>> from bloomberg world headquarters in new york, this is bottom line. the intersection of business and economics with a main street perspective. we begin with breaking news as the release of the u.s. federal reserve snapshot on the american economy. peter cook is standing by with the details. peter, good afternoon. >> good afternoon. if colleagues are looking for signs the u.s. economy is gaining traction right now they will find it in this latest beige book. it was compiled through november 24 and paints a pretty

bright picture of what is going on in the u.s. economy. reports from the 12 federal reserve districts suggest that national economic activity expanded in november and december and a number of districts noted that there was optimism about the outlook for future economic activity. strength was reflected across the country. high lights here. consumer spending continues to advance. lower gas prices helped and arly cold weather. employment gains were widespread. new york reporting hiring on wall street. tech hiring up in boston and manufacturing activity was strengthened. auto and aerospace continues to be sources of strength according to the beige book. price increases for raw materials were generally muted and on the subject of wages, a number of districts reported slight to moderate increases in labor cost.

upward wage pressures continues to be evident for certain occupations and for skilled workers. the fed would like to see wages move up higher for more americans. causes for concern, construction real estate activity expanded overall in october and november but a fair amount of variation was seen. we saw the first signs that the fall in energy prices might not be helping everyone. energy and mining activity was higher on net through the lower il prices. pretty solid outlook that could play a factor of when to raise interest rates. >> all right. peter, thank you. that debate probably will be joined in a couple of weeks when the fed holds their last press conference. that is coming up the 17th of the month.

bloomberg television will bring that to you live. a roundtable discussion on the beige book and the u.s. economy coming up. that is coming up in about 10 minutes or so right here on bottom line. let's get you to the other top stories we are following on this wednesday. president obama had a lengthy session with some of the nation's top ceo's at the business roundtable today. on the agenda, immigration, taxes and energy. >> on energy we have seen a revolution that is changing not just the economy but also changing geopolitics. not only is oil and natural gas production up in part because of technological changes that took place, we have doubled our production of clean energy. >> the president's remarks come ahead of his meeting with mitch

mcconnell later this hour. it is an issue more popular with republicans than democrats. house of representatives is expected to pass a bill that would extend a package of sbrired tax breaks through the end of the year and would go to the u.s. senate enabling millions of businesses and individuals to claim the tax breaks on their 2014 returns and the white house has signaled its support. companies added 208,000 workers ast month. the report is out on friday. a gain of 230,000 jobs is expected. a technical fault at a nuclear power plant has cut power

oduction but he insisted the plant poses no danger. the accident happened last week. officials say normal output will be restored by the weekend. cyber monday sales celt a record. shoppers spent more than $2 billion online. still growth on cyber monday is slowing. consumers have spread out their shopping to other days. that is a look at the top stories we are following at this hour. microsoft's ceo is leading his first shareholders meeting. he has been on the job for nine months and already has a big win. a majority of shareholders approved his pay package for the fiscal year. it was recommended shareholders vote down the package. for more on what to watch cory johnson joins me now from san francisco.

error $90 million that , say lot of money. i have seen that plan opposed because they thought it was too much money for a guy that wasn't been on the job. shareholders may say the guy has given us a 33% rise in the stock prices. more than double the 14% the nasdaq's return in that same time frame. i think it brings together a bigger question. how much should a ceo make. he made 11 million in 2014 and how much should a ceo make that is so unproven and how much should ceo's make period when you have so many people in the country struggling to get by. >> what proposals might make this shareholder meeting more than others? >> the notion that sometime ceo pay is just too high and that is a ceo that has done a good

job for a few months shouldn't get paid like he will do a good job forever. in the context of what president obama had to say about we have seen a strong increase in corporate america and wages stay flat unlike previous eras in american history. i continuing is reasonable to look at the situation with microsoft. look at the great big pay package. $18 million a year. $90 million pay package. how much he is getting in the deal and what it could mean for the future of microsoft. >> last i heard i don't think you made $90 million. >> i am overpaid. don't get me wrong. >> does he deserve any credit for microsoft's move to the cloud? >> he is getting a lot of it. pithink the stock market is

reacting to the positive feelings around the company because of his clear message about being focused on mobile. as it relates from the cloud. moving into more software that s downloaded per user. he is the guy in front of that. the company is doing the right kind of things. the pay package is certainly suggesting it will continue. >> can i ask you if you had one stons sum up his vision, what is it? >> cloud, cloud, cloud. that is not very good grammar but that is really the focus for this business. we will see if he can get microsoft to stop fighting with microsoft. >> coming up, reaction to the fed's beige book. we will get an out look on the

economy in light of the fed's report and today's mixed economic news. stay with us.

>> welcome back to bottom line. more now on the beige book. i am joined by the chief u.s. economicist.

beth, you are here with me in the studio. ment gains were widespread across districts. we are seeing that and hearing that. what types of jobs are we talking about? i know wage growth is of particular interest and concern? >> looks like there is no real wage growth. not seeing that. but i do expect to see next year improvement. one of the things i am looking at is the quit rate now at a six-year high. people are getting more confident about their bargaining potential. another factor is the unemployment rate is very low and particularly the short-term unemployment rate where you see a lot more activity. another reason i think down the road we will see wages pick up. >> what was your takeaway from the release of the beige book today?

>> i consider the beige book the most underrated economic release out there. something that influences the thinking of the major policy makers. wage growth is one of the biggest concerns. we found that about 68% of those gains seem to be driven by the creation of new jobs. normally that is much more broken down into wage growth, new job creation and some borrowing and heavy reliance on that one factor poses something gility for the u.s. economy. >> he noted to us that consumer spending continued to advance does. that surprise you given the stagnant wage growth? >> no it does not really surprise me. if you track consumer spending and the core components of the u.s. economy throughout the

entire post recession period we have ran in the high 1 to low 2% range. in the last few months the tail wind of lower energy prices. might that might only be equivalent to a copy of "the new york post" it is still meaningful supporting the consumer checkbook right now. >> i was going to say an interesting point on that. the sentiment has been pretty strong. when people are depressed they spend. when people are happy they spend. less money at the pump means more money in people's pocket books. but i did notice in the beige books you are starting to see concerns. i believe the dallas district saw that oil companies are pulling back because it is not as profitable touchdown vest in expansion. >> stanley fisher said the fed was getting closer to replacing

interest rates for what the bank called a considerable time. he said guidance would hinge on the economy's overall economic performance. what did you make of these comments? >> i think they are trying to tell markets that it is time to let go. we loved it for a time. but it is time to part ways. i think he is warning markets they do plan to raise rates maybe sooner than markets expect. we are looking for the fed to raise rates june of next year. depends on the data. then i think they are concerned how markets will respond. >> what is your thinking on when rates might move? the middle of next year? is it the summer? >> as we take an approach that is focused around the labor market condition index that rolled out over the summer. if you track it back to the recession period by our estimates, it will recoup all of the recession era losses by

about september 2015. so it is a convenient point to anchor our expectations of the first fed rate hike, when the market has truly recovered. i would note the markets have priced in that. what matters for bonds and what we are thinking about is what factors can change that outlook. in our view it is more likely to be changed later by a host of things. low inflation or deflation from the commodities driven the declines we have seen in the last few months. more likely later rather than sooner. >> i would like to note even if the fed raises rates by the end of 2015 that is pretty much where the fed lowered rates in the previous recession. i think it is getting back to normal levels. >> can i ask a question? i will pose it to both of you. oil. it has been in the news the st couple of days ever since

opec's meeting on thanksgiving. they had said that the benefits of lower oil prices on the u.s. economy could have an impact on the overall economic outlook. but this is not just concerning inflation. it is concerning growth as well. what are we seeing? what impacts are you seeing on how oil has been impacted? >> the drop in oil prices, west texas intermediate is now $65 per barrel. every $10 drop goes to about $25 cents in a gallon of gas. if you see that for a year we call it a reverse shock that. is a positive thing. we know some regions will be hurt. but overall we see it as a boom for the u.s. economy and people's pocket books. i think that gives the fed more time to wait in terms of fed action too.

>> we will let you get the last word in here. what are you seeing from how oil is reacting here? >> there are two things going on here. the fact that we are net consumers of energy. as a result lower energy prices benefit. not just the individual but also the business climb as well. excluding the energy industry. this is the first time we have seen this downward shock in oil prices at a time the oil industry is so prominent over the course of the last few years. i am concerned about using the traditional metrics about decline of a dollar helps growth by this amount. we have no good data on a strk where we have a business economy and energy prices are falling.

>> thank you both so much. coming up the showdown between apanese auto parts maker takata and washington heats up. we will have that in just a moment.

>> japanese auto parts maker wide -- that on celts the stage for a legal showdown with the u.s. government. a top etc.tive defended takata's position at capitol hill today. peter cook is back with us with the latest on this air bag fight. peter, good afternoon. >> good afternoon mark. highly unusual for a company to take on the federal government

in this way but that is what takata is doing. the stand off catching automakers who use takata air bags to confuse consumers who might have these air bags in their cars. facing a midnight airline they defied the call for a national recall of specific driver side air bags that are linked to five deaths and four in the u.s. the company insists a nationwide recall could be counter productive. they repeated it at a hearing today in front of a house subcommittee. >> takata continues to believe that the public safety is best served in the area of high absolute humility remains the priority. but make no mistake. we will take all actions necessary to advance the goal

of safety for the driving public. >> federal regulators do not agree with that. that is not sitting well with members of congress as well. nhtsa's top official says he is deeply disappointed with takata. >> our policy is clear. recalls must be nationwide unless the manufacturers demonstrate they are regional. with the new data it is clear they can't demonstrate the region used before was appropriate for driver side air bags. >> so the process from here, the national highway traffic safety administration has to make its case why a recall is needed and ultimately concluding if the evidence is there it will order a government mandated recall but that could end up in court. takata could challenge it. >> peter what, is the maximum penalty they could face? >> sounds impressive on paper.

7,000 per violation with a maximum of $35 million. they are lobbying dong change the law to make it $300 million. his view is that $35 million is chump change for the auto industry. >> peter, thank you. it is 26 minutes past the hour. that means bloomberg television sot markets. matt miller is standing by with the details. >> i want to catch you up on where stocks are trading after the rally that we saw yesterday. green arrows on the screen with the s&p 500 up a quarter of 1% and the dow only gaining about a tenth of 1%. nasdaq the biggest winner. we want to highlight a couple of movers for you. jc penny suffering its biggest rop in months. and shares of overstock.com are

trading at the highest level since january. sales between thanksgiving and cyber monday rose 23% compared to a month ago. quick break. more bottom line after these words from our sponsors.

>> welcome back to the second half-hour of bottom line on bloomberg television. thank you for staying with us. be joining a ld wave of israeli start-ups listing here in the united states. they make predictive marketing software for facebook, ebay and wal-mart. the firm's ceo spoke about its growth strategy. >> we have businesses of every kind and size from small to large.

we help them search the intent of their consumers and create engine -- engagements in social. creating this view between what are the offerings of those advertisers and what are the buyers are looking for and creating conversion. meaning business coming into the companies is what we do for a living. >> how is growth? kenshoo has experienced tremendous growth. this company since 2006 when we started keeps doubling and tripling in sales over the years. we are now over 6 understood employees and it seems like it is getting brighter. any listing here where they are trying to target smaller and medium sized technology company? >> i prefer the question of

where we are planning to go public. most likely the states. a lot of the business is happening in the states. we see the u.s. as the forefront of digital marketing. we run a very global business we see the states as the core of what we do. so it makes logical sense to go public there. >> you have made acquisitions in the past. more acquisitions on the horizon? >> are we planning more acquisitions? we are certainly very, very happy from the last one that we made. and the same thing, we want to fall in love with the technology but stay because of the people. if we would see more assets like that in which there is technology out there, which is what we do for a living. we will very much see there is a human tenant that can be

brought on board we will definitely go for it and we are active in such pursuits. >> the royal bank of canada reported an 11% gain in their fiscal fourth quarter profits today, the country's second highest lender posted higher profits everywhere except for capital markets. ma'am, welcome to bottom line. thank you so much for your time today. >> hi mark. thanks for having me. >> how is royal bank of canada defying what many believe would be a slow down in domestic banking? >> i think what you see in our very strong results this quarter is our diversified model. we have 75% of our mix is retail and 25 wholesale. what you see is the strength of our wealth platform definitely volumes are slowing in the retail bank but through effective efficiency management we are growing our earnings

there you see sflenth our insurance business. it is that retail mix that was able to make up for some of the challenge we had in the capital markets platform and drove the 11% earnings growth. >> ma'am, without this diversified model you spoke of, would you have had these strong results? >> i would say the point about the diversification is really difficult to have every business that you have performing at the top. but what it does is that it allows for slow downs in some while others are picking up. i think that shows in our great results. >> the bank took charges from shutting its international wealth businesses, include negligent caribbean. what led to that shift in strategy? >> for international wealth it is not a shift of strategy. it is more of a refocused and continued focus on our clients

and can able to distribute the right products and services in a more defined way in targeted markets. so what you see is taking down some of the businesses where we did not have scale and we couldn't get the delivery right. the activity we are talking about is international in scope. it is in the u.s. in the caribbean and in some of our european centers. so that is one area that you saw us taking a charge in terms of getting on with the business. >> rbc did see profits fall because of ponzi fixed income trading. are bond debts going to be cut as a result of that? >> i think that if you look at what happened to the trading profitability, there were three factors. we took a fair -- a funding vealings adjustment, which is an accounting adjustment that reflects the funding charge on derivatives. that was one thing that was $ 105 million growth on the

trading revenue and retooled our proprietor trading to be aligned with the new rules so we tried to get that done before the end of the fiscal year. we have done the bulk of it. and in october the trading markets were volthim, particularly the credit markets. i think a lot of that which happened was specific to certain events and the volatility in the markets. >> you just talked about pro pry terry trading. what is the future in the u.s. will there be job cuts as a result? >> i think with respect to that, we won't be doing it if it is innocent accordance with the rules.

>> i think there is a rebalancing of the workforce. >> all right. we have about a minute left. today the bank's ceo said that rbc is well positioned going forward but that it does anticipate, in his words, industry head winds to persist. what was he referring to and how does the bank plan to naff -- navigate the headwinds? >> for example in europe the continued slowdown, although we are looking for green space there it is a good position to take advantage of growth. in the u.s. we see headwinds with respect to the economic position. but we do see the vestiges of growth there. and then in canada some of the headwinds we speak about are with respect to the leveraging of the consumer. so we are shifting our product mix to be more tuned into

investments and taking advantage of this period to position ourselves for when the growth improves later on in the cycle. >> she is the chief financial officer of the royal bank of canada joining us from our bureau in toronto. thank you so much for your time today. we appreciate it. >> great. thanks, mark. >> coming up, are tech valuations at risk? we will take a look at what they are watching for in the tech industry for 2015. those stories and more when bottom line on bloomberg television continues in just a moment.

-- oomberg news learned according to a person with direct knowledge of the fund. the fund invested in bonds and

had $400 million of assets at its peak and sold its position over cereal months and returned capital to investors. a spokesman declined to comment. that is your latin america report for this wednesday. some of the nation's top venture capitalists are at the 18th annual credit technology conference. >> hi mark. thanks so much. i am here with the co-head of tech investment banking and the head of equity capital markets for the americas. thank you both for joining me. >> thanks for having me. >> this conference, the press hasn't been here for at least 10 years. what have we been missing out on? >> a lot. over the last 10 years and even longer than that we have had everything from the evolution of the p.c. and emergence of things you take for granted

today on the iphones to a major resurgence in the ipo market globally that we have seen and we still see playing out today. quite a bit has happened since the last time the press was here. but we are glad to have you back. >> glad to be here. i heard the attendance at this conference is a barometer for where we are in the tech tike cycle. >> it is a barometer. this is a great time of the year for investmentors to focus on their portfolios and spend a lot more time strategizing and thinking about what to do next and how they prepare for the new year when everybody starts back at zero. some of the themes we have heard about. a lot of focus data and software. there are interesting debates about the internet. internet space has been disappointing in the last quarter. and a fair amount of interest in the semi conductor space.

it is a sector which we have seen a lot of talk and debate and excitement around here. >> david, tell me the most insightful thing you have learned so far? >> what i found this year is that even with the markets as robust as they have been, all of our executives who have been here are searching for ways to deliver more growth to innovate and to really set for themselves a very high bar of performance. and all that has led to very critical thinking about their strategies. we have spent a number of hours now talking to different executive busy where they go from here. so i think that is good news for investors. nobody is standing pat. they are looking to deliver the next leg of value. and you know that is why i think that there is so much excitement here over the past 24-48 hours. >> no complacency. >> very little. very little. >> i want to turn to some of the key trends going on in the

markets and at least the ipo markets. we saw two companies setting ipo below where they raised money in the private market. do you see that trend continuing? what might that mean for ipo's and the venture capital market? >> that is an interesting dynamic we have seen for a while. the public investors have participated pretty actively in private investments. they are doing them at valuations that are high. higher than we could deliver it in an ipo over the near-term. what has created is a little bit of a dampening in the actual number of ipo's that consider. people raise a fair amount of money. they do not need to go public. they are able to operate under the radar still. spend a lot more money on sales and marketing and research and develop to. really prepare themselves ultimately for going public. it does create a difficult

dynamic. going out at a level below where your last round was creating a psychological barrier for some of the existing investors. frankly a lot of the ipo investors do not really look at the reference point of the last private round. they spend a lot more time focusing on the fundamentals of the business and looking at the comparable companies and making their decision based on those factors and don't spend a lot of time thinking about the last round. >> if you are an employee that issued stock options and in an ipo it is a down runed, how do companies maintain that talent when there is such a competitive strife for tal nent silicon valley as it is? >> one of the difficulties of that dynamic. i think that there is a view that these are temporary levels. these are all companies that are incredibly exciting businesses that are doing a lot in their space. there is a view that they will

grow into those vealingses and beyond fairly quickly. so it is a temporary phenomenon and it is one that we have started to see happen a little more often. >> fantastic. >> that is why i think -- sorry. that is why i think that the interplay between the public market and the private market is so important now. and so it is more of a game of three dimensional chess from a very early stage in a company's life to how they build their capital rates and strategy and manage through issues just like you referenced. more than just trying to find a mark on the price of their equity. you will see a lot more care taken and a lot more working done in bridging that gap. >> thank you so much for joining me. >> thank you. >> all right. leslie joining us from scottsdale. up next the first step in a mission that could boldly take men and women where they have

never gone before.

spacecraft is stoat launch. it will travel farther than any mission since the apollo moon missions. bloomberg businessweek takes a look at what is at stake. >> if all goes according to plan by thursday america will be one small step closer to sending humans to mars. that is when nasa is stoat launch the first test flight of its o'ryan capsule. it is designed to carry astronauts more than 30 million miles it will take to reach the red planet. the first journey will be shorter than that. two orbits around the earth. that is more than 15 times higher than the international space station and farther than any spacecraft built for humans has gone since the apollo moon

missions 40 years ago. four hours and 20 minutes later o'ryan will return to earth reaching speeds of up to 20,000-mile-per-hour. at that velocity it will reach temperatures near 4,000 degrees, which is why nasa equipped the spacecraft with the largest heat shield ever made. after splashing down in the pacific ocean the next launch is not scheduled for another three years. astronauts won't step inside for another seven and a mission to mars is at least 20 years away. as a spacecraft o'ryan is incredibly fast. as a program it is a bit lower. >> stay with us. another check of the market movers is on the other side of the break. bottom line continues in a moment.

>> get the latest headlines at the top of the hour on bloomberg radio and on your tablet and bloomberg.com. that does it for this edition of bottom line. thank you for joining us. i will see you on thursday. >> bloomberg's on the market. let's take a quick look at trading. k stocks are not a huge jump on the dow. gain of 20 there. s&p 500 is up a quarter of a percent and nasdaq up more than a third. look at oil prices as well.

something that people were almost panicking about earlier this week. we see coming back just a little bit today but well under $70 a barrel. ymex for a barrel of n crude right now. you are just as shocked as you would have been earlier this week that. means drivers have gotten relief at the pump. for the business jet industry and private pilots oil decline is a double edged sword. we are joined now to talk about the biggest and most awesome toys billionaires and millionaires buy. jets. >> when you are seeing declining oil prices we are seeing a lot of selling from the countries where the people are actually buying the most business jets. russia, oil-rich countries. 20% of russia's private aircraft stock is up for sale. >> the entire fleet. >> approximately 15 to 20% of

all private jet aircraft or business jets are serviced by the oil industry. for people involved in the oil industry. >> cheaper for them to fly but since they make their money from oil they are losing so much money they can't afford keep the jet anyway. >> in russia in particular, they are trying to sell a lot of the jets to convert them into dollars. if the rise of the dollar will be a continuing story for 2015. >> how much money does somebody save on a private jet, say a g-5. i don't know what the current gulfstream is? >> it is beautiful. interior looks like something rom the starship enterprise. we actually crunched the numbers. i worked with a private jet company ceo. with oil prices the way they

were earlier in the year gas alone would cost about $3,000 an hour to operate. now it is about $1,700 to operate. it is a lot cheaper. we are talking real money. the average high net worth individual will fly 400 hours per year meaning they will be saving about $400,000 per year that. is a significant number. fixed g-650 that is the cost of operating this plane. the pilot and the insurance. they are basically breaking even on that with what we have seen in oil. >> you are going to go out there and look for a russian or saudi jet to buy? >> i might have to ask the big boss for a raise. >> i am sure some day you will get it done. thanks for joining us talking about the lower price of oil. loomberg's ranking guru.

if you have to sell your private jet maybe you can get service from him and these things are becoming so popular and cheap i actually saw a black friday sale. you can pick up serious hours for a low amount of money. >> that is awesome. sales are up >> thank you very much. street smart is next. ♪ quest welcome. i am trish regan. stock is climbing higher. down. climbin counting street smart starts now.