. Com. Chances are norm llitch, the president would be about a halfhour to 40 minutes late but i feel like since he is about to go on a sweet vacation in hawaii, he might make it on time today. Surprising revelations about. Lissa myers rocky tenure and a Media Executive who graduated in 1960. Probably has to be corrected the name of the high school but thats all the producers are telling us and frankly they just wrote it down. Our guest. Tongues are wagging and im not talking object set of Market Makers request matt miller im talking about Silicon Valley about a piece coming out this weekend that reveals new details of Marissa Mayers tenure at yahoo. It talks about the fight to save i cant hamilton lets bring in our own tech contributing editor david killpatrick for his reaction. David, dogging often marissa just before santa arrives . What do you think about this . Hi, stephanie. I was sorry to read the piece because ive known marissa for a long time and have a lot of respect for her. But nick who is a fantastic journalist and im really eager to read the rest of the book revealed. It said she focused too much on the media stuff that she didnt understand and not enough on what is truly her true gift which is Tech Products and code and programming. And you could argue that maybe she was not the right person to be the c. E. O. Of yahoo, lthough ive thought she was good but she might have done as well as anybody could have done. But its heading towards a relatively unhappy resolution, it would appear based on nicks reporting. So fine. Lets put it aside and say maybe she shouldnt they shouldnt focus so much on awkwardness but spending 6 million on someone who wasnt vetted . 9 million. In the end they paid him 109 million for less than a year and a half. How bad could the guy be to blow that much money and force him out the door . One would think hes got to be pretty good. How bad could she be the do that . She didnt bother to find out his colleagues at google called him most interesting man in the world because they thought he seemed so much like the guy in the ads which is not a flattering portrayal. Really . Yes. I think the guy was clearly a gigantic mistake. I dont think it was really digested how big of a mistake it was but when revealed, marissas unilateral Decision Making that led to him being hired and really that she didnt have any infiltration from experts or do any research about it. The contrast between that and Mark Zuckerbergs hiring of Cheryl Sandberg where he spent about 60 hours of her and interviewed her and she turned out to be the greatest possible hire. Couldnt they point her misunderstanding of human nature and or low e. I. Q. . I and i know stephanie rule you have such a high e. I. Q. What is that . Does anyone know what that ask . My husband is a tiger dog high i. Q. Low e. I. Q. Have a high i. E. I. Q. But wouldnt you say thats an important thing to have if youre running a company . Is as tech exist go who are coders which is really what she is has a higher e. Q. Than many. But i think being a c. E. O. Is a way different job than running a bunch of products at google however brilliantly she did that. And i do think she has done some really smart things at i cant hamilton you look at the yahoo weather app, these are key things she set out to do and did do. But as the article painfully points out she spent all this money on people like katie couric and david poe and focused heavily on the media side which she really didnt understand where the ads just havent been coming in to justify it and didnt put nough emphasize on code base product and tried to get it to compete more with Media Companies as less with tech companies, that seems to have been a big mistake. Can i get in here . Do you mind . Im sorry. I mean one question, youre owning it for sure. But the stock is on fire, right . I mean they are a worth more than microsoft. Thats 227 . Tripled. Im just saying one guy writes a gossipy book about how bad she is doing and clearly paying someone 109 for a year of work, but as far as investors are concerned, she is doing great. But thats because she invested the Alibaba Investment and i know who is not going to be happy is marissa when she gets this book under her tree. Im going to read it. Thanks david great to have you on. Well be right back with more just me and matt coming up. Turning around a once iconic brand of its friday. You know what that means. Its 26 past the hour. So its coughing. But 26 past the hour on a friday. Lets break the yearbook game down. He is a Media Executive graduated from brooklyn in 1960. Tweet us, who is it . Welcome back to market marnlt im stephanie rule. And im matt miller in for Erik Schatzker today. And blackberrys not hitting the right keys with the investors. The smartphone maker reported a disappointing revenue even though it was reported better earlier. Shares are down hard. Not as hard as they were this morning but lets go to San Francisco with a report on the turnaround with c. E. O. John chen. C. E. O. Of blackberry joining us now post earrings. So first of all, john, positive cash flow and positive e. P. S. But the question is when will we see Revenue Growth again . Is hi, emily. Ive been very consistent about it. We have to turn positive cash flow before we get to Revenue Growth and launch a lot of products and Revenue Growth will come some time next year. Weve announced the passport that youve been selling. Tell us who is buying these devices . How many of these people are new customers and upgrading and how many are using blackberry as an additional or second device . I think you see a lot of people using new devices. I have a Software Product coming out around a june timeframe. That will i hope convince eople to go to one device, obviously, the blackberry device. We will see more of an uptick or ose who used the 900 older classic product. I think most will resonate with that. On the passport its mixed. There are some new users. There are some winback the people who have left us and come back and so theres a mixture on the passport. The classic is a little more secured to current users upgrading. We saw hardware sales down and Software Sales up. How do you expect that balance to play out over the next several quarters . Oh, im hoping both of them goes up. And the one thing people need to understand and need to go to, i understand the impatience with the rev but it was important for us to clear out old inventory. And year over year 90 of our inventory was cleared out and so im actually pleased with where we are positioned. The channel had very little inventory. I cant even produce the old phones anymore. So lets clear the way to get to the new phones, and im not concerned about it. But im sure as you or matt pointed out. The investors have a different feeling about it at this point. We know you sold through your initial inventory of 200,000 passport phones. How many passport phones have you sold so far . Where are your strongest regions . We said that we had delivered over 200,000 phones in a quarter. Unfortunately, thats a little back end loaded later because of the manufacturing process. We have now reduced the lead time of our passport phone somewhere between four to six weeks if you order one or make one. We can deliver sooner than that now. So some of the backorderers, because we sold out so many tiles, some of the backorderers was actually fulfilled in the end of november all the way up to september 12th, so its all about q three numbers. We only take the revenue when the phones got lit up and used. So not the whole couple hundred,000 units are recorded as revenue in the q three. So theres a lot of Different Reasons why the revenue came out like that. I. B. M. Just showed off their enterprise ask geared towards the ipad. What do you think . How much of a threat are they . Well, its always something that we have to take seriously. We are all aiming at the same space. The enterprise space. Those are work flow products. Its not really very deep. But the one thing about their clap rations are very much on a pro pry tori system which is the iphone and the ipad. And nothing to i go ignore. Im not the first one to tell you that. But our solutions, we have Equipment Solutions that are more open oriented and could be running on devices and the partnership we strike are broader than the sales force so i think we continue to stay open. You just closed a deal. John. What ix chances we see another acquisition in the next six months or so . And what areas of the technology and company do you think . So acquisition is certainly something of interest to us now that we have the ability to generate cash operation. But i shouldnt comment on the acquisition by itself. In there is one that will be done in the future, im very interested in the i. O. T. World, the internet of things. You will see we have a lot of Partnership Sites in the case of hand held in the medical world and many others. So you will see us more interested in more progressive in those things. I know we have talked about this at length your interest in the internet. We know youre going to be speaking it speaking about it. What are the chances we see a connected hub for the home device or Something Like that . Not a connected hub of the home deviced but something were strongly interested in and safe to say were working on it. We are very strong in cars. If you come, you see one of those models. I believe its going to be the maserati. One year we show the jaguar and one year we show a mercedes and a jeep. So this time youre going to see a maserati. Ey are using our q and x software. So you might see something there. I cant make any promises right now, but you will see the road map for sure. When we spoke six months ago, you gave yourself a better than 80 20 chance of turning things around. What would you give yourself today . What are the chances . I hope looking at the results we are going to be here to stay. I dont want to say 100 because every time i say 100 you jinx it. So i will say 99 . How about that . Thats pretty confident. How about this . You also said you different know whether blackberry would be iconic again that that was a question you still had to chew on. Whats your answer now . Can blackberry be iconic again . Chances are better. Im working on it. And i feel good about our product. And our road map. And our focus on security, our focus on the i. O. T. I think theres a big space waiting for us, a big white space, and i feel good about opportunities. So when one will never know until we execute, but there is a path i can see to execute. Rivals when it comes to will blackberry always be a niche device . Well, we made money in hardware in the last couple quarters. That might sound simple to some. It was a hard task. But we are very proud of the accomplishment. So therefore we believe that we could turn out good, iconic, highend devices and they are very focused on productivity nd negativety. Devices who saw our had a good review. So we have a lot of space to work with. I wouldnt use the word niche as negative. I could use the focus word. It would be a lot more positive. There are a lot of demand in that space. All right. John chen. C. E. O. Of blackberry, always great to have you on our show. Thank you for joining us. Matt, did you like it . I am initially impressed by the hoeft of it, the materials, the build and the software on it. But i havent gotten to really spend a lot of time on it. It is a heartbreaker. This guy is is a tried and true apple user. You know i love the blackberry. And i know. So i got the new one. Yes. Heres something both of you would love. A connected moss rotty . I mean, come on. Collectively we would like that. Emily change. Thank you so much for giving us the latest from blackberry c. E. O. John chen. When we come back were going to talk about another topic matt is interested in. When matt does this show, its all about matt when we return. Were talking humvees. Lets keep it tight. Hum screes, the vehicles. Keep it tight. Back with Market Makers in a second telling you how to bid on one of these babies. For the First Time Ever offroad enthusiasts got the to buy a hummer. The military auctioned off a variety of humvees. Surprise, surprise, matt miller took part in the auction. I have to give credit to truck yeah. Com. This is a website i frequent. Thats amazing. Used to know an allwomen hockey team called the mother puckers but truck yeah. Theres a kid on there, Andrew Collins who is a fanatic for scouts and he started to bid for a humvee, so i was following along to see how he did and i found this a fascinating story. Here you see one of them. A lot of these were used in battle. In fact the government is going to auction off about 4,000 of these bad boys and started the auction at 10,000 a piece. So the first round of auctions happened over the last couple of days. They auctioned off 25 of them and the average sale price was 30,000. Look at the size of these tires. Can these trucks even drive on the highway . Well, you could possibly ive them on the highway if you could get a license plate. Wait, if youre going tobythem without the right to use them on the road where are you going to use them . A lot of men or women would uy pay 30,000 for an offroading vehicle so why not spend 30,000 on an absolutely bad humvee. They are going on ebay for 60,000 which some of the caveats include there are no more guns. Unfortunately, they have taken the weapons off of these. I was thinking they could partner with the e. They even took the armor plating off that was on some of these. So they really stripped them down but have very specific mechanical checks on them. They even do met alearningical oil checks on them so you can see what shape they are in, and the government is going to, if they continue this average, raise 120 million and got me thinking what else can they sell . You side the original ask or auction starting bid is 10,000 nd they were going for 30,000 35,000 . How much did it originally cost them to make these suckers . Im sure those figures are public. But very expensive, and i guess if the government is paying, hey are twice expensive. Are you going to bid on one . No. Because for me its very difficult to imagine going there. You have to pay within flee days then pick it up and you have to tow it back and so im not the kind of baller this kid is but the next bidding starts january 7th. You know what . Hopefully have that happen in my house. Ok. Pretty cool story. You meaners you can have one too. Its friday. Time to play the yearbook game. Heres your last chance. He is a Media Executive graduated from high school in 1960. Thats all our producers are telling us. Tweet us your guesses. All right, lets go, yearbook game. Media executive graduateded in brooklyn back in 1960. Heres our winner from the twitter sfeer. martin chronicle tweets i thought it was a little bit hard today but our winning tweet said im always in the guessing mood around geffen. Time, david almost failed out. Thats passing. I thought 70 was passing. He was the first person to message me. Market makers back in two. Good job. Joe. Breaking news out of washington. The f. B. I. Is officially accusing north korea of the sony hack attack, and it is revealing some of the evidence its got to back it up. Peter cook has more. Peter . All right. We do have the official word, a written statement from the f. B. I. That we received here and it says explicitly that the f. B. I. Now has enough information to conclude that the north korean government is responsible for specifically the hack on Sony Pictures. They site three reasons why they believe it. One is Technical Analysis reveals links to other mall aware north Korean Developers have developed and theres significant overlap between the frastructure and two links and they have similarities to south korea by north korea and the f. B. I. Has en a wide variety of cyberintrusions and it is set apart. North koreas actions were intended to inflict significant harm on an American Business and such acts fall outside the bounds of acceptable state behavior, and the f. B. I. Says it stands ready to assist not only Sony Pictures but any other business out there that find themselves open to these attacks. One question surrounding this. Not only the u. S. Response to north korea itself but will the be an insta gator for private and government to work closely together. This could be a kick starter for that effort. All right. Peter cook thank you so much for giving us the latest. The president will address this at his 1 30 p. M. News conference. You can watch it here on tv. Berg or at Bloomberg Markets . S on the we are approaching 56 past the hour. Taking you on the markets is mia but before i will say goodbye to you, matt, and i will see you all on monday when minor yall roubini will be my guest. Dr. Doom. You think things get crazy when matt is here . Just wait until dr. Doom is here. Have a great weekend. Thank you. Merry christmas. Thank you. And stephanie rule have a great weekend and happy holidays. Stocks, if youre watching the board, essentially were seeing a pullback in the last couple of minutes. The dow hit well call it a flat session for now off a quarter of a percent following the fed announcement where they pledged patience in raising Interest Rates as well as the bank of japan. If you were watching that overnight they maintained unprecedented sim will you explain. Joining me is mr. Omedicaly from market. Com jim ramelli. I know you have an interesting trade. Lets get straight to that. Its walgreens, right . Yes. We have seen bearish performances in the last five quarters. What really had has me bearish is that the stock is going to close this week lower after a huge move higher in the Broader Market so its thought there will be sellers. Im looking to buy the walgreens deep 26 deep 70 1 2 foot spread for 70 cents i can if the stock trades below as we come out with earnings . Its going to be a pretty quiet next week, especially since we have the shortened week so its something options traders would want to keep in mind with a day 1 2 taken out of the week. We are seeing stocks pretty much sidelined for the past 30 minutes or so as we look to close it it. My thanks to you jim. Stay right there because membership membership is up next. Money clip is up next. , welcome to money clip where we tied together the best stories, interviews, and videos. Blame of thes the sony attacks on north korea. Media, a starstudded sendoff. Stephen colbert leaves Comedy Central to take over for david letterman. Blackberry is back, cash flow positive, that sells growth looks like it is still a long way off. In motors, warren buffets private jet Company Lands and Mainland China appeared we will talk about the plans in the far st