Transcripts For BLOOMBERG Bloomberg Surveillance 20150113

Too slowly. It is an issue in japan, too. The yield on the japanese fiveyear bond has now fallen to 0 , matching germany. A sign the labor market is tightening up. Aetna is raising debatesemploys by as much as 16 an hour. The Insurance Company will cover marker health care costs. The Unemployment Rate has fallen to 5. 6 , making it tougher for employers to retain workers. The Obama Administration admits we blew it. The white house says it was a mistake not to send a highlevel representative to the march sunday in paris. Leaders from u. K. , germany, and israel were among those attending the rally for the victims of the terror attack. The highestranking u. S. Official there was the ambassador to france. Charlie hebdo will print 3 million copies of a special issue this week. The magazine will come out tomorrow, a week after the attack that left 12 people dead. What a debate this morning. The New York Times and bloomberg not doing it, but others are doing it. It is interesting, they put it in such a small box in the corner. It is also a beautiful cover. It features the prophet mohammed weeping and saying, all is forgiven. It is a beautiful cover. It is a shame were not showing it. This is a magazine with a circulation of 50,000 and the Washington Post made her own statement on this. Going against the policy and people battling through it as well. Lets continue as we get to the markets. What ratings. You wonder how they did on Television Last night, the winner of the first ever College Football playoff final. It is one of the venerable teams, ohio state ran for a general miss amount of ginor mous amount of yards. Urban meyer, he makes a jillion dollars a year. College football celebrating it in a different way. Ohio state was not supposed to make it. They had injuries all year. I like the playoff system. It enable them to pull this out despite the rankings. Did an interview with jeff in melt immelt and it is a vibrant place. This huge football success. So much riding on the quarterback one the heisman trophy. My inside sources tell me he was let down by his receivers in his linemen. Very good. You can tell the three of us have a combined knowledge on College Football. We have exhausted it. We are done. How about a day to check . I have been up since 1 00 a. M. Looking at these new correlations. Equities up. Look how soggy the reversed yesterday. There is the lead story, but not the only story. Nymex crude, forget about percent changes, it is in implosion, 44. 54 led by that Goldman Sachs notes yesterday. With the more damage today off of what we saw in the United Arab Emirates comments on supply. Vix your 20. Prints, down to 45. 80. Brfent down to 45. 80. We will talk about that in a second. Here is the ruble. Up we go. Heres the recent russian crisis. The central bank steps in. We are back there. I want to show you a number. That is about 63. The joke in russia forever was the worst three things. Vladimir putins age, the price of oil, and the ruble dollar were all 63. We have a breakthrough on all three. This could become a junk condition fast. Lets get some perspective on this oil and associated commodities continue to implode. Currencies give way overnight. The Canadian Dollar found new substantial weakness. The japanese fiveyear is touching 0 . Not negative, but 0 . Jon ferro is in london. Joining us, john thain. Yes executive capabilities at rbc. It is the royal bank of canada. A weaker Canadian Dollar. A Strong Defense of canadian oil and the journal today. What does this mean for your shop . On average, pluses and minuses minimal, we think the oil price for u. S. Economy, which is the economic leader in the world, is net positive. We think current price levels there is about 120 billion that go to of additional constraining power in consumers hands. There is the business sense. Lets go to Jonathan Ferro in london. Were been going back and forth on correlations. When i see the russian ruble jump in the Canadian Dollar jump, what are you actually watching the london desk . Im looking at the commodity markets. Im not just looking at oil. You had the copper story in the last 12 months. The two words around here are bloomberg at bloomberg are yield evacuation evaporation. Collapsing in the global story bond else from germany switzerland japan collapsing across the board. The big surprise this year for a lot of people has been the move in treasuries. Surely, yields must rise from here. Let me tell you, since kiwi ended, qe ended. That is a lot of jargon. All you need to know is how unusual that is to see the 10 year yield, low the twoyear yield and a country removed like new zealand. Exciting stuff. What does this do to mario draghi . How does the plunge in the price of oil affect mario draghi . You raise a good point. I am shocked by the amount of consensus. Matched by the amount of uncertainty. The amount of division there is over what Lower Oil Price should meet for the global economy. There is a huge debate on what it means for the euro and whether the European Central bank should react. Do i want Higher Oil Prices . Do i want higher food prices . No, i dont. They have a tough one to actually tread. As we speak, west texas intermediate, this is the john taft collapse, west texas intermediate coming right down born going to break to new lows. Weve been talking about deflation in the eurozone, but you also have mark carney having to make that long walk to 10 down the street with literally a letter in his hand to apologize for getting it wrong. Are two things going on. Is it his fault . Youre seeing lower prices feeding into a lower inflation price. Should a central bank have to react to that . Should you look at a deflation target of 2 . And a lot of people on the streets of the u. K. Will see lower food prices, lower petrol prices. Theres a big debate on whether this is a good thing or bad thing. I am shocked by that. He did not just not hit it, he missed it. That is the problem. We still instantly worried about inflation when we really need to be i want to go to john taft of rbc in the capital market. Is this good volatility . I was believe there is good and bad volatility. What flavor are we having right now . I think this is normal volatility. We went through a time when voluntarily volatility dropped off the charts. Negative Interest Rates in germany, switzerland, that is normal . That is not normal, but it is part of in flight to quality of his black swan on oil prices. The volatility in the market is not disrupt it. I see that in my business. When i walk in in the morning and i get problems coming in off the margin desk with a trading desk that i have never seen before, that is bad is that where you are right now . No, it is not. This is manageable volatility and something to be expected. This is normal . Where are you telling your clients to put their money . Same place we told him for years, which is if archives are interested in getting paid while they appreciate look for appreciation in the equity markets, so highquality dividend stocks have been the place for individual investors to be for a long time. Though stocks actually have performed well recently. Last year, dividends increased by over 10 on dividend paying stocks. It is been a good play for investors. Theres nothing individual investors due to be worried about in this market right now. John taft, we will continue our discussion. Jonathan ferro go have dinner or something. Thank you. Listen to this twitter answer to our internet unannounced to the question. Guns. Butter. What are you talking about . Where is the safest place to put your money . I dont have a lot of money. It goes to the coffee can in the kitchen. Somebody said guns. You are kidding. We want to know your thoughts. Tweet us. Ok. I vaguely remember. This is latenight tv. We want to know what you think. Where do you think is the safest place to put your money . Tweet us your thoughts. Another day of oil him to. Currencies give way and yields as well. Were watching this very carefully. This is bloomberg surveillance. Congressional leaders today well head to the other end of the ball for some time with the president. Cameras, smiles, and everyone will return to his office and begin planning to destroy everyone else. Peter cook joins us from our washington bureau. This is just theater, right . You are right. This is just theater. But it is important theater, required theater. For the president going on six years in office, this is still an opportunity for them to build the relationships with the two most important people to his final two years in office. That is john boehner and mitch mcconnell. There could be productive things accomplished even if it is mainly for the cameras, the smiles and all that. If they go back and start plotting to into each other. There will at least be one person who is happy this morning in the room, john boehner after ohio state won the National Championship last night. Someone else not in the room, on capitol hill and very happy elizabeth worn. She has attorney a whitehead on a pike. This is a victory for elizabeth worn, the fact Antonio Weiss top undersecretaries of the department of the treasury has decided to withdraw his name from that job because of opposition from Elizabeth Warren and other democrats up on capitol hill. He faced potential opposition from republicans. It wouldve been a confirmation that would have been a nasty one, but those in the administration who wanted to push forward with it, Elizabeth Warren stood in the way and he took his name back. There is one twist. You still going to the Treasury Department as a counselor to jack lew. I know it is terrible, he is probably down and way too slick, who with senator loren like to take that warren like to take that position if not someone extremely well educated in finance . That is the question. The wall street ties. She and other democrats in bernie sanders, the independent from vermont, had made the case that you can have experience and knowledge about these Financial Markets without actually having work in Financial Markets. The list of people there may be limited, but they insist there are those possibilities. This is remarkable situation because it does mean if you have any wall street experience right now there is a risk it will be held against you and you cant serve miss a administration. That is a problem, because a lot of people who have worked with wall street whether it is lawyers or on wall street is self. Tom hart is beating a little faster at the thought of a liberal vermont putba know, but who are you going to be in their . I dont get it. The president spoke about Cyber Security saying most americans think of personal data is safe online. It is not. What is he proposing . He is proposing not only additional steps to protect american state a, but more important today for the business community, be talking about efforts to bolster the Cyber Security cooperation between the United States and private sector. This has been an issue for four years. There been multiple bipartisan proposals on the hill, but they cant get over the one issue about legal liability. That when the government and private sector collaborate, will be private sector get some Legal Protection in case things go wrong . That has been a Sticking Point in the president is going to go a little further today in trying to bridge that gap. It will potentially anger some consumer advocates and some Civil Liberties groups but there will be questions going forward. The difference here is the sony hack the white house thinks it has changed the climate. This could be an area of bipartisan cooperation. Peter cook, thank you so much. Congressional leaders and the president. Coming up in the next hour richard cleared a will join us. Barely describes his competency and monetary theory. We are thrilled to give you Richard Clarida in the next hour. From new york city this morning bloomberg surveillance. Good morning, everyone, west texas intermediate 44. 56. Brent crude down 1. 72, under 46 a barrel. This is bloomberg surveillance. This morning, we are 14 must reads. We thought this was the absolute genius. Bill emmett very well known for having gotten a call on japan right in the 1990s. He writes tom, i thought this was interesting because it reframed what were been talking about, in japan, this extraordinary money rates, central bank, central bank, central bank. It is about what the government can do to reform labor laws. This is a theme across every other media, which is this focus this myopia on banks. Clarida is brilliant on this in the next hour. It is about the economy, wages. We have got in the habit of relying on Central Banks too much to fix our problems . No question. The church of easy money is driving a whole lot of what is going on in Financial Markets right now. The concern is, are Central Banks going to be able to orchestrate an orderly with draw of monetary stimulus . That is probably one of the biggest concerns investors have right now. And crude can only carry so much. We talk about the high Corporate Tax rate in the u. S. The secondhighest orbotech straight in the developed world is japan highest Corporate Tax rate is in japan. We take us back to europe, theyre not really talking about monetary issues but political issues. Political risk in europe. They need to get their act together. Absolutely. Geopolitical risks are one thing that could drill what were looking at. Our basic framework for the markets in 2015, a tagline is, glass halffull. The full part is the u. S. The half empty part is the rest of the world, quite friendly, europe, japan, china. U. S. Is decoupling from other developed markets. It is the economic leader in the world. The rest of the world is struggling mightily. You talk about negative yields. In the u. S. , were looking at two to be growth in excess of 3 . Very healthy, sustainable Economic Situation and not true elsewhere. What are the consequences for this to virgins for your clients . Stay close to home. The other concern is, when does the drug from europe, from japan, from china start to weigh on u. S. Multinational companies that their invested in . How long can the u. S. Levitate . We dont see any signs the economy is going to get the real by what is going on in the rest of the world. The number one bull market derailer is a recession in the u. S. No sign of recession in the u. S. I will agree on that. I would continue to look at the currency markets. Talking to jon ferro earlier, the russian ruble breaking out to new witness over the last number of days. We are not there yet, but what dollar kind of the dollar canada did, what does a week alarming for ontario versus alberta . Putting stress on Canadian Financial institutions, definitely. The good news is, theyre the best capitalized Financial Institution ill say. Can we rip up the script . What did yal do to harvard in hockey this week . Dominated. Of tech, there it was ok, there was. Crude gets crushed. We look a low oil could go, when we come back. Another leg weaker on ruble. Knockout effect from the low prices in oil. There is the ruble. This is dollarruble, ever hire with a 65 handle. We will be watching that throughout all of bloomberg surveillance. Top headlines. Standard poors reportedly close to a settlement of about 1 billion with the justice department, misleading investors before the subprime crisis. The u. S. Has secured settlements from billions in connection with the 2008 financial crisis. Worldwide, personal computer shipments down 2. 4 for the Fourth Quarter. Demand from businesses for new machines waning. Protecting a 4. 8 fall. Pc sales totaled down from 82. 2 million a year earlier. Donald trump is unhappy with the sound of roaring jets. He is filed a 100 million lawsuit against Palm Beach County timing air traffic is being purposefully directed to fly over his estates. The developer says noise vibrations in emissions from the planes are causing damage and destroying the once serene and tranquil on the ounce ambi ance. I dont think i couldve got through that. It is just that the world revolves around him. It is like a sure magnetism of him is sucking in the planes. You are just jealous of his hair. Watch out below, the price of Oil Continues to plunge. The bti down about another 3 down 60 since the june peak. Brent is down 17 since the start of the year. It is january 13. Our Senior Analyst joins us now on set. When do we hit bottom . Were all china find this magic number. Were all trying to find this magic number. It is difficult to do. There is no one magic number. Producers operate along the cost curve continues. Theres not one specific for example, we did work up in north dakota looking at various like even costs. You within the bok in itself, it is buried so white. Bakken itself, and it is varied so wide. The journal has a rationalization of what canada will do with the tar sands. Do you buy the idea that even as the price comes down through breakeven a set of breakevens, that people just keep producing or is it a bluff . Producers are loath to cut production. There will be some rationalization. You will have that capex cut, but that capex cut doesnt necessarily mean a Production Cut. Resiliency of output is the name for 2015 and will continue within north america and other parts of the world. Maybe the Production Cut a few years out. It will impact that investment spend in 2016. What did you think of the Goldman Sachs note yesterday . It has to do with this resiliency of output. It is not an oil phenomenon. You can look back on the gas site and see this as well. To give you an example do notice how oil guys like to talk about places ive never heard of . And so rich. I look forward to saying the name eagle ford. There is this band in the bakken between 29 and 16. When that goldman note can come i guess a month ago or two months ago, looking at breakeven prices country by country. We are plunging through the floor of everybodys breakeven price and we are looking at saudi arabia, at 45, protein what was given to be saudi arabias for a given price. On a fiscal breakeven price for those prices are higher. Talking about the budgetary constraints, what you need within the budget, the oil price needed to make that budget balance. When we think about the resiliency of output using the example of gas, want to talk about the haynesville, quick example in february 2011, ap debt 160. If you cap 160. Did not peak until 10. 5 bcs. Today we stand at 40. The output is around seven bcf a day. No correlation between the accounts. There are other things to consider. Were talking about how long people are willing to take on losses. We have arrived there. Not so much actual losses, but scaling back your investment and looking at your higher return plays in leveraging your higher return plays and differing this longerterm investments will impact output and the time we have with you, how do you rationalize the streets consensus idea that well, were sort of like supposed to go to 60 a barrel . Howdy respond to that . There is no one particular price. There is none. There is a variety, a range of prices were a variety of decisions have to be made. John taft what your Canadian Research people safe . We are at 65. But i cannot tell you what gets us from where we are back to 65. I want to take a quote from johns rbc. Would you think is the biggest wildcard . We talk about supply as if we could pick out one million, 2 billion barrels and set it aside. The capacity comes back on when that demand cadence comes back. That supply could be moved out. The capacity still exists and it can temper. A more sustained tightening will have to occur on the demand side to tighten that balance. John taft, were going to go macro. This is a chart bloomberg comics pulled out. Were looking at to wages. Yet the aggregate wages growth sort of sluggish and the other sectors tootle around that aggregate line and many of his completely different movement in mining and logging. See where it plummets at the end of 2014, does that worry you . I dont understand the chart. That is my fault. Wage growth rolled over. Mining and logging, wage growth is rolling over in it is going to be ugly and we are rationalizing it away. How big an impact will that have on the economy versus additional dollars and consumers pockets . This is a winners and losers game. Youre taking dollars and putting it into comedies that use fuel like transportation copies, putting dollars into consumers pockets. Overall, it is a net positive or negative for the economy, the macro goal is positive. Vince, i love having you on because i dont get a single price target from you. It is a breath of fresh we going to 60. How many times have we heard in the last two weeks well, were not sure where we will bottom, but lets jump in here. Talking to vince is a lipid like talking to a fed chair. What do you think . I dont know. Where is it going to go . I dont know. Thank you vince. Coming up, ohio state may have taken over the trophic for College Football, but according to arsenault best chart, the coaches are the ones who are winning. Trophy for College Football, but according to our single best chart, the coaches are the ones who are winning. Good morning, bloomberg surveillance. I am tom keene with Olivia Sterns and Brendan Greeley. Heres our single best chart. Ezekiel elliott ran for four touchdown. Buckeyes are the actual champions of the United States of america. Lest you think that College Football is not a professional sport, take a look at who won the playoffs the coaches. This is our chart editor who put this together. This is a bracket of salaries. According to the bracket, nick sabin of alabama wins. I feel like im the last person in america to learn this, but he makes 7. 2 million. That is up there. Urban meyer 4. 5 million. Im going to throw this to john taft. His College Sports professional sport . They are at the very least a semi professional sport. I went to come along with many tafts, and i really college yale six generations. Lets get that in. The role of sports at an Ivy League Institution is completely different than what we watched last night. I am in a mystic. I believe sports ought to serve when overall education. My personal sports usa today n. C. State, the guy makes 1. 89. 1. 8 million. Perhaps those profits should be poured back into the education system. Rather than to the coaches. I dont agree at all. The michigan model their cash flow, Brendan Greeley is right. It could be a business, but these guys dont cost that school a penny. The quarterback cannot afford to go to chipotle. My question is not about taxpayers, but the labor equation. It is about the football players. I think it is ridiculous we expect them to do these things and theyre rewarded possibly in nfl career, but very likely not. Very likely a torn acl. They dont have a guarantee they continue to go to college on scholarship after they tear their a. C. L. Sadly, we cant find yale in your. Into lane where i went, that seller is not about makes 40,000 a year. Does he . No im kidding. Whether this is a net feed or drain, tulaine is a private school where i went and the coach makes 800 67,000 a year. Only slightly more than tom keene. 15 years ago tulaine took money out of the endowment to build a better football team. What were talking about [indiscernible] for the buckeyes, and might work out but further down the rankings, the money is not there. 20 teams down, you have a very valid argument. There we are little bit on the salaries these coaches are making. Photos. We have some photos. Number one, looks like bob newhart has a new gig. Excuse me, that is number three. Number three, this is a wider shot on french tv shows the unity march was actually staged. Remember yesterday morning or sunday, we saw these incredible visuals of 40 liters linking arms and walking through the streets of paris. We saw the crowds of mensa people a naturally assumed those millions of people were behind the leaders. In fact, no, this was a carefully staged managed event at her dozen rows of dignitaries and officials, there appears to be a very large gap. There is much more. Writing about the backandforth between Benjamin Netanyahu and francois hollande. He said, you dont have to come if you dont want to. Netanyahu said, no, i will come. This interesting the white house to come out and acknowledge i agree with saying the u. S. Should have sent their ranking official him and not just the ambassador. Thank you for the mail yesterday. This idea, great with the pageantry, what are you going to do about it . Number two, cadbury tweaking its cream egg recipe. Absolute outrage. Ive had a couple of those. They give you permission to id. Because they only come out once a year, you have to eat them. You have no choice. Their changing the signature chocolate to a standard traditionary cadbury chocolate. 500 million cream eggs are made each year. The new versions will start appearing on shelves this month until the end of april. New coke. Im skeptical. It looks like bob newhart has a new gig. Sidebyside photos of bob newhart in elf and the referee from last nights game. Bob newhart got in on it, is tweeting 85 years old. I think is important ref had the signature bob newhart skit skeptical face. He was probably looking at urban meyers salary. With the markets where they are in the decisions of Central Banks, Richard Clarida will join us in the next hour from pimco. Futures up 9. West texas under 45 a barrel. This is bloomberg surveillance. Good morning, bloomberg surveillance. Oil declines and theres some correlations to market. Lets get to top headlines. Heres Olivia Sterns. Jeb bush, probably. Mitt romney, possibly. All ryan, no. He will not run for president. The gop Vice President ial candidate in 2012 just became chairman of the house ways and Means Committee a job he says deserves his undivided attention. Ryan became chairman of the House Budget Committee in 2011 when republicans gained the house majority. Antonia weiss has pulled his name from consideration to be treasury undersecretary for domestic finance. The move comes after the nomination rally opposition from democrats in the u. S. Senate. The white house says he will become counselor to treasury secretary jack lew, position it does not require senate confirmation. U. S. Businesses spent record amount on Corporate Travel in 2014, and expect it to spend more this year. According to usa today, u. S. Company spent an estimated 292 billion last year on business trips. The organization expects the amount to increase more than 6 in 2015 to more than 310 billion. As you may or may not know ive been a lot of stories on private jets. What everybody will tell you jet sales correspond exactly to the dow and s p. I would say so. We decided to years ago not to upgrade the gulf stream. The ancient cry of wall street. Were not if were not number two by the end of the fiscal year, you will all be fired. That is one description of wall streets focus on the garnering of revenue. John taft has a day job at rbc wealth management. He is acutely interested in the discussion and the best practices to bring ethics in a Broad Spectrum of ethics back to wall street. He is here a month or two before his new book a force for good. The crisis is over. Were back to business as usual. What tides do you see where we actually may get some ethics on wall street . The short take is, the responsible finance gave us the financial crisis. Irresponsible finance gave us the financial vices. The book uses the term enlightened finance to say it is time to stop pointing fingers, looking backward ok. We need to start looking forward of what finance can do to make the world a better place. You dont have a chapter from lloyd blankfein. Why not . I did not ask him. He is one of the most articulate and thoughtful people in our industry. The book is long enough. There are 20 contributors. I would, yes. If the problem is you had that finance causing the problem and we need good finance to help move things forward, can you change culture with legislation . If not, how do you change . You absolutely cannot change culture. It is a critical ingredient in having the Financial System serve real people in rome markets in ways that actually in real markets in ways that actually make the world of better place. It is not the only ingredient. You do need different types of regulation than we had going into the financial crisis. That part of the problem. You need things like innovation to come back. What about the stick . What about justices approach to punishing banks . Should it be during a court cases or hiding these and settlements and taking cash . Dont you think weve had five years of public caning a Financial Institutions . Were talking hundreds of billions of dollars in fines and settlements. You can argue whether they are deserved or not. The point is, that is not going to get you to a place where the Financial System he hates better. What you need is for people in Financial Institutions to look at the world and say, what can we do that will leave the world a better place . For example, lets take the whole retirement saving system on which barbara novak, the vicechairman of blackrock, writes a chapter. If social goal is for people to accumulate enough money not to run out of money during the retirement, we are not getting the job done today. Howdy redesign return of saving system to do what society wants it to do i. E. , to make sure people have enough money to live out the rest of their life . That is what we should be talking about, not finding financial fining Financial Institutions. To think people became more greedy orifices always been the way . There was the masters of the universe in the 1980s with tom will, speculators in the 20s. Wasnt it always this way . My last book was about stewardship. Which i believe is, should be can once again be the core principle underlying the Financial Markets. But we lost touch with that core principle. Do i think Financial Institutions can behave responsibly . Absolutely. Going back to the 3334 securities legislation, weve been arguing about this for decades and decades and decades. How are you going to change it now . The good news, tom, there are 21 people in this book. I could have had 50 people, financial luminaries, clear thinkers who have constructive suggestions for what we can do to have Financial Markets contribute to social good. John taft a force for good. Thank you so much for joining us today with rbc wealth manager. How about a forex report . Rublebased, a weaker ruble. Look at dollar having canada. Jawdropping. How old Vladimir Putin feels right now, 85 coming toward 90. He will hit the 90 handle tomorrow. Stay with us. Richard clarida next on bloomberg surveillance. This morning a continued to fight equality. The global ramifications of a true collapse in oil. Draghi and yellen must react to the market vigilantes. Richard clarinet joins us of pimco Richard Clarida joins us of pimco. Good morning, everyone. This is bloomberg surveillance. Live from our World Headquarters in new york. I am tom king. Tom keene i am i am tom keene. Crew crude is down more than 3 . West texas intermediate fell below the 45 a barrel mark. The latest pressure on prices appears to be coming from the uae. Its oil minister says opec can withstand the plunge in prices. The uks in place and rate has fallen to its lowest level in almost 15 years. Consumer prices rose at one half of 1 in december for the first time that will require a giving the governor to write an open letter, explaining why prices are rising too slowly. The yield on the japanese side has now fallen to 0 . Signs that the labor market is tightening up. And not is raising pay aetna is raising paid. It will cover up more of its employees health care cost. The Obama Administration admits week blew it. The white house says it was a mistake not to send highlevel representatives to the march sunday in paris. Leaders from the u. K. , paris and israel were among those to attend the rally. The highest ranking u. S. Official was americas ambassador to france. Charli e abdo will print 3 billion issues of his episode. It is a raging debate. There is the New York Post this morning. With a modest placement to the bottom. Or those of you on Bloomberg Radio, it is in the lower right corner of their headlines. A cartoon of the prophet mohammed. He is weeping, saying all is forgiven. I have been reading a lot from other journalists, talking about, unless you are prepared to do what they do you cannot say it, because those guys never act down. They did not do it when they were firebombed. There is a debate. Secretary kerry where is he this morning . He is going to france. Very good. Sports. The winner of the first College Football playoff final. Ohio state takes it. The buckeyes win big. 4220 over oregon. It is ohio states eight national title, the third for urban meyer. He won two while coaching at florida. He is only making 5 million. We no longer have to have people argue over the and adequacys of the previous system. We know who the winner is. The first year worked. It was a surprise for marcus mariota. He won the heisman trophy. Everybody thought he could take the team until the end, but his linemen and defense that guy will be fine in life. Shed not a tear. We rally into the 7 00 hour. Dow futures up 112. Oil, oil, oil a bit of a big. Under 45, a stunning barrel. New emergence is correlations across equities, bonds currencies and exploding commodities. Richard clarida of him go. A story career of monetary economics at columbia university. We have asked vince piazza to join us on oil. Wonderful to have you here. To driving, yelling, draghi, yellen what does this market indicate . What does it signal . The u. S. Has had a decent growth rate, perhaps 3 . If deflation in japan and risk in europe. China is slowing. Excess supply, falling demand for oil. Technicals. It is a volatile mix. They countries going in opposite directions, policies going in opposite direction. Is Market Movement limit the degree to freedom . Is janet yellen glued to her bloomberg terminal at the fed . Is that a shameless plug . We have no sound the backs for shameless plugs. The fed focuses on global events on the extent they outlook the impact for u. S. Inflation or growth. At some level, decoupling is not feasible. The u. S. Will not were way to get into that says, you would not have decoupling. You have a strong dollar that lowers deflation and commodity prices. That challenges the fed as they want to start hiking in the year when prices may be falling. Oil as it drops below 46. We keep asking you for a number at which things will start to change and you keep saying, we do not really know. I am going back to the well. Will they change here . Will chevron, will they change their behavior this morning . In q1, we will see the press releases, and we will get a flavor for what that Capital Spending is going to be like for 2015. They are resetting their priorities around for a higher return inventory. Even with cuts even with cuts you will see the resiliency of aspects. You are resetting expectations from the services sides, those cost will come down, and therefore, your break even cost will come down. Breakeven counts vary. There is no one particular break even point. There are many producers in the u. S. , they operate all along this cost curve. Smaller players are highly leveraged. How worried are you about contagion happening . Broader market the wild card is Capital Spending in the oil patch will be down. If it is down by a lot, that will impact the overall gdp picture. So far, that is not a major impact pencil in. I will treat this out later. This is the new zealand spread. Never a dull moment. New zealand is the qe and the coal mine. They went to a negative yield. The 10 year yield is lower than the twoyear yield in new zealand. No one cares. Except professor clarida. This shows the distortions. This morning, i heard on the radio, that fiveyear yields and japan are zero. On the bedside, they are negative. Twoyear deals are negative in europe. I am not saying clearly the role we discussed is impacting prices. It has a huge impact on u. S. Interest rates. We tend to talk about china japan, u. S. , europe. That chart about the qe in version in version there are outlying economies. Switch sweden, new england they haven different ways. They are trying to get broad generalities. New zealand exposed to what is going on in asia. Sweden and switzerland exposed to what is going on in the eurozone. Another one of the big stories we are following is the selloff in the currencies of many petro states. The russian ruble above 65 this morning. Bill gross had an interview that you can hear on Bloomberg Radio this weekend. He said he is concerned that the selloff and oil is going to affect the demand from these petro states from buying u. S. Treasuries. They have big foreignexchange reserves, that as they spend them, they have less available to hold on to treasuries. There is some impact. I have looked at that, so far that effect is being swamped by the opposite effect, people wanting to hold quality assets. Tenyear treasury yields below i love the phrase swamped. It shows us the dynamics we have. Richard clarida with us through the entire hour. We will address what draghi said. January 22 at the ecb meeting. It is our twitter question of the day. Where is the safest place to put your money right now . Under the mattress . We want to hear your thoughts. Tweet as at bsurveillance. This is bloomberg surveillance ,. Good morning. Futures up 12. Oil weaker. There is Olivia Sterns. With less than two weeks to go before greeces election, an interview with greases finance minister. He said, greece good potentially accidentally stumble out of the european union. Leaving the euro area is not necessarily a bluff. An accident could happen. The idea is to avoid it. Tom brennan, tom and grant and, im sure you are fluent in greek. The Opposition Party says they do want to stay in the euro, but reject the current terms of the bailout are leading in the polls. I go back to this distinction we heard from eric nielsen, that the markets would not panic if greece does leave because they would not be forced out by the markets forced out by a run of their bond yields. If they politically choose. Richard clarida do you agree . It will behind but that ago. There is a deal to keep greece in the euro. Most of their debt is oh to the official sector on very generous terms. Very long stretched out payments. To most markets and me, this does not look like an action forcing event, it looks like a negotiation. The finance minister, who i talked to three years ago, he is a phd out of berkeley. Guys like him know the mathematics behind it. That was bluffing. You have bluffing in europe. Germany saying, we would be ok if greece left. The finance minister agree says we are not going to leave but accidents happen. You are an expert in germany. Adam pozen with us tomorrow. Is that nirvana . Who wins this, the politicians bluffing or the guys like you who know the dynamics and know the fear if they screw this up . Greece has lost big time and one. They lost and have gone through a depression, they have one in the sense they have defaulted on their debt twice. They have stretched out their payments to infinity. They are staying in the euro and defaulting on their debt which they have done it. They will stretch this out. It is more complex than winners and losers. Everyone believes they will have to renegotiate a bailout. Our twitter question of the day. Oil plummeting, wrubel climbing. Where is the safest place to put your money right now . Id this sneakers. Tweet as at bsurveillance. Good morning, everyone. I am tom keene. Olivia sterns with Brendan Greeley. Demand for aluminum is growing. Up 7 , good news for alcoa. Automakers are increasing their orders. They kicked out fourthquarter earnings season with better than expected profit and sales. Ill color alcoas shares rose. Three executives at advanced michael devices are leaving. The new ceo shakes up leadership. They are looking to stem the lost of market share to intel. Bill gross says he was fired from pimco the firm he cofounded in 1971. He made the disclosure on bloomberg, the first time he is publicly confirmed his dismissal. He also said he offered to get them from the executive committee and oversee closed end funds after differences with management. His affect departure came on december 26. He is with janice capita group. Janus capital group. In what way do you miss conversation with bill gross . A day to day chitchat with bill gross . I was based in new york. I did not have that much chitchat with him. The fact is, he is gone and there is a vacuum. You have a new team. The day today back and forth was brilliant. Talk about bill gross more. I will leave it at that. Ask a political answer. The president is hosting congressional leaders at the white house. Their first database meeting this year. Joining us is former virginia congressman tom davis. You call other the book the partisan divide, congress and crisis, which talks about how political wrangling in washington is the roadblock to getting anything done. Congressman, thank you for joining us this morning. You have been at these meetings with the president at the start of the year, is this a photo op, or you think it is a legitimate all of branch all of branch . The president will have the xl pipeline on his desk quickly. The house is passing a bill that will put amendments to doddfrank and regulations that came from that. I think the senate will comply with this, and pretty quickly the president will have on his desk a series of measures with the level of bipartisan support. His Political Base is not going to want him to sign most of this. We will find out quickly where this comes down. You are on record as being a fan of whiskey diplomacy in d. C. The problem the president has had with republican caucus, he has a great relationship, or a reasonable relationship with john boehner, it is bringing the rest of the caucus along. You have a lot of teetotalers in the caucus. One of the problem the speaker has is coming back and selling it to the caucus. The bills the house is passing early are bills that have broad support within the caucus and with democrats. We will see how the president reacts to them. They cheek away at doddfrank they chink away at doddfrank. You should try karaoke. The bloomberg Surveillance Team likes to solve robbins with karaoke. Solve problems with karaoke. Elizabeth warren has Antonio Weisss head on a spike. She succeeded in getting his appointment block from the Treasury Department. However eight of your party is of Elizabeth Warren . They welcome a fight with Elizabeth Warren. When you get her to the rest of the country, they would welcome. They have done democratic infighting. They feel she should be a mcgovern type candidate. That remains to be seen. That is a widely held view. You are in congress and 2006 when there was a push for immigration legislation. That is whats on tap for the next several months. Do the republicans did the republicans miss a chance to get a bill on their own terms . Do they have a better chance now . We had very different house and senate bills. The leadership, at that point, decided that this would be too controversial within our base to try to bring the two together. We let it die in conference. The president has taken an initiative on a hard stuff. What the republicans want to do get more high tech devices in. More green cards for businesses and farm and border protection. Republicans can act on their terms and not have to deal with the difficult issues and say mr. President , you handled that for us. When you look at the politics of the moment, how much is todays photo shoot and Republican Action in the next weeks about november of 2016 . How focus is all of his dialogue on the president ial race . And congress, it is less on the president ial race than preserving your majorities. In the senate, you have 24 republicans up, only 10 democrats. Only two democrats would be remotely competitive. Republicans are on defense and need to hold their seats in blue and purple states. Any senate, you are taking a look out for your majority. The house, it is a little bit different. They have a substantial majority. It is different than the president ial race. Interesting. Thank you. We will leave it there. Former caucus and from virginia tom davis. We will be back. Good morning, everyone. If you are just waking up, oil cheaper, ruvell weaker, Canadian Dollar weaker. Futures up 10. Olivia sterns has our top headlines. Standard and poors is close to a settlement with the justice department. S p is accused of misleading investors about its ratings of Mortgage Backed securities before the subprime crisis. Worldwide personal computer shipments down 2. 4 in the Fourth Quarter as demand from businesses for new machines waned. According to the market researcher idc. They had projected a 4. 8 fall, so it was not as bad. Tc sales totaled 80. 8 million for the quarter. Pc sales. Donald trump has filed a 100 main dollar lawsuit against Palm Beach County, claiming aircraft air travel is purposely being directed to travel over his estate. Noise, vibrations, and emissions are causing damage and destroying the once serene and tranquil ambience. Those are your top headlines. Breaking news. A showdown between metlife we have Erik Schatzker here. This is like a double shot of espresso. Metlife is suing the u. S. Government. This is a right metlife has to exercise over the dodd frank act. It was designated a important Financial Institution by the Financial Stability oversight council, which includes jack lew, janet yellen, a 10 member panel. The vote went 91 against metlife. One lone dissenting voice. Roy woodall. It puts metlife in the same category as the biggest of the too big to fail banks, jpmorgan citigroup. The ceo of metlife could not object to this notion more vehemently. It sounds like a badge of honor, but it is not. He says big does not mean too big to fail, insurers are already wellregulated by a system of state insurance regulators that have very stringent capital requirements. Apart from aig he would say, the insurers came nowhere close to collapsing. I believe roger cohen. I think he knows the difference between metlife and jpmorgan why doesnt the government that . When they decided to designate metlife as a important institution. It said that, a largescale forced liquidation of metlifes large portfolio of relatively illiquid act was at assets would pose a risk to capital and funding markets. That is the that is effectively the same logic that the it applies to jpmorgan. The ceo would say, hang on a second we are not subject to runs on the bank like a jpmorgan is. We are an Insurance Company. We operate differently our customers are different, have different requirements. We manage portfolios differently. Potential prudential did not fight it. Metlife is the first to fight it. Aig, ge capital are banks that are systemically important. Aig and ge capital, for politically reasons, could not challenge this designation. Prudential did not come a choosing instead to work with the regular, instead of fight the regular. They lost the appeal . This is the first appeal. Thank you. Lets get a data check. Futures up 11, dow futures up at 96. 10 year yield, 1. 89 . Oil under 45 a barrel is stunning. Ruble nearing a 661. Good morning, everyone. Bloomberg surveillance. Olivia sterns and Brendan Greeley with me. Some will tell you that it is i have a secret to tell you. I have visited the Head Quarters where they have a framed copy of this single. That of course is the first two words of run dmcs single from 1986. You have permission to say adidas. Will you say it. Mark king is president of ideas north america. Help me understand, quite move your design headquarters for the entire company from the sleepy hamlet of germany to brooklyn . To make it more relevant in the u. S. We are finding it hard to beat miles away, across a notion and say we can relate to high school kids. We have to be here to be relevant. Next you think that is the challenge you have . European brands that want to compete at the highest level struggle. There is a european mentality that comes out of germany comedy and you try to apply it here, it is difficult because of cultural issues and different in geography. What are they getting wrong . Everything. We need to focus more on the United States consumer and athlete. We have to be local. We are moving resources here. It is designed. The nuance of messaging. We try to use a global message around soccer or football and make it relevant here. There are so many sports here. You have to go after more american sports. Let me pull up this chart. Global growth in apparel. You can see id this at id adidas what you see at the bottom that blue blip is growing slowly. That is under armour. Those numbers are much more dramatic in north america. What are they doing right . What they have over us is they are in the United States. 90 of their efforts are focused on the u. S. The u. S. Is 45 of the global market. They are here, relevant. Can i mentioned you are in the hall of fame of the university of wisconsin at green bay. The coolest thing. Sports or academic . Both. Nike and under armour are these in america brands. How are you going to change that . Who is the quarterback, rogers of green bay . You need him, or somebody like that to build your brand here. We need more relevance with u. S. Athletes. More relevance with design and messaging. A lot of your competitors have aligned themselves with fitness movements. Nike with local running groups. Reebok used to do this with jane right jane fonda aerobics movement. What movement are you going to align yourself with . We are all about sports and athlete. It is about the athlete. Then, it is about this fitness movement. First, it is the athlete, then fitness. You came from tailormade. The biggest problems you have our reebok. Are you going to wrap those brands into one big adidas brand . We believe that consumers have preferences by brands. There are opportunities to build those brands individually. What are you going to do to save those brands . The gulf is this is different the golf business is different. We are investing a lot of money in the industry to get more people to play golf. Reebok is pointed at fitness. It is crossfit, ufc fighting all these different exercises. Marking, thank you. Our twitter question of the day. Where is the safest place to put your money right now . German and japanese five years are in negative territory. Tweet us at bsurveillance. Richard clarida is one of americas foremost monetary theorists. Mr. Draghi in europe, they need quantitative easing. There are not enough out there. Clarida on tv. This is different than what we know in america. Click the ecb has not done a big scale quantitative easing operation. They have not gone japan or u. S. Or u. K. They will probably announce that. They will announce something along that line. What will they buy . They are trying to buy private label. They will probably announce a big program, perhaps a 500 a dollar. That is their challenge. German yields are incredibly low. Within the committee, there are those like draghi who would like to buy a lot of bonds in the periphery. The germans visit that, because of issues. They are negotiation the terms of the price. They will buy our u. S. Paper directing the u. S. Yield down to japanlike yields. One of the factors is that as yields fall in europe, people chase yields into the u. S. We are connected in the global bond market at if yields fall in europe they will fall here. You have been good on economics finance what keeps you up at night about all this certitude . What worries you . I will give you a specific factor. The fed will hike rates. Every indication is that they will get away from the zero balance this year. Unemployment has fallen. Currently, inflation is below 2 . Core inflation is below 2 . You will have the fed commencing a rate hike cycle, based on a forecast that inflation is rising, but with inflation below target, in a world of disinflation and deflation. That is the big . Question mark. Bond vigilantes and the vigilantes out to upset yellens applecart. Isnt she a slave to what the market see in front of them . I give janet yellen high marks in her first year as fed chair. She nailed wage growth. She navigated a transition to bernanke in terms of fed language to redefine the guidance. The vigilantes may return, but, as of now, the bond market has been going in the direction that yellen would wanted to. You see qe by draghi by january 22 . Richard clarida of pimco. And the columbia university. Our twitter question of the day where is the safest place to put your money right now . I recommend bowtie futures. This is bloomberg surveillance. Richard clarida on a tuesday. Adam posen on a wednesday. One of americas greatest economy. On television and radio worldwide, tomorrow morning. This is so cool. Clarida and posen back to back as we look at europe. Lets get to our top headlines. Commuters in washington dc may have a tough time getting to work this morning after an electrical fire monday killed filled a busy subway station with smoke and killed one woman. Dozens of people sent to the hospital. It occurred at the beginning of rush hour on a train that had just left downtown. It is still shut down this morning. Service on other lines are on a reduced schedule. The u. S. Central command twitter and youtube accounts were hacked with messages reporting to be from islamic state. Just days after terrorist attacks in paris claimed the lives of 17 people. The accounts were quickly suspended. The white house says there is no indication classified military networks were affected. U. S. Is mrs. Spent a record amount on Corporate Travel in 2014. They are expected to spend more this year. The Global Business travel Association Says they spent 290 2 billion last year on business trips. The organization a spec and increase in more than 6 and 20 15th two more than 310 billion. Those are your top headlines. The russian ruble off to a new weakness. Richard clarida Mario Draghis drop never gets easier. Deflation is not just an oil problem it is a deflation problem. Is january 22, is it the day that we get the to stop talking about what draghi will going is going to do . They have been telegraphing this for six months. They have a program in place to buy privatelabile bonds. He had to do that to show he has done everything short of buying sovereign bonds. It will be a big program. Is a collapse in the price of oil making Mario Draghis life easier or harder . Easier. Headline inflation will be lower. He can say inflation is lower. It gives stimulus to the european economy. It is a positive for draghi. We have been talking about greece. The diversion is within the stronger economies. Italy has unemployment at a record 13. 4 . Germany, unemployment fell to 6. 5 . The lowest in two decades. That is the diversions. Onesizefitsall Monetary Policy, always creates tension. 19 countries, one monetary policies. The challenge europe faces, they have too much sovereign debt. They were able to borrow in the last decade excessive amounts. They have a debt, a debthangover. Germany is not willing to accept the Downside Risk of inflation at the center of this economy. Inflation in germany is lower than the germans would like. Everybody is on the same page in terms of the agenda. With your expertise with your focus on german culture, how is the bank today . In lockstep with draghi . Is the economics of the bundesbank i think they and the ecb share a common goal. There is a principled disagreement over means toward that end. Tensely the effectiveness of qe. A big qe program probably will not do a lot to boost inflation this year, but it may prevent inflation and falling. It may anchor inflation expectations. Arent we just pushing on a string. Looking adding negative 5year note. What does it do for mario draghi . An excellent point. All the Monetary Policy can do and all that he can do is buy time. He has bought more time than many of us thought he could. Europe challenges are not monetary. Interest rates are low in europe. There challenges our productivity, competitiveness, and fiscal. He is buying time, masterfully. All we hear is the need for structural reform. Have you seen anything in europe that looks or smells like structural reform . The spanish have done structural reform. Structural reform in italy has been disappointing. Nonexistent in france. The big countries, with the exception of spain, had not begun to go down this road. Breaking news. Rip up the script and go to richard clearedarida. Expect the unexpected. In venezuela. Movies cuts their rating to a caa3 to a caa1. I have no idea what that means other than his spells and junk. I do not follow venezuela daytoday. This has been a train wreck. It has been forthcoming forcing for a long time. Whether or not this particular downgrade is a shot, the fundamentals and is is leila this goes to this new relationship with cuba where venezuela said to cuba, forget about it. Cuba safety venezuela forget about it. Venezuela has said he needs 100 to balance his budget. When it the bargain for the countries where doctors for oil. That is the trade that is broken down between cuba and venezuela. To experience a financial crises is these outsized things step in to the zeitgeist. There is the headline that could roil the markets. I love olivia standard, we live for convergence between the oil price and the starbucks in zurich. We are getting pretty close. Do you have a euro price, a tip price for the euro . I had some internal discussions. Everyone knows, when the euro came into existence. Through the darkest days of 2011 at 2012, the euro never weekend below that 11837 level. We are through that now. The next technical is paris. There could be a real test of this currency . I think there is more downside. There is the headline. Olivia . We ask where is the safest place to put your money. I am considering our first answer is gold. The only way to shine. This is interesting, because you do not often see the euro fall oil fall, and gold climb. Gold is stronger today. Ok. Our second answer, the nasdaq. The s p and dow the nasdaq closed its 2000 high. Purchase a new ford gt. Sell it in five years. What you really want to do is purchase a mustang in 1970. And then have not driven it. A 1964 convertible, where is it . With the venezuela breaking news caa3 is two steps above default. Good government into back government, no matter how you break it down, venezuela is on the wrong part of that quadrant. These are the events of the shock in oil raking at 44. 67. Oil, there is the 66 print on the ruble. We go into the next hour with a new, lack of bid. A trigger of flight equality. We are a huge company, we are seeing all sides. There are clients that are chasing yields, because the yields are zero or negative in parts of the world. That is the bid for treasury. Richard clarida is with pimco. Futures up nine. The 10 year yield, 1. 8 . Tomorrow on bloomberg surveillance, adam pozen will join us. Good morning. Were live from bloomberg World Headquarters. I am trish regan in for betty liu. We are 90 minutes from the opening bell. Some are saying its time to raise the gas tax. That hasnt happened for two decades. We are going to talk with the former transportation secretary if this is a good thing for the economy right now. Audi debuts its latest suv. We will talk with the ceo. First, heres a look at the top stories we are watching for you this morning. Oil passed another milestone on the way down. It fell 4 . Training is below 45 a barrel. Trading is below 45 a barrel. Opec can withstand the plunge and oil prices. The british inflation rate hasnt been this low in him was 15 years. Consumer prices rose one half of 1 . They will write an open letter explaining