to collapse. the new mediocre hits of america. can america create quality jobs? once upon a time, there was a starbucks grande a. good morning everyone, this is bloomberg surveillance. we are live. head get right to our lines. keeps going. just a new three-year high today. a 12th straight day. investors encouraged i did is showing china is importing less well exporting more. do not forget, a stimulus on the top of that. west texas intermediate fell to a fresh five-year low down almost 2%. oil drillers in the u.s., for instance, increased the number of rigs last week.

>> banks have a message for the biggest customers. pay -- take your money elsewhere or pay up. some deposits are less profitable. jpmorgan, citibank, others will start charging on fees that were free before. those include hedge funds. section is after bernie madoff admitted to bedding the biggest ponzi scheme ever, his lieutenants will learn their fate starting today. they made millions while helping $18 millionh his scheme. made off is in prison for the rest of his life. >> will fever is hitting new york. , wheree and duchess women kate, are here. then i meet the first lady of new york and see a basketball game. receptionattend a

with hillary clinton. prince william will go to washington to meet with the president. ,hey had dinner last night supposedly recorded by the new york post. extra day? >> how much was it? >> of $2000 per plate. this was according to a surveillance reporter at the new york post. baby george.ing >> he is at home with grandma. >> bugaboo bring baby george? >> i heard they wanted him to stay with the grizzlies but there was no room at the inn. >> every year, a new one-year-old at the greeley house. >> of course, they made a splash at the carlyle hotel in new york city. this is a happy time. the queen is taking care of baby george? queen will see baby george sometime. maybe she went to build down to

scotland in her land rover. >> let's get a broiler data check this morning. .0-year note high euro weaker, dollar strength all aboard just in the last half-hour receipt further weakness in oil. well below 65. american oil down a dollar nine cents. two-year yield to two digits. 0.66% is and if those he hasn't. is a on and does he hasn't. weaker as well. let's look at the dollar, i'm zeitgeist over the week. joe weisenthal doing a great job with the des report. forrong dollar policy america. we bounced up against this

resistance. here we are once again. with these tick marks. flight to quality, flight to quality. this one is not flight to quality. which is a blend. euro-centric. doesn't include china, mexico, and others. the new mediocre, the zeitgeist over the weekend was the resurgent dollar. a resurgent america sees good job formation on friday. a micro strategist at oppenheimer farms know that imaging market nations are at the mercy. definitely rally was a punishment. was a paper tantrum. that rally will he took out of

the market all of the week ends in emerging market investing. in. has now been priced is strength of the dollar really more a continuation of a .undamental divergence the rest of the year has spent -- the rest of the world has been decelerating. started the year with the so-called franchot five. indonesia, turkey, brazil, south africa. -- best include performance, indonesia, only brazil has weekend. >> the emergence between the commodity importers in the market. >> incredible divergence. we may see more going forward.

leave russia aside, the biggest commodity. >> a drama exporter as well. >> brazil suffering. malaysia, the only place in asia was substantial currency and it is underperforming. philippines,nd, courier will benefit from this incredible windfall of games from oil prices. international bank regulator raising the flag about debt. they say the appreciation of dollar against the divergent monetary policies may, if persistence, have a profound affect on emerging market economies. it may expose vulnerabilities. >> too many sober for monday morning. >> are these risks underestimated?

>> they underestimated to some extent. this is a problem particularly concentrated in the sectors and countries, mostly commodity producers. the strong dollar coinciding with commodities is exponential. you at oppenheimer fines excel bad international investments over the past five or 10 years. do you wake up in the morning saying everybody in america should be an international investments? is it cheap? what is the overall enthusiasm for buying the bricks and the rest of it? >> an insatiable appetite for -- definitelyy emerging-market equities, the majority of them are cheap on a basis compared to developed

market stocks. not just the u.s., but japan and europe. stocks have continued to do well, have not underperformed, still trading around the 20's. the cheapness sometimes can be an commodity or mining, but we are not seeing these valuations getting any cheaper. most importantly, valuations may not matter to foreign trade but if the cyclical picture suddenly turns in your picture, you do want to look at valuations. next year, most emerging markets will have a better cyclical growth picture. >> for most of this conversation, tom has been flipping through well and kate's visit to new york. what i want to talk about. i want to talk about governance. with been talking fundamentals,, oddities, importers, exporters. one thing about india because i

would really compare them is that good government matters. is manus.vernance especially for the long-term trends. -- we're talking about the fragile five. india is the only one that has moved forward with reforms. not brazil. especially in emerging markets, credibility, really helps. the nose is the risk. russia was amazing to risk. >> we off talking about the drop. been dragged lower because of it. there is speculation central bank will raise rates this week again, perhaps aggressively. >> at the moment when flag this comment without going into detail, i am sure there are plenty of solid companies that have nothing to do with russian that geopolitics, that is not to

my area of expertise and i am sure for individual equity investors there are plenty of opportunities at the moment. but from a global perspective about russia, productivity --ndpoint, geopolitical risk >> our twitter question goes to your obsession at the moment? who is america's royalty? if well and came to our british royalty, who is america royalty? at @bsurveillance. ♪

>> the repo man, had a wonderful conversation with him last year. he started out repossessing automobiles. look for that at 10:00 a.m. this morning on bloomberg television. good morning, this is bloomberg surveillance. down 64-68. an ugly chart. what do we have? >> treasuries are declining. the federal reserve may move up its timeline. guest this morning, macro strategist with oppenheimer fines. the 10 year is set 2.32%. to reach 2%t them

in the near future? >> yes. the first half of the year, i think we'll will be dealing with some deep inflammation negative is surprises. energyhe story, that story is well understood, historically that is not always -- you still get negative inflation surprises do to past vice swings. shock is the second largest on record over a ---month window besides second only to the one we saw in june 08. without data points, we really do not know. are moving faster than folks can update the forecast. riskd we know, the between

to higher growth, risk to lower inflation -- let's set this up. bring up the emerging markets chart. 2009, it has been cyclical versus the united states, which is been straight up. difference between those two was series. when asked where really starting to see the strength of the u.s. economy. virgin'swith just a two to the cyclicality of durant versus the u.s. world? >> the cyclicality really helps the environment. the great environment for investing is when you get this cyclical divergence. when the world is cyclically it it is really a beta story. you can be in any equity market and you will do well. divergent,clically

you actually need to know where you are going. only cyclically, but structural and geopolitical. the divergence between the u.s. and the rest of the world. >> when you look at what is going on in the u.s. market in the second week of november, aren't folks in the u.s. taking a look at their numbers and saying, i am done for the year. i'm going to christmas and holiday parties now. >> that would be my guess. especially in the global micro space. investment categories. it has been an above average year. that only natural to think the attitude to take the risk at the year-and is wanted. exponent continue to look at high-yield as a leading indicator? >> definitely. it is an interesting story. at this stage, it is still a

good risk. initially from a lack of liquidity. months ago. now it is suffering because of some concentrated bets in the energy sector are suffering at the moment. of, a big picture per spec growth is solid. no leverage problem. no stress points in the system. you really have to worry about a unwind when the cycle turns against you. we had nowhere near. i believe it will need to very good investor demand. u.s., is it in the possible to talk about it outside of energy? think inflation can be thought about every rows, because we are still at very low levels and the commodity shocks

and core inflation may bring over marginally. we have to ask ourselves, what is the rush? if the target is inflation it 2%, 2.5 percent a few years out, it has to make the case where headed there. if you look at it, inflation expectations are now at the lowest levels we have registered in two thousand eight and 2000 three. major deflationary skills. >> this is stunning. >> breaking news. >> massive fire in downtown los angeles closing down portions of highways. 101 among them. more than two hundred firefighters battling the blaze. live photos right now. burningly, the fire was a tall residential structure and could be seen for miles. >> the twitter feed is getting under control as we see and as

you reported, but there is some real drama to what you see unwind on twitter. some of these images are extraordinary. to bes building used called the da vinci. >> no immediate reports of injury. not clear if anyone was living or working there. good news for everyone. imagine if there had not been rain. at least there has been rain the last couple days. going morning commute is to be brutal. >> versus on 101 and 110. >> narratives in los angeles. keep you abreast. it appears to be more under control. royal $64 60 seven cents. down the dollar $.17. it keeps falling. we will be right back. ♪

stephanie ruhle party because the she was in miami. she was with short seller and art collector to. you know something was missing year. shows this >> privacy eastern european collectors here. for obvious reasons. oil revenues are down. maybe it is harder for the oligarchs to justify some of this. wonder if the russians do continue to stay out of this

market, who picks up the slack? >> there has always been this dealer, do not ask too many questions at home, and you can spend your money abroad. i think we will hear more of this form of its -- you have to wonder, the artds have owned everywhere. ex it is a form of sovereign wealth, this investment. >> i have no idea what they are talking about. money buys soccer clubs because it is a nice way to spend your money abroad. because you have a nice stadium. >> as we start to see sovereign or friends run out of money we're going to start seeing these for all teams go up for sale.

>> will it affect the world cup in qatar? >> i do not think anything can stop that trade. ex i do not think anything can stop that train. >> do you mean jay-z? is he going to sit next to the duchess of cambridge? >> they might be meeting up tonight, we will see. >> speaking of oligarchs and royalty and the duchess, on her twitter question of the day. who is america's royalty? >> the clinton family? the bush family? >> they are not to fabulous. >> where in europe is different than the relatively in america. the tradition. ex i do not see the clintons printing that month >> beyonce.

>> the clintons are not fabulous enough. they are a dynasty but not royalty. >> who is america's royalty? tweet us at to be surveillance. --#bsurveillance. this is bloomberg surveillance. will be right back.

>> welcome to bloomberg "surveillance." on a monday your top headlines, here is scarlet fu. >> the beat goes on for chinese stocks. the index rising for a 12th straight day and investors encouraged by china exporting more and importing less. that hack attack in sony pictures began in a five-star hotel and bank act -- bangkok thailand. the hacking group linked to north korea is expected. involved.rs may be

attack was clearly the righteous act of our sympathizing supporters who came forward following our appeal. the misfortune of sony pictures experience can only be seen as a just punishment. is that it is north korea's revenge for the sony comedy "the interview." the film stars seth ronan and james franco and they are journalists were recruited by the ceo to kill kim jong on. a third straight weekend atop the box office from mocking j part one. the latest installment in the film series. the jennifer lawrence drama collected $26 million in the u.s. and canada. penguins of madagascar are garnered $11.1 million to place

"econd and "horrible bosses 2 generated a .6 million. million. >> this is an ugly chart, a fancy chart with lots of things going on and all you need to see is this curve right here, that is oil unable to find a bid. >> what you chick that chart and set of a line chart? >> liquor pretty it is. >> it shows the rate of change -- look how pretty it is. change,ows the rate of so there is crude oil in america. from crude oil to olive oil, if you love mediterranean olive oil you have to pay for it. because of bad weather and insects. it shows just how bad things are in spain and italy.

the top two set of bars are spain. production has dropped by more than half because of a drought. italy, output is down by one .hird from 2013 fruit flies destroyed all as intel skinny. greeks in tunisia has seen a pickup but not enough to pick up the slack. you mentioned california. --i was interested to learn i read a couple years ago that when you buy olive oil packaged in italy you never know what you are getting. the olive oil expert from oppenheimer. [laughter] passion this more as a as national pride, it is a scary story. there is an incredible business

not just with olive oil but tomatoes that you really cannot trust the label. when it says product of italy most of the time it means it is been packaged in italy but the oil may come from different countries and sometimes the quality -- >> with the fancy white cheese in the salad? burrata? do i not know where that comes from? oil,at brand of olive tomatoes and burrata do you buy? >> burrata normally does not carry a brand. 90% of thematoes, cans going around the world with brand of tomatoes are not from them. they are from that province of salerno and they have a special

-- >> i don't know if they're in the can or whatever. >> in 2003 doors an investigation by italian authorities and they found a lot of tomato imports come from china or california. >> have investigated burrata? oil has moved to a new low. >> how does it affect italy? well affects consumers as because the quality of what you eat is less and there is regulatory control. >> i think this is a scandal. it needs an "surveillance" guilt trip. >> would you use california olive oil? olive definitely drink oil not from italy as long as it is extra-virgin what you learn .s it is nearly impossible , quality italian producers tell you it is impossible to produce

all the oil for less than two true euros a liter so when you see cheap extra-virgin olive oil or cheap deals in the supermarket you probably have to be suspicious. >> i'm trying to do the conversion on the bottom line with food we have to remember that you should never worry about spending good money on food because at the end of the day it is what you eat. >> but you're confident that the burrata -- [laughter] with arm gestures. we have run out of steam on all of oil but we will not run out of steam on the equity markets. adam parker would join us in the next hour from morgan stanley.

oil brokey, crude down to new lows this morning.

>> good morning everyone. i'm tom keene with scarlet clue -- scarlet fu and brendan greeley. fleming me go to this fire in los angeles. from a distance it is stunning, the scope and scale. no one -- we believe -- is under threat. >> apparently it was empty and was planning to be a tall structure but there was no one living or working there

according to a spokesman. >> there it is. we have a morning must-read right now in europe. >> fisher is to be the german foreign minister and a well-known opponent of the iraq war seven or eight years ago and he writes in project syndicate when reunification came, germany regain full sovereignty and has been trying to figure out how to use it ever since. one of the great stories of the last five years is germany learning how to read, this is something you watch very carefully in europe and the ecb is everyday looking over its shoulder. >> it's funny you bring up leadership because for the last few years we have to admit that mario draghi has single-handedly taken that leadership role by partnering with angela merkel. but i would not be surprised if germany changes course because now that we are seeing the

andan economy slowdown disinflation/deflation coming to germany's door despite the lowest unemployment rate on record it makes you wonder and probably germany will start listening to draw the when he says we need fiscal stimulus rather than austerity. if germany takes that leadership role it could be a good game changer for europe. the context is when draghi was --ected the headline was another italian. they have really come a long way. one of the things brendan has been so good about is this resurgent -- not nazi-ism or fascism but this unique conservative european town and in your italy front and center -- what is the distinction

between the new conservatives of france and italy versus when we were kids. >> i think it is important, we are not talking about far right movements with meaningful racist as ascist connotation but mario monte highlighted during the european debt crisis there is a certain feeling of nationalism and the desire to trust only yourself. >> pull away from brussels. --brussels and frankfurt it's typical. problemshave economic it is easy for political developments at home to blame somebody else. >> seems like there's something that the main parties have missed which is the distinction two leading parties are always the pro-europe party and the kind of pro-europe hardy so there has been a vacuum of respectable anti-europe parties

that is starting to be filled in every country. these economic circumstances always lead to these extreme views because it is the only way to distinguish yourself. in times of crisis people want to listen to somebody who shout the loudest and i think that is driving polarization. declineaghi decided or to do anything thing they will take up the issue of stimulus next year so what happens in 2015. i think draghi is preparing the ground for sovereign qe which of course now the german euros are going and getting red hot but i think the last press conference as always these press conferences are very insightful. to thespecifically said end question of raising the issue, and we have legality problems with everything we are debating and he said it would be illegal of the ecb not to follow its mandate and they are failing

their mandate very clearly. inflation should be close to 2% and instead we keep revising inflation lower and lower. anka zero inflation and a sovereign debt crisis. we're top photos right now it's an interesting ones from the weekend. 400he number three photo of protesters roaming the streets in berkeley after the eric garner case they strut down highway 24 and looted several stores and through explosives at officers and set small fires. >> we can say monday morning they are still going on. >> in berkeley they turned violent. >> this is the problem because you don't know the trajectory of the protests and you don't know at what point they will become violent and there was a very strong and beautiful nonviolent movement over the weekend and it is a shame when that happens because it discredits everything. >> protests in miami and chicago and washington dc -- >> the number two photo from the

streets of berkeley to the 1%, this is gramercy park and it is now on google maps. >> it was not there before? >> know because you cannot get in there. airbnb'd and address and took a iphone photo. >> and they are mad. >> this is the one thing that you cannot buy for a lot of money. >> i'll point out that the duke and got chris had dinner last night and maybe they did get a key to the park. >> there is no commercial photography in that park. >> that is the legal question that we will be disentangling. number one photo, the greeley family got a christmas tree yesterday and installed it and this is what it looks like. but we are looking at is the courtyard --

>> of our bloomberg building. >> and i did not notice this morning that a tree had been assembled. -- >> a live shot. >> somehow i did not notice that. its largest one tree it's one tree surrounded by 12 little trees. >> it's very pretty it's the same every year. >> didn't you see this? >> no. [laughter] >> how is it that you missed it? >> i was completely focused on the markets and distressed by the plunge into oil. >> to look at this bright shining christmas tree. coming up here from howard schultz on how he built his iconic brand that started with a trip to italy. our question of the day, who is america royalty?

visit duke and duchess new york this week. ♪ >> good morning ever and --

everyone, a unique perspective on the market, i will call him a cautious measured bowl. he has the courage to be in the markets. we say good morning from new york city and it is bloomberg surveillance. let's get our top headlines. >> german chancellor angela merkel has about had it with vladimir putin. "the financial times" report to delivered a blistering criticism telling a german newspaper that he is creating problems in germany and attempted to make the balkan states politically and economically dependent. wii revival at nintendo. the japanese game maker last 193 million dollars last year but it is on the comeback trail thanks to super smash brothers and a new line of interactive figurines. the wiiou struggled --

u struggle to gain traction because of a shortage of new software titles. here's something that could leave a bitter taste in your mouth. the wall street journal reports the price of sugar is rising. is 58% more expensive in the u.s. futures market than it is globally. a trade dispute with mexico has widened the gap between u.s. and world sugar futures. maybe we'll get out some thing else on halloween x year. -- next year. isbloomberg businessweek chronicling the most disruptive ideas of the last 85 years. starbucks ceo goes back to the tasted his first cup of starbucks coffee four decades ago.

>> aegis came for the day? >> you are the highlight of the day. >> when i came here for the first time it was 1979. , had never been in a starbucks we have changed nothing through the years this is the original store as is. they handed me a cup of coffee made this way -- this is the ra which isat indonesian coffee and this is how i knew from that moment on that i was home. one year after i joined the company i went to italy for the first time. you cannot walk through any major city or town in italy without running into a coffee bar and seeing the sense of community and romance and theater around espresso -- it may me realize that starbucks

perhaps was not in the right part of the coffee business. that the real business and opportunity was the integration of the beverage to creating a destination and a sense of community. i did not at that point have an understanding that coffee would become part of the culture or the zeitgeist in ways i could not possibly understand. we realize early on that what we had to do was everything had to prove itself in the cup, the ability to source and roast the highest quality of beans in the world gave us the platform to do things that would define and build an industry that did not exist. >> you can see when you go to that pike place original -- it is like a pilgrimage. we have installed you as our

italian consumer culture of correspondent this morning. i thought it was interesting that he said he went to italy and found a sense of destination he's trying to re-create an italian atmosphere -- is he getting it right? >> italy created a sense of community or in coffee in particular and in our culture food from coffee to any meal really creates that pleasure of consuming food together, it is a social experience, it's not just about feeding yourself it is about what you want to do and the best way to spend your day so when you go to starbucks you do have that feeling of community that you can spend one hour or two hours in a coffee shop looking at your laptop and reading a book. >> or charging your cell phone. >> do think is a contrast between a place we can get wi-fi and have a sense of community the knesset is the wi-fi turns

on the community turns off. we don't haveure that sense of working on a laptop and a coffee bar but we do a lot of people watching and sitting in there is much more of a culture of consuming coffee outside. tables outside and the weather is more favorable. >> if i could drag you back from our italian consulate, where is the single best place to divest in emerging markets this year? , indonesia, thailand, philippines but china as well. this iron ore shock of base metals from an input perspective and a cyclical perspective -- a lot of things might be going better right now. >> can you see more room for interest rates cuts in china? the floatinge inflation gives them another excuse to ease conditions.

this is a cyclical story not a structural story. disruptors" will be airing at 9:00 eastern. thank you for joining us.

>> thanks to some dollar strength oil continues to collapse this hour. the trickle-down job economy, can america create quality jobs? to0 miles from lima peru paris, light years in the battle and climate change. monday, december 8. joining me is scarlet fu and brendan greeley. cops came to a fresh three-year high today and the index rose for a 12th straight day. investors are encouraged by data showing china is in planning -- importing less while exporting more. west texas intermediate and brent crude fault of fresh five-year lows. signs that oil output is increasing even after opec

decided not to cut production. >> banks have a message for their biggest u.s. customers, take your money elsewhere or pay up. according to the wall street journal and regulations are making some deposits less profitable. bank of america and others will start charging fees on accounts that have been free for big customers. madoffrs after bernie admitted to running the biggest ponzi scheme ever his inner circle will be sentenced for its role. helpinge millions while made off $18 million scam. bernie madoff is behind bars for the rest of his life. >> royal fever hitting new york city with the duke and duchess of cambridge. they will meet with the first lady of new york to see a nets basketball game i reception with

hillary clinton and prince william will make a slight detour. storm.ve set the town a and baby george was left at home. they went to the greely household for babysitting duty. >> yep we have them. strong security presence. now the absolute best quote i've seen from the manhattan institute in "the new york times." put williams will finally new york on the map. has threerk post pages of photos and "the new york times" buries it on page 20. >> you laugh but i know you spent all day yesterday lurking at the carlisle hotel. acclaimedd up and

pianist and i baked him to let me know if they make an appearance. >> let's do breaking news. buying cuba upon pharmaceutical. pharmaceuticals is a maker of antibiotics. this is a deal valued at more than $7 billion. $1.12urrent deal includes billion in net debt. >> this is a story we have been seeing for about a year, the big pharma companies have cut their own r&d costs and are outsourcing it to other companies and buying them instead of doing their own research and development. >> 873 employees out of lexington. >> how many at merck?

merck has 76,000 people. >> let's turn to some of the news over the weekend, an important back-and-forth in europe. never a dull moment. hans legos is in berlin and the dialogue has decidedly heated up. an importantis conversation, there was a quiet this week and so what was going on behind the scenes of the apparent quiet? >> angela merkel -- we don't know when but she gave an interview and that popped on sunday. merkel was harshly critical of vladimir putin saying he is causing difficulties and problems. hollandefrancois lended his plane for a two our meeting with mr. putin. the question is when did angela merkel give the interview -- we don't know if it was before or after he tried to visit and cool things down.

either way you get the sense that angela merkel is fed up with putin and willing to talk about it publicly. >> she connected the dots in a way have-nots in another global she calledbetween them for what they are, destabilized by russia. what is the signal she is trying to send? >> she's trying to do two things, send a warning to moscow and let other countries know those nato countries know that they are going to be protected by nato. that's why the timing with francois hollande is so important. she mentioned the article in the nato defenses that requires countries to come to each other's defense. anytime a leader tensions article five particularly a western european leader it's not saber rattling but it is an indication it will keep applying those euro fighters along the border and patrolling the baltics and they will make sure

that the nato territorial integrity is not violated. and legal distinctions for the heman mind in a lot -- which talks about article five that is sending a huge signal to germany. i want to know as oil breaks down as we speak -- i just put this out on bloomberg radio with oil really breaking oh to $63 ae are on barrel. or you have a trip point for the price of west texas or brent? >> none because -- i will tell you why, this is the joke making the rounds in the kremlin, you can get to 63 on brent not wti, you can get to 63 witches putin's age. they are prepared to endure a lot more pain. oil is 63 even if it goes to 50 or 55 this is a country that

prides itself on absorbing losses. that is the mindset of vladimir putin. itk what the ruble has done, is absolutely crushed and has that modify his behavior? the answer is no. >> thank you so much from berlin, a great briefing. subparturself now, for digital equity returns -- returns, you and i talked to at this earlier with adam park from morgan stanley showing enthusiasm for hydrocarbon. >> you upgraded your recommendation to overweight. -- oil at 63u run or 50 or 55? >> i think if you are correctly avoiding the last six months is time to add to that position. why? we think oil bottoms in the second quarter of next year. supply coming on line already in

place the matter what you start to reduce projects that gives bullish for out year oil. i think the market sees through that and you can show the stocks worth before the earnings revision bottom. it is a little bit of a gravel. -- gamble. >> the two we like right now are oil services which are never been lower in price of sale ever. >> if you look at the valuation they have never been lower except in a recession and we are not forecasting a recession so we think the valuation makes it better. >> what about stop loss? the technical construction of that time series is like i'm giving a lecture and this is the classic south chart. >> we try to buy stocks load and seldom high -- if it keeps going down will have to reevaluate the oil price and earnings outlook but as long as we have confidence -- supply and demand wise that it bottoms in q2, we

don't care. --t is the gamble here it gamble. i'm trying to invest more than trade at the second thing would be the refiners. maybe you would call that little more short-term because there they have the best earning provisions of any energy subsector. i think you way into those two areas first. i agree the price could be a problem tactically. >> brent crude down two dollars a barrel. note wein your research are in the middle of a long u.s. expansion that may last until 2020. >> 2020 is happy talk. >> we've been making this call for a long time. he is the told us senior vice president of buying low and selling high. >> at morgan stanley that's what

we try to do. no, i've been making this call for a long time and we co-authored a note with our senior economist saying we think we are in the middle of an expansion. end of olds at the age. you can't just say it's been around since march of 2009 -- summary has to call. >> adam parker fired up this morning, we are watching oil plunging. the exact opposite of happy talk, we will see if you were c limate change talks can make a difference in global warming.

>> now to our guest host adam parker. and it is astic better use of cash and all that -- mergerslso m&a and acquisitions will drive small caps in 2015. everybody is by apple and you say there is more. >> i like the small caps, there is two or three reasons, they have lagged a lot. margin expansion potential, their margin and

small caps are slightly below the average. the number three i think the relative revision will be better. better intosetup is 2015. inwe saw merkel massachusetts -- that is a sexy biotech thing when about boring small caps in industrial america? >> right now it's very interesting is the mega cap companies doing share buybacks. that might be the market telling them to buy growth somewhere else and small-cap m&a if the number of tender offers are fraction. as m&a picks up in the company say i will get rewarded more for buying growth than my share -- you can fuel more of a small-cap rally. i know that mid-caps are always overlooked. people go big cap or big cap and maybe a little bit of small-cap. smallers to be a broad

to mid sized valuation where >> youis looking very can show that once m&a picks up the premium stock that did not get bought -- people feel like they are candidates. you can show over half a century that they have been a superior asset class a superior asset class and you don't want to bet you have am. >> do visibility on the two year note or changes of dialogue for janet yellen? 1%? >> our house call is the fed will act later than consensus. chief economist says they don't act until 2016. there are moments where i feel like it looks really good in others where i don't but i think it is consensus. his view is consistently it has been marked down during the year and growth is in a lower channel but improving.

thatu a two year yield 4.75?y -- .65 >> if you get above one the price for equities will really change. you'll be looking at the financials and the life insurance. an important conversation later this morning on bloomberg television. market this morning, stay with us. ♪

>> good morning everyone brendan greeley decided show up for work today, scarlet fu as well. let's get to our top headlines. >> we begin in berkeley california were demonstrators hit the streets for the second straight night. demonstrators clashed with officers and vandalized businesses and protested begin peacefully on the campus of university of california but

grew rowdy and later spilled into oakland. that hack attack on sony pictures began in of all places a five car -- five star hotel in bangkok. they began leaking confidential phony data to the internet. the hacking group linked to north korea is suspected. north korea has denied official involvement but to sympathizers may be involved. >> this hack attack on sony pictures was the righteous act of our sympathizers and supporters who came forward following our peel. misfortune sony pictures experiences can only be seen as the just punishment for evil doings and unjustified action. one theory is the attack is north korea's for a new sony comedy "the interview," and it -- a movie about an attempt on the life of the leader. the jennifer lawrence drama collected what he $1.6 million

in north american ticket sales for lions gate. "and's of madagascar" brought in 11.1 million to place second and horrible bosses two generated a $.6 million to place third. >> has hundred games been successful this time of round -- not as muchound >> as the first two. those are the top headlines. at the same time and the real world congress may actually get something done this week. republicans say they plan to keep the government open for business after december 11. we bring in judd gregg for perspective. the republican senator with the state of new hampshire and governor of the state as well. about theck, we talk big divide in the republican party over immigration -- how divided are they over the budget? it is verythink divided amongst those people responsible in the party -- the leadership definitely understands that they have to

get the budget straightened out and they have to pass spending bills to keep the government operating and if they don't do that than they will get themselves wrapped around their own axle and cannot move to the big issues which is why the american people placed their trust in them, i think most republicans especially the party leadership understands they have to come out-of-the-box governing and cannot come out-of-the-box bickering. they're tackling the budget and also coming up with a strategy on immigration which is to take a minimum action to keep the fight alive. your take is they should be breaking immigration reform into little pieces. which is most important? i think they both go together, what they should do is pass a series of bills which defers to the border and the second would address the issue of h-1b these is in the third would address employees who hire people who are here illegally.

you do those and sequence and send them to the residence and have them sign them or veto them and then as the last item you get to the issue of how you deal with people who are here illegally and that is a more logical way to do this. you can show you are progress on the issue with comprehensive legislation. >> along the lines of the spending legislation, history made this weekend as a final southern democrat exits from louisiana and now it is an all republican cell. what does at signal to your republican party? it's so much good news -- do you know what to do with it? we better know what to do with it because the american people expect the republican party to put forward positive answers. we have a wing that is structured in the negative and they wanted constantly pursue retribution that will not help us as a party and we are to be positive and show that we can be

governed and pass initiatives which will actually affect the everyday american. likewill think they look judd gregg and don't sound like olympia snowe -- can they moved to the middle in any way to compete on the first tuesday of 2016? if you look at the folks who have been elected especially in the senate it is a very strong group of folks. they are folks who have experienced governing so i don't think you'll see a lot of people who are outliers coming into the senate in this last election on the republican side -- i think you'll see people who understand they have been sent there to get something done. you cannot get some been by standing in the corners and shouting. if to reach agreements and move the process along. if your suggestion for getting immigration reform passed piece by piece is similar

to the approach suggested for tax reform. the problem for the last three years is the trust is not there to do it piece by piece -- how do you restore trust? think tax reform is an easier issue than immigration because it is not as volatile and the well has not been poisoned the way immigration has on the issue of amnesty. consensus very strong on getting tax reform done, you listen to ron wyden who is chairman of the finance committee today and will be the ranking member in january. you listen to orrin hatch and paul ryan and these are guys who know how to go across the aisle and reach agreements and the philosophical issues actually come together. the liberal side once deductions and exemptions they consider special interest and republicans a tax lawt rid of which is encourages of investing for the tax return rather than

using money efficiently. there is a coming together of interest and i think we can make significant progress. in a think we'll get it all in one ball. >> senator judd gregg, thank you for joining us. we will be back talking about oil prices. ♪

>> this is bloomberg "surveillance." let's get to our top headlines. shanghai reaching a high today. investors are encouraged by data showing that china is exporting more and importing less. more bad economic news from japan. the new report on growth in the number three economy showed a contraction of 1.5% for a new poll indicates that abe liberal party may achieve a two thirds vote. philippines, the storm

weakened into a tropical storm enough for leaving a number people dead. most of the region is still haunted by the last year's plosser. wind gusts reached 84 miles per hour. >> two decades. that's a long the u.s. has been discussing climate change. not much. that's how much they've achieved. michelle, since the last climate talks failed in copenhagen there has been a lot of grim news. is it grim enough yet? >> if you look at the context of these global climate negotiations in copenhagen happens every year but if you look at the context it does seem like they have been a failure. to step away from global climate negotiations there has been some positive momentum. europe has been looking at a 40%

mission target. aretries around the world putting money into the climate fund and most importantly the u.s. and china which are the two biggest economies came to an epic agreement early this month. discussions are preparing for paris so what is a realistic test result. -- best result. discussion in lima peru in terms of what passes for success it would not have to be so ambitious -- just setting up some text or the discussion next year. >> what is a sample thing they might say? it is still up in the air. the discussion could say something about what the framework will be. >> greenland will be a jungle in five years. >> actual reduction targets. >> they can talk about the

financing for countries are the mix of financing run mitigation. the facts is copenhagen crashed and burned and went down in flames -- what will be different in paris from what we observed in copenhagen? >> there are three things i could be different. one there is stronger evidence than there was in copenhagen that there is public support a run climate negotiations and that the actual scientific evidence is more born out over the past several years. is much more positive momentum and realistic achievements made by important countries -- including the china and u.s.. in maybe last week lima has been something of it is appointment but the fact that the u.s. and china came to an agreement really could have been the possibility -- >> but the game changer was the elections we had in the united states. we have to solve problems one

at a time but our negotiators looking to who will sign off on this? >> to some extent but bear my the agreement that they reached which on the china side said we plan to peak emissions by 2030 and on the u.s. side it's as we will reduce emissions by 28%. -- according to how it is drafted a something the president and future executive branches can take without the support of congress. you could sign off without congressional support. >> thank you for joining us this morning. a data check in the meantime. we don't have any real economic data coming up but of course we are still all celebrating from the jobs report friday which showed much better growth than anticipated. nevertheless futures easing just a bit from record highs. up to year yield inching 2.3%. and euros weakening versus the

dollar. below $65 a barrel at the moment. this is bloomberg "surveillance." we have been talking about the plunge in oil prices. wti is below $65 per barrel which means oil company ceos are getting hurt -- hit where it hurts which is in the paycheck. reporter laura has crunched the numbers and she joins us to show us which ceos may be hit the hardest. we have to make the distinction between refiners and expiration reduction companies. there is a big difference between index on and neighbors and the neighbors ceo has been hit the hardest in terms of the

top highest-paid u.s. oil executives. rose in value to as much as $100 million when oil jumped in july and now it is back down to $57.8 million which is still pretty big but a lot lower than it was. >> this is because of his exposure to >> what analysts they are theus land break company in the u.s. so unlike exxon there noticed a diversified to this drop in oil in thet the paycheck stock is getting hits of that's what striving so much of this. of this pay is that he will get paid out until four years down the road? >> first of all he got $21 million in cash which is high for an executive package he got

two different stock awards, one of which was to end his employment agreement. million over three years. then he has a performance fee as well. >> we were just talking about climate change negotiations in lima, is there any indication that it has ever impacted an oil company at all? >> my expertise is in the executive compensation space. >> it feels like any negotiations that we are talking about is a fly on the windshield of what the oil companies are doing. can you get any sense they are aware of what is happening in lima? >> i have no idea on that but i know that when i buy stock i care about how the management team is compensated and to me that can really impact the behaviors of the management teams and how they deploy capital.

if you'll buy a lot of stock you have to understand how the sea level executives are compensated. >> what you found interesting is their losses are much wider than they were for some of the peers. pay from thed the ceos of exxon and chevron and they only combined -- about 19% or 20% per million. but he is almost double that. adam parker as you make your recommendation on energy companies moving to an overweight position you say you look into the management and how much money they make, should they be renegotiating something like this and looking at cost and every direction including -- >> the change in oil prices about .8 correlated with the sector. buying stocks is more about a bet that stocks bottom before the earning revisions bottom and

that that oil prices will be on that height 12 or 18 months from now. the bet that you and i know is you will always see this in the debt market before the equity market so where is the trip market. we are there. of there there for some smaller securities but i'm trying to beat the s&p 500. >> and you're not a bond guy. very few s&p 500 companies will have any issues because most of them that pushed out financial obligations are taking advantage of the markets. >> you're talking smaller and mid-cap energy. >> i need a martini to talk with you about this. >> what about dividends that are eliminated? >> stocks that cut their dividends will be bad stocks -- no doubt. you have anything apogee or dividend you want to avoid those securities. we want to -- you want anything to happen to your dividend you are to avoid the securities.

we want to avoid those in our folio. -- our portfolio. >> protests in berkeley, california turned violent. how far these protests will go. ♪ >> good morning everyone, very

quickly on oil futures deteriorate. negative seven on west texas .44, brent down to two dollars. for -- monitoror the benefit of that for the u.s. consumer and the fallout for the oil companies. skies, the internet of everything has gone there as well. wi-fi connections on planes have been on the rise and companies are looking for international expansion as well. betty liu joins us. goat which are

normally familiar with if you climb on an airplane these days. if i domestically and you get wi-fi. every time i get on an airplane i expect to have wi-fi. and a disappointed if there isn't. >> betty, in the words of the well-known panelist louis ck, give it a second. it's going to space. it is a different physical challenge to do it. it is a unique case in terms of internet access. >> it absolutely is an global eagle entertainment which is a isller competitor to gogo putting wi-fi on planes around the world's they just inked this partnership with air china and will make this announcement on our show of a new partnership with another major carrier and international airlines are way behind u.s. carriers in terms of putting wi-fi on planes and the

reason is it is sewed them expensive. so damn expit is ensive. those costs add up which is why it is not happening. it it is an do object in motion in the middle of the air and a high-bandwidth when to get the signal because a lot of people using it's a let's trick gin and tonic and read books. >> you want to go to to bed and watch movies. >> adam parker is giving us the skeptical eye. anti-wi-fi or pro wi-fi? >> i check in advance the features the plane has and i would only choose one that has wi-fi. >> you do research on your aircraft? you see brenden? flight i been on from new york to california has had wi-fi but if i'm going up and down the east coast it is questionable. this company does not just do

wi-fi they license movies from hollywood because is was started by a former hollywood executive and they sell them to airplanes so i imagine when you are an air punt to get wi-fi you cannot download movies. "> betty liu "in the loop begins at it :00 a.m. eastern time. 8:00 a.m. eastern time. ♪ >> good morning everyone>>, on

the facebook and twitter world what is going on with technology and can the dance continue? it is a loaded question. uber and everything happened there. >> yes that is a really interesting time. i am tom keene, brendan greeley and scarlet fu on an active monday. >> the story we told you about earlier -- we will recap the headlines. merck is buying cubist pharmaceuticals. it will allow them to fight the

growing threat of drug-resistant bacteria. merck will be giving a one dollar 10 share offer to cupid. wayng holiday sales on the for nintendo thanks to wii re vival. it is on the comeback thanks to hit titles like super smash brothers. the company unveiled a 3.6 million console sales in the u.s. this year. the german chancellor angela merkel with strong words for vladimir putin. the financial times reports she delivered scathing criticism of the russian president over the weekend telling a newspaper he is creating problems in mobile the and germany attempting to make the balkan states dependent. those are your top headlines. >> college football in shaping up here as we enter december with the fields set for the

playoffs and it is the first time on new year's day that alabama plays ohio state and they killed it this weekend. florida state will pay oregon and there is the usual number of miserable people not involved. the winners meet january 12 two decide the national ship. baylor tcu was awesome this year and they -- both school sucked they should've made the final ploy. you follow this much more than i -- this ist michigan better than the different things. >> it will make new year's day a little more funny -- do they have any tom keene figurines? >> we had a bobblehead. >> there it is, the bobblehead doll. we'll get you a gift one of these days. >> with a bow tie. >> lasan kromah 2014 with the bowtie.

2014.'s talk about --i will be watching very watching. havet's go to 2015 we exhausted every crystal ball cliche by december 8. adam parker with an optimistic view into next year and i give you great credit for being a measurable -- you went way out while in that we will do this and this but you also went in cash. tell the crowd why they need to be in the market right now as we approach 15,000. dividend and a 2% 2% of the shares being bought back so you have 11% headwind if you want, but the heart of this is where forgotten that it is all ok to go down 10%. it's even ok to go down 18%. we lost that completely. i don't think the s&p ever

really goes down by 10% ever and less people are afraid of an earnings decline so most of the war i do is what can introduce volatility into the earnings estimate and right now we think that is not likely. in the opposite of that is that earnings may have actual increase for discretionary companies because of this drop in oil. loss in the energy sector earnings is more than offset by the gain in discretionary and other areas so our biggest way to the portfolio is discretionary and that is the way you can play lower oil price tactics. >> when you say gains and consumer discretionary are you saying the money they save on the pumps or just that they feel richer because gas is under three? >> i think it is both because there is a wealth creation that occurs as equities rise but more of what i'm talking about is the actual tax break they get from lower gas at the pop. you can see some of the large

consumer stocks in the past few weeks. oil is a positive for the consumer, what about for the financials, there'd been a couple of analysts that of talked about how oil can be a big disruptive source and a threat for the financial industry given what we've seen in texas in the 80's, does that play into your analysis? >> i think the more powerful thing right now is the sloping level of the curb and the police -- believe about what can happen with fed policy. >> keep an eye on fed? >> you always need a view of the front and a long end of the curve because that directly impacts cash flows. let's get to the agenda right now with focus on the story that will shake the day. onare keeping a close eye the protest and the eric garner grand jury decision. demonstrations and protests turned violent in east a last night and early this morning, demonstrators raking windows and

looting, police arrested several people and we will keep a close eye on how this plays out because up until this point they're been fairly quiet at least the ones in reaction to eric garner verdict or ruling -- >> my agenda today i'm looking at angela merkel and she is going into a party convention for this week in cologne and right now she is at her zenith in terms of power. thele talk about her as most powerful -- powerful woman in the world and i think she is most powerful person in the world. >> what is her approval rating -- 75%? >> her own finance minister she is better than napoleon. >> are you serious? that's a loaded statement. >> when you look at her relationship to her party she is reagan plus kennedy plus clinton. >> great perspective. away thetaken

opposition platforms of the don't have anything to go against her. >> is germany unified? you've been there a lot. >> they are so much more than 10 years ago. they really put that behind him and the question is what is their role now in the world. i think they're looking to go past the german question. >> very quickly they had dinner .ast night unabashedly this is a charity fund-raising trip. this is a cash call. maybe they brought an empty suitcase. are in town at the carlyle hotel on the upper east side. i left boy george behind -- excuse me amy george. -- baby george. and i will take it

over from here and we were to get your twitter question of the day. what is america's equivalent? usa royals are obviously jay-z and beyonce followed by michelle obama and hubby. bush 41 and his beloved barb. >> i would not put them all the same place. >> are any of those couples royalty? >> i'll think so. this is a little bit different. faban, tomis, nick brady, michael jordan and king james. professional athletes are our royalty. there has to be a woman in there. >> mia hamm. america's most fabulous aristocrat has to be tom keene? did tom keene write this? >> i had no idea he was such a

royal watcher. you never know what he will be obsessed with and this i could not predict. he hangs out at the carlyle and you know he will hang out there tonight to see if he can catch a glimpse. >> adam do you wait desperately to catch a glimpse of them? >> i have other things just ahead of it on the agenda. as we get to the year and how much more money can investors make on u.s. stocks? >> i think the market continues to have an upward trajectory but i think what you have to focus on isn't is the economy ok or improving -- you have to focus on what can introduce volatility into the u.s.. growth --ng 7% eps how much revenue? >> small margin expansion on top of that and i get pushback on the margin call but i think it is a pretty good backtrack for

equities. >> think you so much. surveillance." continues on radio and "in the loop" with betty liu is up next. a close look at oil prices. ♪

>> good morning. it is monday, december 8. we are alive from bloomberg headquarters. i am betty liu. we have a packed show this morning.

infighting in washington. we have got you covered. plus, in inside look at the wheeling and dealing in miami art and real estate. we will be joined right at the opening bell. before that, tom cole of oklahoma talks about whether ted cruz can again cause another government shutdown. moguls, celebrities, all mixed together. also, we have the renowned art gallery owner joining us as well. first, here is a look at our top stories in china. the shanghai composite index went over 3000 for the first time in three years. the index rose for the 12th day in a row. stocks up 20% during that rally.