I am Erik Schatzker. And i am stephanie ruhle. Did you watch . I did. And . What a terrible way to end a game first of all. An amazing way to end a game. Nobody should win or lose like that. The point is they won the game. A terrible call. In any case, i was also bummed out by some of the advertisements. I was bummed out but i enjoyed like a girl so much, who gives a hoot about nationwide. Real news, breaking, on the state of manufacturing in this company. Scarlet fu is in the newsroom ifm headlines. Manufacturing in the u. S. Grew at the slowest pace in a year. The Manufacturing Index posted a bigger than expected drop. 53. 5. The consensus was for to climb slightly, 54. 5 from a read of 55. 1. I was revised lower than what it had earlier been reported. Construction spending also smaller than expected increase as well. A gain of 4 10 of 1 when economists were looking for increases of. 7 . Added all up in terms of markets, u. S. Stocks are at the loews for their session. They opened higher but they could not hold onto now we have declines of. 5 for the dow and s p and the nasdaq, a decline of almost 1 . There you go. Everybody is a bull into you get one shred of bad news. Suddenly, they are all sellers. Scarlet fu, breaking down the reactions. Meantime, a Budget Proposal from a democratic resident to a Republicancontrolled Congress should be a nonstarter. The latest from president obama today may be just that. It promises tax hikes on the wealthy. Perhaps it is not dead on arrival. Peter cook is here to tell us why. A symbolic act, we could wander from a lameduck president , or maybe something more. A window of opportunity to get something done. Most of the president s his budget act, to be sure is dead on arrival with the republican congress. There are aspects of the plan overall that do pose opportunities for the president to work with republicans. We have talked about some of them before. There is news in here with regard to Infrastructure Investment tied with Corporate Tax reform, that has a possibility for progress Going Forward. There are other aspects of the plan that republicans may like. They like for the fact that he will break the sequestration numbers here and increased defense spending. But they will not like a whole host of things including notably the tax increases on the wealthy and there is nothing at all in dealing with longterm debt issues. The deficit effectively stays much of the same in the next 10 years. The reality is dead on arrival. Opportunities for negotiation Going Forward and it opening bid if you will, from a lameduck president. Lets talk specifically about the president s proposals for taxing overseas profits. What is significant here is he has proposed this before as part of Corporate Tax reform. You link it to Infrastructure Spending and it is a winwin. Companies get to bring money back from overseas and then money gets dedicated to things that republicans and democrats both like investing in roads and bridges. What is significant is he has finally put real numbers to it and expanded it. 14 onetime tax rate on all overseas earnings. Overseas right now, 2 trillion in all. You have got a number of companies at the top of the list. Ge affected by the proposal. Once you get past the onetime hit, he changes the Corporate Tax code and puts a 19 minimum tax rate on all foreign earnings Going Forward. That is a significant number. It is lower than some people thought and higher than others would like. It will be the basis of negotiations Going Forward. It is the most significant detail, if you will within the plan overall. It could be a big factor Going Forward shaping debate. You have a sense yet whether those are numbers republicans can live with . People like john chambers, the ceo of cisco, who has been campaigning relentlessly for a tax holiday on profits parked overseas, will not like the 14 number. 14 is better than 35 . So is 19 . Exactly right. That is where the debate will begin. A lot of this will rest in the hands of people like john chambers. Will they lobby aggressively for a deal that fits the framework the president put forward, the tradeoff between lower Corporate Taxes and some shortterm infrastructure. The Business Community could make a huge difference here. We are not going to be talking about these numbers. The president and the white house knows that. Democrats are talking about a 6. 5 holiday tax rate. This number will come down if it will ever be a deal with republicans. Where it is between 6 and that 14 remains to be seen. But it is the basis of negotiations Going Forward. Thank you very much. That is peter cook. In the next hour, democratic congressman Chris Van Hollen will be with us, the top democrat on the house budget committee. And he has a few plans of his own for what to do on Corporate Taxes. Exxon reported a steep profit drop in the Fourth Quarter thanks to plunge in oil prices. Do not cry too much for the energy giant. It still made 6. 6 billion in the quarter. But that is down by more than 20 from a year ago and cash flow tumbled. Lets bring in our own alix steel. Lets break down the exxon story. Is this just a cause and effect of Falling Oil Prices . No. It is of being a really big oil company. You make billions, production falls, you have to spend more to try to keep production flat. Exxons his production actually fell almost 4 . This has really been the story for big oil. I got my hands on an itemized receipt of exxon for a show oil well in oklahoma. It is way cool. [indiscernible] this is a big get. A journaling cost. 5. 7 million. You are trailing, moving mud and chemicals and water to the drilling site. Then you have your filling cause. You frack and that goes in to produce oil. That costs over 3 million. All told for one well, youre looking at a cost of 9 million. Exxon explored and drilled last year. That is an insane amount of money to actually run in place. The question really becomes, what do they do now . You spent 9 million. Will you close up shop and go home or will you keep producing the matter what the oil price is because you already spent the money . We are seeing the latter. They continue to produce. Parkways coming out and saying there are about 4 billion Barrels Per Day of oil. The cost is already sunk. Why bother shutting production. Part of it has to do with the expectation on part of investors and others that exxon will meet some of the target that it has set out over time. The same goes for chevron and the other majors. They do not want to be, almost ironically to be seen as reducing production, even if it makes economic sense in the short run. Exxon has an enormous balance sheet. Analysts say they can weather this storm. They are in the hole for 2030 years down the road. That gives exxons, in some expects in some respects, some restraint here. 22 per barrel, maybe max. There will be taxes. 50 per barrel hurts your margins. But he were still making money. It is not so much what the costs are, but whether they will be there to sink future cost. Here is the bigger issue. Shale oil runs try fast. The first year you get a ton of oil and that it declines. Producers have to drill quickly and fast to keep production flat. That production might be at risk , but you will not see that until this year. That is what im seeing. Thank you for breaking it down. Dirty enough for you . She has got her hands on itemized people wanted to get themselves on a guest list for the Playboy Party in phoenix. Alex wanted to get her hands on the itemized receipt so she could write down exxon. That is why we love her. Thank you. Our own alix steel. When we return, the top of the charts. We will kick off our monthlong profile on the worlds bestperforming Hedge Fund Manager. Plus, will this be the year of the first time homebuyer . We will speak with the ceo of one of the nations biggest real estate firms. It is time now for some of the top global headlines coming out this hour. The future of alibaba. It will involve Artificial Intelligence and robots according to the cofounder, jack maher, speaking in hong kong. He said alibaba thinks of itself as a dater a data company. Alibaba will invest significantly in Artificial Intelligence. The longest losing streak ever it sells for in eighth straight month, january decline of 7 . There is speculation he will continue to feel the pain caused by the chinese crackdown on corruption. In france, producers love giving this to me just to mess with me. In france, the former head of the International Monetary fund is going on trial over whether he took part in an International Prostitution ring. Dominique has been charged with aggregated pimping. Investigators say he played a role and his employer denied the charges completely cleared home ownership. It is called the American Dream and remains out of reach for many borrowers. Firsttime homebuyers accounted for only 29 last year, the lowest since 2008. President obama is hoping to revive homeownership rates with several new programs including one which would cut mortgage premiums on fh loans to people with low credit scores. Is it enough . Re max ceo dave liniger is with us. What will it be like in 2015 . We will see a recovery that is better than what happened in the last couple of years. Prices have leveled off. They are not the double digit. Interest rates are the lowest they have ever been. Government programs will help bring millennials into the industry. Do those more kneels want to be in the industry . It is not about the fact that they cannot get the money. They do not want to own a house. I do not think that is correct. If you look at our sales last year 31 were to millennials. As their agent, they are not only buying downtown but they lead leave downtown and go to the suburbs. We are seeing a good recovery. How does the behavior of these young couples compared to what you saw 1015 years ago . Are quite different. If they get married, they get married at a later age. They seem to be putting off decisions like homebuying to a later age. How much of that is cultural . These decisions to have kids at a later age, these decisions to buy a home at a later age, how much of it is cultural and how much of it is economic . I think a great deal of it is economic. They obviously imitate each other. Culture does play a part. But they have not had the jobs they needed when they came out of college. A little bit of wage growth, i think you will see a big change. The more people who own homes or want to clearly the better it is for re max. But do you think it is a good idea for the federal government to be trying to incentivize more homebuying and to deliberately attempt to raise the homeownership rate . I cannot tell you that clinically is the correct thing to do. I will tell you it would help the economy greatly if the housing industry could get some legs. Say that in 20052006. I feel like barney frank was telling americans it was our birthright, part of the American Dream, to own a home. Many americans who simply should not own a home. I would totally agree. We went through a her in his foreclosure mess because of the subprime mortgages. It was really a disaster for the economy and our industry. Can i go back to the point you made a moment ago about how it would help the economy with homeownership . Why is that the case . If a landlord eyes a home, if more of these homes are being sold going to folks who will end up renting them out as opposed to occupiers, is that necessarily a bad thing . Landlords often invest in refurbishing a home in order to be charged a higher rent. Many of the people who are cash strapped and end up i a home have no cash, no money to go to home depot and buy new windows or caulking or floorboards or drywall or whatever the case may be. You are correct in what you are saying. If you look at some of the bigbox stores like home depot, they figured out that 16 of their sales occur within 16 months of when somebody buys a house or six months after they sell a house. It is a costly endeavor. If youre going to do a resale. However, the thing that is good for the economy is new Home Building. Every house that is built, it is at least 34 fulltime jobs that are created for a year. At the lowest level of new Home Building in decades. What happens if the new homes that are built, people either do not have the money to buy them or they buy them and cannot afford it and they get foreclosed upon . I am just not sure how that is good for the economy. I think the economy has turned around enough. Dodd frank has put enough rolls out there. For the most part, people are putting 1020 down for the vast majority of mortgages unlike 89 years ago when the vast majority was almost no down payment. How has dodd frank affected the Housing Market . I guess i do not follow that. They put requirements on the banks that the bank had to continue to own a certain percentage of their mortgages. Most banks create mortgages and try to sell them off. If the banks have to continue to maintain a large ownership, then they cannot reinvest the money. What do you think would happen to the Housing Market if some of the proposals to perform, fannie mae and freddie mac, went through. If in fact they would become private entities, it took take d it could take several years. That is probably true and that is not the worst thing in the world that can happen. If you look at our neighbors on the north, they never had the subprime mess. They require people to put a 20 down payment and the real estate business is cyclical. They go up and down. People who invest real money into property do not going to walk away because prices dropped by 1020 . They will wait it out and do not flood the market with properties. They know it is a longterm investment. What you think about hot markets . I spent time in miami and my mind was blown that just five years ago, aligned miami was one of the cities in the epicenter of the crisis. There is construction everywhere, apartments going for 10 million. Doesnt it feel bubblish . The truth of the matter is probably as much as 25 of the purchasers are cash purchasers from outside the country. Wasnt that the case in 20052000 x, the brazilians in miami bill young buying up real estate question mark what is different now . What is different now is prices were dramatically down. Even in florida, they are well beneath the prices they were getting 67 years ago. Dave, thank you very much. Great to have you on the show this morning. Dave liniger is the cofounder of re max. Stay with us. When we return, we are talking hedge fund giant. When we come back, we will be discussing hedge funds. Not all of them are feeling the pressure this year. We will speak to the manager of one of the worlds best performance. Plus, president obamas new proposals on taxes and spending. Any hope for congress question mark we will put that question to Chris Van Hollen coming up later in the show. Live from bloomberg World Headquarters in new york, this is Market Makers with Erik Shatzker and stephanie ruhle. Welcome back. Im erik jeff zucker. Quite some stephanie. We are going to begin this half of the hour with the top stories of the morning. A pay raise for meg whitman hp raised her compensation to almost 20 million. Hp stock is up by more than 25 over the past year. The company will split into later this year. She will run Hp Enterprises which focuses on corporate customers. The Justice Department has stuffed up a fiveyear investigation of moodys. The issue is whether they inflated Credit Rating string housing boom. Prosecutors are wrapping up a similar case against standard poors. President obama plus new budget is challenging republican on the income gap. The plan was sent to congress today. The money would be used to pay for infrastructure and education. Republicans are calling me budget topdown redistribution. Tired of snow, cold and ice . It is grand how day groundhog day and Punxsutawney Phil said theres this so there six more weeks of winter. The biggest tv ratings in super bowl history according to preliminary data from nbc, which broadcast the game. The network says new englands lastminute worse should we say seattles lastminute loss was seen and 49. 7 of homes in large u. S. Cities. The total ratings will be released later today. Eric thought it was a tragic ending erik thought it was a tragic ending. I guarantee Bill Belichick did not wake up this morning and say that was a lousy way to win. Cracks you didnt have to try very hard. Moving on, for the next few weeks, we will be highlighting some of the best Hedge Fund Managers in the world. Get it on the stands right now its the february edition. These are the funds with the best performances of the year. Bill Ackmans Pershing Square was ranked number one. Highline Capital Management was ranked 31 on the list, returning 10 , using a long short strategy. Walk us through the strategy. We believe most equities are valued efficiently by the market. We focus our time and effort trying to identify and better understand situations that are treat situations that are changing and evolving. By focusing on those types of situations,