Transcripts For BLOOMBERG Bloomberg Surveillance 20141210

Speculation chinas government will add stemless after inflation reports. Of estimates below 2 . The price of oil has resumed its slump. It may go lower. West texas intermediate fell below 63 a barrel. Brent crude also down. In official in irans oil minister critics the price could fall as low as 40 a barrel. That is if there is a price war or of divisions emerge among the members of opec. The new Federal Reserve relation may be expensive for jpmorgan. They may need to come up with more than 20 billion in capital to meet the new standard. Jpmorgan is a ready facing the highest capital surcharge under International Rules. The bank might have to delay Dividend Increases and stock buybacks. Jpmorgan says it intends to meet the requirements. And the weather watch, we go out west, Northern Telephone in bracing for one of the biggest storms in years. People putting out sandbags. Up to five inches of rain expected starting today and winds up to 60 most per hour. Another danger, but flyers mudslides. Headlinesour top today. This is an odd data check. Likes are moving kind of may be pushing up against some interesting points. Futures, flat. Currencies, dont do much. Oil has a weight to it. It is not down to recent lows, but there it is, 62. 79. On to the next screen. Spread. Nts drea sayt looks weird to have a 158. 22 . I missed that. That is basis points. That is mislabeled. That is the difference between the 10 year yield and two year yield. 158 basis points. That used to be 200. Nowhere near recession, but i thought it would throw that in. That was my mistake. A terrible typo. We have not talked about this enough. This is mexico and the peso 30 years back. 1998, whatever financial crisis, and this is positively rublelike. It shows how hard it is to run a diversified economy when you have natural resources. Done in a credible job of diversifying its economy, done everything right. And because the price of oil, you see this movement right here. This gets my attention. The peso is weakening out over 14 from 2, longterm devaluation versus the u. S. Dollar. Michael spence is in awse were talking international economics. It doesnt look like ukraine, but i thought it was interesting. Good morning to all listings in mexico, Bloomberg Television in mexico. Lets bring it into the Financial System. Slides, all markets react, but was signal does the new volatility send . Michael spence has truly spent his lifetime linking finance and economics to his core mathematics. He is a Nobel Laureate and professor at Nyu Stern School of business. Michael, i look at the system and go, once again, it is out of whack, overleveraged. Saw inrepeating what we 2006 and 2007 and 2008 . No, i dont think so. We have two relatively healthy major systemic economies, the United States and china. Although, theres some debate about that. And we have two big weak ones, the whole eurozone and the japanese economy. I think the story is more about the virgins and volatility related to it rather than a sort of generalized over leveraging leading to disaster. Living in italy, he spent an inordinate amount of time looking at character and quality. Are the american institutions, our fdic, central bank, our congress for that matter, are they as strong and resilient as they need to be if we see some further crisis . On balance, i would say everybody tends to be self critical. Of their own institutions. But on balance, hours are pretty solid. The Federal Reserve is a nextdoor near institution that mountaineers us through many things. Institutionnary that mountaineers us through many things. Great strength in the american economy. The judicial system, and so on. When we are fussing, we might think it would be nice of congress we never fuss. Congress would stop disagreeing about things and get on with some programs but the institutional character is there if we face another crisis . The main front line of attack is the Federal Reserve and a great metaphor to use. The Federal Reserve has really been a sure but in this crisis ina at whose doorstep do you lay the blame for that . There are lots of parties like it to be on the list. Excessive conservatism in response to the crisis the berlin prescription as has structural change above all. It is difficult. Europe as a whole has the capacity for stimulus him a but individual countries dont. But there are countries that need reform since i want. You cant identify one place that caused the problem. The capacity is there to spend money, but this isnt about money still made on a country by country basis. In italy where i live, it would have to say there is not that much fiscal capacity. We need help in the short run tuesday minute the economy. What about the physical capacity of greece . I dont think reese has much has muchom greece wiggle room. That was diplomatic. That may be the quote of the day. Are we going to see another default or another bailout of a different sort if these snap elections dont go off the way planned . It could. I think greece is not systemically important step it is small enough that whatever it happens it could withstand it might be late and just when you got to the edge spence looks at the mathematics of acceleration. Do you see the decline in oil prices as a mirror image of 1986 . Is there Something Different this time . Are you taken aback by the speed of the recent moves . No, i was stunned by this. Ive spent a fair man of time trying to figure out what is going on. What is going on . We need to make some news this morning. It looks to me to be largely a very large increments apply combined with relatively slow demand growth, and much slower than people predicted because of the slowdown in this dimension in china. This has happened in other commodities. But it looks to me like this is an overreaction. That is when you look longterm, youre going to have substantial demand growth we have to make some news. Professor spence, when his oil p. M. Thisatch, 3 00 afternoon, thats thursday . When is it going to go up . It did briefly yesterday. When is oil going to catch a bid . Sometime in the middle of next year. There we go, i love it. Market strategist, Michael Spence. Theres a moment when it turns into politics. If we dont do these things, they will be radicalized. You live in europe. Are we looking at that moment in europe . Some people think so, but i dont. I think europe can stay in a relatively unpleasant, low growth situation that is not in isble provided the ecb committed to the Financial System and the sovereign debt market. So youre not worried in italy about the power link . No, i dont think so. Showedrepeatedly has resilience in sticking to the project, despite the shoretel problems in Economic Performance despite the problems in Economic Performance. Bill emmett and the Financial Times had a great piece about a week ago, pointing out, as you look around europe, there is movement we havent seen in a long time. But you think that is part of what weve seen over the european project for the last 70 years. Well Movement Toward radicalization and varies countries. No, the downside risk, the populace radicals, antieurope sort of antieuro forces increase in power and eventually, this support i mentioned a minute ago, starts to dissipate. If you roll that out, i think they will just forgive these of the term mountaineer through you are killing me. Im going to have to go back and look at my jargon. Were going to make mountaineer one of our quotes of the day. Are you going to mount through mountaineer through the sickle best chart . First, regional results. To what extent, do people buy gas in bulk . Cosco is that with quarterly numbers. We will discuss. Were going to put on our booze spikes and waited to the Earnings Report whod spikes and wade into the Earnings Report. Good morning, bloomberg surveillance. I am tom keene. 62 . 75. To be kind, 62. 75. Costco to investors, we beat earnings per share estimate and increased samestore sales 7 last quarter. Then they had a great november. Is that good enough for you . Costco, it really has no amazing ethic inside the company where the price drops wholesale . 24, they drop the cost when four cents, not . 20. Theyre not focused on increasing margins. Look at the prices, they break it down into unit price. It will say, . 12 per diaper or five cents per lets look. Im not looking at diapers. Dont break any news. Lets compare the margins. Costco is the white line at the bottom. It is not even in the same ballpark as anyone else. As crude of gas, drops, theyre following it all the way down. We dont have any data on this, but we noticed they have lower prices at the pump, bringing people to costco. They stop and buy stuff. Sort of amazonlike. Giving away the income statement. It is not amazonlike, and they are turning a profit. They make money. Earningspershare were up. For the last 10 years, your return shareholder is 13 , which is pretty good. Michael spence with this, the Nobel Laureate. Youre not looking at regional analysis of our regional business, that you do look at the resiliency of the consumer, the consumer is in power today. There has been a Creative Destruction that means the consumer is in control of the price mechanism far more than it used to be. Thats true, but you kind of have to markets. The Median Income is not going up. I think people who study this say people are looking for bargains, shopping in a different way in that segment. In the upper end, theyre doing something complete different, shopping more online speaks to two americas. Are both at costco . Even more than the two americas, looking at this before this isings report, david strasser, looked at amazing concert in november. Costco famously does not open its doors on thanksgiving. It wont do it. It treats its employees very well. They had great cops and november and beat a lot of other stores. You can be good to your employees. You can be part of that time being good to both americas and do well. Everyone was buying in bulk every thing they needed for thanksgiving dinner. A costco executive a few years ago actually said they would consider expanding to europe in the next few years, including germany and italy. Would cost go fly and italy . Isi think so there considerable success. I think germany would be tough. It is been tougher other players. Come on these incredible lowcost supermarkets are coming to the u. S. , one out in queens now, the german supermarket. Interesting what strasser says. What is the difference between cosco and others . I go to cosco because i like it in general. They take any returns back. That the wide variety of stuff. I havent gone of the other ones. I only have room for one membership wholesale club. They treat their employees well. They have better attention retention, and that helps them keep margins down. This stuff works. Their turnover is really, really fast. If youre buying fresh meat or fresh food, it is always fresh because it comes in they have one problem right now. Weve been doing happy talk about cosco. The one problem is for ex. F stores on mexico and that is the one drug on their earnings. You know who has a strategy like this in a different space . Ikea. Their whole Business Model is to take cost down, prices done with them. The prices will be lower every single year. Michael spence with those from new york university. Coming up, we look to washington. Kenneth feinberg will join us on any number of conflicts including ken feinberg on the in newdecision yesterday york city. Our twitter question of the day there it is. A vote coming up. The sausage making was brutal in washington. One of our themes for the next at bsurveillance. Good morning, bloomberg surveillance. And tom keene with fu greeley. Time for the must read. Were getting to the end of the year. Not of the year, but how about the financial crisis . Short and sharp, our guest host, im spence in 2010 gasping, im so excited. Type one, type two mathematics, which were not allowed to do before 11 00 a. M. , but within that is the idea of overreaction. Lets start four years down the road. If we overreacted in a new reaction regulation. Yes, im pretty sure in some dimensions we have. We were alerted to the need for safety and we probably overdid it in some places. Today, the headlines are jpmorgan and the evil jamie dimon, they need to come up with 20 to dollars 20 billion. It is like, six days revenue . Im kidding, i dont know. Do scope and scale of these billions and billions, are they all that big . I think youre raising important point. My view, to put it simply, is you have to figure out which Balance Sheet is line behind this. And if there is a big Balance Sheet, whether it is a country or company, then it is not relative to the size of the flow, then it is not a big hit. Jpmorgan, it for citigroup, Merrill Lynch . Alex sheet. Balance sheet. They are regulated now out of certain sectors that were profitable before, and that is not going to reverse. It may not be fair to say that banks are being turned into utilities, but they are constrained in scope by regulation in a way they werent before. Eurozonek. And the have done the same thing, macro provincial stability and put it right in the central bank, a movement that weve moved away from in the last 20 years or so. The u. S. Has taken an Interagency Group approach. In europe, it is context specific. Both of them are probably right. The ecb is the place. Centralized regulation of banks because many of these banks, to savor the national level, they just have to do this. They need the insurance and centralized resolution mechanism. I think for now, the logical place to put that. The ecb will be the regulator of last resort anyway. And the lender of last resort. And it works for the bank of england as well. How much do you weigh this withss of our nation, clear markets, that we just go and make decisions within our ugly system that other nations arent able to do . Is that a big deal . It is a big deal. Cleanuprelatively rapid a bank Balance Sheets was a very important part of the recovery. The italian lira, every time i plug Michael Spences oped. If you do one thing in your study of this financial crisis, essayichael spence 2010 on type one and type two risk. It is in english. There is still mathematics. It is the single best essay out of the financial crisis. Ned phelps had the single best speech in geneva. With a lot more coming up on bloomberg surveillance. In the next segment, we will discuss the Tech Industries diversity problems. Too many young white men and not enough women, blacks, hispanics. How defects this . How do you fix this . We will discuss. I wish you are here, folks. Michael spence turned the part Bloomberg Business week. 85 choices on their 85th anniversary. He has some different opinions. You did not think kitty litter was one of the main innovations . Extraordinary. Disagreeing once the placement of the world wide web. We will get a that later in the hour on economics. Lets get to our top headlines. We start in washington, commerce foes on a spending bill this week. While it doesnt please everyone, he would avert a Government Shutdown. Conservatives say it fails to charge challenge immigration policy and some democrats say it rolls back rules. Supportof both chambers the measure. The house expected to vote tomorrow. Marathon shopping hours coming to kohls, keeping its doors open for more than 100 straight hours so customers can shop online and pick up at a brickandmortar location. Several chains as a theyve seen Strong Demand for store pickup options. 100 straight hours . A new set rogen comedy interview may have prompted a cyber attack on sony. That is according to thepublic by the hackers. In another message or another sony executive message, gave input and ultimately the goahead to atone down seen that typically death of Korean Leader kim jongun. Quickly, brendan greeley, this is the anticostco, isnt it . It is insane. I think we miss the lead in a story, which is where learning about how important it is to have a physical point of presence. Everybody goes online stuff has to exist in the real world. All of the stores that exist in the real world forgot they had places. Every shopper wants options and this gives you all kinds of options. Lets mountaineer our way to the single best chart. We take aim at diversity or the lack thereof in Silicon Valley. The biggest u. S. Tech comedy seven releasing some of their Workplace Diversity data and when you limit it to tech jobs, so were stripping out administrative operative sales positions, women make up 20 lessof staff, six 60 on apple, google, and twitter. Hispanics, blacks, make up a combined of 6 of jobs of these Tech Companies. But spring interest in walker. Welcome. We talk a lot about diversity here in the tech world. That will be pushback from others who say, talk about artificialakes it as emphasis on diversity for diversitys sake. How do we get away from that . First, i say they are wrong. The one thing i tell a lot of folks who are kind of contrarians, i say, it is not about explicit bias. I think the more important thing we need to have a discussion about is implicit bias. When a look at our company, over 50 of our employees are minority. Over 50 are women. We have been able to do it by breaking down the barriers. Standard operational engineering some do, most dont. I think that is really telling are we mismatching the tasks needed at these companies to a desire to be diverse . How many minorities are at caltech . Actually, what is surprising to most is the percentage of folks who are studying Computer Science and undergraduate is increasing for folks of color, women, etc. Scathing article last year, he pointed out if you put a bunch of young, rich, white guys together they will build things for young, rich, white guys. He diversity problem into becoming an innovation problem. By the year 2040, folks of color will be the majority of the country. If you look at some of the most popular startups for companies facebook, instagram, etc. How would they be built in the year 2040 . Spanish lynwood first or english first . Android or iphone first . These are strategic discussion points that need to be had or talked about, and theyre not doing enough. Tom mention the lack of enough minorities in places like caltech. Theres an emphasis on building a pipeline for minority talent. Does that divert attention effort away from existing hiring challenges right now at tech firms . There are two problems. We talk a lot about the access problem, particularly the pipeline issue. I want to the about the awareness problem. I did not know about Silicon Valley intel i was 24 when out to stand for per business school. That is a problem. Just because the were not enough folks who look like the [indiscernible] yeah. Your wife was worried you are taking all of your education and throwing it away on a startup. Traditionally, my mom, hey, he is going to be a lawyer, work on wall street. What has been the response of , notajor Tech Companies allegations or accusations, but your observations . One thing they appreciate about what ive done, i put my money where my mouth is. Evangelizing diversity. Inly with my own team think have taken a real liking to what weve been able to do. I want to talk about how you plan to make pockets and buckets and buckets of money. One of my favorite topics. What i have in front of me is backed by horowitz. This is a shaving system. You have to change behavior to make people buy this because ive got to do not just two things, there is this that i have to do and then ive got a do this different bottles. And this at some point. It all happens with this. These are all things i dont own. I do have one of these, but it doesnt look like this. This looks like something that came that i found in my grandmothers kit out of world war ii. Yet to change behavior to do this. Why is horowitz backing a Consumer Product like this . We solve a very important problem. Bevel, our first product, is the first and only intent shaving system designed specifically for men and women with course, curly hair, printed issues like razor bumps and shaving her rotation, etc. N gilletterove was not designing for black consumers. Well, they dont. One thing to think about, mass today will look very different 20, 30 years. What other things do you point to where you say, look, this was designed for specific audience but inmate buckets of money . When we think about brands, we think a lot about the culture. Latinok about black, consumers, the greatest consumer demographic in the world and they been able to Elevate Brands like vitamin water and brands like that. Can this do what beats did . Is everybody going to be using the system that was not designed for my face . Rethink think the opportunity is even more sizable. We think the opportunity is even more sizable. It is fairly significant and we are excited. What about Pricing Strategy . Is it the same that gillette has made famous . This is our 30 day kit. We will ship you 20 blades for 30 days worth of product. Unlike most of the massmarket brands, which will ship you four blades. That 30 day kit with those products, that is 59 95 cents. We pretty much gave away the razor blades for free, which is completely counter to the traditional model. Where are your margins . Looking at gillette or procter gamble, because part of the appeal of shade club is youre making it less expensive. I hate paying for razors. Can you still make money . There is no credible point of differentiation are were solving a unique problem that folks have. If you have problems related to shaving a rotation, all of our products help dissolve that issue. That is where the margin comes from coke, not the razors by themselves. Tristan walker, thank you for joining us this morning, a man of many, many a conscience. As a noted disclosure, the Parent Company of Bloomberg Television is an investor with horowitz, which backs tristans products. Ristan walker lets move ahead to the rest of surveillance. , why it isat uber being sued by several cities, band across the globe. We have details. This is bloomberg surveillance. Newseaking news, this is that all of the World Markets have been waiting for. It is most interesting on the microeconomics of oil. Right now we have Michael Spence. Lets go over these headlines on both demand and supply. Necessarilyy is not coming from opec anymore, but outside opec companies, notably, the u. S. Opec says 2015 demand for its crude oil will be the weakest in 12 years. You talked about tepid demand. This is the weakest demand in 12 years, collapsing demand for opecs oil. Opec lowering projection for 2015 by about 300,000 barrels per day. About one point finally in a day less than what they pumped last im surprised to hear opec releasing joint press releases. It is more saudi arabia imposing its will upon everyone else. We can address this with Michael Spence, opec raises next years nonopec supply. That would be the United States, too. The u. S. In 2015, one million new barrels a day. Scarlet, please. Francisco blanche made a big splash yesterday. He said opec has dissolved as a cartel, in my opinion. Do you agree with that, Michael Spence . That opec are they still do marginal decider of the price of our oil . The swing barrel. I think they are. It looks for the moment like that decided not to do it in the way they did in the past. Again, to the microeconomics of this, which we dont talk about this enough of supply and demand, brendan mentioned the United States. We have changed the dialogue of the Global Economy to the point of lagardes bureaucracy. If you stand back from this, the u. S. North america is a major net producer. A lot of these prices were based on growth in asia that isnt going to be as high as it was. I stood in our Washington News bureau the data last Energy Discussion eight years ago, whatever, blew up. He was literally in tears he was so angry. We did not have an energy policy. And looked what happened, chief oil. Is this one of the historical moments were people have to learn to think about something in a completely new way . Weve always thought about oil in terms of demand. In terms of cartel pricing. Are those just gone . Do we need to think about it in a new way . If you look at the history of oil prices, the standard argument would be to have to go of the time because hotel in argument, basically, it is an asset. If there was a continuous sequence of positive supply shocks. The latest one is huge. We need a trick chart. This is the debt opec downs. No, that is not today. It looks a lot like it. That is 1985 to 1988. Your point of what america is doing, this is the collapse of opec. We noodled along for three years. Historically, there was a major agreement in the 1920s. It might not look like opec, but it will look like something in the future. Can we assume suppliers figure out a way to price fix . That is part of it, but the other part is that the marginal costs eventually, you know, the price will cut through and limit supply on its own. Scarlet, west texas intermediate. We went down and immediate . 20, maybe . 30, not the drama you would expect, but the intraday chart of the bloomberg terminal clearly shows the weight to oil this morning. Think aboutave to it in the context of the mood the last couple of months. We had a little bit of a rebound yesterday, but this is really extending over the last through few months. A major headline to me is nonopec. The fragility of russia. How do you link oil prices in the geopolitics of Vladimir Putin . Well, it it will hurt him badly and it has pushed them into the arms of the chinese because of the geopolitical do you think that dialogue is ongoing . 1970 . Lly going back to yeah, i think it is. China will benefit as a net importer mightily from this price decline. Theres token concerned about securing sources of energy supply. Bad behavior fluctuates with the price of oil. It we havent seen that. Putin has broken that your him that bad behavior increased as the price of oil decreased. He may have thought he was a little more invulnerable to things like sanctions than he apparently is now with a very low price of oil. Michael spence with us. In the next hour, we have a wonderful guest, adams of inskeep, at deutsche bank. Administration. He is the single best person i know on the microeconomics of oil. We will talk to him in the next hour. From new york city this morning, this is bloomberg surveillance. Good morning, bloomberg surveillance. And the next hour, a number of conversations with kenneth feinberg. Always interesting. We may even talk brockton football. Their high school team, they are a juggernaut. Czar. The surveillance lets get to our top headlines. A fourth straight night of protests in berkeley, california with demonstrators again taking to the streets to voice anger over the recent deaths of unarmed black man who died in altercations with white police officers. More than 300 protesters force the closure of roads in the Bay Area Rapid transit station, the bart station. Amtrak service was also suspended. The National Football league is set to overhaul its personal conduct policy. All 32 team owners will meet today in texas to possibly vote on the changes. It curley gets Roger Goodell broad discretion over handing out huddle twos. Possible revisions include stiffer penalties for those convicted of domestic abuse. U. S. Carriers will transport 45 million barrel passengers over the Holiday Travel season. The projected number of travelers during the 19 day period represents an increase of about 2 over last year. The group says friday, december 19 will be the busiest travel day of the season. You might want to stay home then, tom. There it is. With markets on the move and headlines out of opec, every thing i was at the margin on china whether g2, g7, g8, even to 22, china ourgy 20, china is wrapped in a different set of institutions. Central bank is not like any other. Certainly not like the Federal Reserve. Do we really understand chinas use of import commodities, just as an example, of one of the great mysteries . Michael spence has turned his abilities in the years into really thinking about the future of china and joins us this morning on the professor spence, what do americans get most wrong in our analysis of china . I think it is the misunderstanding of the way the system works. Imperiallike bureaucracy guiding the economy through transitions as it becomes a market economy. Yesterday when i see a headline, bank of beijing, blah, assume they are private and separate or is in the given bank a conduit of some sort of government in china, whether it is a local beijing government or the federal government what is that linkage . Most banks are state owned at some level. Historically not strictly marketoriented. They do the governments bidding when it is important, extend credit. They were very important in the post crisis period. They are a different breed of animal. Conflict, how much discussion is there within china over how to proceed with the economy slowdown . You have the central bank, august the, try to push ahead with its conversion of the economy. Obviously, trying to push ahead with its conversion of economy. A good summary. They have to intervene enough to prevent a transition to turn into a trend industry confidence, and they dont exactly know where that point comes. But they want the longer term structural change. Ht now, i think they are they better intervene a little bit more through state of mind because the Property Market has started to cut into Consumer Confidence and consumption, and so you can see some easing. Project Syndicate Last month, we pointed out the assets, the overwhelming amount of assets the Chinese Government has, gives it options that other countries dont have. I dont want to put words in your mouth, but it almost sounds like youre saying this visible hand approach develop men is the right way to do it. No, this is the subtle part. You have a big set of assets and in certain circumstances, they give you the ability to do things that you cant do. For example, get the investment rate up on the Public Sector side. Nobody has ever seen an economy running at 45 investment to gdp ratios, and you cant do that in most democracies because you have to go to poor people and say, why dont we not consume . Ditto, it gives you kind of shockproof things, may help with Income Distribution issues and so on. But, this is the tricky part, if you manage those public assets in certain ways, you will muck up the performance of the economy. I want to go back to the 1930s. You were one of our last links to another time and place. Bloomberg business week has, as one of their 85th birthday items, 1937. You arent there, but sir john hicks was there. You studied under professor hicks on the isim. Do you have a confidence in our greater economics now after what weve seen in the last six years . Well, i think i would characterize my confidence as being a willingness to drop the models and be pragmatic and look at what is actually going on. And i would put that in our central bank. Michael spence, thank you. We will be right back on surveillance. Logos in search of a big, opec demand a bombshell. Market signal a greater uncertainty. And surprise budget agreement. Also a continuing story, takata confirms dynamite allegations over the airbag controversy. Good morning, everyone, this is bloomberg surveillance. We are live from our World Headquarters december 10, 2014. Here are discovered. Overnight, an announcement avert agress will Government Shutdown. But there is something for everyone to dislike in it. Theails to challenge immigration policy. Some democrats are displeased over rules affecting banks and clean water. Still, the house is expected to vote on it tomorrow. A reversal of fortune in chinese stocks. A day after a route in chinese stocks magda global selloff, the qinghai the shanghai index was up. This after speculation that Inflation Expectations fell short of economists estimates. West texas intermediate cellulosic to three dollars per barrel this morning. Went crude is also down, trading below 66. As low as 44 per barrel if there is a price for automation or division among opec members. Is facing the highest capital surcharge under International Rules to meet the new requirements. Might have toank delay a Dividend Increase or stock buyback. Jpmorgan says it intends to do the job done. Northern california bracing for one of the biggest storms in years. Out sandagstting two guard against flooding. Up to five inches of rain are expected starting today. Another danger always in california, mudslides, but more serious now in areas where brushfires in the drought have destroyed too many trees. Those other top headlines this morning. Looking at oil, 62. 58, a. Ertain 2 weight to oil we are waiting on the news to see that can catch a bit as well. Have been focused on that last number of days. Here on Surveillance Club we cannot find a bid on oil. The curve flattens out and blended noticed this morning, greece front and center. Always transfixed in washington on our collective debate. Is a president. Ken feinberg is a trusted seller to the nation. We are honored to have both of you here. So many things to talk about, is how in disrepair is the new yorkwashington relationship . That i actually think it is somewhat more in mind and it has been in a long time. Everyone wants Corporate Tax reform and free trade. In favorl, business is of immigration reform, though maybe not with executive order. And with respect to regulation reform, we are at the back end of it. Mr. Feinberg of the brockton team is here. I had no idea. People look at you as a welldressed fancy suited guy from washington. They dont know that brockton you grew up with. Is brockton, massachusetts reattached to new york or washington . In new york and washington are reattached to brockton. [laughter] expand on that, please. Color,kton, as you know, glass, fouronone foreign on hard times, and trying to working class, fallen on hard times, and trying to come back. Is brockton a leading indicator forlornly echoed because that is where it for lowell . Because that is where gets really bad. There are many locations are on the country, but they are trying. Making an effort to come back, like laurel lowell. Morris, you were the chairman of america at ubs. Robert wolf, you were the chairman of american i ubs. Another down trading signal. It would be the fourth. Is this what washington wants to see . No, profits are good because then you have more capital to lend out. I think its not surprising trading difficult, because you have a deleveraging that took ofce in the last five years 57 . You have a much smaller Balance Sheet and much smaller leverage. And you increase the amount of transparency than ever before. Its not surprising. Its not surprising, but not ideal either, because increased capital regulations and all of that are weighing on the big banks and its unlikely they will get back to the level of profitability before the crisis. Return on capital and assets will be lower. Thats just where we are in banking. You just named three issues where there is general accord on what we need to do immigration, trade, Corporate Tax reform. That is great. Everyone at this table agrees on these things, but these are the things we have been saying for the past five years we agree on, but they are not getting done. When will the conditions actually be there for them to get done . Tomorrow, i will be at the president s ford council. Last week, he was at the bart. You have to assume that free trade is something, whether atlantic or transpacific, is good for the country. And it is certainly rightleaning. That may be something with the new senate we can look at. Corporate tax reform will be difficult. Lets go to immigration. Can feinberg, you worked for years with the senator, the democrat from massachusetts. Is there any sense they can find in one hatch across the isle . We are looking. That wonderful and strange relationship of 30 years ago . As you know, the senate stepped up on immigration. It wasnt easy, but they stepped up. It was over to the house of representatives and it disappeared. What do we need to see out of obama to make this chemistry work echoed this chemistry work . Saw is this we forces congress to make a statement. We are plotting that as the budget is passed, but in Homeland Security was only passed until february. We are all a plotting that as the budget is passed, but in Homeland Security it was only passed until february. It was passed like a hot rock. Greg it will be incredibly difficult. There is a better chance for free trade than Corporate Tax reform. From my perspective. I think they will give trade Promotion Authority approval so they can get a deal done. That one gift is the one gift for 2015. We will hope there is more. Text can more be done for Corporate Tax reform . I dont know. Senator kennedy used to say it is easier to raise taxes than it is to eliminate elections and loopholes. I think it is going to be up uphill sledding. I think they will come up with a good plan that goes nowhere. Lets be optimistic. On every loophole and deal. Democrats watching, what enthusiasm do you see in a new republican politics . Do you observe that on december 10 of this year . Mean, you do. Senator mcconnell and others have stepped up and said they want to get something done. They are looking ahead to the president ial campaign of 2016. There is some incentive to try to do something, yes, rather than no, no, no. Andill Speaker Boehner nancy pelosi be evermore in the new year he a co yes, i think you will see some of the moderate republicans and leftleaning democrats get together. Like they did on the budget. I hear your skepticism. Were already seeing democrats in the senate and house preparing to, mice, which is what they will have to do all year next year. Things than to get to compromise, which is what they will have to do all year next year. Need to get done. Ive heard that before. Thats true, but the president does not have an election coming up. You will see him taking his accurate action that forces the congress to do things. Up oilnt to bring prices. We continue to monitor the drop in crude oil. And this is after opec came out with headlines saying demand will weaken and 12 beers. Coming up on surveillance, we will be speaking with adam kaminsky, administrator at the administration. He will have information on how the u. S. Is not running, but certainly adding and a delicate injection into the global picture. Adam cement scheme simon eminski. Good morning, everyone. Oil, 62. 70. Muster here. Ning here is brill brendan greeley. This is from a contract interrogator at abu ghraib. He was writing in the New York Times yesterday. The title is i cannot be forgiven for other grape pickup four abu ghraib. Sleep deprivation and a procedure called rectal rehydration. This was really tough reading yesterday. We learned a lot. We learned surprisingly about the cia, about incompetence, which is not something you expect, or that i expected at all. How are we to digest this report . In the short run, its a problem. The president has pointed out, foreign security, etc. , in the short run. In the long run, i think senator mccain has it right. That is just amazing if the details were amazing. I think people knew were coming what was coming. Whatever anybodys politics is, they spoke yesterday. And in the guy that knows, that is something that does not happen too often in america. It doesnt, and although i dont necessarily align with senator mccain, on this he feels strong. He was incredibly strong. The thing im curious about is what cia director brendan said. E made mistakes we saved lives. We thwarted terror attacks. Those three sentences say a lot about that time. You cannot disregard what hes saying. You are saying that republicans at a little bit of merit to the question of the form of this report being released, the how of it, how it was released. Yes, i think they do. The substance of the report is something we will be figuring out, while we dig in and read. It seems like one of the goals of the report was to point out that lives were not saved through this. That is something we are still trying to figure out. Right, but how can you director what the cia and a bunch of cia have come out and said. Do we need a new cia star . No. Dowhat does the cia director we . Should stop talking about dollars czars. s our guesteinberg post for this hour, along with robert wolf. Michael jackson of autonation, always interesting. Stay with us. Good morning, everyone. Some stability to the markets after the opec headlines on 12 year weakest demand. West texas intermediate, 62. 09, not so hot. But at least a bit of a bit right now. In south africa, prosecutors in the Oscar Pistorius case will get another chance of convicting the doubleamputee of murder. The judge has ruled that they can can they can appeal his conviction on the lesser charge of culpable homicide. He was handed to five years in jail, but could face a minimum of 15 if an Appeals Court sides with prosecutors. Some marathon dropping shopping hours coming to kohls. More than 100 straight hours between december 19 and christmas eve. The retailer is using the extended hours so customers can shop online and then pick up at brickandmortar locations. Several chains said there is Strong Demand for the store pickup option. Royal visit begins. Prince william and his wife kate wrapped up their first visit to new york city yesterday. The duke and duchess of windsor went to the empire story the and theyate building visited the National September 11 museum. And they had a fundraiser for the, modern at the met. For their alma mater at the met. Duchess was no duke and where i was. But they got word that you would be there. We ares good that talking in the last hour about this post of it is instructive to think back and remember the way we thought then and how things have changed now. We turn to d. C. For something else. Crude prices still looking for a bit in the past hour. Opec has said its demand for 2015 crude is the weakest in 12 years. Because demand is the problem, not supply. Adam,eport out this week, the Administration Says iraq holds the wildcard in crude. Is that what we are waiting to find out, what will happen with iraq crude . There are a couple of countries that could influence where things are going. You could look at the increase weve seen in libya recently, the possibility that there could be difficulties in moving crude in iraq. You could look at the demand issue, the slowdown in the chinese economy. The list of possible suspects in the Oil Price Decline is long. It still seems opec is hoping for a miracle that will not come. In a report, it says that the u. S. Is bringing in one Million Barrels a day online in 2015. That number might slip little bit with lower prices. Ifs likely to slip more prices stay lower for longer. The possible decline that you in how Shale Oil Production is growing is real if prices stay at these levels. Adam, you did such good work on supply and demand at deutsche bank. If you look at all these different players, almost a game ,heory of opec and nonopec which country are you most focused on . Is it russia, saudi arabia . Who is the player that actually has some power . The country that gets the biggest headlines in this is always saudi arabia, because they maintain their productions so they can raise production is you need it, and in the past they have often cut production to try to balance the markets. I think the situation this time and lot more complicated the idea that the saudis alone can fix this am i think, is really wrong. In the past, saudi arabia have has played the role of swing producer. Has it handed the baton to the u. S. To play that role now he . Now . Flex i think it is a lot of things. I think it is a lot of things. Supply will have to be tran trimmed back a little bit, otherwise we will see prices continue to slip. You are the grizzled pro here. Respond to the market pros suggesting that can catch a bid and flow back up into the 70s or 80s . How do you respond to that near consensus call right now . I think, tom, you should look at the market, what the market is saying in general. Vti is suggesting, a 95 confidence level what the wti is suggesting, 95 confidence level, which is below the bottom, and moving up toward 115 percent on the upside. That is a 95 confidence level. Maybe something tour the middle of that might make some sense. An eia in general agrees that as we move out in time, the markets will start to rebalance and we will see prices firm up a little bit. I dont think we will get back had of 100 plus oil we the last three years. Francisco blanche over at bank of america Merrill Lynch made a comment the other day saying that opec, in my opinion, has really dissolved as a cartel. The idea reflects the members of one member, and that would be saudi arabia. Do you agree . Much burden on saudi arabia. The saudis will not be able to handle this amplitude of change by themselves. In a lotequire changes. F different places its beyond saudi arabia. The market will have to respond to this. Usadam sieminski joining this morning, thank you so much. Joining us at the energy administration. As we try to link up with happening in the markets to what is happening in washington, d. C. , there is a new spending bill showing the new Republican Party. Does the spending bill showing a new Republican Party . Tweet us. This is bloomberg surveillance or cap im screwed bloomberg surveillance pickup im scarlet fu. Is preparing for its spinoff from fiat chrysler. A move would not affect ferraris operations south of milan. U. S. Air carriers will transport 45 million Holiday Travelers over the holiday season. The projected number of travelers over a 19 day timeframe, december 7 through january 4, represented increase over 2 of last year. It december 19 will be the busiest holiday day of the holiday season. Sentencesved prison much lighter than the prosecutor sought as the judge placed most of the blame for the fraud on their exboss. Made off. Six years behind bars, half of what the government. Sixoff bernie made off years behind bars, half what the government had sought. Tangible anger that squalor just mentioned the night of december 11, 2008. Anyone around in new york city from the ponzi scheme, justice was demanded. Order. 2014, outrage in ken feinberg with us. Its a little bit away from your expertise, but at the same time, we want blood. It goes back in the nations history, get the bad guys. Did we get him . Did we get bernie made off . It seems that we did. They recaptured billions of dollars to return to victims. The retribution issue is always there. Youre right, in American History is always there. But there has been some definite criminal and civil progress. What was the progress of the meat off debacle compared to 40 years ago with the o. J. Simpson trial . I think mr. The card is in it for the long haul. He has found, first of all, you cannot distribute compensation to victims if you dont have it. First, he had to replenish his fund. Once that money is there and you know how much youve got it, then you are disseminating it to the victims. The judges in the courtroom control the process, dont they . On the criminal side, certainly. Are always there, and the jury and the legal system is there to temper this bloodlust, this revenge, this we want our pound of flesh picku. To bee Justice System has ever vigilant to make sure there. Re not sentences out of whack and the idea of a trial by jury or no jury, that is a different process, isnt it . The jury has been the last bastion of community sentiment, guided by the judge on the log on the law. The jury the judge instructs on what the jury can and cannot do, but ultimately the jury, one toe the ultimately call the shots. We are still to this day, shocked. I was sitting there writing to handed mens when he the blackberry. It was like, wow, are you kidding . But up in boston, they notice must before. A way tos back in human nature. It was a very sophisticated ponzi scheme. People want to believe what they want to believe. The credibility of the schemer is well known and rub respected. By beforecan go Something Like this finally is uncovered where you run out of options, you just run out of options. Justice to be served in the madoff trial in the coming days. Opec said demand for its crude will be the weakest in 12 years. Crude oil down almost 2 right now, 62. 62. A modest open could be in the offing in the 10 year yield. This is bloomberg surveillance. Im scarlet fu here with tom keene and brendan greeley. It does appear to be a kinder, gently Republican Party the one intent on avoiding a shutdown over agreement on a 1. 3 tomorrow. Hutdown a lot will depend on iowa, the first state to vote in the president ial process. Representativete joins us now. The republican approach to the , what does that signal to you about 2016 . Cracked i think it says that republicans are serious about getting i think it says that the publicans are serious about getting the country back on track. We got republican governors across the country that have thisrevitalized across country. There is more moderate leadership . Look at what happen in this last election. We won a bunch of governorships in 2010. People thought we would lose. No, we didnt. We even carried states like massachusetts, maryland, and illinois. Republicans are on the march, and we are showing we can govern. We are doing at the state level. D. C. And congress has failed. Oh governor chris christie, for some reason, is a frequent guest of yours. When republican governors get together, was on their short list to tell republicans in congress . Get the countrys financial house in order and focus on things that will grow the economy, and bring jobs. What can governors Teach Congress . At the we have been state level, and that is, reform our strap our tax structure and reduce regulatory burdens to competitive. Ore get Corporate Tax reform. That is one of the things to do, but getting the countrys financial house in order and reducing massive overregulation that we see from the epa and all these federal agencies that are strangling us. The republican line versus the democratic line, which i think so many listeners and viewers are tired of, i will go to boom, iowa. Twostory street and the boom depo. What is the distinction of the republicans in the boone depo his morning . I used to live in boone county, and we now have a republican congressman, a republican senator, and representative. Bloom county has been transformed because people see republicans are problem solvers. Ive got a new one from massachusetts. They have a republican governor, though. Massachusetts has at least some sense. The nuance between the simplistic idea of a Tea Party Republican and an Olympia Snowe moderate republican . Or is it blended into one . Collects there is a lot of anger because of the way the country has been going, and i understand that, but we also have to use common sense and do things that will work. I think there is a kind of common sense and governors have to do that. And we aregovern chief executives. The democrats got shellacked here in november. What is this thing that the republicans did that you are like, oh . I actually think not having the president on the campaign was a complete mistake. I disagree with the governor on parts of the economy doing well. Desk gdp is under 3 , which is below average in the last four decades. Do they know you in boone, iowa right now that a that is the home of amy eisenhower, where she was born and raised. D realize most of this country doesnt know who made me eisenhower maybe eisenhower is . That is a shame. We need to learn from history. I just read about Winston Churchill and the wisdom he had and the fact that so many people ignored his warnings, while hitler built up his third reich. Eisenhower, ronald reagan, that is our twitter question of the day. Does the spending bill show a new Republican Party, one the gipper would recognize . Tweet us. Good morning, everyone. We say good morning to all of you listening and watching from the great state of iowa, particularly on series xm sirius xm. I once walked into the hilton and it was like 20,000 people watching wrestling. You are on top of your College Sports this morning. Speaking of iowa, the governor her recently got into a twitter war. Give us the back story. What happened . First, we are the leading cork reducing state in the country. Producing state in the country. Crates would not be the right thing to do as far as being humane. The reason we have them is to falling over from and killing baby pigs. People who dont know at about the production and dont eat meat, they want to tell us farmers how we should raise our pigs. We think that is wrong. Why is it important for politicians in iowa to know how to castrate pigs . Why is that a crucial requirement for office . Its not a crucial requirement, but it demonstrates rew up on ast g farm and it demonstrated that she was a practical person that was willing to make tough decisions. And she won the race by 8 in the senate. I would suggest that with any politician from washington, that is, a city to the east of iowa, travels to iowa, change her accent. [laughter] how upset do you get about the pandering of the midwest ecco i worked with someone who graduated from the university of missouri and people in the midwest go nuts over those east coast idiots. What is the distinct deceased opinion of the east coast . Way to minute. If you look at the states that are doing the best economically, they are in the west the midwest and the great plains. And texas is doing great. I was going to talk about him having a sing off with share cher. She could talk about pork and he could talk about her singing. Click the governor has the most coveted endorsement in america right now, the republican governor of iowa. Lets talk about democrats. What does a democrat have to do to win in iowa . Collects you have to go out and shake hands and meet the people, every day. You have to be there often. You have to connect with the people. Its what president obama did in 2007 and 2008. With Hillary Clinton from . Is she from arkansas . Is she from washington . She is from new york now. In illinois and she lived in arkansas, but she is from new york now. Key for any candidate of either party, come to iowa, and go to all 19 counties and listen to the people. Weve got to go. Good morning, everyone. What an interesting surveillance this morning. Futures deteriorate negative five. Oil we are watching, 62 62. 63. Here is scarlet. Click the fourth straight night of protests in berkeley, california. Demonstrated taking to the street to voice anger over the recent deaths of unarmed black man who died in altercations with white police officers. More than 300 protesters forced streets to closed and the bart service and Amtrak Service were suspended. Criticizing the u. S. Over the practice of torture by the cia. Today, beijing said the u. S. Should earnestly abide by international conventions. The Intelligence Committee oflished a summary yesterday interrogation of suspects after 9 11. Sony ceo personally approved certain interviews. That is, according to emails made public by hackers. Ultimately gave the goahead to a tongue down seen that the picks the best the death of Korean Leader kim jongun. Here is a story that will not go away soon. Reportingrk times today that for years, beleaguered the beleaguered manufacturer of air backs, takata, knew that the instability of Ammonium Nitrate was a great challenge. Now takata goes in search of political chemists as they try to sort their way through washington. Ken feinberg is with us. E is the airbag czar we make jokes about the in a bag, but unfortunately this is getting serious. It just festers and festers. What would be your counsel to takata this morning . I dont know about the facts, but i can tell you what ive read. From what ive read, the number of deaths or serious physical injuries has been rather low, which is important for somebody like me, at least. Rig to thes with the dreams occasions of this and trying to take on congress and stonewall with the regulatory implications of this and trying to take on congress and stonewall, that is something else. How does this wraparound engineering to what we have wrought . I was curious about decisions to only do we called in states only do recalls in states that are humid. If i live here and i drive to my familys house in maryland, my airbags explode then . Is that viable . A partial we call in states where you have people moving around . What you have to do is try to get the engineers at takata to explain that. It doesnt seem credible. I think gm i think gm will be moving on to a new company fairly soon. The general of corporate ownership is if you put a call into can feinberg, things are not going well. That is not the case. Is, ift of the matter you look back since 9 11, there was bp and there was general motors. It is fortunately not a common occurrence that you call in and set up a special fund. The regulatory system and the legal system i was glad he did not bring up the wall street bonus. Steam,in your earned a is that a culture of British Petroleum not being american and the con not being american . I mean, is there a difference and takata not being american . Is there a difference in the dialogue in washington . I dont think so. There is such outrage, or such National Concern about innocent victims that you set up a program like this. Would you drive a car without airbags . Have airbags,l but i dont pay much more attention to it after that. That is the problem. Robert wolf, i want to talk about a potential liability issue that we have not even begun to think about, which is the use of drones in airspace. Are there airbags . There are no airbags in drones, but there are so many uses for them and you are with a company that is working on that will stop but there is a regulatory problem. We have a company that uses drones for commercial and industrial use, nonmilitary. Most of our work is being done outside the u. S. , because the faa has not really been able to approve commercial and industrial use other than the ep refinery in alaska and electra electric and gas in san diego. The concern is, how do you differentiate between commercial use and the whole joystick thing . Its a problem, because we are missing out where our technology is the best. We need to do an entire show on drones, because i think you are front and center in this debate. Never die for massachusetts and the guy from brockton. I would suggest to all of you on Bloomberg Radio and Bloomberg Television, there is a certain tinge. Hold on, hold on. On radio, nobody is putting up a chicago cubs mousepad. , more money toer the chicago cubs. The robert wolf, would you please explain why . 20 million more dollars is why, but i think you said earlier aftertax, go with the red sox. Stay with the team you love and stay with the team that will win. They will never get it done. Its pixie dust in chicago this year. Lester was the highest bidder, and there it is. It speaks to media in sports. Im always embarrassed to be part of this conversation, because the only way i can participate is that i used to sail out of there. It still top dollar, top tv, top media. But in that is driven by the owners as well. The owners of the cubs are willing to spend to promise the world series. Its still the only tv content that actually needs to be live, so advertising makes a difference. You are not going to dvr sports. Although, baseball, you could sit down and pop open a beer and disappear for four hours and come back and there are still six innings. Really dive into 2016 when do we really dive into 2016 . Around the corner, probably february, march, thats when you see republican announcements. Certainly, on the democratic side, being one person from your democratic per view, is jeb bush able to continue a dynasty . Jeb bush is one of the most impressive republicans and former governors there are. You have to like, as a democrat, where he is on education and immigration. He has a lot of strength is certainly. And we had a republican governor on just now. They do Different Things at home. Governor bush is probably one of the one individuals that can stay as a true being and does not have to be pushed far right to possibly win in the primary. Saw twoeinberg, we democrats in the senate essentially exit with the senator from louisiana. Tell us about the democrats and what we will miss about their capabilities . There are no National Democrats anymore. You know, when he signed the Voting Rights act, he said we have to we have turned the south over to the Republican Party for a generation. Just to wrap up all of the politics that weve been does it show a new Republican Party, the spending bill . Here are the answers. It shows the gop is smart enough to not go down shutdown alley for the third time in 20 years. Did they learn their lesson . We hope so. How about this one. More from david byrne of the talking heads the same as it ever was. Some cynicism there. And finally, lets cross our fingers and hope. The hope and the audacity is there, but i find what is most audacious here is john boehner with nancy pelosi and a new kind of washington that will affect the markets and the confluence of the nation. And they said they and they are not taking up the things they said they were going to come at least in the immediate term, the things that wall street cares about, Corporate Tax reform and immigration reform. Do you hear anything about immigration . I dont. I dont see the structural politics there to make it happen. Was done a lot on washington, and through the morning on Bloomberg Television and radio we will look at the markets as well. Sayingll not used to 62. Saying 52 to may be if it has. We want to get thank our guest host, robert wolf and can feinberg. And can feinberg. Surveillance continues on the radio and in the loop is next. Good morning. Were live from bloomberg headquarters. We are nine minutes away from the opening bell. A ceo will be joining as guest uberas companies such as face mounting concerns about privacy. In on increasing regulations. We will discuss the changing world of Digital Media and commerce. Plus, amazon taking control from fedex and ups. We will we focus on that story yesterday. Big work and they data needed for efficient distribution right ahead of the holiday season. He will join me in a few moments. Here is a look at our top stories. Congress to vote on a spending bill. The measure would avert a Government Shutdown and it rolls back the provision of the doddfrank legislation that limits trading