Tom keene did not give you a gift . Lets get to some news. Are the top Global Stores making business around the world. Another sign the labor market is getting stronger. Your americans filed for jobless benefits than at any time in the past 14 years. A worldwide airbag recall is getting bigger. Nissan is the latest manufacturer to join in. They are recalling a quarter million airbags linked to deaths. Seven point 8 million vehicles have been recalled in the u. S. For faulty airbags in the last two years. The airbags were made by a japanese manufacturer and earlier, gm said that it had put its issues behind it. The issue being faced by the industry is something that we addressed earlier this year when we first encountered the issue, and then looked across all of our products. While it is more widespread in the industry, we believe we have the issue fundamentally under control based on the actions we took this year. Gm has recalled 30 million vehicles this year he cause of a variety of reasons. New report says manufacturing in europe unexpectedly grew this month. German factories picked up steam after last month and unemployment in spain fell to the lowest level since 2011. Mohamed elerian talked about what the European Central bank must do next. Only way the ecb can get economic outcomes is by getting the euro to weaken. I think they are trying to do that but i cannot stay there. Story andro and yen we are looking at more dollar strength. The ecb began buying covered bonds to fight off inflation. The chairman of uks biggest Supermarket Chain is stepping down. Tesco said profits were overstated by 420 million. More than half of that coming from this year. The new ceo says he cannot provide any guidance on fullyear profits. Mark zuckerberg tells students in china that he is hiring, and he did it in mandarin. He spoke to students at a university and is a member of the Advisory Board school of management. He says he wants to hire their best engineers. Facebook has been blocked in china since 2009. You know what else Mark Zuckerberg is . Really fit. Figure out all the things that he has been doing managing and running facebook. Working on his chinese, working out. I cannot believe how fit he is. That is why he is not wearing a hoodie. Good for you. Now for something a little more important. Breaking news. Freddie mac just reported that the average 30year Mortgage Rate fell to a twoyear low last 3. 92 . That could provide a boost to the Housing Market especially after the announcement last week from fannie and freddie that they would make it easier for banks to lend to customers. Here is what we need to talk about. Is this a positive or negative . Are we feeling remnants of 2005, 2006 . Fannie and freddie are loosening standards, Mortgage Rates are lower. Will this be a slippery slope for people not qualified to buy to goat certain prices, out there, because it is part of the american dream, but not if you can afford it. Thanks, 2008. Even if they loosen up, they would have to loosen by a lot. But is the first step to getting back to a bad place . We will have to see. Lets talk to our next guest about it. He knows the fixed income market. It is an especially big story this month, credit. Nearlyity is gripping every asset class and Mike Buchanan knows it well. He is the head of credit and weston asset management. Lets start with this change in Mortgage Rates. Do you think this is going to cause a boom in the Housing Market, people running out and buying houses, which should make the economy look better . I think we are a long ways of having another boom in real estate. It will help the economy in general. The u. S. Is on pretty strong footing and certainly any boost no, we are not, worried about an overinflated Housing Market at all. You feel like the economy is in a good place. How do you account for what happened in the market last week . It was spectacular what happened last week. Volatility and rates, it was a fear of Global Growth and maybe a reassessment of that. At weston, we have been in the 3 range for a while. The market is reassessing and getting back to that level. Some are calling what happened last week a flash crashing yields. Would that be a fair way to describe it, especially when we saw equities breaching those loans . I would not call it a flash crash, but certainly some volatility that we have not seen in a while. What we may have overlooked a rate were very topical but the volatility and credit was equally spectacular. Certainly, we took advantage of that. Are you concerned at all in credit when the market is hit with that kind of volatility . Liquidity drives up. The street ishen not making markets and you need to make a move . The issue of liquidity is very topical right now. In some ways, it is a little overdone. Clearly, elevated risk management, increased regulation has caused dealers to operate with less capital to commit to corporate inventory. That brings out one of the logical buyers and sellers in toes of stress, but you have remember, there are still a lot of buyers and sellers or credit. You end up finding these different valuation points may be a lot quicker. The ride is not as smooth, but ultimately, trading is working, we are finding the execution doable. Maybe more volatility, but we are using that to ever advantage. Our advantage. You spoke with carl icahn yesterday. He made some remarks about the credit conference markets. Hope will you were watching, but just in case, take a look. He sees a bubble in your house. It is a nobrainer, longterm, the highyield market is in a bubble. When it will burst and it will cost you money while you are waiting. He think there is a bubble in highyield. What do you think . Someone like carl icahn speaks about a market, it is wise to pay attention. That being said, we do not see a bubble at all. Fundamentals, whether you are talking about interestrate coverage, leverage, Free Cash Flow generation, default rates, all of this is supported for credit. The trajectory seems to be going the right way. Then you contrast that with valuations which we measure on a spread over treasuries basis. We are still cheap to historical averages. You put those together, we see opportunity. We do not see a bubble. Did watch that i thought it was a fantastic interview. Howid talk a little about this is maybe four or five years out. Obviously, a lot can change over the next four or five years, but for our investors and clients, we believe there is a lot of opportunity in that time span. He says he is also using credit default swaps to position himself for the eventual popping of the bubble. If that is the case, if people are using synthetics, doesnt that add to the possibility of damage being done when something goes off the tracks . I dont think derivatives are a bad thing. We are traditionally more of a cash buyer, but we have been able to use the derivatives market, in particular, options on cdx as great liquid hedging vehicles. We are not overly worried we are getting to excessive levels on derivatives. If anything, it is helping overall liquidity. The issues that has exacerbated the market in 2008 is that many investors enter the credit market because they wanted yield, everything felt safe, and when market started to freeze up, they realized, i cannot be in here. Given where rates have been, many investors have moved back into that market. As things get volatile, does that pose a problem for you, in terms of how it is to execute . I think there has been some new entrants to the credit markets and we have had a few shakeups. You go back to the tapered tantrum in 2013. You had an abrupt move in rates and you had a lot of investors reassessing whether they wanted to be in fixed income in general. Of aad kind of a flush out lot of Retail Investors in certain categories like highyield and bank loans. I also think, again, when you get those opportunities, when you get full backs in the market, what we have been noticing at western is that institutional buyers come in looking for opportunity, looking for more compelling yields with the strong fundamental environment that i mentioned, and they tend to be a support for that kind of movement. Forf you are looking opportunity, what are you avoiding, where do you not want to go anywhere near . I think one area within credit that we have been underweight and continue to be is technology. We think that is a great equity story, but at western we are always looking for stable, consistent, predictable cash flows. We want to get our coupons, we want to be paid back at maturity. When you have the volatility of steerlow, it makes us clear, at least makes us more cautious. The Technology Sector is an area where we have been underweight. I also think duration if you do not need to take excess duration, if you can get your yield and not take a lot of interestrate risk, that is pretty appealing. Bank loans look pretty good right now, short dated highyield look good. I want to go back to technology. Credit analyst dig deeper into a Balance Sheet then analysts. What do you find in these companies that perhaps the equity guys are not focused on is much . As much . We have a problem with the shot. As a woman who loves the credit markets, basically you are giving a shout out to the Credit Research analysts. Scarlet fu said that credit analyst do a lot more work, dig in deeper. If you did not notice that, i wanted to replay that for you. When it comes to cash flow and Balance Sheets, that has always been accepted. When you are an equity investor, you are looking at a lot of things that others dont need to look at. 2008, manyo back to were forced out of the market, they sold into the negativity. If you actually held on through 2008, cap your positions, you would have had an extra ordinary year. The problem is, in times of volatility, that is not an option. But if you have options, this could end up being a positive. The issue is if you are a hedge fund and you have to mark to market, if you face redemptions or have skittish investors, it is a different story. This might be a good time to be real money. Michael buchanan, the head of. Ixed income we lost him at the end. That means we will have to have him back. Group. Fight over the Company Going bananas over chiquita. It is better in the usa thomas says manufacturers who are bringing work back from overseas. The latest development in the battle for bananas, a Brazilian Group has raised its offer for chiquita, this time for 14. 50 a share. Why are bananas such a hot commodity these days . Julie hyman is with us to explain. Why are they so interested in chiquita . Company thate controls a third of the orange juice industry. Safra is another resilient family. They are an investor in this deal as well. They have teamed up in order to make these offers for chiquita. The reason they want this is diversification. The orange juice business is not so good these days, so you are looking to get into Something Else beyond orange juice. Although they have made no commentary on this front, this would be the first time in chiquitas 150year history that one of the companies is owned by a Latin American Company or family. The reason that ireland is known for its bananas . From a historical perspective, western Banana Companies have had a difficult history, there have been instances of teaming up with dictators in the past, abuses of the unions, banana farms. Read Gabriel Garcia marquez, you remember the fight between the Banana Companies and the unions. It would be interesting to see a latin american owner. Chiquita is still trading below that 14. 50. Beany of these have to dependent on one going through for the other to happen . And fight already agreed to the deal in march. It would only not happen if cutrale and safra succeeded in their quest to take them over. Fyfeestingly, chiquita and es was a true merger in terms of a true merger, but since all of this has gone on, chiquita has gotten more leverage and their shareholders would now own 60 of the combined entity. Fyffes, thereand would be some cost cutting that they could do, but in addition, as we see market share of these big for Banana Companies, del monte,yffes otherta, and dole, Companies Selling those bananas into the marketplace, the margins have gotten squeezed. And chiquita end up succeeding, potentially they could have some more negotiating power and pricing power. I am not a lover of bananas but im told you have a fun fact about something that i do love, hedge funds. 72 management, steve , filed today and said that they had but 3. 5 of to kita. There are some other funds in there as well, but that one caught my eye. Facts, banana is the Largest Group traded crop in the world. Not a banana tree. It is an herb. Do you like bananas . I love them. I love them. We eat a lot of them in my house. I love reeses Peanut Butter cups. Market makers will be back in a moment. We have a rally in equities. We will tell you all about it. It is 26 minutes past the hour and that means it is time to go on the markets. Gains of over 1 for the three major benchmarks. The dow industrial gaining 227 points. Caterpillar making 13 of the average increase because of a higher fullyear forecast because of construction sales in north america. All those concerns about weakness in overseas markets rebuffed for the moment because of north america. Moving onto treasuries, jobless claims came down to a 14year low. The 10year, 2. 2 . K is not here, so one has to be the doom of gloom. Yelp shares are plummeting after a disappointing earnings report. The Company Forecast sales short of estimates. It did post a Second Quarterly profit but it was a tiny one. 3. 6 million. These are there only two profitable quarters. In, only twothat profitable quarters in its threeyear history as a public company. They sent customers posted 5. 3 million reviews in the third quarter, half coming from mobile devices, but who cares if you are not making any money. Welcome back to Market Makers. Im scarlet fu. And Erik Schatzker is on assignment. Probably in canada, right . Yes. Outsourcing is out at least when it comes to manufacturing. Executives are bringing jobs back from china. One out of five already say they are doing it and more than half say they are going do it so looks like made in the u. S. A. Is coming back. Senior partner and managing director at the boston conal sulting group. Welcome back to Market Makers. Ow much of it is because our because of our Energy Production . Well, its making it easier for u. S. Companies to compete. So the tepid wage gains we keep talking about is working in manufacturers favor right now . Yes. And were seeing them make changes adding 7 capacity in the u. S. For u. S. Consumption over the next three years and looking at taking down the amount they are manufacturing in china. Putting it in to context, how Many Companies are doing this . How many jobs are being created . Well, theres really no statistics that are there. We know of at least three companies doing this already and we know theres going to be a whole lot more than that. We also talk about the access to a Skilled Workforce here. W450 two companies and the government do to make sure this is not a limited resource and that its something we can continue growing . Well, far lot of jobs there are not. Such as . Welders and things going on with natural gas and the oil boom, so thats causing a bit of a problem. But for the most part the u. S. Is pretty snuft skills so thats why we are not seeing massive increase in wages at the time. Did we always have the skills but the costs were just not attractive to china . No. I dont think our labor base has become all that more skilled but we just focused more on whats going on in the rest of the world. But for the most part the u. S. Has a pretty good skill base but if we dont continue to educate and train people which ising . Government and businesses need to help with, then we wont have that Skilled Workforce but for the next three or four years we are in relatively good shape but beyond that we have to make sure we have that Skilled Workforce to keep the country growing. One reason why you say we havent seen a massive wage increase is because . Because we have people with enough work. Just because theres so many people that can do the job, why pay them more . Its economics. What we see is every time theres a skills gap you will see wages rise rapidly. Why . Because theres a free market and people have to pay for what they do. Sir martin who headed up w. P. P. The big Advertising Company said 3d presenting in general is a big reason why the u. S. Has this manufacturing advantage over other countries. Do you agree with that . Well, at this time 3d presenting is still a very small percentage of whats going on in manufacturing. Boeing is using it on its manufacturing line in the 787 factories. But its still not a major thing. Its not something we do upscale yet . Well, its probably scaled for the world at this time but still a very small scale so 3d presenting over time should be very important. What do you make of the fact that workers wages arent rising at time when corporate profits are at record levels . Are you saying its a free market so you dont have to give them my more money . But it doesnt take time to ever for c. E. O. s to say look at what the bottom line was this year, tacking on 5 to my bonus so what about the rest of the workforce . Well, its been a rough recession. Almost a depression in man