it is small. if you look at the major averages, we are seeing a small change. in fact, we are giving up the gains out of the gate this morning so the dow has turned negative. it's a little bit of a pause after the big selloff yesterday. you look at the option of this morning, it's clear when you look at the imap there is an equal amount of red and green. health care is higher in eli lilly cut its forecast and introduced new drugs. consumer stables are up and financials are little changed in energy and utility shares and materials are falling. commodities are a part of the equation. a can of commodities, let's check on oil which had a wild ride yesterday. today it is trading lower. we talked about how unusual it is we would see that ratcheting up a tension between iran and saudi arabia and oil with an lower. ample testament to how the supply is out there in the market that you would see that kind of phenomenon. betty: the dollar strength is not helping. julie: the dollar has been on a winning streak. ifsaw it benefit yesterday there was money flowing out of risky assets. this is the euro versus the dollar. that has been the longer term trend as we have seen more stimulus in europe. checking on gold prices, gold carded big yesterday on the same safety trade and it's happening again today but in a more muted fashion betty: thank you so much. let's get a check on the bloomberg first word news. thank you so much. republicans are warning they will challenge president obama's latest move on gun control. the administration will require expanded background checks for guns sold from dealers. the plan is aimed at dealers who were not required to do background checks. president obama will talk about gun control and we will bring of the remarks at 11:40 a.m. eastern. bernie sanders will join us today on bloomberg television to discuss his stepped-up attack on wall street. he says the two big to fail banks wield too much power. he is promising to break them up if elected. thisll ask him about that afternoon at 5:00 p.m. eastern. oil and gas regulators taking steps after a series of earthquakes last week. some injection well operators must reduce wastewater disposal volumes. many of the oklahoma earth -- earthquakes take fracking is involved in heavy rain led to record flooding out west. the water is receding and most of the missouri rivers are receding. the swollen waters are flowing south and officials will try to manage the overflow it levies. global news 20 for hours a date powered by 2400 journalists around the world. betty: thank you so much. started with the plunder yesterday in chinese stocks -- plungingted with a yesterday in chinese stocks. should american investors be concerned? if you go back to 1928, yesterday's drop only came in as the sixth worst start since 19 32. joining me from philadelphia's jeremy siegel, the professor at the wharton school at the university of pennsylvania. he has been a long-term ball on stocks. ull on stocks. do you really believe we can get to the dow at 2000 given what we saw yesterday? >> yeah, it was a rocky start. the first day is not a good bellwether for the rest of the year. there is a lot of pessimism out there. 8-10%k we could get an increase. it might put is at 19,000. first, the fed is not going to be as aggressive on interest rates. i look for one-to increases at most. i think earnings will resume their upward course after taking , germanic wallop last year down around seven dollars from 2013. the combination of a less stabilization, earnings, will bring money back into the equity markets. betty: didn't you say for lester , that the fair0 value was 2000? we are 200 points below that. what makes you think we could hit your target for this year? >> certainly, i was disappointed. mystery why.g an 8-10%ooking for increase in earnings last year. instead, we got a 7% earnings decline. by the way, that was the worst shortfall of earnings that we have ever had outside of a recession. we got walloped by oil going all the way down, the strength of the dollar cost is five or six dollars on the s&p 500. given that we were flat on the drop00 index despite a 6% in operating earnings, it was not a terrible performance. that is why i missed my target. the potential good news is it oil stabilizes and the debt -- in the dollar stabilizes, we can resume in her den we saw in the earnings of 8% outside the oil sector. i think that was a less aggressive fed that will bring us back. we're about one year or so behind on what i had thought a year ago but i don't think this market is over. betty: even if we stabilize, we would be stabilizing oil at the new lows. we would be stabilizing the dollar at these new highs. the fundamental dynamics that are dragging down earnings particularly for the energy sector are not going to change much. from $100orget, going down to $30, that brings us downward. if we stay at $35, the downward component will stay the same. then we can look at the growth in health care and consumer discretionary and all the other sectors that had good growth last year. we will not at the downdraft from the material sector and the energy sector and will get that growth again on earnings. i am looking for in earnings increase of about 8% this year with stable interest rates. i think the bull market can resume. betty: speaking about interest rates, brendan greeley interviewed the cleveland fed president who is a voting member this year. she talked about inflation and interest rates also talked about china. i want to play part of that interview for you. >> we built in a weakening path for china. i don't see that as a significant risk but it's certainly a risk. theill look at that but actual direct trade channel but the u.s. and china is not that large. will it have a direct effect on the u.s. economy? i don't see is a significant risk. betty: do you agree? >> first of all, i know loretto well. she was research director at the philadelphia federal reserve and taught at the wharton school. she is a wise woman. for the u.s., it has to do with commodity demands and oil demand. motors has its best a sales in china. i disagree with her that it would not have any affect. i don't know what slow down she has built-in but i do not think increases that 4 .he blood penciling in i think we will have a slowdown andhe u.s. economy inflation will not hit their target of 2%. i think we are only going to have one or two increases and i think that's bullish for the stock market. they: she is at 10.7% on economy this year that what is your forecast? -- she is at .7%. 7% - 2.7%.s at 2% or 2.5%.er to betty: how do you get to in earnings growth of 8% based on those numbers? 5% last yearad 2-2. and outside of oil, we had an 8% earnings increase. europe is looking a little bit better this year. we don't need a speed up. we need those headwinds that forced down materials, energy, and the export sectors to disappear. it's not necessarily a rebound and i think we can get the 8% increase in earnings. go, youefore we mentioned how you don't think we will go 4 increases, maybe to it the most, when do you expect those rate increases to happen? think it depends on what's happening on the economy. we will not get it from the january meeting but the march meeting will be a big debate. be as significant as december and there will be a healthy debate on that. i think we will see some slowing numbers and lower inflation that will catch their eye. very early call without a lot of data. i don't think they will really increase in march either. betty: professor, good to talk to you jeremy siegel, from the wharton school of business. we were speaking about that and they are stabilizing as china moves to support its own market and we will look at what is next for oil following the biggest the iranost on record and expressing regret over the attack on the saudi embassy in tehran. we will get more insight on the tension between the countries and what that means for the u.s. from a former u.s. ambassador to nato. those stories and much more ahead on bloomberg television. ♪ betty: good morning and welcome back. let's go back to julie hyman. i know you're looking at the gunmakers the president will be speaking about expanding gun laws mark. at about 11 5 a.m. he will be talking about that and some of the gunmakers are going up including smith & wesson. there is this perception that the gunmakers will benefit from a gun buying surge ahead of any increased button -- gun buying regulations but smith & wesson raise their forecast at the close yesterday saying the fiscal third-quarter earnings $.39-40 onell be cents on the upper end had been $.29. the selling more so there inventories are lower than i want to take this opportunity to look at a longer-term chart of gun buying. these are kept by the bureau of economic analysis going back to 1999. it's a pretty straight upward line. we had a dip in 2008-2009 and since then, we have seen an increasing amount of gun sales in the united states. another group we are watching his solar. it was downgraded by goldman sachs with one exception which is first solar. it was upgraded, it's the preferred stocks, raised to a buy from neutral in a price target is $100. goldman says the company has a best in class balance sheet and a catalyst could be the company coming out with earnings that beat analyst estimates and it should add capacity. oppenheimer is raising his price target on the stock so double positive for solar today. we looked at yesterday that was bouncing back from a negative 2015 but higher today. it's up nearly 4%. oprah results may come in better than initially proed -- says it go results make an better than initially feared. there has been some is on the street about the company sales growth. if you look at the bloomberg terminal, we got sales growth going back to the beginning of 2013 and it was explosive. you were talking about double digit growth at one time, 50% growth. now that has diminished and the dotted line is the projected growth by analysts. they are looking for a slowing but the question is how will it be versus projections? it's been an interesting story. betty: high flying in the early days which was not that long ago. julie: and now there is a question of competition. betty: it's hard in hardware. thank you so much. ahead, as you just a quick programming reminder -- president obama will make gun control a bigger issue in one outline his plan later this morning and we will bring you those remarks in the next hour at 1140 a.m. eastern on bloomberg television, radio, and bloomberg.com. ♪ betty: welcome back. it is time for the bloomberg business/. /. next the capital says shutting down its $1.5 billion hedge fund and returning money to investors. this comes amid the emergence of computer-driven trading strategies of index funds that are diminishing moneymaking opportunities. it returns over 18% as recently as 2013. according to data, it was up less than 1% in the first 11 months of last year. carmakers have wrapped up what may be a record-setting year in the u.s.. december sales at gm, ford, and fee across the rose and not as much as expected. ford was up 18% automakers are expected to be the annual sales record set 15 years ago. samsung is showing off a supersmart refrigerator at the las vegas consumer electronics show. thats a 21 inch screen your recipes and orders take out of you are too lazy to cook and you can see what's inside that opening the door even remotely with a phone app. that's great while you are shopping. that is your bloomberg business flash update. markets are stabilizing today after the pond yesterday. earlier today, martin feldstein spoke openly about the state of the u.s. economy and how successful central bankers have been in controlling asset bubbles. >> we know that they have been unsuccessful by driving interest rates down and pushing up asset prices. last time, it was all about subprime and a whole bunch of other things. subprime triggered the crisis but it was a mispricing of assets and we're seeing it again. we are again seeing the gross mispricing -- tom: you lived in the bottles t -- you lived through the bubbles. >> wouldn't mr. bernanke he said he used the tools in his toolkit. >> absolutely. would he argue that he saved us all? i agree that the fed policy was missed this but he would say i saved us all. stephanie: they did little to nothing for the overall economy. >> i don't think that's right. the overall economy came back because of the fed strategy of driving up equity prices, increasing household wealth. in 2013, net worth of households rose $10 trillion in 10 months with stock prices up to 2% and house prices of 40%. butfed was very successful that laid the foundation for the risk we are facing now with lots of reaching for yield by investors and lenders. >> when they say that's the this pad to pay? once, it screwed up got us in a situation where we hope we come out of it famously but you cannot bet on that. stephanie: if i am janet yellin and i look at the market yesterday and there is a 15% knocked hundred billion dollars worth of market cap off the face of the earth, what does that mean to janet yellin? some would say we are back to a more normal market it is this a sign that she acted too early? the s&p 500 at the end of last year before the drop the price-earnings ratio was 40% higher than its historic average. i guess it's now 38% higher. it's moving back toward normal but still way out of line. i think you can say that about a whole bunch of asset classes. >> which ones? >> commercial real estate, long-term bonds, the spreads beat in high-grade and high risk bonds, emerging-market debt. there is a general reaching. that's just a view on low growth and low allocation? >> i'm not saying a misallocation of capital. you've got mispricing. if those prices adjust way, there will be a lot of substantial losses on the scale we started to see yesterday. if that happens, if there is a demand for it, doesn't that they take the prize? >> it's priced for today's interest rates. atthe short rate will stay less than 50 basis points ever, i guess equities can be priced at this level. if short rates are going to come up and we get back to normal , withof real rates percent inflation and 2% short rate, we start seeing 4% nominal short rates, it does not make sense for bonds to be where they are. will the market look ahead and make that adjustment quickly? betty: that was harvard economist martin feldstein speaking this morning. we are talking new york city real estate next. ♪ -- liveive from work from bloomberg world for his, voonie quinn has more. the lady isit is the latest saudi arabia an ally to end diplomatic relations with iran. this follows the saudi break with iran prompted by attacks by protesters on saudi offices in iran and demonstrators were angered when the saudi's exit executed. officials from denmark, sweden, and germany will hold talks in brussels tomorrow concerned about new border control measures and at stopping refugees entering northern europe. sweden induced all id checks and denmark tighten controls on its border with germany. the former south carolina's of us are charged with killing an unarmed black motorist is free on bail. a judge ruled yesterday that michael slater does not have to stay in jail until his murder trial in october. the fatal shooting in north charleston was captured on video can deliberate acts caused more airline debts and accidental crashes last year. that's the finding of an aviation industry company. people butled 161 hundred 74 people died into crashes that were preventable . ande was the german plane the russian airliner that went down in egypt last october. news 24 hours a day powered by our 2400 journalists. betty: thank you so much. after 95 years in business, $10 billion in assets, there has been an ushering in of reit status. they will ring the closing bell in the new york stock exchange as forest city complete the sale of the brooklyn nets for the russian billionaire. joining now's the man leading the transformation, the ceo of forest city real estate trust and with him is a key pirate in the development of the barclays center. prominent property developer, marion dell martin. thank you so much for joining me this morning. the first question is why did you decide now to become a reit? >> we have been going through a since 2012.ange we decided we would focus our business in new york. going to invest in our balance sheet and create sustainable capital structure and wanted to operate as efficiently as we could to maximize value for our shareholders and investors. in the transformative process, a reit was the logical ending after 95 years in business. in 1960 we became a public company. distribute ourto dividends and allows us to get into indexes that other we weren'tthat before so gives a boost to our company and investors and allows us to operate were other real estate companies operate on the same footing. betty: this is an interesting time when we have had certainly a pricing gap between the public market in the private market for these assets. also with the fed on its rate hike cycle, some investors were more bearish onreits last year. >> when you look at the historical performance of the inability to unleash our asset value, it will prove to be a wise move. i think it will get us closer to where we believe the value of the company is. -- raw the ravens reasons david the dow, this is a smart move and you look at and 80%tal real estate of aren at operating income is in core markets, we're sitting in a strong place. betty: what's strong right now? what sectors in what areas? >> i will talk about new york. around the country, we operate in the strongest markets. in new york, we have had a record-breaking year. it's driven primarily by job growth. 100,000 new jobs created over the last year means the expansion is the strongest ever in the last 25 years. that creates momentum and housing and office and retail and every sector so it's been a strong year. it was noted this morning that manhattan hit a new high for the median price of a condominium in excess of $1 million. we keep raking records in new york. issue but it raises the if we are running out of affordable housing. brooklyn is starting to see prices as high as manhattan for residential and office. are we pricing out people? a 50% toyn is still manhattan as far as condominium prices and has a pipeline of affordable housing unlike any that exist to manhattan. as far as rental markets, we are dangerously low in terms of vacancy rates. if you build it, they will come. what makes a compelling is there still a $400 month differential between what it might be to rent an apartment in manhattan versus brooklyn. i think the runway for brooklyn and the ability to capture the upswing of the manhattan market is there. it makes the fundamentals quite compelling for brooklyn. betty: what else might you sell? >> you mentioned the barclays center. we were selling our military housing business. betty: that was part of the preparation? >> we could have cap of those froms but it moved away our ideal focus. we want to focus on the core markets. new york is our largest but austan, washington, d.c., san placesco, los angeles, where the dynamics are very similar to what's going on in new york with maybe re- urbanization of america where people want to live and shop and work. the unique brands that we bring to the reit world is that we can deliver what consumers want. with a mixed product offering, we can deliver that on our investment strategy which is in urban markets. betty: what do you make about the pricing gap? did we get to this point and will this resolve itself? >> that is always the cycle. thousand back to in general traded above their net asset value. markets, those values were trailing the public markets. we talkedcyclical about interest rates going up and public perception and you start looking at leverage levels. the public companies get battered a little bit unnecessarily based upon value officer you are an building owner privately or publicly, you are dealing and computing in that same marketplace. if the market dynamics are the same, you have an opportunity to have a great operating portfolio and your fundamentals will play out. a lot of private equity is flowing into the u.s. markets in particular and that is also another flight to safety we see happening on a global basis for the u.s. and driving those private values up. go, this ise we related to programs that were extended. this is a way for developers to get some easy and cheap money from the chinese. that you aregram happy that's extended and will you continue to use that? >> i believe projects like pacific park brooklyn, land loans are not available in our state. in some ways, the ability to address the marketplace and provide well priced funds for that has allowed projects of large-scale nature to come to fruition. equity to funds those obligations because the vertical is so much later. eb-5ve make great use of and we're thankful the program will continue to betty: thank you so much for joining me. you both will be ringing the closing bell at the new york stock exchange. ofh more i had as millions guns available in the u.s. but after today, could be tougher to get your hands on those firearms? in about one hour, president obama will unveil new executive action for gun control and we will bring you those comments from the white house live at 11:40 a.m. eastern time right here on bloomberg television, bloomberg radio and bloomberg.com. ♪ betty: welcome back. let's go to europe where mark barton is standing by and european stocks are in tandem with us. they are rebounding? better than it was 24 hours ago. it was a big fall for the first day of the year but we are up half a percent, the miners are rising. that's the biggest industry gainer today. there is some improved sentiment. betty: watching the movement today, think everyone feels better. we have a big europe come close just ahead? >> we certainly do. we survived a day one but day to is underway in about 18 minutes. the new extended europe can close and we will get a trading perspective on this fascinating trading week from our destin new york and london. desks in new york and london. an $80 billion load of counties for vw. in the battle of the charts, i will ask of its time to buy china 8 shares to are the chinese listed shares in hong kong. of the haircuts, they are calling it. betty: we will see you in about 15 minutes time. to abigail doolittle live the nasdaq with the latest on one of the big stocks moving yes, shares are trading slightly higher today in this is one of the worst performers at the nasdaq last year. there is investor concern. proy, jpmorgan saysgo results make a mint better than initially feared for the quarter it certain camera models are selling well over the holiday. the stock is stretching to perhaps overtake its 50 day moving average, something that happened last april before the aheadmoved higher by 50% of the big summer selloff. there could be some volatility ahead for them. solar edge are moving higher as goldman sachs downgraded's solar in general but upgrades these stocks. a few selected names may do well in the solar space in 2016. betty: thank you so much. about, thetalking big stock engine china effect of the equity markets all over the world. was the volatility? how do we put it in perspective? erik schatzker has a look into the volatility question and joins us now. i know you have done bloomberg terminal functions. what does volatility really mean? show it to people and that's the value of these functions. this is data visualization. we can show it's happening on my screen. the function is called hrh. it stands for historical return histagram. columns shows us the distribution of daily returns on the shanghai composite index over 2015. it's back to that chart, not just the blue bars but you see that orange line running through the blue bars, that's normal distribution. it's a bell curve. according to the laws of normal distribution, we should never % butaily movements of -7 in 2015, it was a volatile your for chinese stocks. that shows us it was well outside the laws of normal distribution. that's called the fat tail. it is oh is trying to tell us that financial markets don't follow laws of normal , that theon unpredictable is exactly what investors should expect. thatss the consequence of is a 7% move in the shanghai composite should not be as shocking to investors as some people find it. so fat tails are normal. betty: it doesn't make it easier to cope with. it set off this panic selling around the world. what do you read into that going forward? the volatility of the vixre, the best gauges the which is calculated on options prices. it's an idea of what investors inspect -- expect. over the next 30 days. is for historical volatility. that's healthy because it gives us a sense of whether or not the kinds of big moves we see now and then in stock indices or individual securities fall within the normal range and how frequently returns fall outside that range. terminal andto my plug in the s&p 500 index, we can see over the course of last year that it was not as volatile as the shanghai composite. things fell outside the normal range but these values are very small daily moves. it's the stuff on either side near the tales that you want to be looking for. if i go back in time, this is another feature -- you can see the returns back in 2006 and you can see that the returns were much closer. the returns were not nearly as frequent as they became when we get into 2009. we had all kinds of days outside the bell curve. that is what the shanghai composite looks like now. betty: we should do a master class with you every day. erik: it teaches us something about the performance of markets that perhaps we knew but could not illustrate. betty: 100% -- thank you so much. much more just ahead on bloomberg markets. the former undersecretary of state nicholas burns joins us to talk about what's at stake for the u.s. with the saudi-iranian tensions. ♪ betty: welcome back. iran is expressing regret over the attack on the saudi embassy in tehran tensions between the two countries are on high alert after the execution of a prominent shiite cleric. nick burns joins us now as a former ambassador to nato and grace. -- and peace. eece.d grace - gr first off, what should the u.s. responded to? saudi arabia is a key ally in the middle east? you have seen, the united states is acting quickly behind the scenes to get restraint on the part of the saudi's put untrue that's a same message going to the iranian government. these other the two major contestants power in the middle east. the saudi's represent the suni world and they are fighting it out through proxies in yemen and syria. the iranians are a major problem countries and the u.s. so we would like to see these tensions diminish and not let the situation get further out of hand. betty: how does it diminish? what happens? a majornk you will see push by the u.s. as well as the united nations and the russian government to get these syria stalks started on january 25. it will be important that the saudi's and the iranians show up at those peace negotiations. this could take months or years to end the syrian civil war but the consequences are disastrous. 260,000 dead, 12 million homeless, and da silva were that has been tested size into iraq and jordan and lebanon and turkey. it got to stop that war and you need the saudi's and the iranians to be at the same table. despite the fact that they no longer have diplomatic relations with broken over the weekend, think there will be tremendous pressure by washington and the yuan to get them to the same table and a couple of weeks. do you really think that will happen? can they meet at the same table in january 25? see the saudi and basso to the united nations was quoted yesterday as saying that saudi arabia will continue to operate with this process. there will be all sorts of pressures in tehran and riyadh to continue to have a difficult relationship but there is a fair chance they could show up. that's the imperative and from a u.s. perspective, you want to make every effort to make sure there is no direct military clash between iran and saudi arabia. i don't think there is a great probability of that because these are rational governments. the tensions got out of hand over the weekend. there is a sectarian divide that both of these countries represent. are sowhy the stakes high in the major energy producing region of the world. betty: some of the critics of the president and his middle east policy would say that some of this is our own doing, that saudi arabia, we irritated them with the iranian nuclear deal. we have not had a concrete middle east policy during obama's term. essentially underscoring that the president is leaving this country with a mess in the middle east? >> i don't think it's fair to blame president obama for what happened over the weekend. the saudi's and iranians have been strategic rivals for generations and they will be for generations to come. they are responsible for what happened over the weekend. it was unwise of the saudi's to execute such a great number of people including the shia cleric because that has exacerbated the sectarian sunniss betweenshia and and the iranians are being extreme in their response. they have executed hundreds of people over the last 12 months. i think it's important for the united states to be a stronger leader on the syrian crisis and i think we can babe but we should not blame the united states or what happened over the weekend. 1 betty: thank you so much. much more ahead with mohamed el-erian . he joins us in the noon hour can . ♪ betty: it is 11:00 in new york, good morning, this is the european close. mark barton joins me live from london. i know you cannot wait. >> a very good day to you. european stocks are recovering from the worst start of the year on record. the european close starts right now. betty: we will take you from new york to london and berlin in the next hour. we are less squeamish today recovering in the markets? worst first day of beer stocks with aean decline of 2.5% and we have clawed back some of those losses today. what a day it was yesterday and today with china announcing various measures to soothe the nerves of investors. the fear index rose

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