tv Market Makers Bloomberg December 1, 2014 10:00am-12:01pm EST
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>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. to be battered by the shockwaves? this will be a survival of the fittest. , will cyber monday be any better? we will talk about that -- talk with the head of e-commerce. >> you may start paying more for your habit. farmers aren't making enough to grow cocoa. this is market makers. i am erik schatzker. >> i am in for stephanie ruhle.
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we have some breaking economic news on the manufacturing sector. mike mckee has headlines from the desk. we expected a big drop in the purchasing managers index for the month of october. we get a drop, not a big one. we see new orders actually rising to 66 from 65.8. that was not in anyone's real forecast. employment down just a touch. interestingly enough prices like oil prices really having it in the impact of their. the dollar has been rising but export orders are up. a really good overall number. >> thank you very much. a black mood for
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retailers on black friday. the national retail federation says spending tumbled 11% over the weekend julie hyman is here with a rundown of the latest on black friday and what we know about weekend shopping. >> that was for the entire weekend, that 11% figure. also some number saying individual spending, per shopper on an average basis, was down 6.4%. traffic fell by 4.5%. there is one caveat we need to take with these numbers. we do not know if they are accurate. national retail federation commissioned a company to survey shoppers. they surveyed 4600 shoppers. do you know what you spend this weekend? exactly to the point that they could figure out the 59 point $9 billion was spent over the
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weekend? it is a tricky thing to do. i have seen estimates that show a drop in traffic but in -- but an increase in sales. of nrs,e chairman saying he doesn't believe the 11% drop number. he was talking to some of the retailers. he said they did not look as negative. that is an interesting caveat. >> we are going to talk to a woman who is in charge of tracking online sales. they see a nine and a half percent gain. gain intlets see a 20% online sales. this does include brick and mortar. the dispersion of these estimates give you an idea of how difficult it is to estimate them. themberg has been pounding
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table on this for years. it is difficult to get good numbers on what exactly holiday shopping was. you talk to them about why we are seeing these numbers that seem to be weaker than had been anticipated, he said part of it is the spreading out of the black friday phenomenon. some of that spending happens earlier in the week, earlier in november. he also spun it to say if you are feeling better about the economy do you need that deep discount that is going to be offered on black friday? do you want to battle the crowd? people are waiting because they know they are going to get a deal later in the season as well. are the victim of what they had been doing with consumers and all that discounting. >> julie hyman covers retail for us. $63.72 per barrel.
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the picture overseas is very similar. the plunge continues in the aftermath not to cut production. we look to global fallout. we speak with columbia university's professor of international and public affairs with the global policy center. the obvious question is where is the floor? answer sure you can that. >> if i could predict that i might not be a professor. we are going to be in the range of quite a low oil prices. you can see them staying in the 60's for the next several months. . would expect them to rebound it is still possible they could get their act together and decide another 10 or $15 price decline. there is still a lot of geopolitical risk out there. eventually you may see some supply response.
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, where is it likely to come first? until next meeting is not june. it is easy to see an emergency meeting between now and then as people get concerned about the price to climb. it takes them to her three meetings to get their act together and do some cutting. wasn'tsame time it surprising to many people they were unable to reach an agreement to cut this time. the saudi's are the people we are looking to do to do most of the cutting. countries, they said we are not going to be the only once to cut. they need the revenue. to need thet seem revenue as much as everyone else. we have seen them to this kind of thing before. i am thinking of the 80's when they let a price war. there are a lot of countries
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that desperately need the price to go higher. how come those countries cannot exert their power to bring about a cut? >> they do need the revenue. and so they were unwilling to cut. the venezuelans really wanted there to be support for their prices. they are under a bunch of physical budgetary pressure. --se countries were really were really unwilling to do anything by the way of cutting themselves. the saudi's want shared pain. >> let's walk through the impact. severe budgetary restraints with oil at $70. what about russia and nigeria? >> those of the country's the hardest by this.
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the saudi's have the potential to lose a lot of revenue. they have built up large reserves. they can weather this for some duration of time and let the markets sort itself out. we have seen what happened with the ruble. russia under significant economic pressure given the sanctions. these are countries that need oil revenue to fund significant social programs to build public support. -- ashould be a course source of concern. >> who is most vulnerable here? the russians could easily turn around their behavior and reverse sanctions. they also don't need the price to go quite as high as the iranians do. >> it is hard to know where
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these breakeven numbers are. the iranians are a little bit higher. the question is how much discretionary cutting can they do in their spending? russia could take steps to roll back sanctions. what that looks like and the what it looks like for putin to save face and give the west and excuse, that is going to take time. >> for putin it would be easier to pull out of ukraine. >> if anything we may as well see them ratcheted up a little bit. what does -- what effect is the drop have? the brent commands, the spread has narrowed to the point where it is only about four dollars. is the argument moot?
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>> you are looking at the gulf coast price. that has been virtually identical recently. on the one hand, if you are concerned about a price discount off of 10 or $15, that is a bigger concern than one it is 120. you are going to see more of the u.s. start to get impacted. price starts a low to reduce the growth rate, the day of reckoning, the point which the domestic system has more oil may push off a bit. >> saudi's benefit from putting a tamper on production here in the u.s.. it seems they want to inflict pain in iran and russia. there is a political aspect to that.
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>> they recognize the fundamentals in the market, the reduction in demand, this justifies where the price is right now. they do want to instill some discipline. to beon't want to see -- seen as the only ones balancing the market. i think to the extent it imposes pain on iran and russia, at as an added extend. -- added benefit. >> thank you very much. when we come back, maybe retailers will have better luck on this cyber monday than they did on black friday. the head of e-commerce from walmart will be with us. it may hurt the nfl commissioner standing. but it does not look good this year.
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back when cyber monday started people went to to work and shopped because their internet connections were faster than they were at home. that has changed a lot. runs walmart's e-commerce business and joins us from the company's network operation centers. julie hyman is back with us as well. first of all, thank you for joining us on what must be an incredibly busy day. a lot of people are doing cyber on ciberopping saturday and cyber sunday. >> happy cyber monday, which is
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still one of the most exciting shopping days of the year. really black friday is a five day shopping event. we had our highest performance on thursday, friday, saturday. like a space shuttle launch but i'm assuming that is all data behind to relevant to what you have to achieve on a busy day like this. >> i am in one of the coolest rooms you can imagine. 60 people are watching every piece of our operation on about 100 different screens. monitoring how each of the sites is performing around howworld, everything from the distribution centers are functioning, all to make sure customers can get access to some of these great deals we are offering today. >> we got some information on
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thursday when we learned it was walmart's second-highest day ever in terms of online sales. can you tell me about anything about your expectations for today? said thursday was a big day for us. the three days were record traffic in performance for us. what was interesting is 70% of that traffic was mobile traffic. we are building towards today. we have some of the best deals online today. traffic has been ramping as the country is waking up and going to work. coleman eighto day with cyber monday evening addition. a lot of working moms and dads to not have a lot of time to shop during the day. we have great deals.
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we have a 55 inch samsung for under $1000. have a no contract phone for under $10. to have accessg to these deals throughout the day. we are expecting a big day again today. >> will walmart hit its target this year? >> in the second quarter we talked about how we were ramping through the year. we felt good about a mid-20's growth rate at the time. about it now as we continue through the holiday season. mean you will get that $12.5 billion figure? >> we gave guidance in july. we areexcited about how serving customers and we look forward to seeing how the dust
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settles. a bit of time has transpired between july and today. people here are hearing you talk about a good holiday weekend and think, does that bode well for the forecast or poorly? when i cannot get a specific answer i have to make the assumption it is held. guidance in july and we will get to the end of the year and see how the dust settles. and i'm looking for more color onhow people are shopping your website versus how they are shopping in-store. i know you count on a relatively high attachment rate. get one of those discounted televisions i'm going to walk around and by other stuff. one would imagine it would be a lower rate. to the could take you
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big picture, walmart is one of the few brands that the customer knows they can buy anything they can want and they can trust they are going to get it at a low price. on our sites are on her apps, that shopping experience is driven by that knowledge that they can get what they want, anything they want at a low price. thought about the holiday shopping experience, we have programmed that with our unique combination of online, in-store, and mobile. we had the one hour guarantee. at one of the cool features is when you scan that receipt and you get for that item personalized shopping recommendations we have done through the commerce engine we have built here. we are really integrating that shopping experience. the customer can find a collection of things she wants.
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the experience online is very similar to the stores in that they can get everything they want, they can expect they can get it at a low price. >> many online retailers have trouble with the conversion rate. what was the experience like this weekend? >> one of the differences between online shopping and store shopping is that definition of conversion. most people who walk through the front door are going to buy. we have been pleased with our broughton as we have more and more traffic into the funnel and given people more things to buy. we expect them to do things like research that tv they want to buy online. when they get ready to buy conversion for us is very strong.
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>> what about inventory management? i went online friday to buy matt it wasn'tbe and all, available in the stores. how do you figure out what inventory to deploy to the website versus stores? dozen that limit sales? >> we chalk that up in the good problems to have, for these really limited items like the elsa snow globe we want to make sure they are available in stores. we will start by making sure they are available in stores and continue and we move inventory back online so we can satisfy as many of those needs as we can. we be selling them all online. >> head of global e-commerce.
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>> you are watching market makers here on bloomberg television. >> it goes without saying banks large and small have a lot on their plates. fromolicy and the exit quantitative easing all playing a role. some banks think consolidation is the answer. americans --ceo of an organization that advocates on behalf of the $15 trillion u.s. banking industry. to see you again.
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>> thank you very much for having me. bb&t,poke with the ceo of asking him why he has been busy with other banks. here is how he answer the question. >> we need more scale. some would not understand why. we are about 210 billion, 10th largest u.s. bank. with the huge investments we are having to make in technology, the digital space, regulatory costs, the costs of operations are going up explanation only. >> on one hand kelly says regulation is here to stay. on the other so is cybercrime. is that the future that american banks have to deal with, there is no choice but to consolidate?
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>> i would hope not. kelly king is an excellent banker and a member of the bankers association. us that come from a community background, for those of us that come from a state from urban areas, rural areas need community banking. when you consider the enormous cost of regulation, we have lost one bank per day in growth since the fall of 2008. who gets served by that? not a whole lot of people. i would hope we would get some relief from congress on the regulatory side. there has been a lot of headwinds to community banking.
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trying to make the case america needs more than >> we are at about 1600 plus. when i was a child the big banks were not in cities in america, they certainly were not in small towns. the community banker that for startupding businesses, lending that is not cookie-cutter lending, that is a real value. can have the we big guys compete abroad, the middle size guys complete abroad here. bankers --ty obviously though at -- those at the low-end of the asset scale
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and passed them off as need be to the larger brothers and sisters in the industry, i think that is good. community banks are well capitalized. the tremendous cost and burden of regulation, 10,000 pages now of dodd-frank, propose the final rules. that is not good. >> what are some specific pieces you would like to see rolled back? congresshear this new fighting back against dodd-frank? what we want to emphasize is any reform should be reform, not to repeal. there are things most people on reflection would say, make sense. a complicit government encouraging you to make loans without assets, jobs, or
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incomes, that is not smart. if i can keep that alone that i i can make it automatically a qualified mortgage loan, you will see more lending to first-time home buyers. mortgage lending to people who are not otherwise be in the market of buying a house. there are very few character loans being made. obviously what to do about the consumer financial protection bureau. this is america. , men ando sit down women of good wills in both parties to determine what is best for community banking, what is best for borrowers and customers, not what is best for
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stockholders that what is best to get the economy moving. i think that reform will go places. >> good to see you. we have breaking news. julie hyman is at the desk with more. this comes after this morning and amazon announced who is going to the debt market with a senior note. now revising its outlook of amazon in terms of credit rating . it he did this upon reviewing the news it was going to be offering these. timeis only the second amazon will be going to the debt markets. it said it will be using the proceeds for general business. this is because of the announcement this morning.
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he says in the release that there is uncertainty around the cadence of deployment of proceeds of not just this but how amazon is spending its cash. also moody's does no that even though amazon is the dominant player, there is a lot of competition. not a good day for many of the stocks in the technology group. >> thank you very much for that. amazon getting a negative outlook. >> ray rice's suspension may have been thrown out but does that mean we will see him back
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>> roger goodell cannot wait for this at -- for this year to end. he took another blow when a arbitrator rejected his indefinite suspension. focuses attention on how he mishandled the issue of domestic violence. he runs the center for sports law. he is also an espn analyst, thank you for joining us. had theodell has roughest year in his 10 year. why does he continue to get so much support from the owner's? it is interesting you say tenure. it has been defined that the conduct commissioner, we can debate why, but this archaic himself to aolding high standard, he has been that.
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he basically called him out, as you would say. he said, this is not the way to handle things. this was not a good process, you had no notetaking, no transcript. it seems we make it up as we go along. a baddie year on the credibility and discipline side. the people who matter are the owners. the owners think highly of roger goodell. they have a player friendly cbs and play. they have acid rockets havecketing -- and they assets skyrocketing. ,espite all this negativity roger goodell seems to have his stock high in the people that matter. would it take for the owners to lose confidence? >>
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eight -- i asked a couple of ownership sources i know. not so much following a great process as we have seen in but some lying. that would have to be involved. thing we will see, though, is some abdication of total power. they are the people that matter. needsay listen, you don't to have this on your plate. let's get an independent panel. let's get the domestic violence people involved and keep you out of it, keep you involved with on the field issues. is the most that is going to happen here. >> what is the most that is going to happen to ray rice? there are a long list of people
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who've committed discretions at the least. that is going to happen as we have seen our -- we have seen his last days on the field. i was a former agent. i think -- go ahead. >> michael vick was killing dogs. it doesn't get much worse with that. there have been nfl players that have killed people recently. michael vick didn't go that far. he came back to an nfl team.
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ray rice's wife since this is the first time and last time. what she said on the today show. >> i knew it was going to be hard. at the end of the day he is a football player. he has proven himself as a football player for seven years. >> regardless of whether or not you believe claims of whether or not he has been violent in the past, you have to believe he is a football player the same as michael vick and he is going to do his time in the public eye. >> i agree, the issue here is timing. we have quattrone weeks left and then the playoffs. a team to bring someone in the locker room know, it is over
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in four weeks. if you are a good team you're moving toward the playoffs. it is hard. even if he didn't have baggage with him. ofs is why it is a 20 15th -- 2015 decision. it is a sea level decision. i remember bringing victim. we had a lot of pushback from the corporate sponsor people. we had to keep it quiet. there you talk about emotion and picketers. you are going to have that video shown over and over again. if you sign in march or april or june or july, that's will fade. if you get into the season next year that all becomes history as
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, here's something i don't get to do every day on television, introduce my brother. he is the author of a new book that will be out in the new year. talk to usis here to about the and of chocolate, the title of his cover story. we have 28 stories in midtown manhattan. as far as i am concerned there is not enough room for two
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schatzker's. >> i want to point out to the graphic we just pulled up, it does not go chocolate. >> it is not disappearing. we have always been used to chocolate being abundant and available. there is a tremendous amount of pressure from chocolate on all sides. this delicious treat will get more expensive. disease is a major threat to chocolate that comes from a tree, not a small plants like corn or tomatoes. global warming is a threat. farmers are finding alternative props. there is a constraint with chocolate.
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>> we will make half of the chocolate. >> 70% comes from africa. >> why can't they stop the spread of disease? >> it takes a long time to improve chocolate. it takes forever. it is spiking. always our favorite example. they are eating more chocolate in the last two years. is only 2% of what we eat. eat half as much chocolate, what will it to do to >> he is the cofounder of dandelion chocolate. do you find ourselves -- do you find yourself confronting some of the factors explain to us?
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>> i think all of the things he mentioned are true. i think the chocolate shortage is a bit overstated. by 2020 the world is going to run out of chocolate, i think those headlines are overstated. they both put out statements last week, effectively stood -- effectively saying it is not that bad. there is going to be a gap between supply and demand. the prices go up, the farmers are interested in planting more trees. things stabilize. has been thishere tight coupling between supply and demand. we don't by commodity beans.
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having the farmers get paid a little bit more is not such a bad thing. great but there is only so much land. we start selecting strains that are more abundant. these for i.t. is give you a lot of cocoa. it just is not taste very good. we are going to do the same thing to the strawberries. wondered about this, i lived in germany for a decade. accuse thealways english of selling state chocolate. they are different levels of chocolate. >> they have all sorts of rules about what constitutes as chocolate.
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at some point it does come down to quality. today loot the quality, everyone will feel of that. overall we are going to feel it. >> do you have some concern about the quality of the plan that these farmers are going to put into the ground in order to or to a trust supply demand imbalance. >> there is a distinction in the market. all you really worry about is how do you increase your yield? it doesn't actually taste very good. the big industrial
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makers are concerned about how you get enough supply and makes a vinci been consistent. they are starting to treat chocolate like wine and coffee. it could have more flavor complexity than wine. they are pretty proud of what they planted. they are already getting paid a fair wage. a bunch of people out there trying to find new and interesting strains of chocolate. willing to plant that. that is pretty different in the commodity market. >> he is the cofounder of dandelion chocolate. >> mark schatzker, you are the second schatzker brother i have met. every time i want to know, what was it like?
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>> it is an inside job, hackers with wall street experience have been healing secret m&a documents from dozens of companies. >> a chinese firm going hollywood, it already owns a big theater chain here and it wants a piece of the video behind "the hunger games." >> carmakers flood the airwaves with holiday commercials, but do you know anyone who wakes up christmas morning to find a car with a big red bow on it? not me, anyway.
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>> i will save that for later, we will give you the top stories of the morning right now. >> top business stories around the world right now, manufacturing more than expected --t month the isn factoring factory index, with growing demand from american consumers bringing up the letdown from foreign customers. >> david einhorn has a great month. his main fund at greenlight capital gained 5.8% in november . his firm invests mostly inequities. -- in equities. according to be familiar with the matter, hundreds of jobs in the night is it's could be cut in groep -- cut in glaxosmithkline. a chinese company is in talks to
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her just a stake in lions gate. they already have a foothold in the movie business, controlling the second-biggest theater chain and i are cut. they have also had talks about investing in mgm. brad pitt is a hit with hackers. hackers launched a cyber attack on the sony film and tv studio, stealing "fury." they also swiped the unreleased film, "annie." downloaded half a million times, already, hurting the take at the box office, as expected. >> breaking news just moments ago on amazon, moody's has changed its outlook from stable to negative just a few hours after amazon announced a debt sale, one of the only debt offerings in its history. cory johnson is at an amazon tracy,ment center in california. serendipitous timing?
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>> it is very exciting. i am surrounded by these robots moving around gear, but the exciting move will be in the balance. we don't know the numbers yet, we are expecting them sometime tomorrow, but the ducks are quacking, interest rates are low, and they will be raising of 2012,y in november with a borrowed 1 billion and one quarter. i tried to get them to tell me how big the offering would be. when i said more than one billion, i got an eye roll. i don't know what that indication means for us here, but clearly even though the company is barely profitable at all times and that is how they run things, the film and center is a big part of that. they are spending so much money on capital expenditures to bring distribution closer to urban centers, places that they would never go before because they have agreed to not pay sales taxes abroad, they have built many of these fulfillment centers -- not distribution
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centers, as they like to call them, they are building a lot more, spending billions to do that, and now it is happening in wall street in a rarity for amazon. moody's is already looking at their ability to return cash flow to the company. know, credit ratings agencies are not looking favorably on amazon plans to issue debt. with things look differently or feel differently for amazon if the margins were not so razor in? you mentioned that they don't make any money with margins less than 3.5%. >> so, barely profitable is the way that they run this business. there are some great people at credit ratings agencies that do a lot of work, but to make a statement without knowing how -- the offer is >> however, however, maybe they know that there are times when the credit analyst have more
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information than the investors do. >> absolutely. we can safely assume that it is at least $1 billion, which is a big deal for this company. what i will say is that you can see it in the facility. with these robots moving around, moving these 700 pounds stacks of random items, like dog treat and paper airplane kits, cds, these things that they are moving, this technological wonder of robots and database software, sewing it together here, picking it over there, this is all about trying to get more value to the customer. can carry 50%lity more items because of these robots and the methodology that has grown up around them. their return on capital changes dramatically with these robotic fulfillment centers as opposed
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to the majority of what they have all over the world, so they are clearly steering the governing factor to be on the razors edge of profitability with control on a real-time basis at all times. i would imagine that the argument to the bond ratings agencies would be that they could be barely profitable, make them on the payments, and consistently reinvest and be cash flow close to breakeven to get bigger and bigger. maybe it is a more attractive deal for bond offerings than equity offerings. maybe that is why they are trying to make that decision. >> are those rumors? ombas? ro >> that would probably be cheaper. >> i only saw one hard-working person there and i wonder if she has to wait in line like half of an hour of unpaid time as she leaves work before going through her security check.
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>> i am thinking think goodness for the robots because now cory has someone else to talk to besides the blowup doll on the front seat of his car. inanimate objects rather than actual people. it is really interesting, i have been to these centers elsewhere in the country and the workers will often walk 10 miles to 12 miles per day pushing carts around like it is the pathmark from hell. this is similar, but they do it from one location and do it through a lot more orders in a given. of time. as far as getting it out of the building and the issues before the supreme court and earlier stilleek, those issues stand. >> cory johnson, editor-at-large , thank you very much. i am sure that you will do some more digging for us there. could call the global
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outpacing shopping untraditional computers, online sales were up 10% on black friday and 14% on thanksgiving. here to tell us more is the worldwide leader for global business services. how significant is it that more shopping was done mobile devices than traditional pcs? does the retailer care? >> i think so. people browsing on their devices drive them not only to the site, but to the store as well. >> meaning that they can and will shop anywhere at any time? >> absolutely. we have 800 retailers as part of our analytic benchmark. the trend has been increasing. looking at mobile sales, that is one in every four online transactions. imagine that it could be a double-edged sword for retailers, right? if i walk into -- i always use guitar center as an example,
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they match rises like many stores do. i walked in there, i see a guitar on the law and i google it and find out it is available for $10 or $20 cheaper here or there, then i can work the retailer down a little bit. therice matching is in marketplace today, that is why many retailers are making the move to looking online to show each other's prices. look, they are trying to get everything they can from this year. the good news is that sales are up. the two days prior to 8.8 percent. thanksgiving, 14%. up 17 over the weekend. >> mobile is up 17%? >> it is all online shopping. the growth year is 25% for actually going to a mobile device. >> earlier we were talking with the head of e-commerce for walmart. neil ashe. he was standing in front of a
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huge kind of norad style wall showing them everything that with all that technology i have noticed a number of different numbers coming out of different sources for how much, for example, black friday shopping was done online. why the discrepancy? >> look at the benchmarks, it is all anonymous, they can look at what they are doing with their peers. if you notice that your traffic or conversion rates are down, maybe you can do something about it. if you are a department store seeing other people landing on other sites rather than yours, you could change your homepage. >> i think that what matt was getting at is that there are other data providers to examine online ales and they say that black friday numbers were even higher than what ibm has found. so, tell us of that more about the quality of your data set. >> or the methodology. >> again, these are live feeds
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coming from 800 retailers in the u.s., so you are seeing live sales, large and small. you are looking at online traffic, online conversion, how long people stay on your site. that is the kind of benchmark that retailers need today. >> neil ash told us that that's the way that he described it sounds as though walmart, like many other online retailers, is struggling with conversion from the virtual shopping cart to the check out. do moreg that people research online, the conversion is not necessarily -- >> what did you find this weekend? is it higher than in the past? >> if you look at browsing, just browsing, that is 52% of all online traffic. if you look at sales, that is kind of a different story. 72% still goes through a desktop. we found that as you increase the screen size to go from a phone to a tablet and then to a
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desktop, conversion rates go up. >> people are more deliberate. >> and the average order goes out. next that makes a lot of sense. in the store you don't put something in your shopping cart and then walked to the front and then not i it. in your mobile device you are probably doing more research. i spent a lot of time looking at different televisions, for example, on websites before i narrow it down and buy it. >> what kind of strategies are at work to raise the rate on mobile? >> i think that personalization is key and we have been helping retailers making sure that you see things you likely buy as opposed the ladies underwear or something, for you. >> maybe he would. you don't know. it the 90's. [laughter] >> you never know. you are talking blowup dolls and chocolate. but that's the thing, personalization matters, obviously the responsiveness.
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what you can see on a phone or a tablet matters. do what a good idea to some retailers are doing right now? to send you an e-mail and say -- hey. >> people are pretty smart. there is this ability to dangle, you can abandon your cart and wait a few minutes and of course people are savvy today. come on, now. yes, of course. price matching, as you mentioned, people are bringing their devices to the store, scanning a barcode and missing a price match. and more believes in more. >> jill taylor, thank you. >> very interesting. when we come back, a new angle on insider trading. crooks may be getting their
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>> a new hack attack to tell you about this morning, and this one could lead to a spike in insider trading. the report says that hackers have stolen them in a information from dozens of ,ompanies in the past year allegedly tracking executives with lawyers tricking them into with thoseccess behind the attack possibly being wall street veterans. brian finch specializes in helping companies respond to cyberattacks. thank you for joining us, brian. the most interesting thing is hackerpicture some
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getting into the files of a bank, i don't imagine that he knows where to go to look for the m&a information or tidbits that could be most profitable, so there must be someone who used to work at these banks no?ing him or her, >> possibly. this is something that people have been expecting and frankly this is probably been going on for a lot longer than the excellent report indicates and highlights. this is something -- there are so many attacks going on in the financial industry, much less the economy generally speaking, it is inevitable that it will work its way into m&a firms, partner firms, trying to get at the data. i am not necessarily sure that it is an insider. many educated people across the globe understand financial data and you don't necessarily need someone working at an investment organization to understand the data and understand how to
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utilize it in order to make money. >> i have spoken to bankers about this and they maintain that especially if they work for one of the larger banks, the amount of money being spent on cyber security and protecting sensitive, high-value client beyondtion is almost imagination. they say the weak link in the chain is that the law firms. do you agree? theirst of all, whatever number it is the you are spending does not matter. if a cyber attacker wants to get in, they are going to get in. talking about a bank? in this case we're are probably talking about a foreign nation. the chinese military will be the bank every single time. >> that is amazing to me, brian. i think of major banks as being incredibly wealthy, with all the firepower of every ivy league school behind their security, their defenses.
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what does the chinese military have? >> thousands upon thousands of tople dedicated solely attacking the united states infrastructure, both economic and military. they are so good at creating new malware -- thousands, if not hundreds of thousands of new pieces of malware on a daily basis. they recently commented that 70% of malware available now is one time use, meaning they only need to use it one time and then they move on to the next. when you have traditional and even advanced defenses aimed at picking up trends and patterns that have been used before, if you are coming at it from a new vector you will not stop it. it is not to say that banks are bad, they are actually quite good, but i am saying that the breach is inevitable. going to your question about law firms, absolutely, law firms are the weak link, not the most technically savvy organizations
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in the world. we work very hard for -- at elsberry, but there are a lot of firms that really do not understand the threat from cyber attack, understand that frankly hackers do not care about the attorney client privilege. we have rested on that for too long. it is interesting that when you talk about the sec with its guidance and other rules, we are at risk for malpractice claims and law firms need to do more to prove that they are protecting themselves. cyber crime on a corporate level described as a three stage process. the first is the denial of service, the second is the step of information. the third is the distraction of property, effectively. stoxx net for the irani and centrifuge. what we are talking about seems to fit into the second category, the theft of information. why has the third not happened yet? if these hackers are as powerful
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as we seem to believe that to be , why have they not gone that far? that far youou go come close to committing an act of war, to be frank. if a foreign nation comes and actively destroys data and property and causes significant harm to the u.s. economy, at a national security level that's the equivalent of bombing an organization. >> that is what happened in saudi arabia, right? >> it happened with 30,000 computers there being destroyed, but if you look deeper into it they were not linked to any of the production facilities, so it was not that impactful at the end of the day, but you are right, this is the type of situation where if there is distraction -- russia does it late -- does it regularly, they conduct a denial of service and other cyber attack, preparing the battlefield, if you will. they go ahead and do it and it
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is close to a national security issue. >> what is the answer? from the perspective of the bank if all the idv -- ivy league schools cannot give you enough protection, do you just go to china? all, again, i want to emphasize that this is nothing new. as a child of the 80's, this reminds me of trading places. but the u.s. government has to step up. >> brian, i apologize, we would love to have you back. brian finch, we are just running out of time. i apologize. back in a couple of minutes.
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>> it is 11:30 here in newark -- newark? no, new york. >> we are close to their. >> it is 11:30 there to. let's talk about oil, survival of the fittest. which american oil producers can stay profitable in an era of $70 crude? for look at the out put at risk, where? jeff curry is with us. jeff, is there a single number,
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at whichaverage price u.s. crude oil production from shale becomes uneconomic? >> we would put that at $60 per barrel. we are between 60 and 80 range right now. i also want to emphasize more the $60 number putting money on that as well. it is a band with more of a wait and see. below 60 creates a lot of that for both sides. >> you just said something worth explaining to people. $60 is effectively the level at which you keep the lights on, but the full cycle at $80 includes things like cost of capital, the cost of replacing accents over time.
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if you don't get $80 for several then ior even years, would have to assume that production is severely at risk. well, the existing production is not at risk until you drop below 60. but future production is at risk below 80. >> so, if you go out and inspect some land and get a contract, get a lease, you will not be putting wells in the ground or putting up after the pond if you don't have at least $80 per barrel? >> that would be for the average or marginal basis. there is obviously going to be some low-cost down there in the $40 to $50 cost basis, still putting wells in the ground, making investments, the group taking out of the high-cost group in the $60 to $80 range. >> what does this mean then here at $65, $.70, for russia, for
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iran, who needs the much higher cost. concept do this whole attach cost versus the full cycle cost. the full cycle cost includes forfeit taxes, export taxes, production taxes, north of $100 per barrel. going back down to look at the cash costs, we are looking at numbers and the $750 range. people also argue that -- places like iran and the middle east have a very low cash cost. the difference between shale and other productions historically is that shale has a very high variable costs with a very small capital cost. in contrast, take conventional oil and it is the opposite. low capital costs with pressure on a lot of other types of users. >> i know that you, like every
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other firm on walls read, have run numbers on the producers themselves. which areas of the country can ?roduce at the lowest cash st which are already out of the picture? >> when you think about the places that have the highest the bucket at put the highest. that is up and north dakota, the group that gets her first. then you look at eagle ford and it gets hurt by other costs. >> how long does oil need to be in its current neighborhood, toer $70, before we begin see an impact, a material impact on the growth in shale oil decline inven a total production? >> think about it in different price ranges. look at the 70 to 75 type of range, which is where the work as was going into ths.
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there is enough pressure on the industry such that you begin to thelance the market in second half of 2015. one important note is that the surplus is still not here yet today, meaning the market is moving ahead of it. we expect it to be in its death around the third quarter of 2015. dropping down to where we are right now, let's call that 65 to 70, it does begin to speed up that process and we think it will happen much more quickly. finally, getting into the 6065, that is the range where you really begin to speed the process up. >> given the fact that we have not seen what you have forecast yet, is that were we are headed? >> in terms of looking at the risk at this point right now, the market does not get hairy soft until the second order. when we think about real downside risk, we would put that as second quarter. why?
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seasonal uptick in demand that obviously occurs during the winter with your winter heating season. one of the big things will be how cold it is. we also think about the impact of supplies and the other regions that are coming online, like libya. it takes a while for oil filter into the system. would expect it to be concentrated in the first half. >> between now and then, how loyal -- how low could oil get? rice today? they're looking at $68 per barrel right now. $71 and $.81 for brent crude. these are prices lower than many would have thought we were going last week on monday. what is the very near-term? >> i can think about that as $50sed to our costs with per amount, that is where you
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would have to get to immediate costs in order to shift the fundamentals. it does not begin to play out. negating byself pushing it too low, too soon, creating a big shift in fundamentals. >> jeff curry is the head of commodities research at goldman sachs. you want a piece of the hunger games or james bond? chinese firm is at cost in buying stakes, we will tell you who it is. ♪
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let's bring in our media m&a reporter, alec sherman, to talk aout another gamble for chinese billionaire trying to break into showbiz. isould say that the answer probably yes. >> we got it confirmed, so yes. this is an exclusive bloomberg story. it is an unusual m&a scoop, we have it on the record that he has held talks with lions gate, something that we heard back in october, but now we have it straight from the horses mouth. >> what does he want? to buy all of lions gate? >> he wants a controlling stake in right now lions gate is not willing to give that up. what we heard today from the chairman of lions gate, who owns roughly 37% of the company, what we are hearing is that maybe lions gate would give up some of that stake, or not all the stake, and those are where the talks are right now.
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this follows the path of other chinese companies also speaking with u.s. film studios. we had heard that alibaba had tensely gone into preliminary talks or a partnership with lions gate and some other ones. form -- firmse owns assets and is now looking at film and other media assets. talks to purchase forbes, some people run number that. large asianother company, softbank. >> what is motivating all of this? >> distribution to asian customers. china has an enormous potential fan base and watch a lot of u.s. films that are often dubbed or subtitled in chinese. also, potentially, you buy a large u.s. film studio you could start making films. >> surely that could be done
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without needing to own part of lions gate. could they not strike some kind of strategic agreement where they help to distribute the film? >> and they might. that is what alibaba has looked at. , thedea here is lions gate aaluation going up and down, bit more light between buyer and seller, proving that a number of different chinese companies have look at mgm looking at bankruptcy, potentially at a point now where you could strike a deal with an upside on the other side if you want to buy some sort of stake. >> there is always the question as to the long-term viability of these independent studios. whether it is dreamworks, lions gate, or mgm, does a firm like this have deep enough pockets for? the table taken off indefinitely? >> or there are the other assets, like distribution.
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they have the movie theaters, right? >> they own amc. i think your question, this speaks to the other part of the m&a equation, it speaks to the need for these companies to potentially find a buyer. it is difficult for lions gate, mgm, or dreamworks, or even legendary, to survive on their the film industry associate driven that if you are not part of a larger conglomeration -- for instance, universal is part of comcast. it does not matter if they haven't up order or down quarter, they are a small part of this. >> like 20th century fox. >> exactly. you are more immune to certain films of doing as well. obviously investors don't look too kindly on that.
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>> matt miller has been looking at whether people buy cars at christmas. >> by nature. >> this is nonsense. >> it is not about falling for it. it is about the same equation that retailers use. the advertising is one thing, but marketing is one thing, but the dealers offer discount that art deeper than any type other than in december.
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specially luxury car dealers, like lexus, what is it, december and it is the time when a lot of people's leases rollover. honda, nissan, toyota, chevy, they are all doing it. over black friday is a .3%. >> with a financing incentive ratio. >> of the msrp, you can see here but it is getting even steeper in december of 2014.
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8.3% here, we are expecting a .8 or send on the first. >> that is the average. if you assume you are a better negotiator than the average person, you can get double digits. the top five discount things in the year i'll come after thanksgiving. and i really getting a car for my mother for christmas? not really for christmas, but is she getting a car in december? yes, why, her old car is seven ones old and she's a new and she got this 10% discount. >> with a big red bow on top.
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i should point out. plus she went to high school with mr. byers. there are a lot of reasons that people get cars for christmas, but then they get christmas presents and probably only the very wealthy do. >> there is a calendar , does it have a big red bow on it? i would, it's fun to go outside and see it. i don't even know if they celebrate christmas and kenya. it is on the 25th as well -- canada. it is on the 25th. and then there is boxing day. >> someone here needs to take a trip north of the border.
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capable job for standing in for stephanie. >> it has been a pleasure. i could not fill her shoes. literally. she has gigantic. huge. >> lacing them up, we will be speaking with the ceo of skechers, the upcoming sneaker company. right now, bloomberg television is on the market. scarlet fu is here with more. >> thank you, eric. u.s. stocks falling for a second straight day as u.s. and gold prices fall off the lows, rebounding. the derivative strategist at m km holding is with us. we are taking a bit more conviction today, because friday was, of course, i have to a of trading. is this record by oil prices or the macro out of china? >> it is tough to differentiate what is due to the holiday and what is due to adult market. the 10 day volatility touched
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2%. to volatility will not go zero, but there are a lot of moving parts keeping the market relatively dull at the moment, but that could change. in our view volatility has been suppressed since the beginning of november and our target has really been mid-december. but we do think a transition is underway and that investors would do well to move towards more equity volatility. >> what kind of trigger will start the next round of volatility spikes? this year, for example, when volatility was low nound asset classes, that is longer the case. currently volatility has remained elevated to october. if you think about the long and the yield curve treasury volatility has also been elevated as well. whereas over the last couple of years u.s. equity has needed a specific and idiosyncratic
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trigger to move higher, right now it is all over the place. >> why are your stocks so resilient, then? >> a great question. perhaps of the index level they are, if you look at energy volatility. not so much the case with materials as well, there are pockets of u.s. equities that have been impacted. volatility on the index level? not so much. >> one individual named we are keeping an eye on his apple. what kind of action are you seeing in the options market? >> quirky trading, down almost 6% earlier. here most of the volume seems to through applessed over the last several weeks and moving on. next months over the or so, really just out through december, a little bit out of the money with profit taking iving on and not positioning
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think for more upside in apple in the immediate future. >> might be kind of a year-end trade. what about the united states expectation activity as crude oil prices tumbled? >> everyone is staring at prudent -- crew related energy equity as well. it appeared to be someone who purchased the put in january at a 26 strike and is rolling them today. instead of getting that money and running what we are seeing is they are rolling at lower, really expressing the view that weakness could continue. >> looking for that oil price to continue falling. you have a take for us on general motors? >> it's true. this fits with your earlier piece about car commercials. here we really want to play around with beneficiaries of lower crude prices. it is not clear how this will play out, but we can find other winners. looking at the auto component
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industry group, the third best performance since mid-october, we think there is more upside to buy gm and it has lagged behind since january with strike calls out right. >> all right, you are looking to pick up gm after lagging behind ford. thank you so much, jim krueger, for joining us this morning. onceight, we will be back again in 30 minutes. "money clip is next. ♪
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clip,"ome to "money where we tie together the best stories and video in business news. black friday fizzles, cyber monday half-day, all weekend grounding online. and there is a new warrior in videogames and a male-dominated industry. the streets of hong kong, the government and its citizens now say that there are limitations with protesters. go gaga for lady mary, they say that they are k
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