the price, canceling the release of "the interview." the cost might be in the hundreds of millions of dollarss. gourmet goodies for the holidays. good morning, this is bloomberg "surveillance." live from new york this thursday, december 18. scarlet fu with brendan greeley and leslie picker of bloomberg news. tom keene is off. ews, vladimir putin is trying to reassure the russian people about the economic crisis. conference,l press the russian president predicted the situation will last at most two years. he said russia should not waste currency reserves to prop up the ruble. putin blamed outside factors for the economic slump. >> this situation has been provoked by external factors. we believe that a lot has not been done by us of which we

planned in diversifying our economy. >> putin says sanctions are responsible for 30% of the crisis. u.s. businesses looking south to cuba. president obama's decision to normalize relations opens the door to limited trade. u.s. companies will be allowed to export telecoms equipment, agricultural products, and materials for small businesses. the president spoke with abc news. andf you are a cuban exile you saw your family driven from a country you love, you are going to feel strongly and emotionally. there are friends of mine who feel that way. , we wante said to them to see greater freedom. >> marco rubio of florida is

the action.ock saying he could hold up the confirmation of an ambassador to cuba and block the mc. stocks in asia and europe are rallying after janet yellen andy fed pledged to be patient. keeping borrowing costs near zero for a "considerable time." the most inrose 2%, more than a year. >> sony's decision to cancel "the interview will not come cheap. sony spent about $80 million to make and market the comedy about a tv crew sent to kill north korea's leader. the actual damage from the hacking will cost sony more than $100 million. 0 millionsony spent $12 to clean up its systems after a hack on playstation.

unveiling. a new phone equipped with a keyboard. similar to the funds that made blackberry a household name. customers complained when blackberry abandoned the keyboard. share now is less than 1%. let's get you a day to check. you mentioned a rally in global equities. futures at their best levels of the session, s&p futures up to 25 points. a stronger dollar fading a little bit when you look at euro-dollar, 1.2332. some selling of treasuries leading to a higher yield on the 10 year. crude oil stabilizing the last few days after dipping to 53.60 on tuesday. $58.10 a barrel. >> overnight, a little bit of recovery in the ruble.what is going on inside putin's head?

he's been sharing it with us at a press conference that began in hour ago. the russian state media ran a trailer. as in a trailer for a movie. plays]ic music that's not a joke. a trailer for a presidential press conference. hans nichols joins us from berlin. how is the movie going so far? >> when you take a look at what the ruble has done since putin started to speak about 1.5 hours ago. it looks like a heartbeat monitor, up and down. suggests theputin central bank is independent, at the next he does not approve of what they are doing. on onet mixed messages

crucial point, he's been consistent that the west is to blame. 25% toa precise figure, 35% of the economic crisis is because of western sanctions. >> 35%, exactly? >> that's russian precision. even metaphorically, his language is remarkable. talking about russia being a bear that likes to have honey and berries, the west wants to moreg the bear to nothing than a stuffed animal. tohe's telling the bear hibernate. he is sending a signal that this can last for two years. russians are going to expect this for a while. >> he did give himself some room on that. he did say if things are not working out after two years,

maybe we will have to cut some programs. forrepared the public additional economic pain. at one moment he sparred with a ukrainian journalist. not given anything. the only hope for optimism is that he and merkel had a late call on monday evening along with hollande and others. >> not a lot of optimism. glad you brought up merkel. putin with near record approval ratings in the 85% range. merkel is very popular in germany. is much of her popularity hinged on her relationship with putin? >> very little of her popularity has to do with what they used to call the view towards the east. it is more on the economy and what angela merkel has done. somewhat internally given credit for saving the euro. we have some concern in greece.

most of merkel's approval rating is based on economics. less focused on russia. there seems to be a consensus on russia, sanctions need to have teeth. sanctions need to stay in place until crimea or until the sovereignty of ukraine is respected. >> there is an eu summit today. are the leaders more worried about what is going on in moscow or athens? >> technically, the summit is going to be more russia-focused. athens got a 2-monfils on life. we will have to see how the presidential votes look in athens. yesterday's did not go well. that was expected. the heartbreak moment for athens and greece is december 29. whether or not we will have snap elections. right now it is a wait and see approach ungreased. -- on greece. >> hans nichols, thank you.

>> we continue to monitor that movie, four hours. >> it never ends. >> i love the specificity. twice 5% to 35% of rush' has problems are caused by sections. the audience are holding up signs with their questions. >> that is worthy of a hollywood jim is portfolio managing director at morgan stanley. we talk about the markets and the fomc announcement yesterday. what did you learn? >> yellen had a strong, to the extent that he had lowered the 2015-2016 and 2017. she kept her long-term forecast of 3.75% in check. the message is that she wants to

create growth. even though we are getting good data now, she wants to get the growth moving higher in she wants to close the output gap and increase inflation expectations. by keeping a three point 75 rate and chat, she is saying we're not going to let things go out of control. it is pushing the economy forward. if she needs to take any of that back, she can. >> did she clarify or confused? .> initially it was confusing the rhetoric on the street when we were thinking about it was it was all about the term does she leave a considerable period in or replace it with patient. patient is code word for hiking rates in six months' time. link theshe tried to previous statement with the current statement. she didn't inject the word inject theshe did

word patient or cheated change her forward guidance. did inject the word patient. she did change her forward guidance. she kept the integrity of the previous statement by keeping considerable period. it's a marriage of those two. the fed is worried about another taper tantrum. >> it sets off a panic. jinping that is not what she wants. she's careful. >> leslie? >> is it worth it. it is almost like a linguist at class. is it worth it for the fed to give guidance? is worth it for the markets. the markets are always going to think about when the first rate hike is going to be. based offng to price

of that. from a clarity and risk profile perspective it is helpful to know that the next move by the fed is a hike. and when that might start to occur. and what are the criteria she is looking at to make that occur? right now what she is saying is it is based on economic data but we want flexibility. you went to link it to what do. do you agree with janet yellen that systemic leverage is not close to where it was precrisis? >> absolutely. even the regulatory environment has made that, dodd-frank and basel iii. we can see in moves that we have had, we have had oil down 40% since summer. we've had take shocking moves. we had not had any big financial shocks where there might have been and over levered position that needed to get forced out of the market.

for right now we are not -- typically, those types of moves follow it. >> we will talk more about oil when we speak to an oil analyst in london. coming up on bloomberg ony cancels a," s movie release. what kind of precedent does it set for the entertainment industry? our twitter question of the day. did sony do the right thing? tweet us, @bsurveillance. brendan? >> n we will be backo. >>. ♪

>> this is bloomberg "surveillance." scarlet fu with brendan greeley

and leslie picker. >> sony pictures got hacked and threatened over "the interview." it canceled the new york premiere. canceled appearances. sony gave theater's to violate contracts and not run the movie. now sony has said they have no further release plans for the film. paul sweeney is director of research for media entertainment. could sony has handled this any worse? >> i don't know. this is an extraordinary, unprecedented situation. the issue in the short term, i the righte they made decision. this is not a franchise movie. the risk reward of trying to show this movie in the holiday season, the risk is too much for a movie that is not a make or break situation for the studio. longer-term, it raises a question of is this a precedent

that feature films could be held hostage by any party? short term it is the right decision. sets a bad, it precedent. >> in that industry, do studios run a reputational risk or do consider years -- or do consumers really know or care who made what movie? >> they really do not care. sony, it is an issue of isn't a reputational risk for the talent in hollywood. producers, directors, and hollywood. relationship with their theater partners. here, sony worked with theater partners and said the theaters were not comfortable showing this movie. work withey tried to their partners. they are run the risk of getting a reputation in hollywood that they would not stand behind their film. this is such a unique situation.

i think everybody is going to give sony a pass. to an industry consultant with 40 years experience in hollywood. they are very cautious. it is easy for them to drop a movie. you do not have to play this. what therstand theaters wanted to do. i'm having a harder time giving sony a pass. more for first amendment reasons. >> is there another way they can distribute the film so the public can see it? online streaming, is that a viable option? >> a lot of folks are saying this might -- the silver lining might be sony might have an opportunity to release via online video service such as netflix. this might be a test case for filmto launch a big studio

directly the end netflix or some other, amazon prime or something like that. else, to gauge the market. what that be a viable business market. the silver lining might be that sony might have an option to go direct to consumers. i am not really clear that this film can live in the home video market, what walmart want to put the movie in stores. >> my morning must read is from michael moore, best known for "fahrenheit 9/11." --tweeted, dear sony hackers almosts retweeted 15,000 times and favored 11,000 times. the movie business is not

cutting edge executives. does this discourage risk-taking in hollywood? >> this could be the risk. hollywood over the last 10 years franchise towards the movies. the comic book movies. the greatest example would be marvel studios. they've had a tremendous track record of releasing marvel and box office hit after box office hit. a is more difficult to get one off movie green lit in hollywood. this might make it more difficult. a very risky film to begin with. it is a political film. north korea. this is a one off, high risk film to begin with. sony acknowledged that. that might be a little bit of a damper for new ideas. >> paul sweeney, thank you for joining us from bloomberg intelligence. sony treating it more like a

risk and a first amendment exercise. >> we will wait to see if they release it. >> it looks like they arc in the headlights. i do not think they anticipated it would be picked up as a possible cause. changing the trailer lives on on youtube. did sony do the right thing? tweet us @bsurveillance. some screenwriter is taking notes and this is going to be a movie. >> the most meta-movie ever. ♪

>> this is bloomberg "surveillance."

scarlet fu with brendan greeley. tom keene is off. time for our morning must-read. andn the "ft," uber self-employment. self-employment startups and maker businesses comprise a larger share of the workforce. workers are becoming more free and more at risk. many enjoy the challenge but few are secure. it's a more efficient use of capital. pusheds risks are being down to people who used to be employees but are now contractors. >> the risk is worn by the individual. it also brings down costs. there's a cost-benefit analysis. inflationok at the numbers today, i know we like to blame oil prices. we also have technology. we have other industries that are creating more individual workforces. >> structural changes.

>> it becomes a big disruptor. inflation comes down. how does the central bank push interest rates higher? gets businesses out of the job of providing a safety net. safety net is not there, someone has got to pick that up. the government has to step in and be a bigger role. are still going to need to have a doctor and go to a hospital if you are self employed. are we taxing that properly? are we getting b revenues from that? it creates a different dynamic for the treasury. i think the market are ahead of the government officials. >> i wonder whether congress sees that as something coming down. >> these are things that are being discussed but i do not think a lot is being done.

typically tax policies, these things move at a glacial pace. it is hard given that in itself undefined. all the businesses are so different and unique that it is different to have generic policy that covers all. in bite had to get paid coin. >> maybe. we discussed oil, coming. oil prices on the move. the chief oil analyst at energy aspects joins us. ♪ ♪

make the best entertainment part of your holidays. catch all the hottest handpicked titles on the winter watchlist, only with xfinity from comcast. >> this is bloomberg "surveillance." tom keene is off for the day. let's get you top headlines, a

historic development in the relations between the u.s. and cuba. president obama announcing his decision to normalize relations between the island nation and open the door to limited trade. chevron does an about-face on the long-term billing plan and has indefinitely debate -- delayed plans to drill off the coast. level ofny cites the economic uncertainty in the industry as one reason for the change. chevron does not plan to drill its first well until 2025. the hottest ibooks -- item at starbucks might not be the coffee. they had record gift card purchases on the fed -- december 24. last year starbucks sold 2 million in the u.s. and canada on christmas eve. that is roughly 1500 gift card per minute. how many are still stuck in the drawer? you make money --

you sell the gift cards and they don't get redeemed. it's a line item -- unredeemed gift cards. it is a profit center. from morgan stanley is with us -- you look at fixed income all over the world in brazil, venezuela and india and russia. thing they all have in common is their reacting strongly to the price of oil. do you have any idea of the floor. >> in terms of calling a floor it is difficult. i know our commodities analysts had said the $40 areas -- that could be a floor but the bear case. perspective an oil as we think about it through the market -- the one thing it is done is cause correlation to go up. everything now is trading on oil. stock prices are trading on oil, high yields are trading on oil, this is an environment where we

bought central-bank policies and they were starting to change and the fed was easing and going to remove accommodations and we would start to tighten in the bank of england would do the same, the ecb would be easy -- the boj would be easy as well and we figure the correlations would break down now all of a sudden you have the shock of oil coming down so quickly in the market and it focuses the entire risk on that and creates correlations and volatility to rise and that is really the key. >> it certainly creates opportunity for some but let's get an expert's take on where the prices may end up. energy analyst and she joins us from london. we were talking earlier about a new natural price of oil -- anyway to come up with one? >> that's difficult. we are already seeing a strong rebound in prices. and you areersold likely to see a volatile market going ahead. when you look at the u.s. --

you are drawing a distinction between the independents and the majors? >> having said that the oil verys have gone after expensive projects and you are just turning to see cancellations and cutbacks and you are going to see the aftermath of this sharp drop in oil prices across the board. you will see projects getting delayed or canceled. >> one of the most popular forms of ipos are tax-free spinoffs. lately these things have been underperforming as oil prices flubbed -- what you expect in 2015? >> we are likely to see a huge increase in m&a in the oil sector particularly in the u.s.. a lot of players are going to get taken over because -- their debt is so high and their finances are not strong enough

to withstand what is going on. you are likely to see a lot of activity in the sector -- particularly on the shale side of things. >> i would to bring you in here -- a lot of people compare oil and the slump we are seeing to the next subprime crisis -- did the bond market get too enthusiastic? >> certainly the high-yield market is hurt on this -- 15% of high-yield is energy but 85% is not energy. one of the things we are seeing as i was saying earlier -- there is a high correlation risk where one's -- one sector of the market has taken over for everything else. default rate in high-yield is around 2% so we are starting at a low base. with the fall rate rising it probably well. how much will they rise? we will have to see. the question is -- does oil stay

at these levels for a long. -- long period of time or does it bounce? if it's here for a longer time default rates could go higher. the fall hasof been the slow realization sinking in of low oil prices and what that means for huge capex expenditures. are we seeing the end of huge offshore projects like the salt pans off brazil or the north sea? by howill be determined long these prices stay. our expectations are oil prices will be low for the next six months at least and that will do significant damage and you are absolutely right -- in terms of the big projects -- the capital intensive projects, they will be questioned and the fact that saudi arabia has not stepped in and made the opposite noise saying it is not interested in stepping into shore up prices --

that puts a huge amount of? surround these projects. for this there was a sense of complacency -- don't worry saudi arabia it will stay at $100 in this will be a paradigm shift -- it's a matter of time until how long it takes to filter through. he will probably see that the back end of 2015 -- 2016. >> congress is lifting a four decade ban on u.s. oil exports. the timing is curious because supply far outstrips demand -- would there be much demand for u.s. exports? >> more importantly, the problem for prices for the u.s. today is not that it is disconnected -- u.s. oil prices are only trading three dollars below brent prices. i don't think exports will help boost u.s. prices and you are right -- it was a lot of oversupply in the market, we are looking at over one million barrels of oversupply. andrew member the u.s. oil supply is really light which is

not what the demand is. i'm not sure it lifting the ban will help the u.s. produce anything just yet. >> we keep learning the same lessons. it is not about demand, it is all about over supplying in the poker game being played between the saudi arabia and american west. bloombergup on "surveillance," should you trust the market predictions? it makes you think it is time to be humble. this is bloomberg "surveillance ." ♪ >> good morning, these are live

pictures from moscow. this is the audience for the vladimir putin annual press conference. he is taking questions trying to reassure the russian people about his economic crisis. russiar putin saint should not waste reserves protecting the ruble. two hoursen going on 39 minutes that he has been holding court -- my favorite quote is where the real problem with red tape in the economy but if you want to talk about red tape we should go to brussels.

>> deflection. and him quantifying how long this will last, two years. >> 35% america's fault. >> how he quantifies that amazes me. bet on a feding to rate increase it has been a fool's game. it is basically groundhog day. the chief international economist at deutsche bank. the dotted white lines show what the market was betting the fed would do via fed funds futures. these are the pricing and rate increases getting it wrong every time. a good lesson considering wall street economists are predicting some kind of rate increase in june. >> i'm interested in the psychology of this -- we came of cyclesching the regular

we could understand and one of the thing and a less two or three years -- we are desperate for the cycle to resume and it is not happening. a big change from the way we grew up where he had that business cycle and rate height and rate cutting cycles and that defined the business cycle overall. what we had in this post crisis environment has been the period of easy policy. the chart you just showed clearly indicates that it is not a good predictor of the future. especially the market trying to do is discount the risks and that's where the communication strategy starts to come into play. they're not moving interest rates -- they are telling us what they will do so as their communication strategy changes the market reacts to it. burned so manyt times they are at a point where they are thinking -- i will believe it when i see it. i will not make a move until the fed tells me it will happen. >> you think we would've learned our lesson. is we have to

understand the starting point. short-term rates were really low so if you get that rate call correct where rates may start to rise and the fed may start to hike interest rates -- there is a lot of money to be made. part of the psychology is to place investments on hedging that to some degree and markets tend to move all at once and altogether. that creates these overshoots and then the data comes out and it has been the reverse of that and rates have not risen. back over the last five years -- what have we learned about how to do forward guidance? >> the clear communication strategy has to be crystal clear. it taught us a lesson that you cannot come out and think you are saying what you mean. you have to be explicit. we saw that in janet yellen's statement yesterday, she wanted to change the language but kept the old when we jim just in case. there is a lot of hedging.

if you look at the word count of the statements, the word count -- her statement was the shortest statement ever. right to the point. now the words are growing exponentially as she is trying to explain more and more. >> her reading level is increasing as well. [laughter] we don't read the statement anymore, we watched the presser. we will jump to photos right now. our photo editor has been looking at photos of the year. in oso the collapse washington that cause a massive mudslide that killed 43 people. >> only march of this year. >> the single deadliest landslide in u.s. history. a really interesting photo looking at this which is the president looking out of the window -- that is marine one. i think there is an architecture -- a choreography to

presidential visits to disaster areas. you declare the disaster areas and get the shot looking out more in philly and wondering about the damage and then you show up with your jacket off and your shirtsleeves up. >> katrina was my first thought. photo, the u.s. is helping marines take part in an annual joint landing operation. north korea responded by firing 500 shells. >> to use actual artillery as opposed to computers. >> what was a drill turned into a live fire exercise and afterward kim jong-un announced it would be conducting drills of its own. south korea returned fire. we watched this cycle all year long. number one photo. ellen degeneres poses for a selfie taken by bradley cooper.

repeats -- retweets. it crashed twitter. that was peak selfie. awardsas at the academy and she broke out her camera and it became obvious thereafter that samsung ran at commercial and she was using a samsung phone as well. >> shameless plug. >> jennifer lawrence, channing tatum -- see cat. a selfie -- do you do it panorama or portrait view -- how do you do it? >> i try to do panoramic. >> because then you can get jennifer lawrence in the picture. >> that's why you need the six plus to get more people. you can do it with the old four. more bloomberg "surveillance." ♪ >> coming up in the next hour,

ethan harris will join us as the

guest host on television and radio. he will be telling us what he thinks of chair yellen's statement yesterday. and the collapse of oil prices. coming up in the next hour. this is bloomberg "surveillance ." joined by brendan greeley. tom keene is off for the day. purge ofnning a big foreign technology. they went chinese businesses to provide technology for banks, businesses and other institutions by 2024. it could have lasting consequences for u.s. companies. oracle reports providence sales at top analyst estimates to push deeper into web-based cloud computing pays off. the first with the chief executive officers, they took over from larry ellis and the founder three months ago.

some kmart shoppers seeing the as they apologize for the online layaway system. a number of customers who put gift items on layaway have been told they are out of stock. kmart says the notices were inadvertent. it leaves many without their orders with christmas days away. those are your top headlines. the best part of the morning -- we are channeling our inner marie internet because it is part of our -- marie antoinette. we bring you our world-famous macaroons. they entered the modern age in 1993 when the chairman stepped it up. over the past decade they expanded internationally to london then to buy, kuwait and saudi arabia before touching down in new york city in 2011. usacopresident of laduree

we've been looking for to this all morning long. and up and i can wait. >> you keep talking and i will walk around here and pick up this box of macaroons right here and start at the head of the table and that i will hand them around. >> as you expand to two stores in new york city, how do you handle your brand? >> we are very happy to open the store to true use ago and we have to say americans love the product and the brand and are very successful. we are still looking for other locations. >> you honor that by making all the history and the macaroons in france and ship them over and you include a little card with an expiration date. selective and the idea is to have only one location for production worldwide so we are sure we have the same quality and the clients

in hong kong -- new york at the same products. seeing the street crazes with cupcakes and frozen yogurt -- we've seen these businesses get oversaturated when the lines start to disappear at the front door -- how do you make sure that doesn't happen? >> the macaroni something classical and traditional -- we like a little jewel, a luxury product. we have some new flavors every every monththink -- a new surprise with something new coming. >> and they are delicious. [laughter] an eatingkeptical and my first one and i cannot be a journalist -- it is so good. >> what flavor? >> rose flavor. >> what special flavors you have? >> vanilla and pineapple.

>> love it. how do you differentiate yourself from macaroons in other places. there are funny of people who love these but no care to pay $75 for two dozen. they go to the cafe across the street and pay three dollars. >> it is less expensive than this but we have created the macaroon so we are the first one to do it and we have the best. our pastry chef has trained for years and years to do it so we're very selective about the products and we have packaging which is beautiful that you can keep. has a separate life with the packaging. you keep it and you can use it in your own house. >> packaging is a big part of it but you are now charging for the boxes? >> a little bit. those are gift boxes but not so

expensive and a very nice gift. >> there a people watching this were wondering how do you take a small brand -- a small limited shop to turn into a brand? we have the magnolia bakery in new york that became a brand and in that shop on royale that gave birth to all of this, how do you pick that small thing worthy of a brand? was thehing is laduree french lifestyle. everything is here. we have a story and dna and we have the know-how with the bed chef. -- best chef. everything is a good product and it creates the brand and everything. >> you're not just selling these but france. >> exactly and lifestyle. >> unlike cupcakes you cannot just make them at home. >> you can try -- we have the book actually.

>>oh. [laughter] here have everything because we like to create every month a new flavor scene of everything with a fashion designer -- you can cook of course and try to do it. >> i find this might be a challenge. >> i will make you a deal -- i will take that box. >> final question, what do the people of france think about is expanding quickly overseas -- doesn't diminish the appeal? newhey like to find it in york or wherever when they travel -- clients are happy to see it everywhere. >> it's like seeing a little bit of home. >> exactly. they like to have them for breakfast. >> is it still too late to order for christmas? >> never too late. [laughter] ladureeopresident of

usa. thank you so much for joining us this morning. let's get you the force report on the heels of the fed statement. a weaker you will -- weaker wrubel. ♪ >> reassuring russia -- putin

tells the country they have enough currency reserves and the wrubel will recover -- ruble will recover. we know about hillary and we know that jeb -- who is the dark horse with the potential to turn this presidential race upside down in 2016. surveillance,erg live from our world headquarters in new york city. and joining me as always is brendan greeley and tom keene taking a rare day off. vladimir putin as we speak trying to reassure the russian people about the economic crisis. the annual press conference in moscow, the russian president predictable last at most two years. and he criticized the central bank for not acting faster to support the wrubel.

>> this situation has been provoked by external factors first and foremost but we believe that a lot has not been done by us. of which we planned in diversifying our economies. pugin said that uris -- u.s. and european sanctions are responsible for 30% of the crisis. to dealdent obama plan with cuba opens a door to limited trade. the president acknowledged his decision would not be completely popular and spoke last night to abc news. exile andre a cuban you saw your family driven from a country that you love -- you will feel strongly about it. there are people who are friends of mine who feel that way. is -- we said to them

have the same objective. we want to see greater freedom and greater prosperity for ordinary people. rubio frommarco florida is allowing to block the action. he suggests he could hold up the confirmation of an ambassador and the funding for the embassy. investors around the world are signaling their approval for federal reserve policymakers. when it comes to interest rate increases, that pledge replaced the language that would keep borrowing cost near zero for a considerable time. the s&p 500 rose 2% -- the most in more than a year. decision to cancel "the interview" will not come cheap. the studio backed down. they spent about $80 million to make and market the movie which is it calmly about a tv crew sent to kill north korea's

leader. the actual damage from the hacking cost them more than $100 million. back in 2011 they spent 170 million to clean up a hack attack on the playstation network. and blackberry, the struggling smartphone maker unveiling a new phone equipped with a keyboard. customers complained when blackberry abandoned the keyboard. blackberry as we know used to dominate the smartphone market -- the market share now is less than 1%. >> think i've ever seen anyone using that blackberry password. people still really miss those keyboard so there is maybe a nostalgia market. >> those of the top headlines -- we want to bring a data check right now. brendan mentioned how equity markets are celebrating yesterday. out with considerable time and in with patients. in s&pr 22 point gain

500 futures and there is some dollar strength as well -- the euro-dollar 1.2307. and crude oil had fallen as slow as 53.6. and the 10 year yield is 2.18%. >> the wrubel's tracking minute by minute. known-unknowntant is what is going on between vladimir putin's gears. he is in sharing in this morning in a press conference at began three hours ago. you're looking at live pictures, thatent so important russian state media ran a trailer like a trailer for a movie. >> this trailer where watching would be funny if it weren't getting a lot of people killed.

what is the reaction to the press conference in europe? has nichols -- what is the reaction to the press conference from where you stand in europe? >> all morning we have been waiting and the press conference keeps going on and a little bit -- on the merkel will fly to spoke earlierrkel before putin and she made it very clear that whatever sort of short-term comes out of russia in the next few hours -- they are going to continue with the sanctions and that is very clear from her but there will be no additional sanctions talked about at this summit. toone of the last things come out of this last congress authority for the president to increase sections if he chooses but also a nudge for him to do that. is there some diplomatic distress that the u.s. is far

out on its skis farther than europe? you have always seen as a 1-2 approach and they try to coordinate the sanctions because sanctions by themselves lack a lot of effect. what they have done is escalated in concert and the last time i believe it was the u.s. that agree to it after the eu did but they let merkel -- this might've been the second round -- they let merkel go ahead and announced that round of sanctions. i don't detect any daylight between the u.s. and the eu on sanctions. but it be wrong on that seems like they are on the same page. >> it sounds like the u.s. is the bad cop. >> how unified is europe when it comes to confronting russia? >> there is a big debate within germany at least about whether or not merkel was being too hard and whether that would affect the german economy. it seemed like she had that debate and won the debate and she has the green light at least from german industry to go ahead

and continue to put pressure on vladimir putin parent -- 10. but audi has decided to pull out, opel to pull out, jag wire and they're pulling their cars and will no longer be selling cars in russia. what started as a currency crisis could metastasize into a common good prices. german companies don't feel comfortable selling that. hans nichols, thank you so much, our international correspondent from berlin. our guesthouse house is ethan harris, head of the global research at bank of america merrill lynch. -- to whatet to that extent does russia have any bearing on our economics? >> we heard yelling talk about this at the press conference and russia is not that important. this is not like the late 1990's when there is exposure to russia

through the financial markets. u.s. banks have very small exposure and russia and people have been asked -- preparing to back away from russia and as yellen suggested trade is only 1% of u.s. -- not material. if the conflict in europe got awful and started to pull down the eurozone again -- you worry about it but only through europe that russia would be important to the u.s.. the last toion of two hours -- for you this is not 1998. >> it's not -- the markets are very nervous we are going to the year-end with liquidity and the banks have less balance sheets to make markets in many products -- some markets are in a volatile mood and the move-in oil is huge. you will have a lot of shifting of investments around that but basically -- nothing big is happening from a u.s. perspective. bond yields are lower -- the

stock market is doing ok, not much has happened from a u.s. growth perspective. >> if there is collapse or default or a massive devaluation in the ruble's year -- to what extent does that wreak havoc on the timeline? a anything that creates global capital market crisis will slow down the fed it certainly the fed must be feeling a little bit cautious given how rapidly everything is moving. the high-yield market has been hurt badly. these are things that will slow the fed down a little bit. metastasized into something ugly i don't think it changes the outlook. >> what is a leading indicator? >> i think in the short-term it is oil, oil is dominating the markets -- i think it is good for markets. if oil just find a spot to stick -- i don't care if it is $60 or

$70, just to settle down. once that happens i think some of the volatility comes out of the market. >> what is the most important set of words that comes out -- the statement itself for the press conference? >> they are both important and when you follow the fed these days it is all about the press conference, the directive and janet yellen. the big thing that comes out is how cautious the fed is. they are tiptoeing to the exit. ethan harris joining us as guest house. oil prices and the collapse we have seen since september. >> sony to the right thing by pulling "the interview" out of movie theaters. ♪ >> this is bloomberg

"surveillance." time for the must-read. i have a must listen from the president. president obama spoke with abc news about the historic decision to restore diplomatic ties with cuba but he also weighed in on the sony hacking scandal. >> the cyber attack is very serious -- we are investigating and taking it seriously. we will be vigilant and if we see something that we think is serious and credible we will

alert the public but for now my recommendation is people go to the movies. >> he recommends people go to the movies but sony decided to pull it regardless because the theater operators are fairly cautious. sony has changed its tune so many times -- they had what they initially described as a piracy problem when it was a hacking problem -- then a pr problem and now they are treating it like a business problem like they can pull the movie and take the charge off and deal with it when in fact what is going on is they have a civil courage problem. a different problem than the one they started with which is -- they had not expected that this would become a national movement to not let the bad guys win. >> there is a culture class between this electronic manufacturer that is based there and japan with an entertainment company based in l.a.. or everyone crying at first amendment rights they're all the looking at that part of sony.

we know ishe things that seth rogen was very frustrated with cuts made to the movie by sony in japan before it came out. >> he is canadian so i wonder what he thinks. >> would you see this in a movie theater? >> i would go see it but i think this is disturbing on many levels -- from an economics one of you all the resources you go into cyber security and -- it's telling you the development of new technology has a negative side. in a better infrastructure behind that. >> we finally get some capex. >> but it's not productive -- it is capex to fix the problem rather than improve the economy. >> are companies prepare for this yet? >> it doesn't sound like it. i think it is a moving target and for the industry it will be a growth industry. >> steve carell had a north

korean thriller he was planning to film and he was issued in march and they dropped that. north korea as a fill-in may not -- as a villain may not be good. >> i'm not ok with this. of thetwitter question day -- did sony do the right thing by dropping "the interview"? >> answer, no. >> opinion. ♪ >> this is bloomberg

"surveillance." let's get you our top headlines. a step closer to early elections, this comes as the prime minister failed to gather enough to or for his nominees. voting yesterday in athens, 160 the candidateed and that were short of the 200 votes required. failure to garner enough support

will lead to the dissolution of parliament. chevron has delayed a long-term drilling plan. that is according to the financial times. the company sites the level of economic uncertainty in the industry as one reason for the change. the hottest item at starbucks this season might not be the coffee -- according to usa today, they expect record gift card purchases on december 24. last year the coffee chain sold more than 2 million cards in north america. for those who don't want to do the math that is 1500 gift cards per minute and they're probably all going to be used in the last five minutes. we have to talk about cuba because that announcement took everyone by surprise but it took a hot second the sword -- before u.s. businesses set their sights on cuba.

they opened the doors to limited trade. we are joined now by our white house correspondent phil mattingly. give us the backstory -- it did take us by surprise but this was months in the making. >> you can say for the administration it is probably years in the making. one of the first things the president did was start to ease the travel restrictions. we knew they had an interest in this but the question was whether it was politically palatable and the american contractor who had been held there for five years but it really started about one year ago. there were negotiations through back channels, housed mainly in canada and the most interesting third-party in this story is the vatican. there was one meeting at the vatican between u.s. and cuban officials and a personalized letter from the pope to president raul castro and president obama urging them to head in this direction and the

final thing that sealed it was two days ago a call between roto castro and president obama -- about an hour long in the first wreck contact between leaders since 1959. it's almost like a movie script. -- can anybody have a better year than the pope? is there something good happening in the world he seems to be a central player. >> perhaps a small victory lap for the president as we close out 2014. the also want to bring in our bloomberg news reporter who joins us from atlanta on the business element. you're been looking at credit card companies and what they're doing to prepare for the opening. they are already operating in cuba? mastercard are already in circulation through hotels and car rental agencies and certain restaurants -- the caveat is there only accepted by non-us institutions. this could be the first time the likes of bank of america and jpmorgan can step in. i spoke to kevin mcveigh the

managing director at mccrory p he said this is the right direction that they will get incremental revenue but it will not have any earnings impact. to put this in perspective, russia is a lot bigger and when you look at transaction volume it is 1% to 2%. these credit card companies will not ignore cuba -- they're still trying to figure it out but their transaction volume will be less than 1% three -- 1%. >> let's talk about their most famous export -- what happens to cigars? >> yesterday after this came down they were inundated by people wondering about cuban cigars. it is good news for people who love cuban cigars because things are loosening up -- perhaps you can get your hands on some legally. but really it will be a slow go for a while. you can bring in -- certain people who are loved to travel can bring in no more than $100 worth.

for most people -- you will still have to get it whatever we've got it before. >> ebay. >> as this eases up might see more in the market. >> i know phil mattingly smuggles his through friends in switzerland. but it is a strange grab bag of industries allowed into cuba -- telecoms, agriculture and it reads like a list of powerful lobbies in washington. >> a little bit of that, business was a huge component of this. the business chamber of commerce has had individuals and they took a fact-finding mission a couple months ago and they have been pushing behind the scenes -- there was making sure that certain constituencies get a piece of theirs. you can see that on the agricultural side -- but on the telecom side, there was a broad foreign policy angle. you can see it in burma and malaysia as well -- they try to

get in and use social media to have an impact on younger generations of people in countries where they want to extend ties -- that is why telecom is so important. >> i just got the phone with the former secretary gutierrez and he said it will be a nightmare for businesses. certain times cuba will impose one of the biggest challenges which could be a fee -- if you're a credit card company you can see fees and rules are set -- with the policy framework but this is not law. this could be more tactical as it has been and we don't know if this is going to be a fundamental change in the way that these businesses operate in cuba. >> to get the last word in here -- when you talk about cuban cigars and exports -- tourists are not yet allowed. be generaln't tourism -- people won't be running to the island and coming back. they will loosen up the travel to some degree so more people can go but it is not wide open.

thanks foranford -- waking up early and joining us from atlanta. course, phil mattingly our white house correspondent. our twitter question of the day -- did sony do the right thing by pulling "the interview." ♪

bloomberg surveillance. i am scarlet fu. thew day dawns and relationship between the u.s. and cuba. yesterday, president obama announced a normalization of the

nations with the island nation. in u.s. will open an embassy havana for the first time in more than half a century. reports profit and sales topping analyst estimates as it efforts to push deeper into web-based cloud computing. fiscal second-quarter profit was 69 cents a share. the quarter was a first with mark hurd as the ceo. some kmart shoppers seeing the holiday blues as the retailer apologizes for problems with the online layaway system. people put gift items on layaway and are now being told the items are out of stock. the problem leaves many customers without orders. kmart is working to resolve customer complaints. those are your top headlines this morning. as 2014 winds down, we are 2016ng ahead to the presidential election. candidates will start officially throwing their name into the hat

early next year. this week, jeb bush announced an exploratory committee. david brooks cannot with an opinion piece in the "new york times." it was called "elizabeth warren can win." he said the popular candidates never get the nomination. the establishment wins. phil mattingly joins us from new york. is there something in the air and washington? absolutelyple are talking about ap resolve the $1.1 trillion spending bill. elizabeth warren, on a wall street regulation provision that is so in the weeds and of the outside of the finance community and probably the regulators and the banks them selves, actually understand it. she was able to turn that into a major issue, turn it into a singular attack on citigroup europe populism is in the air. whether or not it catches is the big question.

particularly on the democratic side of things, elizabeth warren can either get into the race, which i think is unlikely, or can push hillary clinton to a more populist angle. that is the big question. let's talk about the shadow primary. as far as democratic donors are concerned, hillary is the candidate. they have made that clear. the grassroots is not on board. this is the interesting thing with elizabeth warren. she has signed a letter saying hillary clinton should run. she has said she is not running or grassroots is on board. her senate floors each last week where she attacked citigroup lee is on its way to one million youtube hits. it is being secreted by liberal groups. -- outside liberal groups are raising millions of dollars to try and push her to run. yes, big money. hillary clinton will out raise anybody the democratic party times 10. but money is getting behind elizabeth warren right now. whether it is on a howard in

level from a couple years ago, whether that can have an impact, wiest will need to the. -- we still need to see. jeb bush andtioned the exploratory committee. the next step will be a formal announcement. who might be a dark horse and the republican party or the democratic party, someone we do not expect? >> there are so many different candidates in the republican party. double digit potential candidates i could have an impact. individuals like ted cruz and rand paul, bobby jindal, scott walker, who have been laying the groundwork for years to actually do this, both on the social media site and a fundraising side. the big question i am interested in, and this is why what jeb did this week is so interesting, it is a battle for donors. a sliver ofng for donors shared by chris christie or potentially mitt romney. so when he gets in, donors need to figure out where they want to

go. ted cruz and rand paul play for similar donors. hypersh put things into drive, particularly on the big money site, the wall street side of money. how donors operate now will be the most interesting thing to walk. >> who do you think wall street people will be donating money to? it is a wide-open field right now? >> i actually do not want to comment on that. >> fair, fair. >> the money part of this whole thing is big. do you have -- you have to have theseive war chest to win days. nearly guys in the race get an advantage. it forces the presidential race to be very early. we just finished the election, didn't we? an early nominee could give you advantage in making money? >> if you are jeb bush -- look, he has his bush network. they thought chris christie could tap into that if bush decided not to run to her they

will lock in quickly if you get in early. >> phil mattingly, thank you for that. futures are higher, indicating a bullish open for u.s. equities. yielding 2.18%. crude oil is higher. this is bloomberg "surveillance." tom keene is off for the day. what are we going to talk about? >> what is awesome about electromagnetic spectrum? >> what? >> everything. .ere is what is going on the senate communications commission every couple years finds new spectrum to auction off. spectrum is when your cell phone talks to a cell tower and sends data back and forth, it is using a small piece of electromagnetic spectrum. this belongs to the government. the government auctions it off to wireless carriers. it is their single biggest asset. if you are t-mobile him att, or

bag of, you get a huge spectrum. that is what you own. there is an auction going on right now. it has brought a lot of money out of nowhere that we did not expect to con into the treasury. -- to come into the treasury. right now, i will walk you through this -- can you show pulling money out of an air? >> the goal is making money. >> the government is making a lot more money than anybody expected. it was buzzed to bring in $12 billion year at a brought in $44 billion. these companies are realizing there is not a lot of spectrum left that will be freed up, so this is their last best chance. we are already seeing credit rating companies taking a hard look at at&t and considering downgrading it because -- >> because of their cash outlets? >> because of what they may be committing themselves to with these spectrum auctions. the problem is, all of this money is supposed to go to the

treasury, but it is a drop in the bucket. $44 billion against a debt right now that is $13 trillion. >> the interesting thing is you always see options in fiscal negotiations as some minor provision that will raise x- amount of dollars to her thinks about the broader implications. >> it is maybe one line in a story about a massive spending bill or any sort of proposal. look, there are a lot of people like you who love this and think this is super awesome and it is the only thing they want to talk about those people are not generally the ones making the big decisions. what are the broader implications of this? what is the scale we are looking at? how often can this be tossed into deals as a way to raise a small amount of money? >> that is right. i do not think we should look at spectrum auctions as a way to raise money. it is a terrible way to raise money. it is a one-off win. you cannot even plan it into the budget.

it is a drop in the bucket. ift i worry about is what the fcc were to go to congress and say, hey, look, we made money, so loosen the reins a next year because look what we gave you. it makes for bad policy. spectrum auctions have large players bidding up the small players, so it reduces competition. so it is a very small win for the treasury and you end up with more concentrated markets. >> can companies like at&t spend money on spectrum that is a one-time expense? businesspart of the competition. they need spectrum. obviously, it is very expensive. they need it. >> what does it mean for the phone companies themselves, at&t and rises, -- and verizon, and how they charge services to us? >> they're looking to be a bit get the fcc to free up more spectrum in the future. what you hear from their lobbyist is the phrase "spectrum

crunch." we are running out. we do not know how these auctions will play into the narrative. but the problem is getting very difficult because there's no good spectrum left. it will have to come from tv broadcasters, and they are not really interested in letting go of it appeared so this may be the last batch that gets released in a while. >> it is funny to listen to the interest -- lobbyist versus the agencies. fcc's perspective on that? >> they are moving towards unlicensed spectrum, which is wi-fi. half the data we're using, roughly, comes over wi-fi, not over what we're talking about a the fcc is realizing that maybe in the future, instead of selling this, they will release it as unlicensed, like wi-fi, that is more efficient. was very exciting. >> that was it for the month. >> this is in the latest issue

of bloomberg businessweek. for mattingly, thank you joining us. our twitter question of the day, we will get to the answer on his later on -- did sony did the right thing by pulling "the interview" out of movie theaters? ♪

>> this is bloomberg

"surveillance." hackathon is taking on a new meaning. that is what mark zuckerberg invented. had its e-mails hacked and pictures put online for last year, it was target and all the data breaches. 40 million accounts breached by hackers. betty liu will be doing a deep dive into cyber security in the next hour. >> you are right. there was the mark zuckerberg hacking which was cool and then the not cool hacking at all which we have seen over the last 12 months, the very scary cyberattacks. this is the one-year anniversary of the big cyber attack on target. it is still to be played out. interesting -- have we learned nothing here? right? you read the details of sony's cyber attack and what this company did or did not do to protect itself. i mean, sheets of paper with

people social security numbers, personal data that was not .ncrypted it is a credible. >> this is about behavior. aspanies see cyber security something they can't pay for. they have a firm and a contract and do not have to worry about it. do not say things on e-mail that you do not want to be printed in the newspaper. take better control of your own data appeared but that is a cultural change. cultural change is the hardest thing to do within an organization. >> it is a cultural change. e-mails and beyond. the most ridiculous details is they actually had a sheet of paper that said "passwords" and then had a whole list of passwords. 15 people inlike the organization kept a file labeled "passwords." >> why? >> i actually have an item in my iphone labeled passwords.

>> do not do it. we will talk afterwards. >> companies have to make this more of a priority, and they have not as you can clearly see we will be looking at a lot of this during our program. and whether we are in this new era -- it is not the cold war anymore, but it is a cyber war. >> banks have had to face a big change in culture with regulatory scrutiny. do you see a changing culture in the way people approach cyber security? we just talked about is absolutely right. it has to be in the culture. this idea of whatever you write on e-mail is in the front page of the newspaper, that psychology has to be there. basis, we have so many passwords to remember that you end of doing the wrong thing. you end of storing them places that are vulnerable because you cannot remember all these passwords. >> that is a good point purity have two difficult just.

i.t. wants things to be as secure as possible and makes things complicated in the process. security experts say you could do a simplification for the people follow the rules. we had tomberg, change the password every couple of months and i can never remember what i have used. >> my password is always scarlet fu is awesome. >> ok. we are hacking into brendan greeley's account. ♪

>> good morning. i am scarlet fu with brendan greeley. tom keene is off for the day, enjoying a nice day because it will be quiet and calm and, finally, we will not get some rain here. >> we are looking at a picture of new york right now. let's get to our top headlines. china planning a big purge of foreign technology. it wants chinese suppliers to provide infrastructure for banks , the military, and other state institutions by the year 2020. the plan for changes are driven by national security concerns and could have lasting consequences for u.s. companies.

wells fargo becomes the world's most valuable link -- bank. retail bank deposits -- according to data compiled by bloomberg, wells fargo get 78% of its funding from deposits. 90% or smaller amounts from individuals and other account holders. the tank is within tripled its deposits over the last seven years. lotsoliday season means and lots of lights, so many that nasa can bought all of it from space. according to satellite analysis, it reveals my time lights in and around you metropolitan areas brighter around christmas and new year's compared to the rest of the year. can seeually think i glen bernie, maryland, on that map, and they have amazingly gaudy christmas displays. >> it is pretty striking. >> ethan harris, when you're looking at the broader global economy, i was intrigued with one of your reports from october

-- i saw a chart label distribution of wealth by income tier, by percent of assets in 2013. this is fascinating, and idea economists have been talking about forever. why is it relevant for you? >> income distribution affects winners and losers in the retail sector. it affects the housing market, what comes of homes we're building. it has an effect on the micro level related to investing. the other issue that has come up that has people out of equilibrium is this idea that the fed is creating a worsening income distribution because it stimulated the markets but has not really stimulated wage growth. the problem with that argument is that the success of the fed will be when they finally get the wage growth going. in the next several years, we think the stimulus finally works its way down to main street, and that will be the mark of success for the fed, when they no longer

are creating a widening income distribution, but they're getting a broad recovery in the economy. fed,means do not stop, keep going to get a full recovery. people say the fed should not be doing what they are doing. it is a big mistake. you need a full recovery. >> there is the wealth effect, and we're talking about psychology, as well. >> one of the things that is very important going forward is people have to believe in the housing market and the stock market. they have to feel the benefits .f those wealth gains that is an important driver to consumer spending and growth in the economy. it is one of the reasons i think we will get a little bit better growth in the next couple of years. people feel better about their assets. >> with the drop in oil, is a better for low-income earners or high income earners? >> it is for low-income people. they spend about 20% of their income on energy. on the upper end, only 10%. it is a big windfall.

>> it is not necessarily going to show up this holiday season. in your note, you said retailers have destabilized consumer demand with their ever recurrent discounts. >> they have made it so there is no penalty for waiving. deflation at work. >> they are creating their own deflation in a sense i convincing consumers to not buy at full price. willes not mean the season be terrible. it just means another discounting season, a lot of last-minutetying -- dying, and lower gas prices will give it a boost. hear youfascinating to talk about this. when you look at the debate over income inequality in op-ed pages, the argument against paying attention to it is always that income inequality is not a problem. but there are real consequences to the economy because of it. system two-tier consumer

or discount stores do well because you have people in very tight budgets shopping there, and the luxury side does well, as well, and it hollows out the middle of the retail area. it definitely has economic implications. >> i like how you say that the isp in oil prices -- prices helpful for those lower income earners who have stretched budgets. >> there will be some slowing in in theduction investment oil industry, but the stimulus to the consumer is stronger than the stimulus to the energy sector. globally.t is a plus it is not a big driver of growth, but it is another small tailwind to the global economy. the fed open market committee, it almost sounds like you are not sing -- this is how i understand janet yellen's

words -- patience. sounds like you are almost more patient than the fed. >> the fed has not really acknowledged how weak inflation is becoming. we have seen a lot of very soft data and a lot of global forces pushing down inflation. ultimately, i think that means the fed waits beyond june. they do not go in june the way everyone is talking about. a member of the minneapolis fed is saying what you have been saying for years. >> yes, he has it he will probably be dissenting. fed is leaninghe in the direction i am talking about her they say they are closely monitoring inflation. that is a code word for, you know, we're getting close to it now and inflation is now moving up the way we were hoping it will. >> as we look for the fed to do some the, people are watching the european central bank and

mario draghi who promised to reassess the situation in the new year. how disruptive would it be to financial markets of the ecb does not come through with a big enough stimulus? >> it is very important to global markets right now that the ecb followthrough we think they will do sovereign quantitative easing starting in the first quarter, probably in january. it is very important because the european economy is fragile and needs all the help it can get. they have a weaker currency. they will than if it from lower oil prices. they need mario draghi to deliver on what is widely expected to thought is very important that they followthrough. >> the announcement might actually be a disappointment when it happens because everyone is expecting it. let's get to our agenda where we focus on a stories shaping the day. you are looking at one russian leader. >> exactly. it is still happening in real-time. vladimir putin -- we expect the conference to last four hours --

it has wrapped up, in fact. watch her hours, in total. it is a little bit like reading the notes from the fed. everybody gets the transcript now to figure out what is happening. this is literal kremlinology. i want to see how various european and american leaders l these statements. >> vladimir putin appeared to me done on hisbotox head. i don't know, just putting it out there are in will be reporting results after the close. it has currently fallen for watch row -- four straight days. have beenorth america fairly strong. in western europe, as well. the question is if they improve and eastern europe and china. >> adidas was the competitor, but it turns out that under armour is the real competitor.

>> i am looking at the sony hack. target was hacked to a year ago. today, they have a first amendment and public relations nightmare on their hands. release this straight to streaming, but it does not look like they have plans for that. let's go to twitter. >> we asked if sony did the right thing by pulling the movie from the others. here are the answers -- i still do not believe there was an attack coming. i think there is something else. second answer -- -movie, there is a meta coming out about this. and weill not get better

have all seen the trailer. it harris, think you for joining us. way.d the fomc on the end, there isyear always nervousness with a lack of liquidity in the market. ♪

>> good morning. thursday, december 18. you are "in the loop," and i and betty liu. rally in stocks

taking shape, thanks again to janet yellen, the fed chair he tries to give the world the best of both worlds. a rally was sparked yesterday and it continues into today. on a much enthusiastic front, sony has -- on a less enthusiastic friend, sony has canceled the release of "the interview," caving into the threat of hackers. it has hollywood of in arms. hacking, one year since target's massive cyber attack. is it cyber war? is cyber war the new cold war? have we learned anything in the past 12 months? worst, a look at our top stories. a global rally taking place. give credit to janet yellen and the federal reserve your janet yellen said the fed will be patient when it comes to future interest rate hikes here that sent u.s. stocks up 2% yesterday. futures indicate that there will be a