standing there grounds. will go on without tromp. he has accused megyn kelly of bias. -- donald trump leads with 34%. no other republican candidate after rubio and cruiser in the double digits. only a few members of a group remain inside a refuge. day,ars ago on this tragedy struck when the challenger exploded. will hold memorials today at the johnson state center in houston and at arlington national cemetery. matt: a slew of earnings out now. ford, the earnings just crossed. $.58. they were looking for $.51. also beat. -- if you40 mill strip out some of the other businesses, they beat on revenue and eps. we have the conference call, looking for detail on the outlook. says earnings will be the same or higher in 2016 then they were in 2015. we want to see more about cost on the conference call. i'm going to speak to bob on bloomberg television. has come out with earnings. in the both. the interesting thing about alibaba, they had users by making purchases in the quarter. the fundamental strength of our core business gives confidence to invest in strategic priorities. thatd so well on earnings we can invest more. to see the same thing with facebook. those shares continued to rise in the premarket. this is going to be a year of investment. up 12% because of the metrics. thange daily users more one billion. 1.6 billion using it at least once a month. earnings numbers, 80% of used on mobile devices. futures have turned around. bouncing back-and-forth between gains and losses. futures down. nasdaq futures with facebook and internet companies rising up about a third of 1%. oil had a bit of a tour around -- a bit of a turnaround. atare basically unchanged 32.27 after a rally yesterday. it is interesting to watch the effect oil has on the market. david: i want to turn to the fed. notet share in new york did like it. they took a tumble after they registered concern over the health of the global economy. now, global head of market economics. they have a redline version of the statement. they take the statement and market up. every change they make is to the dovish side. looking at the terminal, it is down 16%. you think there is a decent chance. >> i think the markets have gone too far. maybe the pessimism got too much. feds left the options open. it could get worse. at the moment, staying on the fence. what is the data flow going to be over the next weeks weeks? january will be softer than december. you will probably hold up well. in this statement, they moved the labor market from the third to the first. they gave a strong impression. what we care about is the labor market. david: they wanted to take out the underlying discussion about the economy. said the longer view of the economy is intact. it does not matter if they go march, april, or june. they're waiting to see how things play out. things will not be as bad over the next six weeks. the market has too much of a probability of such. prices.ave a lower oil , they arespeaking down. other than the labor markets, can they point into anything going into march? --the fed is waited until they expected volatility and they got it. they are more than they expected. the labor market is the key thing. we do not want to overshoot too much on the labor market. it is very difficult to engineer a soft landing. the basic game plan is intact. we give ourselves a bit of flexibility over the timing. did janet yellen give us -- to as we have not have that since the start of the year. >> the market did not love the use -- did not love the news. there is so much going on. it is difficult to disentangle one piece. stephanie: was there a message janet yellen could have given us that would have made the market super excited? the fed had given up on the basic story, it would have been bad for the market. given all that has gone on in the economy, q4 gdp was softer. admitted the facts. stephanie: they what? >> they admitted the facts. stephanie: i wanted to make sure we got add me to -- admitted, not omitted. its little bitid yesterday. i thought it was cool there was no perverse reaction. economists have not rushed to downgrade their estimates. this is the estimate and the curve of distribution for the march meeting. wem all of the economists survey, which includes jim deutsche bank, they are all looking for .75%. an increaseing for in march, even if they change their forecast. it is interesting to look at the market reaction. bonded traders outlook for inflation took a dive after yesterday's meeting. it comes up a little here. we are at 1.6%. not see the inflation coming, even if the cpi figures are at 2.1%. on the inflation, clearly the world economy is turning out softer than expected. break evens ishe the spot oil price. does it give you a good read of where inflation will be in five to 10 years? no, it gives you a good read of where the oil price is today. >> you can see in past cycles, the contagion can spill over into the more developing economies. >> how does it affect the u.s.? transmission mechanism is confidence. one --fidence route is >> it is up to 98 -- >> because the consumers are benefiting from lower gas prices. they may be worried about the stock market. the fed does not know how that will balance out. if you look at the comfort index, it tells you the get lower gas prices are winning and that will continue to be the case. theyose numbers come out, will see the consumer is not that rattled. stephanie: josh, we are making him stay. much more to talk, breaking down the fed. el-erian will be joining us. he says he pities the federal reserve. the market cannot figure out how to take this news. ask mohammed. he surely knows. we will find out more about the bank's turnaround planned when we come back. you are watching "bloomberg ." happy to see oil sitting where it is. when oil moves big, so does the market. relatively flat on the morning. ♪ vonnie: welcome back. shares of facebook are up in free market trading. fourth-quarter sales rose 52%. 4/5 of the revenue comes from mobile devices. has 1.6 billion users who log in every month. fourth-quarter results better at time warner cable. shares of time warner cable are down 5% this month. stocks up 22% in the last year. california says self driving cars are not market enough to zip around town without a driver. says that would limit the technology. stephanie: deutsche bank in theies posted a loss fourth quarter. this is the first we have seen in seven years. john wants to expand in businesses. for more on where the banks turnaround effort stands, lee abromwicz.s -- lisa people leave the bank. what are they going to do to get out of this? debt trading revenue dropped 16% in the fourth quarter versus a 4.2% gain in the pool of fixed income trading revenue for the top five u.s. banks. you can see who is cannibalizing from whom. stephanie: if you look at people who came from debt businesses, bank and aretsche now at the top five businesses. they have nothing to sell. seemedhe human element to be taking it out some degree. new debt sales came out, activity happened in the first 10 days after the sales and people stashed the bonds in portfolios and that was that. that is changing. you are getting more volatility. you need the capital intellect, the experience, which are not some of these as able to pay. he made the point that stephanie is making. compensation was out of whack. if you look at the tyson-johnson deal, who was advising them? center view and lazard. the fee differential between being the lead advisor and the word advisor is significant. stephanie: why are they losing market share? >> big banks are having a hard was said. what keeping the talent who has a relationship with the executives. you call? you call someone you have had a relationship for 20 years, who is not looking for a piece of financing business. stephanie: if you are the best banker out there, spending your life on an airplane and you wake up and your bank is facing another regulatory charge, another area they have to shut down, you are tired of not having your destiny controlled. they want to work at smaller boutiques where compensation is tied to the work they put in. lisa: banks need to be strategic. there is a group of performers the top performers are necessary to bring in the business. goldman sachs has gone against the grain and said we want to be commended, even if morgan stanley says -- deutsche bank is saying our board members are not going to take bonuses for the next year. you are talking about two different worlds. lisa: morgan stanley has said the overall pool is shrinking. it is not coming back. morgan stanley, goldman sachs, it will continue to do well. they attract great talents, they keep it. difficult gamere to be competing in m&a. >> thank you. we will be seeing you at the 9:00 hour, lisa. we look at the top trending stories next. ♪ >> welcome back. it is time for the bloomberg trends. we look at the most read stories of the morning. here are the top five. .he first one, deutsche bank look at the hours. stephanie: i would be all about deutsche bank, but we have to move on. i want to talk elizabeth home. -- has been under attack. heranos labs have found shortcomings in one of the labs run by theranos. was the youngest female billionaire ever. when you look at who was on the board, the backers, this makes you think about unicorns and the amount is dead unicorns we could see this year. can you imagine how the evaluation would he destroyed? she has other smart, talented people supporting her. feels like icarus. flying too close to the sun. stephanie: the darling of the silicon valley tech world. these evaluations are made up by people in a room. that has been torn into confetti. josh: there was a story about the zika virus. it, toa light angle on say, are people going on their babymoons there? seen how relatively obscure or health concerns can become significant issues for people in the region. he can have a profound impact on economic activity. become concerned about traveling to that region, it hurts leisure. david: remember the evian flu. it was a real issue for china. josh: they could be serious. david: economics minister of japan had to resign overnight. he was spearheading abenomics. he was caught up in a scandal about political contributions. he had to quit, in tears. josh: there is a tight linkage about political financing. you see it in japan, france. things that get politicians in trouble are contributions to their parties and political campaigns. david: it is not the fact of the contribution, it is what is done with it. the question here is whether it was used for personal use. joss: they cannot help the momentum seeing further reform in japan. stephanie: in the market, we have earnings. when we come back, shares of as users areup, turbocharging sales growth. more of that on "bloomberg ." ♪ david: welcome back. futures slightly up. we are here with josh and are you recovering -- and tom keene. tom: i am stale. david: you are never stale. stephanie: are you gluten-free, tom? david: this is the rational. we are not going down. vonnie quinn? vonnie: they may send thousands of refugees back. the british government may reject half of the refugees looking for asylum because of the cost. they might be sent back to their home country or the country where they were when they first filed for asylum. one of the main syrian opposition's has sent you conditions for peace talks set to begin tomorrow. they want to see progress in syria before they take part. opposition leaders have accused russia of trying to dictate who would dissipate. the $1.3 billion u.s. fourth-quarter loss at the security units, the largest in europe. revenue of fixed income fell 15%. they have been scaling back trade-ins. overall, he said he was pleased with the bank's performance. global news 24 hours a day powered by our journalist in our news bureaus around the world. matt: let me give you a couple of breaking earning releasing's. jetblue coming out with falling 1.9%. that is revenue per average seat mile, so that is not good. forth quarter was 56 cents jetblue and we were looking for 51 cents so that is an adjusted number and not unadjusted. that would be estimates. jetblue is up 3.5%, so it looks like that could beat the comparable figure. i'll go through the jetblue figures, but caterpillar is that with fourth quarter adjusted eps, 74 cents a share and 59 cents is what they were looking for. sales growth was down, so whatever negative growth, 16% in december, 11% in november, seven months in a row, it has come down. goldman sachs put up the cell on town to poet a couple of days ago because of the global economy effect. after beating eps. jump.armour with a huge 11%. 15% year to down date, so down more than doubled the s&p 500. sincenie: and down matt: september, like 40%. right, but it has beat on that only every fourth quarter metric, revenue, earnings-per-share, but outlook. they're predicting revenue for the up about 4.9 5 billion dollars. they were looking for $4.9 billion. what i thought was interesting was in a statement, the ceo, maybe i think it is interesting because i am one of the users, uniqueey had 160 million registered users across the platform and they are talking about connected it is stephanie talked me into this and i signed up and i have to log all of my workouts and what i eat. stephanie: and that is not a good thing for you. matt: no, i just ate half a bottle of peanut oil. david: i can see the results. [laughter] stephanie: david just crushed you. did you see that? matt: i have earned it. facebook is the most amazing story of the earnings over the last 24 hours and i think there have been about 1000 companies. this book is up 15% in the premarket. the company had one billion singlehat uses every day. 1.6 billion that use it every month. people watch 20 minutes of video every day on it, so they are crushing it. said he willrg start investing in the business more and put more money into future growth, so facebook is the story of the morning. stephanie: when you talk about facebook and under armour and the they are around, users, amount of people activated. more and more companies when they talk about growth are talking about user engagement and not about selling products. that is interesting. matt: that is right. david: we have a lot of user engagement here. stephanie: you know it is interesting, [indiscernible] it is time for our morning must-read. tom keene? tom: vonnie quinn found this, it is a smart essay. it is attending france in the cause conversation -- francine acqious conversation. china is not slowing. it is picking itself up slowly after a legit recession in early 2015. a short-term economic rebound is already baked into the pie. it is stimulus as usual. to its bageled ways. this is a good essay with a lot of different themes, but as we work with many other people, they are really pushing back. , they arehe says interpreting what george soros had to say. he is not trying to bet against. people are overreacting, but i thought it was interesting with the suggestion that not that china is slowing down, but it is coming back up now. tom: the complexity and the mystery of what we know about are thate basic ideas we don't know the vector, the wins and the ways, but we do note the mass is a pretty good math. this: we have never had date of economy with this lack of transparency. the head of the statistics bureau was put in jail for corruption. stephanie: it is mind blowing. david: it is so big go we don't know what is really going on. josh: there is clearly an issue of transparency. generally speaking, people who are aggressive and currency market do not go against countries with over $3 trillion in reserves. that is not possible of the case to make -- that is not a plausible case to make. when the government has this much influence over currencies, it is hard to play. stephanie: george soros had another message. distinction is between china and this asian currency that. it is rolling over and going in the soros from a direction. josh: china has a problem. you did they have to put capital controls and or devalue the yuan. tom: there is a distinction between devaluing and depreciate. devaluing is more about junk. we are hoping we see a managed depreciation of the currency. think of america of merrill lynch suggested we get to 71. stephanie: you know what they don't have an faceboo -you know if they don't have in china? facebook. david: she is good. they spoke as delivered another quarter of record revenue. climbed more than 34% last year. we are going to bring in a bloomberg intelligence director paul sweeney and josh and tom keene won't stay with us. i was flabbergasted. i cannot find a cloud with a silver lining. topline growth for company, we have not seen that for a while out of facebook , so it blew out daily user growth, mobile user growth, and the bottom-line revenue and eps numbers that came in. sheryl sandberg took a lot of time last night to get across to we'd beenthat facebook are the key partner for big brand advertisers out there. as more ad dollars shift to online, and if you are a big advertiser, there are two places to go, google and facebook. david: the number that jumped have 100 billion hours of video views a day on facebook. 100 million hours of use. stephanie: i want to go back to this, google and facebook. barry bell or set -- barry miller said to us yesterday that any company that goes to facebook or google, they are merely serfs in the google empire and that is the same argument we could make about facebook but given the power. and look at twitter. observation,hat which i think is valid, can you extrapolate the trends? security analysis is a game of extrapolation. can you do that with these kinds of growth's? josh: you look at the big bad picture globally and global at ding grows, but if you look within internet, there are shoots that are really putting up more extraordinary growth rates. the two fastest growth areas on the internet are online video and social, clearly, facebook is the big player on social. they are making tremendous and online video with a lot more video in your newsfeed. that is where advertisers are contracted, so facebook has made the investments and they seem to be paying off. as sheryl sandberg said, they are walking a fine line of increasing the advertising though, monetizing their audience but preserving users. stephanie: remember facebook is offering to advertise. facebook will give you the actual data. here is how many people have clicked. if you're trying to get advertisements and you are saying, would you like a billboard on the highway or get the response that facebook can get, no comparison. matt: i want to shape the market cap. this is normalized. they spoke is a much bigger company than twitter, but it is up 25% over the past year. twitter is down 51%. paul was talking to "surveillance" with tom, about the network effect. about one billion users, that is when it starts to work is what mark zuckerberg said, so i thought the network effect was interesting terry thousand and takeaways from "surveillance" this morning. stephanie: one would think since the whole universe is doing well, they would rise with them but they are not. pulsing the, thank you. t.k. we have to send it back to radio. -- paul sweeney, thank you. t.k., we have to send you back to radio. ♪ stephanie: welcome back. we are taking you to frankfurt, where it deutsche bank security posted a loss in the fourth quarter. fixed income and currency trading also sought 60% revenue decline. for more on the banks turn around, our own guy johnson sat down with cfo marcus schenck and he joins us now. guy: thank you. deutsche bank is trying to get fit. division at the bank went into reverse in the fourth quarter. many analysts are now questioning whether deutsche bank will have to raise money to hit the 12.5% here one target by 2018. i caught up with the cfo, marcus schenck, and he is convinced they will not have to raise money. marcus: we have a plan and i think we have made a lot of measures or events that we expect to represent the burden. we have been specific about this and there will be more in 2016 whatsts the crib you on one amount of money is necessary on the restructuring side. we also have a clear view on what we think we need to invest into driving down our units. we have some flexibility in doing some of that, in particular, as it relates to our units. we think we can manage the way over the next 12 months, 18 months, which will be tight, but from what we can see, it is doable. guy: one thing that worries investors, you will be relying on origination, equities, and what do you say to those people not concerned about that? marcus: we need to recognize that quarters three and four of 2015 have not been great. in contrast to the first half of the year, the business performed quite well. clearly, there will be some uncertainty amongst the people, which probably have cause to drop inent with the activity, but we have also operated in a much weaker market environment. i think what we are doing now, we recognized and we need to reinvest into our equities .usiness secondly, we have to strengthen our corporate finance team. he have made some investments, as in hiring additional people, some are not even in the bank, and he will keep trying to look for some additional selective add-ons to the team. guy: are you losing people in those areas? are you losing revenue generators because of the outlook on bonuses? effect having a ripple to the fact that people will step away? marcus: i would say it is too early to tell because it has not been communicated. it has yet to happen. the message is clear. yes, we have lost some people. as always, you regret that you lose, some of them you say, maybe not so bad because as he had communicated, we need to reduce, but it is not so much of the client facing side. have a big will differentiation in times -- in terms of how he paid the bonus. those who we really want to keep and our big revenue contributors will be paid a competitive terms, and others, will probably have to accept a much lower and sometimes zero bonus. guy: is there any risk given the it is aurbulence that separation for the business in 2017? you said you are on track, but is there any risk in your mind that it will end up slipping? , i or johnstops with has never said it happened -- it has to happen in 2016. john and i have been very clear when we came out in october that this is something that we expect to do over the next 24 months, i.e. during 2016, 2017, and what happens depends on progress that the bank makes and what the market looks like. that may be 2016 or 2017. of: marcus schenck, the cfo deutsche bank, talking me about the results. the stocks drop today, they were the and it dropped after pre-announcement, so the market is not taking this story particularly well. john is running deutsche bank and trying to put a positive spin, but he admits that 2016, and the beginning of 2017, is going to be very tough for the institution. stephanie: very tough. remember, since the financial crisis, it is not like deutsche bank is coming off a great 2010 two 2014. a tough start to the year. where marcus schenck says they will have selected add-ons, where? who? who is coming into that organization and even if they paid that person, they will have a team that is not getting paid. that is why people work at banks, the dough. we will be back with more. tonight, the last republican presidential debate before the iowa caucuses and donald trump's empty podium mayfield -- may field to show. we will have that next. you are watching "bloomberg ." ♪ ♪ stephanie: you are watching "bloomberg ." we are talking power though, donald trump all over the news boycott and tonight the day after the network refused to axe megyn kelly as a moderator. he defended his decision must that. >> i was not treated well by fox. they came out with this ridiculous pr statement, though not by a child. it was baton and i said, how much of this do you take? i have zero respect for megyn kelly. i don't think she is very good at what she does. donald trump's favorite defense, you stink. as donald trump has pointed out, no stunt hasn't hurt him in the polls so far. what will he win in this debate by not being there tonight? chance to do a what he feels is right just not to help a news organization with an event that consulted him. i don't think this was a thought through decision. i don't think he listened to his advisors. this is his this wrote reaction to being attacked by fox news in a pr statement. there is lots of second-guessing, will this hurt him? was a complicated? i do think so. stephanie: when you say he did not conduct a poll or xp to advisors, does he ever really -- or speak to advisors, does he ever really? mark: he does speak with advisors, i am not saying he did not ask or consult with them, but this decision had heart at the roots. trump reading the statement from fox, thinking it is juvenile and not something he would stand for. trump does not stand for being insulted and he has the power, he thinks, to get away with it. david: how does this play with the voters? all of a sudden, he is the man and trump is the insurgent and roles are reversed and roger is having trouble trying to play that up, but how is the top photo reacting? mark: i think the people who are poor trump are fine. the ones i talked to in the last days, they don't see it as a big issue. there have been a lot of debates and people one not say, i have not seen debates, and i think it is a moment of strength and that is what trump's spreading with his supporters. does this hurt him with undecided voters? maybe, but most of the public polling and private polling showed trump with enough of the lead that i think it this turnout operation performs, this debate and will not be decisive and it could help them. david: there was a story two days ago about whether bernie sanders was going to go more negative on secretary clinton on the ties to wall street. you expect him to be attacking her more vigorously or do think he will stay with his more positive and uplifting message to pilot and new hampshire? -- through iowa and new hampshire? mark: there is a question on whether he will change his tv advertising, but his rhetoric has been more negative than hers in the last days, but it is largely on issues. the fact that she spent time fundraising in philadelphia with the financial community rather than in iowa, i think it played into his hands. you will see that senator sanders will engage in contrast. whether he doesn't in television or paid ads, i don't know. i think what the candidates say right now is a bigger deal. stephanie: let's go back to the psychology of mr. trump. he will not be at the podium and he does not have to answer the hard questions. does this detect them against criticism because he will have said nothing? mark: i think it trump had been in this debate, and he might change his the mind, but if he had been in the debate, i think you would have seen that there cannot incoming at ted cruz and donald trump. i don't think donald trump is afraid to take ted cruz, i believe he has -- i think he believes he has won every one. i think the main argument will be ted cruz and i think that works in trumps favor. whether that was part of what he thought through or not, i think that will be in effect. senator ted cruz will be the subject of the tax -- subject of the tax. stephanie: catch mark on "all due respect" here. we talk aboutack, the fed. ♪ the only way to get better is to challenge yourself, and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. david: this kid is in the wait and see mode. march risks may make a rate hike unlikely. we will talk to mohamed el-erian . the online admission, facebook, and fourth-quarter sales soared and the stocks doing the same. later, the focus turns to amazon. this is real sweat equity. we would talk to equinox about hearing real estate with fitness pairing real estate with fitness. stephanie: welcome to the second hour of "bloomberg ." i am stephanie ruhle. david: i am david westin. i went to welcome mohamed -- and moree co-cio importantly, he had brought out the book. i want to talk about the book. congratulations. we will be talking about a fair amount of weight you talk about in the book, but first, first word with vonnie quinn. is not donald trump changing his mind and he says he will not take part in the debate tonight. the new politics poll shows donald trump with the big lead, up 34%. marco rubio is at 14% and ted cruz at 12%. lawmakers in michigan will water crisisint and they are expected to approve 28 million dollars more to address the lead contamination. michigan's u.s. senators say they will command to propose energy bills to protect the water supply. the national football league is been investigated over the ticket prices. new york attorney general eric schneiderman wants to know whether the pricing rules for nfl ticket seats are illegal. the league encourages people with tickets to sell on the nfl ticket exchange and enforces the prize for the nfl. global news 24 hours a day powered by our journalists and i knew spiros around the world. market -- and the knew spiros around the world. matt miller on the markets. matt: thank you. we found direction after flip-flopping because of what was going on with commodities. s&p 500 futures up one third of 1%, nasdaq features of the most at .8 of 1% because of some of the earnings i will go through right now. check out oil, the move and oil has been up and down this morning. we have found a little direction. there is optimism in the market according to analysts that the saudi's and opec could cut production, although, even the analyst do not put the high probability on that. right now, 32.73, so it continues the games we saw yesterday. if you look in my terminal, i have crude futures and s&p 500 futures scrapped together. you can see that there is a tight correlation in the moves. oil is helping the market to decide in the equity market decide which way to go. let's take a look at facebook. this is the reason you see the nasdaq features doing better than the dow jones and s&p 500. there helping internet companies across the board. up 14% after it the earnings, revenue, had great user metrics. david mentioned 100 million hours of video viewed on by 500 million people, so it is a massive, massive win for mark zuckerberg. 80% of facebook users are on mobile and they are getting advertising dollars to invest in the business. paypal is a tale of two companies. another day we talk about carl icahn and how right he was. he said paypal was the jewel of ebay and that they needed to spin it off. way,eo of ebay said, no jose and then he said, i will spin off paypal. paypal comes out with earnings doing better than the street had estimated. ebay comes out with our needs doing worse than the street estimated. you can see paypal is gaining ebay which is down. david: thank you. the federal reserve is in the spotlight again. mohamed el-erian writing this after the fomc statement yesterday. he wrote -- pity the federal reserve, as they demonstrated wednesday that the central bank remains hostage to changing financial markets and global economic conditions. this is making it very hard for them to communicate the consistent policy that will be pursued for a significant period of time. to janet yellen blow it in december? mohamed: no, i think raising rates was the right thing to do and they should have done it earlier. we are seeing is the fed is no longer in control of their destiny. ask fed officials, where they have liked to move the dow jones by over 300 points after the statement was issued of doing nothing at all? dancer know, but they did because they are not able to communicate and contain a clear policy message because they have become hostage to the rest of the world. david: are they not communicating? i bet they basically said they would hold and not move either but hold. that is fairly consistent. is it really their fault for not being consistent or, as you save your book, people are fascinated with them because there is nothing else going on. mohamed: they have been pushed into a role that they don't really want. think of it this way, one month earlier, they told us they expect for hikes. now, we may get one or two. months earlier, they had told us that there were certain amounts of risk and the economy and now they are telling that they are telling that the cannot even comment on the balance of risk. i think the fed is as confused as everybody else because we are living in the midst of massive changes in liquidity, i'll activity, and global economy. stephanie: when you said the fed cannot control their own destiny, do you mean there are the ammunition? mohamed: first, they are out of ammunition. and second, because they have been the only game in town for so long, the policy affects are getting exhausted. stephanie: how is that new? i feel like the time we are on security -- we are on security -- mohamed: they told us in august 2010, when he went qe2, he saidl with benefits cost risks and the longest tuesday unconventional, the lower the benefits and the higher the cost of risks and that is what we are seeing today. david: when we go back to december and they sort of gave guidance about four hikes this year, if they had said, no, there will not before hikes and then there were, people would have been surprised, so they were trying to get ready. today have any choice? -- do they have any choice? mohamed: they are trying to get this off this obsession of what they would do in january, march. they want us to understand this of the an unusual hiking cycle. it will be shallow, stop and go, not the usual 25 basis points and it will end way below them in the past. that is what they want us to focus on, but we keep pushing them, what are you doing in january, march, 2016? stephanie: is the only thing to do to prevent this they simply step out and that the markets fall as they may? they may isl as interesting because that means we have alliant on the fed. stephanie: that's what it is. if the fed is trying to push us to do one thing and we say, no, if their answer is, i am saying and doing nothing, then what happens? mohamed: they were to step back completely, then we will realize how much we have decoupled prices from fundamentals. the difference has been central banks. if they were to step up completely and say, -- here is an example, we will continue hiking to 4% as he had sent historically, the market would have a heart attack. they do not want to become part of the problem but the solution. david: you are pointing to a fundamental problem, which is, if you are right and i'm sure you are, that means a fair amount of valuation in the market is in anticipation of what the fed will do and not help operations are doing and whether people are making money or employee. mohamed: in the book, i said that the fed has done, because it is the only thing they can do, it has borrowed growth from the future. that makes sense if you can validate it by promoting economic growth, but the fed cannot promote economic growth without the help of policymakers. stephanie: what if the market had a heart attack? yesterday, we talked about raising rates, and barry thought about the fed more in that moment that he said he ever has. how much did you think about the fed before you sat in this seat, david? david: never. hashanie: if the market heart attack, the prime recipient of all the goodness around qe because asset prices rose, whether the market had a heart attack? why is that bad for the fed? youmed: the example i use, have a best friend forever, that's what the fed was to the markets. stephanie: that is a problem. the fed should not be the best friend forever to asset managers. mohamed: i agree with you but the fed had no choice and you would have been the same, stephanie. it had a moral obligation to step in when other policymakers cannot. it never assumed that it would still be in that business five years later. stephanie: well, that is a [indiscernible] david: are we headed toward a recession? mohamed: i put the probability 30% ofssion in 2015 at people thought that was high. a possibility,s a 30 percent possibility and there is 870% possibility we do not. i think this economy is quite healthy, there is a ton of cash on the sideline, innovation going on. david: you said for 2015. 2016? mohamed: i think very low probability. stephanie: can you tell the difference between ben bernanke and janet yellen? does it matter that much who is in the seat? is it about monetary policy versus the school or political policy? mohamed: i think it matters. i think this is a less unified fomc. in december, they were able to unify around certain actions and has happened what subsequently, it is not their fault. china made policy mistakes that has complicated everybody's life and now we will see a much less unified fed and that matters when it comes to who is sitting in the chair. stephanie: david and i will argue that it seems no matter what janet yellen does, you hear all the other members coming out scmunified.ed, when we come back, we are talking more. plus, we will take a look at qualcomm on the way out. shares this morning are down after earnings at the weaker forecast and the smartphone maker is going on semiconductor orders. we will find out if his team is winning even if it is company is not. qualcomm shares down, take earnings week. stay with us. ♪ back.: welcome here is your latest business flash. was theficial, 2015 largest for automakers ever. themost $11 billion for year. the big reason, rising sales of suvs and the f1 50 pickup. caterpillar will keep stealing the impact of the commodity slump for a while. they say sales and earnings will keep falling this year. in the last two years, caterpillar revenue has fallen by about $10 billion. for the first time, amazon will advertise during the super bowl. the commercial features alec pitchingnd dan marino amazon's echo wireless speakers. they are paying up to $5 million for 32nd spots during the game. stephanie? stephanie: that is so much money for a time when people are using the restroom. a little rapid fire with mohamed el-erian. we went to get his view on the number of things and you helped us with your instant bloomberg questions. let's start with u.s. treasuries, buy or sell? mohamed: fairly priced cold. david: should investors state in this point? mohamed: good question. investors should have 25% to 30% in cash for this volatile period and you could pick up good names. stephanie: over what time? mohamed: over the next year. we have entered a new paradigm and it will be quite volatile and you will have stocks overshooting and being contaminated by elsewhere. probably getting back to fundamentals? mohamed: i think we will get back to fundamentals but really important names on the way down. from twitter, two markets have it wrong with china being considered as a leading indicator? stephanie: that is what the book is about. mohamed: care to parts of china. i think the markets have over worried about the chinese economic outlook, but i think the markets have understood that on the financial side, china made the same mistake we make with housing, which is remote equity ownership too far and now we are getting a correction because financial markets went too far in china. stephanie: i have a question directly about correction from insmed bloomberg, why is it such a big deal if equities go down, 20%, 40%? high heels, should only be 25 basis points? mohamed: it contaminates fundamentals, so if we were to wake up with a 20% or 30% stock , as your reader has suggested, which i'm not suggesting, that would have an impact on economic sentiment. you will find consumption, investment coming down and the economy will slow down. so a natural assets do matter. david: -- mohamed: so financial assets do matter. david: are we going to start a series of defaults and credits? mohamed: default rate will go up and not to historical levels because a lot of companies turn down their debt, but we have been in a period of low defaults. stephanie: when you talk about added volatility to the system, how much has regulation affected that? i went to understand the impact. the fact that there is no longer that cushion from the bank, especially in high yield. mohamed: there is no doubt that regulation has put forces on the community and the broken dealer community has not wanted to provide that amount when everyone is trying to do something different. that is absolutely correct. having said that, the alternative for that the worst. have we had not had the adjustment, we would now be great concerned about another round of financial instability in the banking sector. it is the news that a banking system has been found. david: has reduced liquidity exacerbated the equity markets? mohamed: absolutely. we have less liquidity and we have been changing policy. the two of them together cause volatility and will continue to do so. stephanie: how so? mohamed: the market has assumed that the global economy is goldilocks. backedntral banks have it, and now there is concern about the global economy on the account of emerging countries and china. in addition, central banks and the fed easing on the accelerator and they will continue to ease off the accelerator and the ecb will press harder. stephanie: i want to talk emerging markets. even though it is more sound, banks and not taking on big risks. we were talking about emerging markets yesterday and emerging-market corporate today are significantly riskier and have more debt, or leverage than ever. shouldn't we be afraid? that is a big problem. mohamed: it is. they over borrowed for two reasons, interest rates were very low, so they over borrowed and now they will adjust. having said that, if you look at some corporate's, the markets have tracked that. stephanie: that is a good thing. as opposed to high yield last year at 5.5%, which was not a good thing. mohamed: it is a good thing, but the one issue to remember with emerging markets, they have a very weak base a dedicated investors, so they can skip over quite easily. david: let's go to sovereigns, oil. there are a lot of countries that are really hurting on oil prices. mohamed: if you are looking at venezuela, nigeria, you should not worry -- you should worry. you should worry because they have little reserves, quite a bit of debt, and they cannot adjust terry much. stephanie: we are always worried about venezuela and nigeria and now it is worse. mohamed: but don't generalize. there is saudi arabia, and they will come out of this overtime. david: russia? mohamed: i would put that close to the first group. david: more of a worry. stephanie: where will oil being six months? mohamed: around here, having traveled quite a bit up and down. [laughter] stephanie: around the world and back. mohamed: i would tell you ambiguously -- unambiguously higher. to 36 months, oil prices will be higher, but in the slow time, volatile. stephanie: you should buy his book. not just to read, but if things get so bad, you may have to burn it in your fireplace to stay alive. [laughter] david: when we come back, the strong dollar is hurting earnings and a lot of corporations and we talk about the role of washington in the economy. that is on next on "bloomberg ." ♪ david: here on "bloomberg ," we're back with mohamed el-erian . i went to turn away from the fed. stephanie: i like the review columnist. david: as you say, we focus on central banks, the fed, but we don't talk about fiscal policy but just monetary policy. what is the role of congress, the president in this economic grass? mohamed: congress should have done more and should do more. we know what we need. we need first and foremost, more structural reforms in our tax infrastructure helping her labor market and we need to match the will to spend with the ability to spend and fiscal policy has been. thirdly, we need to deal with the federal bank. student loans in five years time, they will crush: new generation. , wehanie: we need, we need need. nothing you are saying is new, so why haven't we? mohamed: we have political this function. stephanie: that is not changing. have you looked at the debate tonight? mohamed: i am blessed as a mystic. i think there is a good path that we need a political moment with growth becoming a big issue. it has been outstanding to let politicians know that they care about this. there is a reason why these anti-establishment movements are doing well here and in new york. david: i want to talk about the dollar. a chart showing the trade of the dollar. matt: i do not know which one to use, so i used the 1973 face because i was born in that year, so this is my own trade weighted dollar. since my birth, we have never or we have not come back yet to a full 100. to my year, we did spike in the 1980's, the early 2000, but we have not come back yet even though there is talk about the strong dollar. mohamed: thank you for not going back to when i was born. [laughter] there would not be enough room, but let me point this out. every time the spiked at 150, 110, something broken the global economy. if we continue spiking, is something going to break this time around? i think the fed is concerned about excessive dollar appreciation. the problem is everyone wants to depreciate the currency, so the most likely take your in three months time is we will spend even higher since the trade weighted dollar. stephanie: i leave the show scared every morning. mohamed el-erian, we are not letting you go anywhere. when we come back, mall of -- with u.s.ish gays futures relatively flat and job data on the other side. bullish gaze with u.s. futures relatively flat and job data on the other side. ♪ the only way to get better is to challenge yourself, and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. so your business can get back to business. sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. stephanie: you are watching "bloomberg ." we are looking at crude. comet el-erian is with us -- mohamed el-erian is with us. we may see oil at the same prices six months from now. we are seeing oil take a turn. choppy, difficult markets to trade but a time when finally, corporate's best we may be getting back to fundamental levels for equities. the question is, when is that going to change? the fact that we are seeing oil and equities trading 1-1, that has to break at some point. mohamed: correct. they are reacting -- atphanie: we have to look jobless claims. it is all about data, the strength of the u.s. economy. people filed for jobless claims for the first time last week. that compares to a survey number of 281,000. it is coming in better than had been estimated. we had durable goods orders coming in -- 5.1% jump in durable goods -- drop in durable goods orders. take out, that smooths it out of it. durable goods orders much worse than had been estimated. initial jobless claims a limit bit better than had been estimated. little bit better than had been estimated. s&p futures up a bit. , bit of abless claims turn up here at the very end. what may be more interesting is the jolts data. hillary has turned that for me. can use this chart at home or even at your office. hires. gold, we have in white come openings and blue, quits. they've been pretty well separated over the last seven years. openings are rising up over hires. does this change something? does this mean wage inflation is on the horizon? mohamed: with that tells you is the labor market is functioning more and more normally. it is the healthiest part of our economy. when i look at the data and other elements, wage growth will go up. that is important. the durable goods number you cited, investment is not doing well. -- u.s. economy increasingly wage growth is essential for consumption numbers. tt: the durable goods miss is a meaningful number. mohamed: the u.s. economy continues to rely on the consumer and the consumer will have to do more heavy lifting. stephanie: when is that consumer going to start? oil prices will have consumers that help consumers. it is not happening. -- oil prices will help consumers. mohamed: it will happen. cash is accumulating in people's pocket. lower oil prices has a direct impact. it is beneficial for those who spend the most of their wages and salaries come at lower-income segments of the population. stephanie: why are we suddenly saving money now?? mohamed: humans adapt. that simple. stephanie: humans adapt on one side it on the other come history repeats itself. side.ans adapt on one on the other side come history repeats itself. mohamed: you want to drive as fast as you can on the highway but you don't want to cause an accident, either. david: is that because of the leveraging and households -- deleveraging in households? is that why consumer confidence is up? mohamed: that and oil prices that is the best tax cut for the consumer. david: gas is cheap. book. to go back to your normal, but we have a choice in front of us now. stephanie: it is not just doom and gloom. mohamed: what i think is unambiguous is that the new normal is going to end. we cannot run western economies at low level growth. we are seeing tension appear. --nomic, political, social what comes next is not predestined. we've been talking a lot about is takingually likely the right turn. more inclusive, general financial stability. there was huge potential, lots of cash on the sideline, massive technological changes. if our politicians can get their act together, they will unleash growth in a major way. stephanie: if i am an investor, what in god's name do i do? part of the book talks about how hard it is to make good decisions when facing unusual uncertainties. the book guides us. we know that we make mistakes. in terms of what it means for investors come every morning after -- ask yourself, do you have these three things? resilience come option audi and resiliency. audisilience come option lity --ona >> after that disappointment, looks like investors piled in two bonds. the yield dropped down. -- piled into bonds. david: take me through those three. , optionalitym and agility. mohamed: you have to have quite a bit of cash and you have the to places central bank said not distorted yet. lots of tech startups -- that is what gets people in trouble because they cannot get out. whenu cannot get out things are stressed, there is no way to get out when they are super stressed. mohamed: that's why you have the cash on the other side. you have a lot of this and you are able to reposition this. make sure you hold it. that is a scaling and sizing issue. it doesn't mean you give up on this. right, a few of these this is where lots of the changes are happening. why is facebook so successful? it took content -- david: it had other people supply the content. it combined it with a platform. that is the most powerful investment piece today. that was google, too. lyft and gm are trained to do it. can they pull it off? platform and content, if you can mix them, huge upside. stephanie: the point of this book, we are talking political, monetary, fiscal leadership. why don't you want to have a job in washington? mohamed: i have the most wonderful portfolio approach. i'm able to write a book, work for bloomberg -- stephanie: you don't look at the gridlock in washington and say let me step in here? mohamed: no. stephanie: do you have faith that we will get out of this gridlock moment? --amed: the system wakes up part of the objective of the book is to be a wake-up call. we control our destiny. if we don't do something about it now, we will end up in a place we don't want to be. stephanie: how high are we on political dysfunctionality? mohamed: about a seven. stephanie: yaks. mohamed el-erian, thank you for joining us. -- yikes. equinox is getting into the hotel business. i will be speaking with their ceo, next on "bloomberg ." ♪ vonnie: welcome back to "bloomberg ." with quarterly sales that beat expectations come up 32%. is slowing economy down, but alibaba was able to offset that by expanding into rural areas and setting record sales during the single state promotion -- singles day promotion. jetblue spends less on fuel. they began charging passengers first checked backward. under armour up 14% in premarket trading. bag.r their first checked stephanie: in your best -- we're talking to the ceo of equinox, harvey spevak. welcome to "bloomberg ." there is concern that the more -- there's all this connective fitness. is it taking people out of the gym and into our own homes? there wouldone say be concern and people are wearing wearables. we think it is complementry to what we are doing. this is a bricks and mortar business come and experience. replacement for coming inside the club or studio or the gym if you're getting a good expense. you cannot get into a shape or build a better self by doing it online at home. you need to be active and you need to be engaged and you need to be doing it. are seeing the complete opposite. our usage is at an all-time high. our studio usage is at an all-time high. why? people are coming more frequently than ever before. stephanie: what is the expansion plan? you are in the luxury market. you have to get growth. harvey: all of our brands are growing. will have its biggest growth year this year. we just opened houston, we are opening in vancouver next year. we are opening our second location in toronto. we are doing some other things as well. explosively on the soul side as well. it is bringing awareness to cities like seattle -- stephanie: what happens if the economy slows down and we tighten our belts? soul is amazing, but it is a $40 spinning class. harvey: let me relate to what happened in 2008. inhad a flat year 2009. compare it to retail, we would be off the charts -- people came to use us more often. when they are stressed, when they are trying to think about themselves even more than ever before. especially with the kind of eonsumer we cater to -- thes are people with discretionary income. living is more important than ever before. stephanie: high and low end retailers getting shellacked. what about your numbers? harvey: we have never lowered our prices. a lot is driven by what happened in 2008 and 2009. people are more conscious about how they feel and how they look than ever before. full-service fitness, fast fitness, we are seeing huge demand. that's why we are growing as quickly as we can. want an experience and they are willing to prioritize experience over a new jacket or sweater. stephanie: hudson yards partnership -- what is this and why? harvey: we've been partners since 2006. it has been a great partnership. we've been involved in the hudson yards since the beginning. we are excited about what we are doing at hudson yards. we are one of the biggest buildings there. i largest equinox we've ever built in manhattan. -- we are moving excited into our entry into the hotel and skip. -- hotel landscape. you see explosive new surround activity and movement and eating . when people travel, they want to continue their routine. tell me about your hotel jim. five-star or not -- stephanie: how are you hedged? harvey: we are a private company and we think this time will be good for us because retail values are truly high -- we made our boldest moves during the recession last time and we've had great number since then. stephanie: harvey spevak, thank you. digging deeper into alibaba and facebook earnings. both trading higher on positive results. big day. markets in the green. ♪ david: welcome back to "bloomberg ." a win for all the above of this morning. if you could percent increase in sales -- a win for alibaba this morning. up 32% this morning. mark zuckerberg just became the sixth richest person on earth with a net worth of $47 million. for more, let's bring in paul sanosky from san diego and in san francisco, cory johnson. take us through the alibaba numbers, if you would. >> the alibaba numbers in general, this is an exceedingly complex company. a mix of paypal and amazon. you have a merchandising business come a cloud services business and payments business mixed up. the merchandising side came ahead of expectations. was up morervice than 100%. in general, it was a beat in terms of analyst consensus. fairly positive across the board. it is a difficult company to pull together and value . cory: it is a very strange thing. their strategy toward public markets seems to begin a your money but we don't know what we want to do with it. they came out of the gate with his huge ipo and turned around and said we want to buy back shares. which is confusion about what this company ultimately wants to be. the south china post, their hollywood foray seems fervid rather than thoughtful -- david: this has been a theme at alibaba since before the ipo. there was a lack of transparency. is there a discount in the marketplace? as the market place discounting alibaba because of that lack of transparency? stock has come off quite a bit from its highs. to say chinacoming come you say e-commerce, it is exciting. china,say tech, you say you say e-commerce, it is exciting. that's the only matters when people have this when worries exceed optimism -- paul: that is the story shorts are telling. that's one of the pieces they are talking about quite a bit, the hair around the corporate structure and what is going to happen if there ever is a ruling made on it. there are a lot of people telling negative stories. he blamed investors -- when alibaba did their roadshow pre-ipo, there were questions not asked. investors should have demanded far more transparency but they did not because they were so excited about this hot, hot deal. this is their own fault. cory: preach it, stephanie ruhle. stephanie: paul, what do you think? paul: this is a company playing regulatory arbitrage. placeare some agencies in that are supposed to protect investors. i accept that this is a company that investors should have been much more skeptical about when it came out. there's also regulatory arbitrage going on. david: let's talk about a company that doesn't have any hair on it. that would be facebook. these numbers are stored in our. which one jumps out at you the most? cory: the business analysis shows a fantastic company. you still see them adding users in sizable numbers. they've added more users in the last year and a half than twitter has added in its entire lifespan. the monetization of that -- you have this user re-acceleration. you saw user growth falling down to 2%. now, it's up above 3%. sales growth looked like it was slowing. now, 52%. they are able to charge more for mobile. paul: they are stealing share. they've gone from something like 8-11% share in terms of mobile advertising. most of that getting taken from some company called google or alphabet. you may have heard of them. cory: the make driverless cars. stephanie: i want to go back to twitter for a moment. it blows my mind the pain twitter goes through. just being in the social media universe, given the amount of users they have, it would not be taking a beating like this. aul: this is a company that has been flat in terms of adding monthly active users in terms of adding new users for the better part of the year. there was a great bloomberg --ce on this that points out they have to grow. david: paul kedrosky and cory johnson, thank you for being with us. -- rickhave black rock reader with us. ♪ david: we are just a little bit over 30 minutes away from the opening bell in new york. welcome back to "bloomberg ." stephanie: we were talking about the zika mars. i would rather talk about the markets. virus. the last time we saw a rick, it was in the snowy mountains of ,ominoes, switzerland -- davos switzerland. lisa abramowicz with us for the hour. first, let's get you some first were news. agency the u.n. health says the spread of the zika virus in south america has been explosive. the virus carried by mosquito is linked to 23 countries. donald trump standing by his position to skip tonight's presidential debate. he calls the sponsor biased. we will be live from des moines. the seven astronauts who died in the challenger disaster will be remembered today. 30 years ago on this day, the shuttle exploded just after liftoff. at --ill hold ceremonies global news 20 for hours day powered by 2400 journalists and 150 bureaus around the world. matt: futures up across the board. we just got some direction about an hour ago. s&p futures up 17 points. down futures up 117. nasdaq futures gaining 1.2% for a couple of reasons i will show you in a moment. really decided the direction of futures over the last few weeks. that has not changed today. you can see the big spike up here, now up 4%. there is optimism in the market that the saudi's and opec are actually going to hold discussions to think about cutting production. not that they actually will do that, but that is enough to drive crude up to $33 62 one .61 aa barrel -- $33 barrel. the reason the nasdaq futures are gaining so much, facebook, massive gains for facebook in the premarket. up 14% after it beat on literally every metric from eps to revenue to users to user engagement to user engagement on mobile. it really impressed the market and mark zuckerberg will be given free reign to invest on moonshot ideas. i want to touch on the automotive sector. ford also beat on every metric. earnings that blew away the streets estimates. outlook theg its same for 2016. i will interview the cfo at 11:00. ford shares up 1.7%. then come hardly give its and coming up with fourth-quarter eps at $.22 -- then, harley davidson. ordernts will be to 269,000-274,000. purchased aure, i harley davidson in the last quarter. stephanie: how are we not surprised? so happy rick and lisa are here. japan's economic minister resigned after fending off allegations that he received money in return for favors. he's pure headed abe's strategy to boost japanese competitiveness. what do you make of this? spearheaded. rick: we don't think they will do much. we are now transitioning -- what abe has to do is create a dynamic where you are moving into the third arrow. that is something we focus on. i don't think it will have changed dramatically. ,t is a bit discouraging particularly in a place like japan where you don't anticipate this sort of dynamic. make of hisdo you successor who was a big rival to abe? rick: that is fair. i think mr. abbe is moving down is moving downbe a path where you are working fiscal policy and structural reform together. it is something to keep an i on but i think he will keep moving down the path he's been moving down. sa: how important is one person to an entire nation's monetary policy? in this particular case? rick: it's always important. case,in russia's vladimir putin, really important. peopleersonalities and around whereosophy the system should be going are hugely important. think of where we are with the fed today or with mario draghi coming hugely important. i don't think today is different. this is clearly abe's idea. two, facebook is soaring in premarket trading after sales jumped 52% as the company capitalized on its user information to attract more advertisers. the social network has more than 1.5 billion users who log into the service every month. on,thing i want to focus they said we have not even got started yet. we started in monitoring instagram -- monetizing instagram bit. the world is changing so quickly in terms of technology to deliver services and commerce in ways we never seen before. the juxtaposition this morning against durable goods and this office and machinery -- the , howess in machinery different the consumption basket is in the world today -- i thought right next to durable goods was the whole story. stephanie: mark zuckerberg said on the call yesterday to his product managers come if you have any ideas to present to me for the desktop, i'm going to kick you out. it is all about mobile. do you remember when the facebook ipo happened and mobile was there achilles heel -- achilles heel? matt: yesterday, we were looking at this with jeff bezos. take a look at it for mark zuckerberg, it is a very interesting page. there is the relative value function. he has $47 billion. macsuld by 9.8 billion big third the bull and bear -- the bull case analysis, he collected more than a billion dollars in stocks and's 2012. since 2012. stephanie: i stand corrected. that is absolutely awesome, matt miller. i loved it and you. was --ou very much but .hank you very much does it in a vase you come of the univision we've seen in facebook, compared with other companies? for me, the q1, the switch to mobile. people were not sure they could do that. vengeance.t with a we do a lot of work looking at companies like electronic stores you have to go alarmfor an clock or radio -- it is all on your phone. every service can be done. it is pretty extraordinary going forward . there was a lot of focus and the markets on apple's numbers. stephanie: let's go to number three, deutsche bank. sure is down around 4% after the bank this literature holders again. shares down around 4% after the bank disappointed holders again. you are not talking about deutsche bank specifically. more broadly, how has the pullback from wall street banks from debt trading affected how you do business? rick: one, you have to think about -- there is a healthy part about it people are getting back to court investing as opposed do i have to think about what i will do to make money over the next hour or so. i will hold an asset for a longer time. that is healthy. that being said, there is this how do you interface with deutsche bank or other firms? they are changing their model. things like research interface, things like financing interface will be pretty important. no doubt, the liquidity some of the markets is not where it was. stephanie: what does that mean for you given 700 billion in assets? to move the needle, it is like moving a barge. you lose a massive liquidity provider like what you think does that mean for your business -- like deutsche bank, what does that mean for your business? rick: one of our risk metrics we think about is what is the return we are going to what exit strategy has to be and what is our ability to move that asset around? we think about what are holding period is going to be. one last thing nobody talks about -- less liquidity, we want to be able to move things in some of the markets. we trade currencies. yields premium goes up in the market. all that benefit accrues to investors and that is one of the options that this we have less liquidity, the risk premium has to change. not all investors, big long-term investors. rick: that is what prices have to reflect. liquidity is not what it once was. assetou will pay for the and the unity will garner for that asset has to be more effective. there are investors who can no longer play. marketsthink you have that you have etf's, indices, number of tools to trade in the market. moving.ets are still different than it was before, but you can still trade. david: those are the stories that matter to markets now. we will take you look at what is moving up and down in the premarket trading. facebook opens where we are trading right now, this gain since 1980, the ninth company ever to break over 300 billion in market cap. walmart and ge have all phil and fallen out. ♪ vonnie: welcome back to "bloomberg ." european airlines resuming flights to iran. air france and klm already on board. british airways officials are discussing it. flights were stalled five years ago. tired of paying rent for your cable tv box? he wants to make it easier to buy and use boxes from competitors. that could cut cable bills and help companies like roku and apple. amazon will advertise during the super bowl were the first time. they will push their echo wireless a speaker. -- echo wireless speaker. : a tale of two companies as paypal and ebay just separated in july. paypal is showing growth. sales goings and into new market. ebay showing a decline in its main auction business, getting beaten out. to some extent by amazon. take a look also at qualcomm and texas instruments. qualcomm coming out with forecasts -- even though it be on eps and revenue, forecasts that may miss some analyst estimates for the coming or current quarter. qualcomm down. this shows more signs of a more competitive smartphone market. texts instruments gaining -- texas instruments gaining in the premarket. i want to take a look at caterpillar. goldman sachs downgraded the company to a sell. the market likes what caterpillar showed this morning. it is the biggest maker of mining and construction equipment in the world. it cut costs and that is how it has managed to beat the street on earnings. a dour outlook for 2016, the shares still rising in the premarket. we will have more on caterpillar's earnings, we will dig down into this story, next. ♪ david: welcome back to "bloomberg ." the world's biggest maker of mining and construction equipment reported earnings this morning. earnings came in better than estimated after cutbacks -- shares of caterpillar up 4% in premarket trading. forn covers caterpillar bloomberg intelligence and she joins us for a deep dive into the numbers. a bit better than people expected. overall, this is the story of a company facing a tough market. karen: things have been down in the mining business for three years. the new hit is energy. energy has just begun to go down. every single one of their businesses were down 30%. next year, they're looking for andher 15% in mining energy. there is nothing to hide. stephanie: if i'm a company like caterpillar, mib hold into i beholdenes -- am to energy prices? karen: as long as they have a top line problem come they will 11 earnings problem because they that is all they can do. lisa: do they have any growth areas? rick: north american construction is not bad. there some inventory adjustment going on. cat is not big enough to offset the other things going on. we faced this in advertising. our stock price went to have. --. half.t to cut across people the board and then cannot take advantage when it comes back up. stephanie: can rick rieder cash in? if it is the market leader, is at the right time to go along -- go long a company like cat and then when commodity prices turnaround, they will ? because of the nature of china and heavy industry and manufacturing. the companies that have margin for error, the companies that still have cap x that you can cut and don't eat into maintenance, the world class the ones you want to own. you have to be careful as you get into the second and third tier companies because they don't have the free cash, they don't have the margins you need to and that's where you see major -- if it is the third tier, it is the year they get bought. david: ford motors, the earnings call going on right now. matt: ford absolutely crushed it. this is a different story appeared you are looking at an industry that is almost maturing, peaking right now. they beat on earnings, be on sales, record year. $10.8 billion in earnings. they are doing the best they've ever done in asia, returned to a profit in europe. the concern for investors is the u.s. because margins will start to compress and costs are starting to rise. what do you think about a company like ford? rick: car sales have been incredibly strong. been goingales have up. tremendous, solid growth in the economy. the consumer has done well. as you described, you think car sales have been at terrific levels. whether it's airlines or other businesses. i do think he will come off the boil a bit here. is theink car sales microcosm of an economy that has been operating quite well when you measure it -- stephanie: how about strategic moves? matt: that is really paying off. that's why you are seeing these record earnings. the concern is they have to continue to spend to boost output and develop new product. they just spent $600 million to get the uaw contract. concerned are you about the fact that auto loans are fueling the growth in the auto sales? rick: i don't think it has been the driver, but there is no doubt it has been a complement. longof why we've argued a time that the fed has been able to move is when you keep rates at zero, you see deterioration in credit quality. you see it in auto loans and parts of the commercial space and parts of the mortgage space. there's no doubt it has been a complement to auto sales. stephanie: we have to leave it there. we will be back. ♪ stephanie: you are watching "bloomberg ." we are moments away from the opening bell. futures purely in the green. we are taking a close look at oil. oil has been slightly unchanged. here we are a slight positive, but for the most part, somewhat muted. after the fed announcement yesterday, we've seen -- oil has risen. a pretty substantial move. a three-week high because of talks and talks that opec will meet with other producers in february. energyhe russian minister has just come out and said that they are going to hold meetings with producers in february and they are considering a 5% cut. well reported, matt. matt: you see markets right now moving higher across the board. 1% gains. this will continue to march up. oil is behind that story. the 6% move in oil is definitely what is behind this rally. $34.15. at the hi, we were at $35 a barrel. whetheren talking about opec would cut production, the russians are coming out and saying we will have a definitive meeting if a very -- a definitive meeting in february. that gets oil traders very excited. stephanie: it has been a supply and demand game. finallyeep supplying -- , maybe now a different -- a right time to invest. to invest in equities internationally in places like the, japan and israel. over the past 40 years, the s&p and international stocks have taken turns come outperforming one another. time is up for the u.s. hereto explained it is the head of global equities at newberger berman. -- here to explain it. >> the outperformance in the u.s. market has gone on for some time. the dollar has been extremely strong. peaking, margins peaking in the u.s. come economic growth returning in europe, the long-standing weakness we've had in the yen turning around or at least stabilizing, that is a good foundation for international equities. much on pure valuation, much more on the profit potential. we are not looking for multiples to expand, but earnings to drive share prices outside the u.s. faster than those within the u.s. lisa: how concerned are you about the bounce of volatility that analysts think are only beginning in european shares? oil. are talking about has the middle east driven volatility? has china driven volatility? it is here to stay. for us, we trade a bit incrementally around that volatility. --can step up and increase when people are more sanguine, we can rotate a bit more. means. more defensive volatility is certainly here to stay. stephanie: we like to help our viewers make money. >> quality names, multinationals, health care is pretty stable. asset management companies a lot more stable. it is not so much focusing on the historically stable sectors. within geographies, focusing on those businesses that are less exposed to risk. -- lessnings risk earnings risk and less geographic specific risk. david: how'd you think about some of what drove multinational earnings the last for years growth out of the emerging world? out ofential devaluation china. how do you build that into your model? companies, there's two big global markets -- , china's 800ets pound gorilla there. and the u.s. for non-us businesses with the dollar this strong, in particular if they are exporting , that is high profitability. the u.s. has been relatively strong and relatively profitable. the emerging market has taken a turn for the worse. when you are in direct competition with low-cost producers benefiting from the government financing in countries like china, life gets challenging. many of the companies we focus on my japanese industrial companies, european materials and health care businesses, they're not in direct competition with those more asia.c producers in many of them are using those guys as supplies to benefit. it is tough for the businesses in emerging markets. david: i feel like european -- we keep hearing about it, but we don't see it. if you look at the major indices, they have not come up. what will cause that to change? >> there is a disconnect between what's happening with the stock prices and what's happening on the ground. for us, that is the opportunity. share prices have come back to fundamentals in terms of the economic statistics. there's a big disconnect. the fundamental is improving, but the shares are looking quite compelling. if what we looking for to see signs of distress -- we have not company sensitivity. for us, the backdrop is pretty solid. sayingeople have been europe is the holy grail for bonds. are you buying or stay away? rick: we do think europe is not tremendous growth in the debt side -- we like to see accelerating growth. europe is in a sweet spot today. you have the easiest monetary policy in the world. you are accelerating to a 1.5% growth rate. some regions and staying a bit better than others. , you areeasy policy starting to see fiscal policy come to the fore. we like europe. in some to be careful of the credit markets because of what we described earlier. whether it's the basic industries or materials or because growth is not fast enough around the region. we do like europe generally as a region. stephanie: why not buy those international names in the credit markets because you marketing getting that exposure but limiting your downside risk? optionalityt is the . equities in some respects an option on the companies because the debt is more fixed. -- yieldsincome yield are not particularly attractive. we are getting good dividends. upside about the creation will provide equity to shareholders. how much of a japanese call is dependent upon more stimulus? >> the easy money has been made on that trade. it is much more skewed to the exporters who benefit from the stimulus by the weaker yen. that is converting opportunities -- undermining the potential for the exporters. favoring the more domestic businesses in japan. we still need to see better corporate governance. david: when we come back, we will find out exactly what rick rieder thinks about the fed. matt: we see stocks up across the board. the s&p at 16 points and dow jones up 95. the nasdaq the most interesting sector because of the earnings we had today. take a look at the imap right now to see the industries that are moving. tech stocks one of the biggest gainers. abigail will talk more about facebook. energy is the big gaining group here, up 3% after oil ripped higher. take a look at crude right now and see where it is. it has come back off a little bit -- a lot. up 141. it had come up over $35 a barrel. we are talking about a 6% move. take a look at the 10 year. it was down 1% come up 1%. right now, the yield at 2.01. we've seen a six basis point swing today. a bunch of tech stocks to keep your eye on. amazon coming out with earnings after the bell. that is up 5% and change. google up 3.5. yahoo! up 2.25. alibaba also beating on the .ottom line and revenue alibaba up 3% mirroring what mark zuckerberg said. abigail doolittle is at the nasdaq with the latest on facebook. togail: facebook is soaring one of the biggest single market cap moves ever for a publicly traded company at the open. this after the company posted a monster fourth quarter, revenues grew by 44% to $5.84 billion. we have this big tech company bucking the negative trend -- gene munster raised his price -- suggesting facebook could climb by 50% from current levels. back, we'llwe come talk with rick rieder. we will find out what he thinks about yesterday's fed statement and how he is investing. ♪ vonnie: welcome back to "bloomberg ." you would pay jobless benefits fell after reaching a six-month high -- near a four decade low. orders to u.s. factories for durable goods plunged in december. facebook chief mark zuckerberg says users will soon be able to post an array of emotions. i have dozen emoticons will be sad, wow, yay, and love. stephanie: breaking news right there. , let's talk about yesterday's fed announcement and where should investors be looking in this world of slowing growth? rick rieder is still with the spirit we are also joined by michael mckee. that shenothing more brought a chart to explain key investment risks you see right now. rick: we think growth is pretty good in the economy. we do think it is decelerating. i think topline revenue is sliding in the big companies today. fed, we think about the are talking about the fed funds rate which is close to zero, with happening is the companies have expanded -- capital markets every priced the debt. it is a critical dynamic when you think about forward investment. the way companies think about investment is you look at your return on potential against your cost of capital. we put talking about will the -- or notword not 25 25 so the company possibility to this it is hard to grow topline revenue in this environment. cost of capital is something we looked at all the time. when we decided what new inventors -- what new ventures to invest in. they will not make the cap -- rick: we've lived in a easy monetary policy world. there was this tremendous demand for assets come all forms of assets. your debt costs just came down to the floor. your return on capital against your debt expanded to historically wide margins, despite the fact the fed is still talking about 25 or not 25, the cost of debt has moved up hundreds of basis points. it has to dull your willingness to invest going forward. in some industries like technology and health care where you think the return on that capital is significant, does that really matter if that debt has gone up. david: this could have a direct effect on the inflation target the fed identifies. mike: one thing i would ask, how many companies actually borrow a debt return on investment and how many bar win just to buy back stock or pay dividend? comenies have so much cash is it possible your scenario will not play out like that? rick: tremendous buyback of your stock -- why are they buying back stock? you had this historically low debt level. what are you rewarded for as a business? influence youoe have quickly? your debt costs are so low, depending on how you are rewarded, you get the same benefit from buying back your a five-year grow on investment. companies think about the longer-term and think about what the longer-term return is against what is a more normalized that cost. -- debt cost. it is the same rate. you have to clear that hurdle. in theory, you should not be buying back stock unless you think it is a good investment of the shareholders's money. stephanie: or to keep activists at bay. lisa: you are facing a catastrophic picture. if you have companies facing increased debt costs and not investing in a way that can boost inflation, this could be a potentially really damaging -- rick: i don't mean to exaggerate the point. wages are heading up. to boost your revenue, you're sgna is going up, so your margins are compressing. you think about money you are spending on inventory,, hiring, etc. what has been a very point economy that is ms. measured -- msismeasured. a driver ofsuch growth in the world that it is something you have to be thoughtful about. the are people who think it is going to move faster than that. i don't believe that because the consumer is still in a good place and will be there for a period of time. part of why there is a great opportunity in the fixed income market, volatility has increased, whether it is china or slowing growth, spreads have moved out dramatically in nonagency mortgages, parts of ,urope in the credit market parts of the emerging markets that get thrown out with everything else we think are pretty interesting. lisa: like what? rick: india is a great story. at where theyelds are today, stable inflation. everything was trading at 1% in the world. all of a sudden, you have high-yield buying come emerging markets at seven or nine in -- and brazil at 16. it is a lot more fun to do it today than when everything was at 1% of couple of years ago. a lot more research applied to it and a lot more risk. mike: how much of that is risk and how much is inflation? rick: inflation has not moved up. energy technology is telling the -- dolingry pressure the inflationary pressure. you are seeing in the premium that has been built up at the spread levels on some of these --ets at historic areow that risk-free rates here today versus 10 years ago 200-300 basis points wider. year wheres is a carry is really attractive. if you can book a 6-7 through diaper suffocation and balance and make it through -- diaper versification and balance. david: we will talk about social media on "bloomberg ." ♪ david: it is time for post it. a chance to share what we will be talking about. rick rieder, final thought. rick: it's interesting to think about what happens with the numbers out of facebook and durable goods. when people think about investing, you have to think about balance and flexibility and go global in terms of how you think about where to invest in the world. quantitative easing everywhere, just by any asset and it would elevate test today, you have to andk about diversification flex ability. i thought today was a perfect example. stephanie: caterpillar 30, facebook, under armour winning. there are the market they have the fundamentals. the issue was commodity prices. you want to be investing with the market leader. lisa: the world is not falling apart. oil prices are actually rising. i'm struck by the hands of optimism that perhaps everything is not going to hack in a handbasket. we have it within our power to take a right turn or wrong turn. stephanie: i think you should run for office. david: i agree. stephanie: rick rieder, thank you. they q2 lisa abramowicz. that will do it for us today. -- thank you, lisa abramowicz. i'm super excited, monday come a new addition to the show. a special greenroom. get pumped. ♪ >> it is an :00>> p.m. in new york, 3:00 p.m. in london, and 6:00 p.m. in hong kong. welcome to "bloomberg markets." ♪ betty: from bloomberg world headquarters, good morning. i'm betty liu. oil is surging to a three-week high even after opec delegates came out and said, no, there is no plan to meet with russia to discuss any cuts. they're going to be flexible on interest rates. how many basis point moves will they make this year? topping and alibaba -- estimates as they make their way to global domination. let's head to the markets were julie hyman has some more data on where the economy is headed. julie: pending home sales coming up with a gain of a 10 of 1% month over

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