♪ >> a big month for the big three at gm, ford, and chrysler, all beating estimates for november sales. >> counting all the money that you will save from federal energy prices, one economist says to stop right now. >> makers on the comeback trail headed back to the aggressive marketing, including everything from ringo starr to racehorses. this is "market makers." >> good morning. neat sneakersls

like ringo starr. breaking news out of the nation's capital, bloomberg has learned that president obama has made a decision on the new defense secretary to succeed chuck hagel. ashton carter, the former deputy >> ashton carter has an expensive record of service in the federal government going back to the carter administration. also the deputy secretary of defense at the defense department, the president and his top officials, the person they're looking for will have extensive experience and knowledge. something that they definitely get.

confirmed unanimously by the u.s. senate with amf shifting in a big way. idea that he has already gone through the process is certainly attractive to obama officials. >> will it help that he was a defense department official during the bush administration? >> on the name started to float andhe top there was genuine there were a lot of questions about what happened in that year. having allies, they were pretty firm and that is going to be extremely beneficial

going through this process. >> the president's choice, according to our report he and. ofthe top business stories the morning, russia may be on the verge of its first recession since 2009. gdp is likely to fall 1% next year. they have been hit hard by the sanctions over the fighting in ukraine. according to skyland, hackers have been looking for vulnerability. computersoke into the and stole the credentials that could be used to impersonate workers.

in the last three months they cost him $12 billion, personally, which constitutes more than half of their personal fortune. the ceo says that drillers will cut back until the price recovers. >> it was a big month for auto sales in november. perhaps sales boosted numbers to a level that we have not seen since 2004. matt miller is here, they talk here. >> we are just seeing the sun headlines coming across at 3.1%, we were looking for something better than analysts had estimated. chrysler was up 20% in the month of november because jeep sales were up 27% and the sales of the

up 100 55%. went >> 155? >> 150 5%. the new model of the car often helps sales, which had stalled last november. but jeep has been on a tear. chrysler sales in general have been up for 56 consecutive months. >> was the sellout or expected? >> totally expected. of the moreo one optimistic analysts out there, brian johnson, who called these numbers to achieve. we saw the consensus lower, but that was because somehow they managed to work consensus numbers down to deliver a beat. but the smarter analysts have kept it above water. haven't beat by a lot according to general motors.

lost under the decline of 2% with the switchover to the f1 50. i actually found that surprising. are buying people them. >> yes. >> it is an older model, right? the new exciting look of the future has become tedious and it may be time for facebook -- facelift on that car. the charts, why are these stocks not doing better with a drop in oil prices? >> there are a number of different reasons and obviously they have a huge number of recalls and they are not sure, given the uncertainty how much it will cost in the end. are ford a lot of people saying that the stock may be valued perfectly, even

overvalued. that is what the analysts at morgan stanley are saying. those chairs may not benefit from the p/e ratio or the value of them in the health affect, the changeover is costing them a lot of money and taking a lot of time. sales dropped 10% in november as they waited for the new model to come in. the fuel numbers were shockingly awesome, so maybe it will not be that everyone thought it would be. that is potentially what investors are thinking. that one say interesting thing this year that we did not have last year is that black friday is pulling sales into november and it will be interesting to see how much they do that, they do. -- how well they do. >> won't it be the same, november or december? >> and the end of the year looks

like it will be very strong. the seasonally average adjusted rate was over 17 million and this is only the second time we have seen that in the month since 2006. the other was since august, so the carmakers are doing very well. >> that is my overall issue with cyber monday and black friday and total. i don't know if it gets me to buy more things, just earlier. >> it gets me to buy more things. >> thank you very much, matt miller. this itt to stay with is a pivotal moment for japanese auto parts makers. a dash takata faces -- faces a possible first recall in decades. it is decision time for them.

>> it is decision time for not have word do whether they will respond asitively to the call for national recall. the company has been making a regional recall is necessary because they suggest that this is only happening in high humidity areas and that that should be the focus of this point and maybe the replacement kits are not going to the right places, rather they're going to other parts of the country. in all we had five deaths related or link to takata air bags around the world. the company says that at least two of them are still under investigation, so it is not clear, exactly, whether we this nationwide recall is necessary. a short time ago i spoke to senator richard -- senator richard blumenthal from connecticut to go even further

last month. a short time ago i asked him his take. >> i hope they listen and heed the calls that we have made. there is no logical or factual basis for issuing regional recalls. >> again, if for some reason they were to say no, we don't believe the nationwide recalls should be initiated at this time, the government could step in. could step in and it could take several months, but there is the potential that the company could face a fine for every car out there in violation and needless to say that would hit the $35 million maximum that the federal government could impose quickly. >> thank you so much for breaking it down. >> coming up, a market maker

warning, the outlook is not so bright. from theoing to hear head of north american economics at citigroup. >> reports of the demise were greatly exaggerated. one speaker company, bouncing back 80% this year. ♪

>> welcome back to "market makers." what is not elected but the u.s. economy? unemployment is at its lowest level since 2008 in jeep -- eep is growing at its fastest in the decade. well, we have found some things not to like. this building is filled with wrong,who say we are they like balance sheets, turface the ceos, unemployment. you >> i hate to be such a caricature.

but one of the things we are considering about oil prices giving a jolt to the economy is what the fed will do after the middle of 2015 and into 2016. that is where i do not think consumers will be sustainably strong or investment will kick in. >> so, why is the consumer not going to come back? why will companies not be investing as much as they think? >> we always say that the wealth effect is one of the big drivers of consumption. after 2008 net worth has been coming at a good clip. what happened to consumption is that it has barely trailed. we are worried that the wealth effect is not as strong as it was before. in my research i found it was asymmetric. spending less now than they did before, they say they have to hold back. >> why? >> the uncertainty about growth.

>> we cannot depend upon valuation to stay where it is for a longer. of time. >> why have people wised up today? it seems like every mistake we made in the past we will make again. >> you can't look back to previous recessions and say that past is prologue? theaybe five cents on dollar. consumer, what about investment? maintain thatt they have? economistsjunior assigned me to the sector.

now the share of the sector exports gdp. doubly the size of the exposure. now they are and they have correlated big-time. >> they have still changed from being a fed guy. set of classyst economists in the world. >> studying the international. why is there so little consensus on the u.s. economy right now? it was not until i looked at the

data that it opened up. the risk of downside is coming from slow growth abroad. what do you think that that is doing to the decision-making process? what do you do with a lot of uncertainty? >> you waited you do less. i delayed my fed call from december into september as i am not sure. doesn't that hurt u.s. growth? >> consumption is going to be down, it will not be a strong as we hope. one of the things the fed has got to make sure of when you raise rates is that this signals an unsustainable growth path. >> why don't you think that the

drop in oil prices is going to toe enough of an effect counter what you just described? because if all prices were to double, is that inflationary? is it going to permanently change consumption? >> surely, people will be spending more money. relatively strong consumption into next year. i am wore it out after that. will drop back. consumer.sustain the will give us more of a jolt. more on steroids with a temporary jolt, so how long will it last?

my guess is probably six months to nine months. this is how you view the world, sitting down with citibank to take away is this is what you should do. right now it is better to air on the easy side. all talking about being behind 2017 ore, there is no afterwards. >> bill lee, citibank, that was great. >> when we come back, oil services. we will show you who is really struggling. ♪

>> oil service companies are getting punished as the selloff intensifies. scarlet who has been looking into this and looking into which companies are shakiest. >> energy stocks as a group of fallen 20% since oil reached the high and have been on the decline since oil dropped 30%. , therms of individuals industry is off $.55 the 20th. down 54%, half the market value. these are all oil service companies off by 40%. the lower the price of oil, the less economical it is for companies to extract oil. demand forre is less companies providing equipment

and services to those companies as well. >> is there anything that these companies can do to defend against this? >> they are all on the defensive right now, reducing spending. there is concern from investors in the marketplace about smaller leveraged companies. one measure that people look at right now is a total measure of ratios. get a sense here, 2.8 times for transocean but as it gets the three that is where it gets dangerous. that is what analysts say. keep in mind that the higher the number is, the worse it is overall. how many areas would be necessary to pay that back? neighbors towards the danger zone are in a better shape. surely this is something that investors -- >> is it really going to change with the baker hughes purchase? >> that is another part of the puzzle here. how many are looking to consolidate? to offset a lot of the changes

in the industry? expect a lot of more that -- expect a lot more of that. that just happened yesterday. angie at ubs says that it is just one step, the first step, really, and conservation. you will see suspended dividends. >> what about consolidation? >> it is already in the cards. that is what the next step may very well be. people may try to hold off, but these were put in years before, they might have some room to hold off on it, but maybe once it gets going you might see a mad rush. >> it is all about the less new drilling, right? >> exactly. when companies have been looking at it for quite a while, there are already efficiencies playing

out. they can extract more for less money. back, we areme going to stay with oil. for the shaleay revolution, you may be looking at big losses. ♪

♪ bloombergrom headquarters in new york, this is "market makers." is "market makers," on bloomberg television. investors who helped to finance the shale boom are facing billions of losses as upgraded energy producers have issued 90 billion debt over the last few years it has dropped since the oil crash began in june. 21 borrowers will turn profitable according to data compiled a bloomberg. for more we welcome brent rogoff

at barclays capital. what is the situation like in the credit markets right now? are they closed to independent oil producers? sections ofay that it are. in real differentiation you are seeing the investment-grade , where theining open cash flow isn't much better spot. of it are probably closed. if you look at the single b or c part of the market it gets really tough, off to 1000 basis points. >> and other words truly distressed? that 1000 basis points is usually the line in the sand that people draw. a high single-digit yield at this point where you could get something done, but it will not be easy. >> closed meaning that they are not able to issue more debt, correct? >> it would be difficult for some of those triple c companies to take in more debt.

they could probably come to market to do it, but they would pay a lot. >> what does the secondary market look like for these dicier names? distressed investors coming in to buy? >> it is a little bit like a falling knife for the most distressed names. some of them trading well down into the 60's, say. but we have certainly seen some people stepping in. the problem is that with high yields there is a lot of emerging paper. looking at the market energy is 14% of the high yield market, by far the largest sector. people scaling back, that is a lot to get sold. >> why would any oil company want to issue debt right now unless you absolutely had to? a moment ago you mentioned that the investment-grade market is still open. this is the last possible time

they would want to use it. >> i think that generally i atee with that, if we look the credit spreads. looking at the all in yields that are so low in general, compared to where the treasuries are the absolute yields that some of them would issue at his in mind historically with where they have issued, more on the credit side, less with where the rates are. but i think that these guys will be on hold for a while. >> are any of these at risk of being downgraded to junk? >> it would take a more prolonged. of time. look at the hedges in place for 2015. a lot of these companies have significant hedges in place that prevent them from really seeing the full impact of lower oil prices on the bottom line. for 12 months to 18 months, we will start to see that. >> any force dollars? that,has not felt like

but the outflow that we have seen it times this year that ive led to forced selling, think that a big concern is that they have something that is 14% of value at market with a that isial outlook underweight on the energy. researchced in your that you make the case against comparing what is happening in high yield or energy in high-yield markets for telecom in the late 1990's and early 2000's. >> i am sure that it has been on your mind like everyone else's. why is getting different, if you look back at a higher market in 2000 you had tnt representing 40% of the

market, then you had the march defaultthout wave of over the next two to three years. 15% with all4% or of these other differences, it is probably not going to have the same impact but it is still nuts. >> is the credit market shocking? are we suddenly going to see a change that changes the way that all of us look at credit? >> we could if this persists for a long. of time. maybe if oil rebounds by the second half of next year it will not massively change the rate. we think that it goes from 2% today to 2.5%, there is a risk , butoing higher next year if it persists into 2016 it is definitely possible. >> a what, besides a meaningful drop further in oil prices, what

could be another catalyst for, i guess, trouble? highly leveraged energy companies in the credit market? >> i think there is a lot of different type of energy companies, right? you have the guys that were the immediate focus in the oil crisis. the sector that has traded up the most are the servicers, which is part of what happens, for that type of company to try theyprove their margins may be moved somewhere else and if we see that play through the numbers that could have a large impact on that sector. >> do not go anywhere, we need to take a break but we will be talking more when we return. it has been a record year for corporate and the biggest debt sale so far with a medical device company. that story is next. thank you for staying with us.

♪

>> welcome back to "market makers." i am stephanie ruhle with erik schatzker. total bond offerings have passed the $1.5 trillion mark. the year was capped by the medtronics that sale yesterday, the biggest dollars denominated offering this year and lisa abramowicz is here to talk about it. brad from barclays remains with us as well. i have to ask you first, the biggest year for corporate bond sales, but if you spoke to a corporate bond salesman he would say that it was a horrible year. connect the dots for me. >> a lot of this is what i alert -- alluded to earlier, low yields with companies noticing the fed moving in 2015. if you look at the overall yield , thee market investment-grade is below 3% right now with high yields

happening in energy above 6%. historically those are attractive financing yields. the reason you get that sentiment from corporate bond sales, spreads to not look that good, they are wider for the full year. >> i guess the question for lisa, for brad as well, but we will start with you, what is the most important factor that will determine whether corporate bond ?ales determine at this pace is the fed a holding off on an interest rate hike? or is it something else? >> that will be a huge factor in what the fed does. if they continue to hold off you will see more issuance. we like to look at the average stated coupon bond and right now there is a huge gap there. if you think about the average 4%pon bond being well over in the investment-grade but below 3% in the yield, it is attractive to refinance. there will be places where the cutback because with spreads

thrown wider -- take energy as an example, looking at the high-yield 30% of the bonds that were issued under were energy related, right? we do expect that to come down a lot. >> one thing that is interesting is you are seeing a real divergence between junk bonds and investment-grade bonds. there has been much more interest inmuch for investment-grade debt. amazing and size considering the as brad says, these are widening but part of the reason that spreads are widening is because of the growth of sales that there have been. issuance is starting to taper off. the energy issue, as you talked about, is creating more of a disruption in that market. >> and that is a huge number. how did the deal go? writes pretty well, you know? especially because we were raising the money to buy another company.

and they could have just paid for it with cash overseas. it was more tax efficient to do it this way. for $17 billion to be taken out, is there a fall elsewhere in the market? or is that cash being put to >> this month there has been a bit of fallout. >> let it go. [laughter] >> a bond girl. [laughter] credit girlve said or bond girl, the fact that you said credit girl is telling of our relationship. >> bond girl. [laughter] not have been easier. >> i'm sorry, eric, i have to side with stephanie on this one. [laughter] >> you are seeing some fallout from the incredible sales in the investment rate as far as spreads widening out this month, but there has been so much money put into these straight, plain,

investment-grade this year. there is so much cash out there. >> brad, one of the things that has driven all of the amazing issuance that we have seen not just this year but last year is the cleaning up of corporate balance sheets. companies have done all of that, i am wondering how much of a need there is to do more refinancing. lots of companies have taken advantage of the low yield environment to protect the balance sheet in the medium is not long-term. >> and that is interesting, a lot of the cleanup has really occurred in the high-yield market, which is why it think you will see the issuance slowing down as we move into next year, a little bit less in terms of the need to do that. in investment-grade there is still a lot of short-term debt coming due over the next year, we think that issuance could become similar this year because those companies do not have quite the same need to clean these up.

they expect the markets to be open for them at all times. >> thank you for joining us this morning, brad. >> when we come back, raising their way onto your feet -- how do skechers compete with nike and under armour? the ceo will be here after the break. ♪

welcome back to "market makers." skechers is putting its -- let's try again -- having a hard time. skechers is putting its best foot forward two years after

facing controversy and a hefty lawsuit over unfounded claims over its shape up shoes, they are back and better than ever, over 80% this year. but can this kind of growth last in the long run? robert greenberg is here to tell us. what a comeback you have had. >> it is just getting started. >> why? >> look at you, you could sell two pairs for everyone. look at how easy that is. >> what is so special about skechers? my little kids love them. it is a low barrier of entry. anyone could make shoes that rise up -- light up. >> it's not that simple, you need the right people, the right factories. imagine how many people it takes to make those shoes. launching production, product, and innovation? is a big expansion that is working. >> who do you feel you are

competing against most closely? or >> everyone in the footwear business. >> but who is your number one competitor? >> athletic footwear is the majority of our business, so i would say nike. >> what percentage of your shoes are sold to kids or for kids, but percent go to adults? >> 20% go to children. >> only 20? >> 20% -- >> how do people identify skechers as a kids shoe company if that is only 20% of your shoes. >> i didn't know they did that. >> i definitely think of them as light up shoes that my kids covet and not as adult where. >> well, ok, but a lot of people do, think god for that. >> how tough is it to compete with nike? >> tough. bigger, five times which gives us a nice growth goal. >> how do you compete when they

sign-up premiere superstar athletes and you don't have that? a they are primarily performance footwear company and we are more of a lifestyle, comfort footwear company. i consider scat were -- skechers to be america's family brand. >> how does ringo starr become a a lifestylein with footwear brand? hard for me to connect them to thomas the train, but skechers was a real late -- really. >> he is known all over the world. we brought him on for the relaxed fit. we have a fit called relaxed where the she was wider in the thet, the same width in back, sold to people that might be a bit older than teenagers. they are called all ages because everyone thinks they are young now anyhow. whether they are 60, 70, 40, or 50, but they love the product and he's a beetle.

how do you beat that? >> i don't think you can. >> what superstar is in your mix most shoes?he kim kardashian? >> that was years ago. that is a legacy. those were the shape of days. lovatoow we have demi and pete rose, also. walking down the hall, trying to get into the hall of fame. trying to get him into the hall of fame? >> absolutely. >> why? >> because he deserves it. >> why? >> because he's pete rose. thell know why he isn't in hall of fame. >> but you have got to let it go already. >> here's a question for you, talking about things that happened along time ago, like setting the record for hits, you are also the guy behind l.a. gear. l.a. gear went up and then went

down pretty quickly. what did you learn from that experience that you are applying? >> i was not there for the down, i left on the up. >> another smart move. >> seven years later it went down. >> but when you saw what happened to that company, what was the lesson to make skechers in during? >> l.a. year is my school and skechers was my picasso. [laughter] i'm not from the shoe business, i'm from the garment world. an importer. skechers is a marketing company in the footwear business. time, skechers is a marketing company in the footwear business? >> may be the most honest thing i have ever heard anyone say. >> what about the media? >> we have 24 built right now. i don't think that the combined industry has 24 tv commercials. we do animation in-house, we are

a real marketing company. >> are nike and under armour also marketing companies? a tremendous demand creative company. they create the manned. whether it is michael jordan or everyone else, it's all marketing, all celebrity marketing. >> help us to understand your international marketing plan. zimbabwe, nepal, why you are trying to get into regions like that? people want to have light up shoes there? >> we have an out-of-control distributor there, we don't do that, he does that. he sells in the open stores all over. >> and let's talk about when i walk into foot locker with my sons, what is it a skechers offers to get my sons away from an air jordan the cost $150? >> that is a tough one with little boys. they do love nike. >> why is it that converse says

that skechers and other companies, i should add, ralph lauren, etc., are infringing on their trademark on the screen? >> we frankly have no idea why. >> no idea? >> no idea. >> does it concern you that the federal trade commission is looking into this? international trade commission, excuse me. >> of course, but it is a very small part of our business anyhow. >> this shoe might be a big seller, but i am letting you know that this is my worst nightmare. issue for little boys. it does not just light up. they can play a game with it. >> the first-ever smart shoe for kids. >> it has come out already? >> it is getting going and i hope it will be next year's big christmas item. >> except i don't think schools are going to allow kids to wear shoes that light up where you

can play games. >> there is an off switch. >> how does it work? it looks like simon, right? member that game? quite to present year, the light goes on. you do it again twice. here comes the next color. you just follow it. if you miss -- i am going to miss now -- >> do you do it while you are wearing it? >> it's on one foot. >> for those parents that don't want their kids having an ipad at the table, just put your foot at the table and you can play the game while you are wearing it? >> a dream for an eight-year-old. rights it has a silent switch and an off switch. quiet.go totally >> do you make them adult sizes? >> if you like. >> eric, would you want your girls to wear these? >> no. there we are. >> there we go. thank you so much for joining us, robert.

we know what is going to be under a lot of christmas trees this year, skechers. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> airlines and energy companies in the cross hairs. iranian backpackers looking for weakness. >> on the verge of recession. russia says gdp is going to fall next year. >> tired of mass-market clothing? meet the former model, former banker who makes it possible to shop at the best boutiques around the world. welcome to the second hour of "market makers." >> we will begin this hour with

able t bulletin. general motors cuts -- jim, fiat, chrysler and ford. chrysler was up 20%. remarkable. black friday specials on cars. hisident obama has made -- he has worked in government back to the carter administration. there is words of a new cyber attack. hackers working for iran have targeted airlines, defense contractors and energy companies . they are looking for a vulnerability that can be used in fiscal tax. -- fiscal attacks. abe is urgingzo

voters to stay the course. he defended his reforms and estimate leading the economy. the labor market is improving. wages are rising. this is our chance to rid japan of inflation. -- determined >> the japanese election will be held in december 14 >> we have a special guest host for the hour. the executive editor of bloomberg markets. welcome. we have set you up. our first conversation is going to be a topic i like the most. we will talk about the hedge fund industry. they are shutting their doors at a rate not since seen since the height of the financial crisis. 461 funds closed in the first half of this year.

at that pace, the most closures since 2009. hedge funds have returned a measly 2% this year. smaller funds have been hit especially hard by redemptions. i want to focus on that last portion. how upsetting this is. we are not actually saying smaller investments. capital --ing, more >> more capital is being deployed, but they're going to the biggest funds. big funds don't necessarily have bigger returns, but those investors out there, the allocation men and women are seeing nobody gets fired from investing more capital. i don't want to stick with the new guys. >> the same with mutual funds and pimco. you will never get fired for investing with pimco appeared over time, the returns got more and more mediocre.

it seems likely the same thing will happen with hedge funds. the names everyone knows, the names people have heard of. over time, the returns will be so great. cease? this crack if they are only returning 2% and asking for two and 20, david you are in the einhorn universe, can you ask for that? einhorn, aren't david the days are gone already. they are certainly gone for the start of hedge funds that don't have -- that aren't being run by some marquee manager. in theory. haven't we been saying that for the last 2.5 years? >> we have. all of the anecdotal evidence is the days of two and 20 are over. >> you agree with that?

>> you're right that from an investor's point of view, the last thing you should want to do is put money into a pool that is going to earn diminishing returns over time. thater, you have to assume arehedge funds are closing not star performers. >> funds that are launching are not getting twin 20. -- two and 20. cedar who issing a not paying two and 20 >> third that is probably right. it's interesting because so much finance is premised on the idea of rational markets and people investing. there are these decisions made for other reasons like not getting fired or whatever that do not necessarily correlate with smart investment decisions. >> you find a lot of that as

state pension funds. >> the incentives are different than what you would hope for. >> one of the biggest issues they face is the fact that they are forced to offer such short-term liquidity. in a market like this when you have to trade up against the fact that you up to offer quarterly, monthly, weekly or daily liquidity, how can you possibly invest? >> it's the same thing that you see with any company that has to make a quarterly number or any time they have to make a decision other than early what is the best investment. >> hedge funds are at a pretty sizable this advantage if you compare the way they invest with the way real money invests right now. an issuedvantage or facing the industry? >> i think it's a disadvantage. pimco and i can be a

long-term investor or i'm stephanie ruhle capital -- >> hundred $50 billion is tied up in the total return fund which offers the quiddity anytime you want -- liquidity anytime you want. >> fairpoint. >> it's the same argument you can make about mutual funds. you are paying the entitlement fee. with the price -- >> it's all about trade-off. should you demand constant liquidity, your ability to go into more interesting investment opportunities is diminished. there is this curve of do you want to have no liquidity or you don't mind parting with it for a long time, there are private equity opportunities. if you want daily liquidity -- >> the problem is trust. if you are a bill ackman and you have these extraordinary track records, investors will say here

is the money, let it ride. versus someone starting out, no one will have that faith in you. furthermore, and answered her question. our picture being editor says the typical starting hedge fund fee right now is 1.25. --ther big story today >> still working out for hedge funds. >> we have to talk about russia. top government official says recession facing for the first time in five years. carl is here with us. can't surprise anybody that russia faces a gloomy economic outlook. >> right. we see it happening with russia. intensified ors exacerbated by russia given all the sanctions following the ukraine crisis. early on, a lot of people said

it these sanctions don't have enough teeth. the sanctions finally are delivering a substantial economic drag to russia. >> what is going to be the effect for the average citizen of russia? you expect unemployment to rise? >> they are seeing that already as the economy is stagnating. they have 9% inflation. or you raise rates to combat that inflation? you are only going to further club in the economy. much then is not so domestic development in russia, but as vladimir putin faces a stagnating economy, he is not going to take this sitting down, especially since it's being imposed by western governments. rattling in some the form of national gas exports to western europe. .hey could have real problems just as low energy prices are , the potential

for a disruption in natural gas supplies in the middle of winter would have a deleterious effect on a lot of european economies which are already teetering on the brink. >> you get three bonus points for working the word " deleterious" into this interview. economyvalue russia's -- >> there is some rules he can't change. the sanctions and the price of oil and the price of natural gas. a lot of free market forces are felt in the russian economy right now. these are bigger picture issues. >> how good are the russians at forecasting therein economy -- their own economy? >> that brings a whole another consideration to affect.

this may be summit knowledge meant from the officials that these private-sector forecasts which are very pessimistic -- >> i'm curious about putin's allies. are they feeling deep pain over this yet? >> they are feeling the pinch here. you look at these major institutions. banking institutions or energy sector companies. they are being pinched by these sanctions. maybe they are not feeling it quite yet. there are companies certainly are running into these problems. recessions have a lot of unintended consequences. look at the housing bust in this economy which transferred to a bankruptcy in the auto sector. there could be knock on effects that you are not seeing up front . the real risk is what it these energy companies have problems tapping into financial markets?

>> stay here. feeling sympathy for oligarchs and hedge fund managers. up, iran unleashes hackers on airlines and government agencies. how much of a danger this is. >> going upscale online. all the best boutiques in the world just a click away. ♪

>> there is a report out today that hackers working for iran have targeted dozens of pricing private companies. 50 companies have been hit, energy firms and defense contractors. the targets should raise fears of actual physical attacks. iran rejects these allegations.

for more, let's bring in mark weatherford he oversees cyber security policy in the department of home and security. what do you make of this report? >> i don't think it is unusual or unexpected. after the event in 2010, we know the iranians were a bit upset about that. they have began upping their game of it. this report is in indication of what they have been doing over the past couple of years. quite frankly, it isn't something we need to be paying attention to. >> the report makes the case that iranians have become among the more advanced cyber criminals. it has been an advanced cyber power.

what does that mean? we know the chinese have certain names and the russians have certain names. now, the iranians are going to have a whole different set of aims. >> it's just an indication that when you put a nation state resources to train and get the tools and infrastructure necessary to do this kind of , you can come up to speed quickly with the right kind of resources. countriesen other over the past decade have done the same thing. -- we believe we know the chinese are interested in cyber espionage and are trying to steal corporate secrets. what are the iranians trying to do? what is their objective? >> we don't know what the real objective is. they are still pretty upset with the united states following the

flame event. there is no indication that i have right now of what their intent this. we know they are infiltrating infrastructure organizations around the globe, including in the u.s. everything from airlines and energy companies to manufacturing and transportation. >> i wanted to hit on that last point. we have heard about china hacking, now iran. this story has been going on for a while. there has not been any obvious outside impact yet. no major disruption of infrastructure, electricity coming to temptation. -- electricity, communication. it's nott know if realistic. it isn't something we need to be

monitoring and aware of. there may be some triggers there waiting for. they may be setting the stage for a specific point in time. i don't know and i don't think anyone knows what the long-term goal there is. there have been a number of these events that have gone on for years around the globe. we are waiting for the other shoe to drop and make cases for several years. >> what is the u.s. government doing in response? you mentioned the fact that the iranians are angry. weather was sponsored by the americans or the israelis or both. that was an offense of tactic. -- offensive tactic. >> i think there is a couple of

things. on the diplomatic side, the u.s. government continues to work with other governments around the world to discuss these issues. not as proactively as i would like to see. on the other side, on the defensive side, seeing a much greater showing of information, including technical intelligence information with private industry as the government uncovers the different things, different events like this one recent event with iran. sharingeeing a greater of information between the government and the private sector, which really helps the private sector understand the threats against them. many are still in denial or in the mode of it would not happen to me.

i don't have anything of interest to anybody. which is not the case. >> this report says the attacks are not just about intelligence gathering. they could be used toward physical attacks. you agree with that? >> i have read the report very briefly. what the report is intending there is the intelligence is being gathered, gives the opponent to the information they need that if they in fact an attack embark upon that resulted in physical damage, that is what the report is intending to say. the reconnaissance and intelligence gathering they are doing is giving them the capability to potentially at some point conduct these kind of actions. >> we thank you very much for spending time with us. " will be backers

in just a moment. ♪

>> we are approaching 26 minutes past the hour. time for on the markets. a california-based drugmaker being acquired today by a japanese company for $3.54 billion. that is not a very big payment -- >> 13%? --ms with blac >>?

unlucky? i want to talk about royal caribbean. having a good day. it's a shares are up on the news it is being added to the s&p 500. lots of funds at snapping up the stock. there is nothing great happening with the company. >> this always shakes my faith in markets when i see stuff like this because it should not change anything about the value but because these funds have to buy it -- i don't imagine it will have a long-term effect. -- i normally have absolute faith in the market.

world caribbean's inclusion in the s&p has broken his faith. when wall street attacks. activism, when we return. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> welcome back. >> it is 11:30 here in new york city. guess who is here? the new executive editor of bloomberg markets. >> glad to have you. time for another topic that we like. activists have never been more active. 36 -- $166 one and billion in assets this year alone. compared to only $23 billion in the early 2000's and company boards must be prepared in the

event of an activist attack. clark murphy is ceo of russell .renner associates he advises boards on how to respond to activist attacks. in the last two years, are you spending significantly more time with fortune 500 ceos and their boards to prepare from icahn? >> in brazil, japan, spain, germany. while the vast majority of these campaigns are in the u.s., only 160 the first half of 2014, they still to 5% outside the u.s.. -- there is still 25% outside of the u.s. >> some activists try to tell us there is a such thing as from the activism. -- friendly activism. >> i would not say they like to take the call. what they call aberrational activists now, they're going

quietly -- operational activists now. here is an interesting plan. is incredibly good and the lesson learned the past year is you look at something like darden restaurants, engage quietly early. talk to the board immediately. have one voice. be prepared. active andcome more they have done as much due diligence on you as you have. thinkt is the first rule somebody should do? >> ask when you would like to meet. >> really? how often does that happen? , the the last six months majority of the time. quietly, privately. >> after they dropped the phone. >> ask for a stiff cup of coffee.

and you getey will a media advisor because the activists are incredibly media savvy now. they can say things and you can't say anything because you are the head of >> the public come in. >>what percentage of companies have a plan for activism? >> a vast minority. own are assessing their operating businesses faster. there is a tendency to say that we have two more quarters of this economy and it's going to be so much better. the activist says no you i might talk to wall street tomorrow. >> one of the big complaints about public markets is it ceos are focused on hitting their quarter or couple of quarters. now having to take into account the activist that, does that make it even worse? >> there's two things.

whatever we think about operational activists who are there, they need a return for their fund. they do factor will get out at some point. is the chief executive or the -- have a sense of where the company is operationally? the ceo still has to think long-term. they had to have a battle plan to respond effectively. >> since you have a deep understanding of how these companies and their management works, would you be an ally for the activist? should they be calling you and saying what is my best plan of attack? >> they have and we don't. we work with boards and management. we have not worked with

activists. they are forming their own slates. europe, ampanies in number of them. when you look at what activists have been able to do in certain circumstances, successful campaigns like bill ackman and canadian pacific -- >> everybody seems to have one there. -- won there. do you find yourself sympathetic to the activists? they do find value. they do spot and competent management. >> sympathetic is probably not the right word. are they effective? they are. are they taking longer-term views when regulators are saying this is a good thing for shareholders?

you are seeing some action in germany about how they respond to this. long onlytutional investors are quietly putting capital to work in the activist funds because they are getting better returns. mi sympathetic? that's a pathetic. is the world responding -- not sympathetic. >> we will come back, talking wall street. it is supposed to be the most wonderful time of the year. bonus season. ♪

>> we are back with clark murphy with the year and approaching, we have to talk about wall street bonuses. when hedge and security divisions call you for device. -- for advice. people are turning up the volume right now. surprises.

trading businesses are off and compensation is not going to be a strong acid has been historically. the banking business stronger. is the regulatory environment of the world -- even new york is different than london. londonulatory world in is going to be pretty muted on compensation. >> are those bankers willing to accept they are not going to have the biggest years of their lives? >> i doubt they are going to be surprised. differentiation which started 10 years ago just get stronger and stronger. it's more of the strategic relationships. those individuals who have had large transactions or long enduring relationships will be well-paid. >> it's not necessarily about what class of role you are in.

specific individuals and what that person ranks of the table. >> absolutely. you will never have seen as much differentiation as this year. think the superstar employees who bring in deals like alibaba could be getting paid more than officers whose compensation is widely reported? >> i would assume someone in the banking business will be paid more than the officers. overall, all of those levels continue to come down broadly. >> what will happen to ceo pay overtime? -- over time? these banks are getting bigger. they are getting larger. on the other hand, even if there is a turn in a comic cycle, it -- economic cycle, it will be hard for them to give the returns precrisis.

size as it relates to people in asset management businesses has an impact on overall pay. those banks that don't have significant asset management confidence is much more aligned to the long-term performance of the institution as opposed to any walls. -- annuals. >> more pay will be given to stock than cash? >> absolutely. aligning the shareholders with the chief executives is the most fundamental difference than 10 years ago. investing am a longer . because you don't have the risk strong, if you have fee-based businesses, that is going to do great things for ceo pay. >> the day for you.

-- good day for you. >> it's good to be jpmorgan. bad to be citigroup. >> wells fargo has a great wealth management business. it's a hidden gem on wall street. vanilla is sometimes the most . -- most the wishes. -- most delicious. >> how to hit the world's best boutiques. all you need is a screen. ♪

>> our next guest has a fascinating life story. it she left eastern europe as a teenager to attend college here in the u.s. she is a former model, former goldman sachs investment banker and a very successful on to newer.

she is here. the founder and ceo up shopti que. how has it worked? >> it's an online destination for the coolest stores around the world. we all travel around and go shopping. when we go home, we can't have the products at our stores because they are in paris or london. i was frustrated that i could online. for them i decided to start a market for the school boutiques -- those cool boutiques. >> how would you like in a two en two thingse an like ebay? >> both of those things were very unknown. etsy was handmade things my mom or sister made.

small artisans. ebay is still a big brand. it's a destination for well-established and well followed boutiques that curate the coolest things around the world. it's a huge brand. if you want to shop for them in you can't find those products other than on shoptique. we do all the e-commerce for those unique stores, which is so valuable to them because they can say in one week, i can be online with everything. you all of a sudden have access to the new products. >> you are an online marketplace. you don't do any fulfillment or helping them with logistical aspects. >> we do all the logistics.

we do the photography and give them packaging. we host websites for over 200 stores. if you go to the stores and click shop, the whole website will be set. we do the whole area of things -- the actual fulfillment is what they do. >> what do you charge for it? >> it's a percent commission. you pay the same price in store as online. splite commission, we commission with them and have different tiers. >> what happens as these a stores become bigger and more popular? what is to say they are not going to cut you out of the mix? >> the opposite thing is becoming true. they say do all of it, do e-mail marketing. they are so great in the off-line world.

online is a different beast. they are saying we know how to buy for our stores them about how to -- >> it's a different beast today. as everybody gets more tech savvy, how do you keep your business sustainable for the next 10 years? >> we integrate very deep. we are doing e-mail, posting their websites, helping them with photography. we are becoming an integral part of the business. >> what kind of products sell best? >> dresses. they love it. inis it because if you order new york, everybody has the same dress? destination. >> given that it is so boutiquey -- >> is that a word?

let's say i am shopping a big retailer or a brand, i know it's going to fit. i'm comfortable shopping online. if it's a boutique in paris, had my know? -- how do i know? >> we have the lowest return rate among all the brands. the customer has spoken. boutiques are very mainstream sizing. small, medium, large. cool,e their items are so sometimes you might overlook that it's a little bigger or smaller because it's so amazing. >> who is your customer? >> a woman who wants to be different. we have a customer who was 81 years old. we have girls who are 13.

women who are 45 running huge companies saying hold things for me because i have a board meeting tomorrow. we have over 1000 stores on the platform. >> he just had your biggest day for cyber monday. thank you for joining us. >> "market makers" will be back in two minutes. ♪

>> that is it for "market makers ." joe, we loved having you. >> i had a blast. >> you have been here a month?

>> about three weeks. >> you have done surveillance, in the loop, street smart. what is your favorite? >> obviously this. >> thank you so much. >> tomorrow, tune in. largest asset --ager >> its 56 past the hour. bloomberg tv is taking you on the markets. scarlet fu is back. >> i take issue with that. surveillance is not behind. let's go into the markets right now. u.s. stocks recovering from the s&p 500's biggest loss in three weeks. industrials now on pace

to close at a fresh high. joining me is kevin kelly, chief investment officer at recon capital partners. concern orbit of caution after yesterday's selloff. >> absolutely you are seeing that in the options market. when you look at what's trading on the s&p 500, you are seeing double the amount of puts being bought versus calls. there were about 80,000 contracts on the put side, 43,000 on the call side. investors are coming in and looking at buying insurance -- >> that does not get reflected in the vix. >> that is implying volatility 30 days out. realized volatility has been under 10. >> i want to get to a couple of

individual names. priceline was downgraded. it has been under pressure of late because there are some larger concerns about disappointing outlook on reported earnings. they haveiceline, been trading at a high multiple above 20 and their earnings have backed that up. we had great earnings when they reported early in november but their guidance was lower. gross bookings are about four fit's -- another concern is the integration of a lot of acquisitions they have had. one has been opentable come in the restaurant industry and the other is kayak. they have to integrate the companies they have acquired as well as show growth in europe. >> sbr has a 1225 price target on its stock. is that the activity you are seeing? it is near a 52-week low and

you are seeing a lot more calls been traded against puts. people are positioning for a bottom here and positioning in case there is a beat in the first quarter. >> looking at the downgrade in saying this might be the bottom. great. you have a trade for us on f5 networks. what is your trade? >> we are looking at f5 because they are growing rapidly. they had an analyst date and every analyst went berserk over it. as cisco moved out of this space , f5 is taking over that market share. they are growing rapidly and near a 52-week high. investors are positioning going into the first quarter. one of the first traits we are looking at is buying the $130 call for eight dollars and selling the 140 call against it.

that adds $3.50 yet to pay out. >> good to know. f5 networks picking up lost ground. thank you so much. kevin kelly joining us this morning. we will be back on the markets once again in 30 minutes. "money clip" is up next. ♪

>> will come to "money clip." ." welcome to "money clip here is the rundown. there is a new hack attack, one that came from iran and targeted 50 companies, including airlines. u.s. automakers beat the estimates, just in time for the holidays. when it comes time to holiday shopping, the name of the game's efficiency for consumers and for retailers. a dude with only one name, staying. -- st