>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> the big short, two years after investor bill ackman went herbalife, he says he has more proof the company is, in fact, a pyramid scheme. bill ackman will be here in just

a few minutes for an interview. rublessian leader and the as the fed rats at its meetings today. -- is it time to say time to say goodbye to opec? if the oil cartel cannot affect price anymore, what is the? on assignment.is he may be back in a few minutes, but in the meantime, a very special cohost today. of weisenthal is the editor bloomberg markets, but that is not why he's on. your hair looks so good. to matt miller, obviously fantastic. but standalone, it still looks good. it's time to start the top business stories of the morning. we have seen some very big swings in the ruble today, but nothing like yesterday. the ruble soared more than 8% at

the open, fell back, and now again it is strengthening against the u.s. dollar. russia intervened for the second day in a row, buying rubles out in the open market. meanwhile, russia said it will keep well production steady over the next year. that sent oil prices down as much as 3%. west texas intermediate has been trading below $55 per barrel. brent crude is around $59. and now, it is payback time for the world airlines. after years of rising fuel prices, airlines are positioned for a $12 billion windfall from the collapse of oil. int means higher profits and the u.s. rewards for shareholders. do not expect that to help you or me. so far, most airlines have not cut ticket prices. over ating revenue citigroup fell 9% in the first three quarters, but the traders will not have to pay the price. according to a person briefed on the matter, the bonus full for

citigroup's trading unit will be unchanged from a year ago. at the same, investment bankers might feel shortchanged. they revenues increased, but their bonus pool will not rise proportionately. and breaking news on a scam i've been following closely. jeffrey group banker bad boy, i like to say, sage kelly is officially resigning to focus on his family. you remember his divorce became tabloid gold here in new york city. his wife accused him of setting up hidden cameras to catch her using drugs. while not disclosing his own drug use, she demanded $7 million in damages. most recently, she said we've made amends and it's all about the kids, but as far as stage not so much. work, and the currency crisis in russia, moving on to a little more serious topic, it is sure to be a topic at today's fed meeting in washington. we are asking whether it will affect the policy statement and

will janet yellen talk about the economy at the news conference? who better to ask than alan blinder. greenspanunder alan and is now a professor at princeton university. and neil dutta is here, too. gentlemen, this has been a now full for me. i will let you lead. >> what will happen today? either one of you, are they going to get rid of the considerable time language today? class i think it is a 50-50 that. 50-50 bet.nk it is a " side,down on the "no but i think they will keep it. and it will be a considerable time still before they are thinking of raising interest rates. there, i would think about throwing a firecracker into whatever this is. was on the f1 scene now, i

think that would nudge me towards waiting. now, if i was on the fomc i think that would nudge me towards waiting. >> what do you think would cause them to not rush to change the language? is the strength of the u.s. economy, which is what is pushing people to think sooner to drop it, and the behavior of inflation. inflation has gone down, and expected inflation has gone down a lot. the 2%been well below target, and the fed does not like it. they have been trying to convince the public and the investing markets that they are symmetric at about 2%. they don't want it higher or lower, and it is lower now. >> do you have the same call? or do you think they will get rid of it? >> meal is making a face. i think he is not. >> i think that they will drop it, but i think they will probably soften it once they do.

maybe stress patience in raising rates. really, i don't think the events of the last few weeks are changing the baseline outlook for the u.s. economy. for the last five quarters, growth has been at or about 3%. growing att jobs are a fairly respectable pace. most of the decline in unemployment is year has been because of a long-term unemployment. the market is not tight, but it is tightening. financial scheme of markets, three months, six month, is like an intern at sea. three to six months from now, we will be talking -- it is like an intern the. three to six months from, we will be talking about more jobs and probably some wage growth. the headlines that stephanie just read about airlines not passing on lower oil prices, to me, this brings into question pass into corell

prices. i think underlying inflation is probably stable. >> maybe i knew them in my heart, neil. how high is russia today in terms of topics they need to cover? >> not that high. >> really? >> i think there will be some discussion in context i just raised. that is, you have this financial turmoil, so is this a great time for us to throw another monkey i hand mixing my metaphors. throw another match into the fire. it will come to that, i'm sure. fomcocus is always at the meetings, and when i say focus, attention, onthe what neil was just mentioning, how good the economy looks. i think i agree with the outlook that he was just saying. and i think the fomc -- that neil was just saying.

and i think the fomc agrees. the question is whether that phrase and today or hangs on for another meeting or two. if you come into the meeting feeling 50-50, or if you came in three days ago feeling 50-50 and you look at what is going on in the markets, you might say, maybe we should just wait. >> everybody agrees that the time is basically dead. let's get to the fun part of when they finally hiked rates. what is your outlook? lean on the more often and stick side of the consensus. because my economic outlook drives my excitations for monetary policy, i think they go a little sooner. my expectations for monetary policy, i think they go a little sooner. i do think there is an argument for a 2015 baseline.

the question is how quickly they go once they start. the market right now, if you look at it, it is trading more dovishly thanmore the members of the fomc. and you could see a drop in the yield curve. market, potentially if the economy continues to strengthen at this rate, may be in for a more hawkish fed than many appreciate at the moment. >> alan? collects in terms of rooftop, i inn the june-september -- >> terms of lift off, i am in the june-september. they will have to have a press conference, and that is not to say they will not have a press conference anyway, but it is somewhat of a deterrent. that is the main argument for june as opposed to september. a very important determinant will be the behavior of

inflation between now and then. people are still not blonde on to how much this will fully information down. mmedeople are not still glo pull themuch this information down. it will almost certainly lead into core. and you will have when june rolls around, probably a six-month history of very low inflation, well below 2%. will they do it in june? be a lot ofe will second thoughts about that. but i do think it will be slow once it starts. >> in -- besides the time question, what else should we be looking for from the fed press conference? >> i think we should be looking for how the fed will characterize the state of the economy. opty doo -- be wo >> technically speaking with a

quick yes, the term will not be >> technically- speaking. >> yes, the technical term will not be in there, but they will upgrade the assessment. the crucial thing will be what they say about inflation. they could come back and say very little about inflation, or they could well more on the behavior of inflation. if i were to pick one thing to watch in terms of the pros prose the economy -- around the economy, it would be that. >> what do you think of the press conference after class i don't think -- the press conference >> i don't think we will see much of a change. whetherwhen question is the fed is making a policy mistake. i would like to see some in the press corps asked whether janet

yellen believes in stagnation. that would be an interesting question to ask. i think she probably doesn't. >> believe in it at all? >> yes, i think she knows there are risks at there, but it would be interesting to set -- see that aired out there for the public to see. what is another question you would like to see asked at the press conference? about should be asked time and when the fed will move. and she will dodge those. >> isn't that her job to dodge those? is, but whatt people don't understand so much is that -- >> yes, it is, but if she doesn't -- what people don't understand so much is that if she doesn't know, she doesn't know. she might have it in her head about june, july, september, but there will be a lot of information coming in. neither one of us think that this russian -- whatever you

want to call it -- will bend the u.s. economy in a serious way. but what if we are wrong you go six-month -- what if we are wrong? we will know now whether we are wrong. i don't think she thinks it will affect the u.s. economy. but she cannot know those things now. >> professor, get your red pen out. give janet yellen a great. >> i think she has done well so far. an "a" give her and a -- for what she has done so far. but give her -- >> give her a grade. >> who am i to judge? what we've seen so far is basically a negative. that means the treasury sees the market as there is certain, and janet yellen is talking about uncertain. there is a disconnect between

defense guidance and away the markets are currently trading. that will be an important topic for 2015. >> gentlemen, thank you so much. it --linder and neil. neil dutta. the in for full coverage of fed meeting and janet yellen's news conference for bottom line here with mark trenton. we have a lot more to cover. line" here with mark crumpton. we have a lot more to cover. bill ackman will be here in just a few minutes. ♪

greg will come back -- >> welcome back. i'm here with joe weisenthal. president obama will announce a major shift in u.s.-cuba relations today.

it can be that he is ending the decades-old embargo on the communist island nation. phil mattingly is here in new york city today. you came just to see us for christmas, i hope. >> [indiscernible] >> we will be ending this segment early. seriously, the reason this is happening is the release of alan gross, a u.s. contractor that has been held in cuba for five years. there have been back channel negotiations going on between obama administration officials and the cubans for a long time. they have heated up in the last couple of months. why this is important, the u.s. has made clear that as long as he is held down there, there would be no change in major relations between the u.s. and to buy. even though there has been a big push -- and cuba even though there has been a big push on that front.

what the president will announce at noon is the start of normalization of relations with cuba. this is huge. think about five decades, cold war, major changes in trade, bank policy. this is a big step for the administration. >> the embargo began under eisenhower. just to put that into perspective, people thought that cuba was never going to be in our lifetime. what does this mean for president obama? does he want this to be part of his legacy? >> no question. he came into office eastern easing travel restrictions -- he started easing travel research is on people going to cuba. country -- this just was not a country that lawmakers were ever going to allow because the way they operated under castro. houseere are some in the

that are not going to be thrilled with this, robert menendez, mark ok -- marco rubio. >> what does this mean for 2016? forhen hillary clinton ran president in 2008, she was for maintaining the van -- the ban. which based on the cuban population in florida, that was always the assumed position of anyone trying to win in that state. she has shifted. who hasn't? jeb bush, marco rubio. on the democratic side, hopefully there is a new population of cuban-americans coming up that want to normalize relations. is that right yet? -- ripe yet?

goston could this happen you -- >> how soon would this happen? initially heard was that this would be a symbolic announcement. now i'm being told that there are concrete things being put into place starting today as part of that normalization, both on the cubans time and our site. -- our side. >> stay with us. we have to turn our attention to russia. putin is pulling out all the stops to halt the glass in the ruble. i want to bring in ryan chilcote joining us from london. we started this conversation yesterday, talking about where you were 10 years ago when this happened. fast forward. what is going on today? >> it fascinating how much one day, how much a difference makes. -- how much a difference it makes. the story today is russia going

on the counteroffensive. the finance ministry and the deputy finance minister are finally -- are kind of channeling mario draghi in saying that they will use as much of their hard currency reserves as necessary to prop up the ruble. they have $7 billion to that. the bank of russia has $14 billion and a lot of gold. market it put into the to the tune of $2 billion yesterday. the ruble is not where it was last week, but it has gotten back some of it losses. which the russians will find to be welcome news. and the game changer came yesterday when we heard from the economy minister saying that russia would not impose any capital controls. not that we believe in just check, but that was also very supportive of the ruble -- believe him just yet, but that

was also very supportive of the ruble. >> looking at the russian ruble ticker on the screen, it looks like it is down 10%, but it is the dollar against the ruble. that is quite a significant ruble strengthening today. >> that is all the time we have. we would love for you to stay forever. but we've got reporting to do. ryan chilcote joining us from london. it has taken two years, but bill ackman half steps against herbalife is in the money. we will be digging in with him in just a moment. ♪

>> coming up, it is a first on bloomberg tv, bill ackman on his second anniversary of his billion dollars short against her life. he will be here to discuss that and a lot more.

stay with us. ♪ . .

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> welcome back to "market makers." i am stephanie ruhle. who is back with us. my partner in crime could not miss this next interview even though he has been on assignment. erik, glad to have you back. >> good to be here. . guess who is? he is called a true

insider who took the other side of the trade, but at least for now, mr. ackerman is having the last laugh. shares have fallen by 50% and it appears that bill is in the money. thanks for being on "market makers." >> thank you. you speak about herbalife, the stock goes up. this summer it has been going down. >> what has changed is a lot of the former herbalife employees, top distributors are turning state evidence. so we have very interesting --eo from herbalife >> film by herbalife? >> that is from october -- it you will say that it was 10 years ago, but wait until you see the video. it is one of the top

distributors, i think he is in the top 10, talking to other readers,op to strip members of the company, senior vice president of herbalife and he is talking about how herbalife is basically a pyramid scheme. >> as soon as you set down and started speaking herbalife, shares began to tumble. let's look at this video right now, shot in 2005, an internal video. it is an herbalife video. let's take a look. herbalife get these people to put up their own money run-of-the-mill products. in a word -- deception. >> this is a great business opportunity. >> herbalife is a recipe for success. make 120 thousand dollars in a year or $240,000 a year. anywhere up to $3.6 million. >> herbalife is proud of the

fact we have an unrivaled business opportunity. >> herbalife's financial success is a most inevitable. but in this traitor session, the telly different story. sell people a dream that they can make it. deep down inside, what do we really know? yeah, we know the reality is most are not going to make it. >> the reality is most herbalife distributors earn less than $1.50 per week with hundreds of thousands suffering significant losses. the model is not based on customer purchasing. it is based on distributors purchasing volume. that is the herbalife business model. that is the way it works. >> i.e. to make a correction. that overall video was put together by pershing square, but in there -- that video

was taken by an herbalife distributor and an internal meeting and the person standing in the front of the room was a senior herbalife staff member talking about the fact that people who enter the herbalife community do not actually use the product. >> we just put up on our website the entire three-hour video. not going to make you watch all of that. we also have a white paper that walks you through the video. that will take you a lot less time. and we have a segment that highlights -- takes pieces of the highlights. people complained about our nutrition club presentation. bill, where is your smoking gun? the answer is, we have a guy, shy of the is just founder circle, the top 15 chairman and the company. herbalife recorded the video. and he is walking through how this is a deception, his words. he is talking about how the

business is kind of struggling in 2005, how they are going to fix it. i for julie, things are much worse -- unfortunately, things are much worse now. the scam is even greater. the bad thing is we did not get it first. the government got it 30 days ago. >> how did you get possession of it? >> an intermediary. let's put it this way -- we are who thewed to disclose person was. the excerpts of the video are short and good, but it is important to watch the whole thing. i think it will be important evidence. >> but ackerman detractors will werehe finds people who not making money and he puts them on the payroll. >> there are a lot of seeributors now and they their paychecks declining as they are realizing herbalife is

likely to be shut down. they are going to the government or coming to us and saying, look, i have information that could be helpful to you. in this case, we had someone come to us with a copy of this video and it was a very valuable document. they give it to the government, and then they gave it to us, but none of the people in the video -- i have not met any of them. these are chairman's club members, board members, several senior executives featured in the video. it is a recording. it is not something we created. no one was paid to be in this document. it was an herbalife document. people areioned that turning state's evidence. they are coming to pershing square with their stories, of woe in some instances question mark how do you know that they are turning state's evidence? to they come to you and subsequently tell you that they testified or signed an affidavit or put out a deposition? a number of them have

gone directly to the government and we do not know much about them. others have come to us and said, look, i am scared. we have agreed to give indemnity's to some of those people before they go talk to the government. >> how does that work exactly? >> we protect them if they get sued by herbalife. >> you cover their legal costs? >> exactly. >> just so everyone understands how it all works -- people to goge directly to the government. if they feel they need legal protection, we are willing to take the risk of protecting them. >> you have got to say that that is fair, erik. >> i'm not saying it is not. i'm just wondering why you have to indemnify them -- >> [indiscernible] >> probably not a legal scholar. >> that is fair to say. the government pays

whistleblowers. come forward. some have. they sit down with the government and they say, this is how the scam works. the government will pay that person to make a meaningful recovery. failed but if i was a herbalife salesman and having the confidence to say i'm going whistleblower, i'm going to say if bill could not get the government to do anything, what could i? a question.es two years ago you made a big presentation about herbalife that started the declining shares. two years later, why keep it up question mark the government, from what we understand from you and other people -- there is scrutiny at the very least and perhaps active investigation underway. >> sure. >> so people look at the videos that you showed us today and you made available on your website and the white paper and the stuff we heard last week, for

example, and they asked themselves -- why of just let the government do its work? >> unfortunately the government and in theng time meantime there are literally hundreds of millions of dollars being extracted from distributors. more distributors need to step forward and say, hey this is a ripoff. it has an economic effect. it is much harder for herbalife -- were cute distributors in a world with transparency. it is going to be a lot harder for them to recruit. you have seen that in the results. the come but he claims they are a health and wellness company and they talk about the obesity crisis, but the obesity crisis was inen 2014 than it 2012. the business is deteriorating, but that is because it is much harder for them to recruit distributors. >> this is year-over-year sales for herbalife falling

consecutively. there you go, third quarter 2013, third order 2014. can you stick to the numbers and what this last quarter looks like -- can you speak to the numbers and what this last quarter looks like? >> sure, this last quarter was nothing less than a disaster. quarter willfourth be worse. to grow, they have to replace 2 million distributors who wait and you have to recruit another 2.5 million. the time the treadmill goes faster than they can recruit, you see the business decline. you saw evidence of that in q2, q3, and i think you will see evidence in q4. know that? herbalife has gone on sale. the qualifications to be a sales leader -- used to have to buy 5000 him sales point. now it is 4000. and they give you longer to pay.

they have launched a sale, if you will, on november 1. the other thing happening -- herbalife probably has more currency exposure than almost any other company. why is that? they produce their products in the night's states and ship it abroad. what are their big markets? texaco, brazil, russia, venezuela. what do those markets have in common? exposure to oil and what is going on with their currencies. costs are in u.s. dollars and your revenues are in the venezuelan bolivar or the russian ruble, you are getting killed in each of these markets. the fundamentals of business are deteriorating as it becomes more difficult to recruit distributors. the whole thing is a confidence game. as distributors lose confidence, they withdraw. >> you still believe this company is worth zero? >> yes.

>> remind us what you have said about how long you are willing to waste this battle. >> in terms of the battle, i will go forever. in terms of investment, i have to look every day at risk and reward. it make sense to short, to add, to detract. the risk/reward is probably the most compelling since we put the investment on. why is that? the answer is the investment has business has begun to deteriorate. >> it is finally paying off. business is declining. that is number one. number two -- they bought back $23 billion of stock. the formal investigation was announced in mid-march. they announced a buyback. and they bought back a huge amount of stock -- i think and an average of $65 per share. now the company has leverage. they have $2 billion in debt.

there is no longer a bull case for the stock. case for the stock price going up has declined dramatically. we are getting closer, in my opinion, to the government intervening. i can't give you a date. you have the sec investigation for deed of years. you have the ftc investigation. you tell me when they are going to act, but i think the more , at somee problem point the government is going to finish the work. >> is as much of your lp's money in this trade as it was in december 2012? formal, we changed the position. it was originally and all short position. position quite a large . at 1.15% of our capital. chunk of thebig

short. we actually increased the potential for profit, because we are now share many more shares and we were originally, but we reduced the amount of capital at risk. so, this is today about a 7% position. the opportunity for profit is actually greater than it was. >> since we began this interview, herbal life is down officially over 2%. you mentioned your friend carl. have you discussed herbalife it all? is kind of stuck. he was on the board of directors, got five directors, five affiliates on the board. i think he just can't sell. i would love to see himself. it would be great for carl. but he is a stockholder, i think i would describe him. >> take it out. unhedged.on hedge -- cry for carl icahn.

he'll be ok. >> forgive me for trying to interpret what you're saying, but you say with the tactics you've been deploying, and what you believe is happening with the government investigation -- >> and they're running out of victims. >> does that change anyway how you plan on managing this position going forward over the next several months and 2015? we have several put options expiring january. we spent the last several months extending those options as far as 2016. 2015 inthis will be a it, the implosion of the family. i think worst case, early 2016. what gives me confidence -- the company has debt that comes due in early march 2016. they will not be able to refinance that credit facility. they do not have hard assets. that is before all of the government investigations and

revelations. if i were an investor in the company, i would encourage them to watch to get hours of video. actsaboutherbalife.com. yet another expense you have incurred. how much have you spent on this? >> about $3.5 million. it is small relative to the scale of the investment. even something like allergan, that is something that is more intensive for the cyclical, passive investor. that is the cost of doing business. >> let's talk about allergan. how do you feel about the outcome? >> first of all, our focus is doing the best we can on the shareholders. our franchise depends on maximizing values for the other shareholders and that is ultimately how we do well for ourselves. $125is case, the stock was

a share when we started. our favored candidate for a merger was valeant. there was no other viable merger partner for allergan until very late in the year. we felt very comfortable with the management team. we thought it was a good fit. alternately, valiant was not prepared to pay what was necessary to on the business. they said, hey, our stock is undervalued. we do not want to issue more of it. and we spent some time with the ceo. in fact, two of my guys today are at his headquarters doing due diligence on the company. we still on every share of allergan we purchased other than the piece for valeant. >> and will for how long? >> we have yet to decide on that question.

what is interesting by the way on a mergerre just arc, you can buy out against up-to-date. assumingut 28% return, the transaction closes as we expect in april. a very high probability deal. it just shows you what is going on in the space. is off thee deal table for valeant, how does that make you feel about them? would you on it? would you buy it? >> [indiscernible] >> would you buy it? >> we had a confidentiality agreement, but once that is expired, we will take a hard look. say, bill,ld you about the value structure for allergan and blank and it -- like unit to green mail? out by aere bought premium -- the company levers up and buys you out.

all of the coming shares that had been diluted by an overpriced acquisition, and that was a bad thing. >> that for the remaining shareholders. >> in this case, every shareholder made more than we did, because we spent the legal costs. so, the difference -- i compare it to carl icahn one point oh versus carl icahn 2.0. in the old days, carl was in a he was with management when the shares were threatened, and today, girl is with all the shareholders. we think it is a much better system. >> fannie and freddie. is there any money left to be made after the recent court decision? >> yes. we had an arbitrage meeting in the last week or two. we think the court decision that came down, first of all, did not address the substance of what we think is the most important argument, is can -- which is can

the government take rubber property -- private property? imagine one day the government walks in to apple and says, ok, we're going to take 100% of the. >> profits apple is not under a conservatorship. >> conservatorship does not mean you can take it. the government had a very of fannie andout freddie and they took 80%. i think they did a very good job. >> they make the rules though. , the government cannot act outside the law. ultimately, they cannot take that transaction. -- fourd of directors years after the crisis, those companies turn profitable. they wake up one day and they want to take 100% of the profits. they say, well, they will never pay us back.

18 months, the government is paid back. that is a decision that will never stand. if it has to go to the supreme court, it will. the obama administration just taxed them $5 million or so a year for affordable housing benefits. all of the companies that emerged from the crisis, the only one that is a risk to the taxpayer today is fannie and freddie. why? recapitalized, dig and recapitalized, the government has sold out its stake. fannie and not have any capital. it is a false prophet, because there is no capital push left for fannie and freddie and the only way left to protect the taxpayer is to recapitalize and the only way for that to happen is that there is going to be return. .> let's talk about mcdonald's are you active in mcdonald's?

wereere was a rumor we acted in mcdonald's. i would like to comment on that question, but we cannot. >> if you hit 5%? weeven if we don't hit 5%, will not have to disclose. and we are not shy about sharing. i will say that we are very proud shareholder for burger king. we think that they have done a fabulous job. they closed earlier this week, i think the acquisition of tim hortons. >> our favorite canadian. >> now it is called something else. interesting,nk is the restaurant brand is international. what they are building here is a restaurant conglomerate with a fabulous managing team. >> you are a fan of burger king management, 3-d, tim hortons. what else should they go after? >> right now focus on tim hortons. after they do that -- >> [indiscernible] the power of bill ackman's

words. in that moment, the stock surged . are you sure you do not want to say what you think about mcdonald's? >> i'm sure. i can't comment. were runf mcdonald's like burger king, the stock would go up a lot. >> [indiscernible] >> virtually that's true. >> what's true? >> i can't comment. else. talk about something i'm sorry. how about some stuff i am happy to talk about. i just came from a board meeting . they are doing an incredible job. the railroad has run just about as well as they have ever run. the management team is doing a great job. the stock took a hit because they received energy exposure. i think that is an opportunity for investors. the company will grow at a high rate.

there is an enormous amount of opportunity. they have the best ceo in the industry. >> how do falling oil prices affect them? >> they have been delivering the growth -- some of the growth in the future will come from oil deliveries and the extent -- some of the growth in the future will come from oil deliveries and the extent to which they are exposed. this is a high rate. >> so, hunter, the ceo that you helped put in place, has quite loudly advocated for this notion that there should be consolidation among north american carriers and he would like to be a consolidator or presumably the former, not the latter. -- dose helped to drive

those oil prices helped drive consolidation? >> is not oil prices. it is -- it is not like we will have a new rail. the economy has grown a lot in the last 20 years and the only way to rails will deal with the product and get it to the end markets is for them to become more efficient. terms of delivery efficiency, that would only happen to a great extent if there is some degree of consolidation. and there can be consolidation that happens without a threat to the competitive point of view. right? >> can you help to facilitate that? in the manner of something akin to what happened with allergan, for example? >> i would say that there are more regulatory issues in the rail industry, two former companies combined -- sure, but what might work? what things are on the table to

drive rail consolidation forward? >> common sense, and i think the management team has done incredible job -- >> common sense according to bill. >> they have done a great job turning around the system. i think they will be the on therforming based metrics. and what will drive that -- the shareholders will say, if the management team is disappointing year after year, they will want to change. before we run out of time, how will pershing square in -- end 2014? with a lotend up of cash from allergan. we are looking for places to put that capital. we will be more focused in 2015, and i like all of our companies. bill, thank you for joining

us. happy anniversary, herbalife. hope you are watching. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> are we finally seeing the final days of opec? price orannot control control supply, maybe it is time for members to go it alone. a breakthrough on cuba. president obama will announce a major shift in diplomatic and trade relations on the anniversary of when the embargo began. true, ittoo good to be probably isn't. the scam that promises investors

phenomenal returns. more on that in the second hour of "market makers." our special cohost -- all of you on twitter that he was hiding under the desk, went for a coffee. joe weisenthal. how are you doing? >> pretty good. >> are you ready for the next hour? >> that was great with acumen. ckman.with a >> glad you are here for it. now to be fed. will the fed back of its pledge to keep interest rate near zero? we will hear from the fed at 2:00 p.m. eastern. apple has halted online sales of its products in russia. last year the company increase in price of the iphone 6

russia by 25%. investor bill ackman just left our studio and he has launched a new attack on herbalife. he has called herbalife pyramid scheme and shorted the stock. he started the crusade two years ago almost to the day. and on bloomberg a few minutes ago, he told us exclusively that former distributors have turned state's evidence and we are getting closer to a government intervention. downsaid herbalife shares 15%, and that is in the course of 15 minutes. one hour from now president obama will announce a major shift in u.s. relations with cuba. the diplomatic embargo with cuba has been in effect since the eisenhower administration. cuba paved the way by releasing alan gross. sentenced to 15

years for prison while he was expanding internet access for the havana community. russia did not help matters with oil by announcing -- opec did not help matters with oil by announcing it would not cut production. we have the head of global commodity research with bank of america-merrill lynch. what do you make of this? >> it is a really volatile period, and frankly that is how saudi arabia wants it. they made it very clear. by definition, nothing really happens. they will lose 5% day after day. and we no longer have a inivating agent for prices this market. to me, that is just the inevitable conclusion of opec

effectively dissolving as a cartel and just letting the market run its course. >> so, what is the real downside for oil? there is the talk that it cannot get much lower because of what it costs to produce oil. what is the real scenario? and we get back to the day where it is at $20 a barrel? >> the real dark scenario, in getting aif we end demand side event the compounds what has been a supply-side event -- remember the reason that oil rises have fallen, we online,yan oil coming too, after relaxing during the civil war last year, because -- so, all of this oil coming into the market, pushing prices lower because the saudi's have opted not to withdraw production. .ut back to your question what is the cash cost of

producing oil? very low. even the canadian market, it is $30 per barrel. we do not get cash players out of the market that easily with lower prices in my view. we will not see it immediately right now. investing goes, where are you telling investors they should be playing? >> with think that strong , low marginal cost players win this game. this is a battle, this is a poker game with high stakes on the side of saudi arabia. you want to be positioned just are.the saudis lots of cash in the bank. if you are a highly levered player, you are probably not going to do well in this game. again, we are in a very volatile

environment. if a commodity like oil does not have a moderating agent, it is going to be all over the place over the next few years. that will focus on the low-cost producers to have strong balance sheets. there will be a lot of players who will come out very strong, in our view, on the back of this turmoil. >> who does all of this volatility hurt the most? >> i think it hurts -- we see right now, it hurts the most some of the highly levered names. if you look at the names and the high-yield space, they are getting hurt. you look at russia, it is getting hurt quite a bit. venezuela. it is really about those players who were over the operating margin because they were running very high expenditures or because they were actually reaching out for a expensive projects like borrowing money. those sort of players are getting hurt right now. we talked about the

dark scenario where oil could drop a lot further due to a construction, but what would cause oil to head higher? scenario is wee have a higher price in the second half of next year. note fair, we are contemplating the darkside scenario where things melt down for the first half of next year. in our view, the lower oil price is a big benefit for main street. it may not help wall street. but helping the main street in america and in europe, places like spain or italy or greece, which have been hit really hard with a double-dip recession, it is going to help japan and india and china. the major consumers on the planet are going to benefit from the lower price and we will see incremental consumption. i think also we will see lower output from the show producers.

i also think the medium-term, we back ae this will push lot of lower prices, things like arctic oil, very expensive projects. those probably will push back on capex. so some of the major companies over the last few weeks of come out and announced what he percent, 30% capex reductions. at the end of the day, that is what brings the recovery. -- the incremental construction and the increase in capital expenditures and the reduction in the rate of supply growth, which has frankly been too fast for the last deed of years. >> let's talk about opec. what is in store? >> i think there is very little in store. opec has become a very differentiated cartel. you have a few players, kuwait and abu dhabi in particular,

that are very strong. big ballad sheets, a lot of money in the bank. low expenditures era -- big balance sheets. then you have the rest. iran.a, these players were having problems before costs came down. there are the haves and the have-nots. i just cannot see this cartel operating very well for business. i think it is effectively dissolved. but i do think the saudis, if they want, they still have the power to influence the market, but again it will not be a cartel issue. the cartel, after the decision marketks ago to let the sort itself, they are no longer a cartel. what is the point of a cartel -- >> francisco, wayne a moment. are you saying opec is no longer

-- wait a moment. are you saying opec is no longer relevant? relevant.rabia is but the rest of the players, frankly they are a sideshow. they do not count. they do not have power at this stage, in my view. >> opec is dead. we can say that now? ll, we think it is the effective end of opec. toically the saudis have pull the plug and let the market balance itself. if you cannot control the price, you do not have a cartel. said,udi oil minister, he we will let the market figure out where the price should go, right? does that so much a cartel? it does not sound like a cartel to me. >> thank you for your very, very candid talk this morning. fromis francisco blanch

bank of america-merrill lynch. coming up, president obama has an announcement on cuba. and a very believable scam. ♪

>> "market makers welcome back to --welcome back to "market makers." i'm stephanie ruhle and this is joe weisenthal. president obama will be announcing the normalization of relationship with cuba. white house correspondent phil mattingly is here. our chief washington correspondent is in d.c. and on the phone. -- what you think of this? bigs you said, this is

news. we have not seen this kind of change toward policy on cuba in 50 years. policy ofery clear sanctioning and restricting cuba, and if in fact, what we hear might happen, this will dramatically change. there will be more economic engagement, more people traveling potentially to cuba, and there will be more opportunities, i believe, for peoplean people -- cuvb to engage the united states. that could create spaces that could ultimately lead to democracy in cuba. >> peter, what is the reaction? criticismction is from both republicans and democrats on capitol hill. marco rubio very critical, as but menendez, the chair

of the senate foreign relations committee. also got a statement -- calling what the president has done today "outrageous." criticism from capitol hill from both parties. but also words of support. members ofthree congress on the plane picking up today from cuba. it will be interesting to hear about this decision. you will hear criticism. you will hear some on capital saying the president is again going it alone and that in its health is a problem -- in itself is a problem. is --hink the back story >> peter is giving us the official. what is the dirty story? negotiationshannel between the obama administration and cuban authorities really year. up in the last

canada was often the coast. no meetings took place in cuba or the u.s. the third party that had the biggest impact, the vatican. the pope. >> the man of the year. >> he is everywhere. he was a key component of pushing this all through. what kind of sealed everything --there was a 45-minute talk call between president obama and ralph kustra, the first direct contact between the leaders since the embargo was put in place. you can see that the buildup to this is historic. whether you are opposed to it or for it. it is historic, the reattachment this has beenr is a big business push on the business side. but also the obama administration, because the latin america in general. often when they have dealings

with countries in the region, they say, we do not like how cuba works. what you going to do to change it? and this may be the answer to that question. the pope has been more engaged in the region than previous post. as you know, he was involved in the political crisis in venezuela. i just want to add to what was said in terms of the strategic impact this might have with our relationship with the rest of latin america. the summit of the americas will be in april. was invited. it was doubtful whether president obama be attending. it does seem now that the president will attend the summit of the americas. ro will attend. and i imagine that human rights very big part of the speech president obama will give in april. anyo you think we will see

photo opportunities, the president and castro hand-in-hand? >> i do not know about the hand-in-hand theme, but i think we will have something much like we saw at the funeral of nelson mandela where the president castro.nds with raul there may be something similar at the summit of the americas in april. many are curious about concretely what this will mean, whether it means travel or even importing cuban cigars. what would be the timeframe for people to see real change? see what the will details are. one key element, as you know, cuba is a foreign territory. that puts a limit on our ability to engage with the island. kerry is called

upon to remove cuba from the terrorism list, that will open up engagement much more than we see today to include american citizens. that does not mean american citizens will go to cuba like they did before the cuban revolution, but it does offer opportunities to include --ential he lending i lending money to the islands, foreign investments, things of that nature. it could have an impact. i would not expect the doors to open wide open and to see a flow of american tourist's going to cuba. askingpresident is secretary kerry to begin that review. at one of the immediate. on the full embargo, what the administration is doing through the executive powers they have, expanding licenses to travel, and as frank was pointing out, expanding the ability to invest in cuba, send money to cuba. of investment,

cigars. if you're a licensed traveler, you can bring up to $100 of tobacco products back to the u.s. black -- to the u.s. -- cost? much do they freight, how much will 100 bucks by you? >> it depends. there are a couple cigars that will cost more than $100 for one cigar. that is really not a lot of cigars, $100. >> there you go. we are getting a live shot right now. that is x prisoner -- ex-pr arriving justoss outside washington, his first steps on u.s. soil -- i want to say in the last five years? >> less tried years. another interesting component of what is going on. the face of what

is going on, but behind the scenes, there are more details. releasing three cuban prisoners who were arrested, convicted for espionage and number of years ago. the swap is for a u.s. intelligence asset who has been held in cuba for more than 20 years. >> so the people we are releasing, what did they do? >> they are known as the cuban five. two are already out. this is the other three. they were convicted for espionage in the night it stays. we are sending those individuals cuba.o the swap is not for alan gross. the swap is for an unnamed intelligence asset who has been behind bars in cuba for two decades. a number of advances were made

possible before he was taken prisoner. there is more reporting on our end to do before we figure out the back story. but the administration is trying to say, alan gross was not the prisoner swap. was put in by cuban officials, always much to the joy of his family. >> all right, thank you, phil and oury and frank mora own peter cook joining us from d.c. in just about 30 minutes, president obama will be at the podium and housing his major shift in u.s. relations with cuba. -- announcing his major shift in u.s. relations with cuba. ♪

up, maybe the name of

the skins should have been the tip-off. it is a bloomberg exclusive investigation. >> "market makers" is going to be back in just a minute. stay with us. you are watching bloomberg tv. ♪

x live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> welcome back. i'm stephanie ruhle. filling inweisenthal for erik schatzker. it was a scam. the con was first brought to light by bloomberg's markets magazine. willem marx has been investigating. >> it is a gamble. it is a year of investing he invests his

time daytrading and dreaming big. he had grown frustrated with mutual funds. >> it was through a well-known bond. one of the guys had posted a message. he thought he had an edge on making money in the market. >> that edge was a website called secureinvestment.com. it would calculate your balance and that back in. >> the site promised investors they would share but be shielded from downside. of thousands of people and 140 countries had put in more than $1 billion. said, stay away from this company. >> he decided to invest the $500. $500 -- $2500.

secure investment claimed it was based in panama city. >> there were a lot of red flags from the beginning. if it was such a great deal, why was anybody even trading on wall street? before long, secure investment lacked in panama. said, let's test this thing. >> on may 1 of this year, secure away and hisnt remaining investment disappeared. >> the possibility of getting ahead vanished. >> across the country, a former truck driver was attracted to

the possibility of getting ahead . he invested the last of his life savings six days earlier. >> i was looking for a bigger deal. >> he had found client testimonials touting the success. >one thing was never advertised. these videos were voiced by paid actors. investors --ing invested money, looking to build after a bankruptcy that lost him his business and his marriage. >> i wanted to find a shortcut to life. right at the point where i was going to be able to look for something else and then i found it was a fraud. >> after his investments went south, he was forced to move north to live to his father in north dakota. over the past few months, he searched for a job in the booming energy sector, all while done to so little being

help him. >> i need justice and need to make sure it does not happen to anybody else. >> we contacted dozens of victims around the globe. companies were registered on three different continents. >> i would tell anybody to stay away from this market. you are going to get burnt and burnt badly. the retail forex market was overrun with fraud. it was a no win market to the unaware. >> more than $5 trillion a day trades on the highly complex foreign currency market. that is five times more money than changes hands on the new york stock exchange. >> those reforms will become the

law of the land. >> legislation like dodd-frank has strengthened regulation in the u.s. offshore remains beyond the law. who pays attention? >> the clear answer is not enough people. the damage done relative to the entirety of financial markets is miniscule. but the damage done to the individual investor is huge. >> these are the little guys that people forget about. >> exactly. are going to start a website, we are going to take people's money, we are not going to care if they are going to try to start a new life, we are not going to care if it is their life savings. we are just going to take it. >> u.s. authorities have just began to investigate who was responsible for taking the money. >> walk us through the process. how easy was it for people to

set this whole website up? >> pretty complicated. testimonials, attracting covering, they did their tracks very well. they had shell companies, the used entertainment, cut out systems. it is very complicated. being done anything to prevent the next one of these or will these keep popping up? challengeoing to be a . they are offshore. involvedhese companies do not have the tools or resources to chase up on all of these things. >> the government cannot actually be proactive in terms of investment -- defense, they can just be defensive? it is hard to say this is going to be a big problem before it becomes a problem. >> had his scams search out

victims? how do people come across? >> someone go searching for secure investment. there would be banner ads. a lot was recommendation from friends. then people are saying, i'm going to do that. people at the top of the pyramid scheme were getting money back out successfully. >> you know that sounds like? people who invested in bernie madoff. let me introduce you. >> it is a simple version of that. a lower rung version of bernie madoff. >> there you go. willem marx giving us the latest. goinge come back, we are to be speaking with someone who knows this story very well. we will be speaking to senator richard blumenthal. ♪

>> welcome back. >>we are about moving markets.

our interview with bill ackman sent several stocks flying, moving in a big way. sammy and freddie are both up huge after he has said he has added to his position in both companies over the past few weeks. many people have said, we are leaving the fannie, freddie trade. many investors have said there is nothing left in the trade. can a guy like bill ackman say, of course you can fight the government. if they break the law, they break the law. that heteworthy continues to be in the trade and add to his position. >> he is continuing to fight and has talked about taking it to the supreme court. >> he has got brass balls. it is pretty clear to me that he has an iron gut. 4%balife sells as much as that he has new evidence that is

that a pyramid scheme. pretty much every single time bill has spoken on record, on tv, via phone about herbalife, the stock has gone up. since his last presentation in july, it has steadily gone down. the biggest decline we have seen and he speaks today and it is down almost 4%. --the pre-done tatian presentation seemed like a watershed. it is one of these things where he is plugging away and starting to do well. >> i argue this point with bill in the past. he is a fiduciary. he said, i will take the trade to the end of the earth. worthieves herbalife is zero. many people think it is like a crusade. he seems like he is actually turning a corner. the guys a multibillionaire. he has the dough to do it.

he is still in the trade in a big way. he has had a huge year. it seems like he is working his way out of the trade. he first unveiled the trade, does he really care about this or is it just a show? it actually seems like you generally cares -- ginny -- he genuinely cares. >> it seems like with activist investors there is always a show. in this case, it is starting to work. he did not want to talk about a name that we did. burger king is what he is known for. mcdonald's, he would not sponsor the rumors that he was buying shares of the fast food chain. said he did think management could be better. if you think they could be managed better as an activist, burger king has worked out for him, tim hortons deal is closing this week. he made it sound like tim

hortons is the first of other potential deals that could happen. he is saying mcdonald's could be managed better. was a very amusing and interesting silence when the topic came to mcdonald's. people interpret that is possibly representing something. >> if you had to make a guess, one month from now when we are sitting here, do you believe that bill is chipping away and building a position in mcikey d 's? >> i will say yes. you don't think his heart only belongs to the whopper? >> he could be a big mac man too,. a big interview with bill ackman. check in online or check the stocks he mentioned. we will be back in just a moment. ♪

>> welcome back to "market makers." just a few minutes ago, you saw willem marx's blockbuster report about a global financial scam. secureinvestment.com. its victims want to know whether the authorities will recover any of their money and help bring those responsible to justice. villain is still here. here and we still have a special guest, senator richard blumenthal. toore we get to that, i want ask your reaction to the

announcement on cuba earlier today. gratifiedry, very that the hostages going to be freed. many of us have insisted that his freedom was a precondition to any discussion about any normalization of relations to cuba. my hope is that some of the other stepsents or toward normalization will improve their economy, but more stubbornly our economy and create more jobs. opportunities for commercial transaction. we still have a long way to go before we have a basis to really engage in full normalization. >> it is great to hear that he is now coming home and will be safe i'm going to turn to willem marx to turn to another rubber other people that are looking for help. >> i've been looking at this

game for a number of months. regulatorsurces -- have enough resources in the u.s.? >> the regulators need more resources and we certainly should focus on this major scam. evidence ando be potentially cases that are to be involved in this investigation. my hope is that they will pursue it. , resources are absolutely necessary. when he to focus on funds, trained expertise and personnel, and most important, as the piece on the scam shows -- >> my reporting showed up quite a few russian individuals.

does that make this kind of prosecution much more difficult given the lack of cooperation between u.s. and russian authorities? >> lack of cooperation is certainly an obstacle. the russians ought to have a stake in these kind of investigations, as well. >> you have stood up about consumer fraud over the years. given that people were wiring companiesegistered turning up in belize and the virgin islands, is there a need for people to have greater financial literacy, to understand more about where they are putting their money? they need help. looks too good to be true, it probably is. one of the victims in your excellent piece said that he was seeking a shortcut. that term shortcut. there are very few shortcuts to ,ealth in this world today

particularly where it looks too good to be true. it almost certainly is. banks havehink that a great responsibility to their customers when someone goes to them with a wire transfer request for $50,000 to somewhere like this? do you think they have an obligation to say, don't do this? >> they should support consumer education efforts. have some sort of moral obligation to better inform their customers. >> is there a way of educating them for that? >> legislating a moral duty is always someone hazardous, but certainly there can be some greater requirements for more frequent and effective warnings. >> when it comes to working with other governments, do you think that the cftc and the ftc and

other regulators have developed a relationship sufficiently well to work with people in latvia and cyprus and these other countries? >> those relationships are ongoing and building. my understanding is that there has been some outreach and it is always somewhat step-by-step. >> absolutely. when it comes to the department of justice and you have these decisions being made about whether they're going to prosecute, can you tell us about how that decision works? >> the kind of decision they hear will be based in part on whether there appeared to be sufficient evidence that enables the department of justice, the cftc, and the ftc to track the paper trail. it may not be actually a paper trail. it may be a transaction trail.

is, iflmost certainly there are sufficient directions from the top and sufficient will to investigate, a basis for going forward. >> a final question. what would you recommend to people who have lost money in a scam like this? what should they be doing? >> they are to be notifying government regulators and they ought to be seeking redress from any further financial from the bank. the should look for negligence. financial institutions ought to be held accountable where they could have exercised greater care in protecting investors. >> thank you so much for joining

us this morning. awesome reporting. senator richard blumenthal, great having you on with us today. joe, thank you. that is going to be at. what did you think? >> i had a blast. >> what is better, our show or tom keene's show? >> today, the show is better. >> all right. coming up tomorrow, experts here from madison avenue. we will be speaking advertising. we will be speaking with andrew robertson. out.ld not get that i might need a marketing specialist to help me. good thing he is here to help me. that is it for today. john went, thanks for joining. for now, bloomberg is going to take you on the markets. here is scarlet fu with more. >> i heard what you said about "surveillance." i think he said something different when he was on last time. we are on the markets. let's get you started on how equities are trading right now. we are looking at solid gains

across the board for the s&p 500, tao, and nasdaq, recovering tao, and nasdaq, recovering from the three days of losses. of them are energy companies. gas and related energy companies. let's show you what the underlying commodity is doing right now. take a look at nymex crude. and brent. they are erasing losses in the past 90 minutes. nymex crude has clawed its way back above 57, almost approaching $58 per barrel. for more on what is driving oil prices -- isaac, you cover the energy markets. any particular catalyst for this rebound we are seeing? >> it is hard to point to something that has happened exactly 90 minutes ago. have had a free fall in oil

for a number of months. to expect aable certain number of traders thinking that this has been an overreaction. where there any technical levels that people are keeping a close eye on? >> when we broke 55 dollars, that was a psychological level the people were watching. we have been breaking them one after another since thanksgiving. >> we certainly have. ,n equities and fixed income they'll point to oil as their leading indicator, as the asset class that is moving first. what are people in the energy market saying? >> as it applies to debt and equity, it is important to remember the traders are pricing in risk on top of the decline we have seen. there is an instability factor. we don't know if oil is going to lose another $15 or $10. it is hard for analysts to get a

handle on the future cash flows of these company and what it is going to be. some kind of see stability, you're likely to see a rebound. have you heard any new updates on where people see oil prices heading in the first quarter? are we too far gone in terms of the declines? >> i think a lot of people are on the sidelines. it is an unprecedented situation right now. it is really anyone's guess where it is going to end. >> give us an update on the u.s. oil exports. there is some talk that perhaps we might back on that. the timing is pretty curious given the demand-supply picture. just a much of an oversupply of oil is there? why with the u.s. consider changing this now? >> you might call it too little, too late. it has become a priority as congress changes hands. there is more serious discussion

about it now. there are some people pointing out that if you open the floodgates now, would any oil be exported that these price levels? the rationale was that producers wanted to sell on the world market because the price was higher. but the price is still very low, no matter where in the world right now. on the one hand, the producers are going to argue, all the more reason, we need all the help we can get, basically. on the other hand, who needs the oil in a buyers market? >> thank you so much. ♪

>> welcome to "money clip." i am olivia sterns. here is your rundown. bill ackman says herbalife is going to disclose next year. bush says he is exploring a bit. today's wild card, a website called secure investment.com. it turns out to be a scam. the ceo shown