>> holy cow. we have got a serious old run. the dow hit 18,000 for the first time. jeremy siegel is here to tell us why he is expecting 20,000 in a matter of months. wall street-ish trekking back. the new republican congress takes aim at dodd-frank. what changes could we see in the law next year? a big sprint to the finish. i take on usain bolt and i did not do all that bad. to "market makers."

i'm stephanie ruhle. erik schatzker is off today. bill cullen is joining me today. -- bill cullen is joining me today. >> i wanted to be similar to santa claus. >> we are breaking news on the housing market. olivia sterns is in the newsroom with headlines. >> the numbers look like u.s. november home sales fell by -- economist we surveyed were looking for new home sales to rise by about 4 -- .4%. this is a big disappointment. third-quarter gdp showing 5% growth in the american economy. add to that the disappointing herbal goods orders and -- durable goods orders.

u.s. consumer spending rose by 6/10 of 1%. incomes rose by 4/10 of 1%. those numbers were in line with estimates. the takeaway is that new home sales in a month over month basis for the month of november fell point -- fell to 1.4%. >> i do not think we will see too much of a market hiccup. thank you for giving us the latest. we have hit a new milestone on the dow, 18,000. it is up a little less than half of 1% after the gdp report earlier this morning that showed the u.s. economy growing at the fastest pace we have seen in over 11 years. the s&p 500 has more than tripled since hitting their market lows in march of 2009. i want to bring in jeremy siegel . he says there is room to run. he thinks the s&p 500 should be at 2300.

professor siegel joins us from philadelphia. what do you make of this morning? i did predict 18,000 a year ago. while luck should have it, here we are and at that level i still think this bull has room to run. we are much closer to fair market value than we have been any time in the range of outcomes is also more uncertain. i like the tailwind we have from the oil price decline that we have seen in the last three or four months. i think that will make for a good 2015 in economy. keep interest rates low. i am not sure the fed is going to tighten until autumn. that is a good climate for the stock market. their --y have hedged

there. you had predicted we would be at 20,000 by the end of next week. what do you think -- >> not next week. >> you said at the end of 2014 at one point. >> i think we can definitely get there. from 18,000 to 20,000 is about run.which is a good it is about what we have had this year. number,eems like a huge but it is not that great. i think we could get there. i also say we have had a long time without a correction in the market. we almost got there with that ebola scare. 2015, a lot of uncertainty. we could have a good first half, a little bit of a sinking spell,

maybe a correction at 10%, and then go out the year strong. one has to realize, short run predictions are very hazardous. i can only speak to fair market value. given the interest rates i believe will prevail over the next year, i think the fair market value of u.s. stock market is about 10% higher than what we have today. >> what could cause a correction? tech valuations seem pretty crazy. overall, tech valuations are not crazy. i believe the tech sector of the s&p 500 is only selling for .bout 15 times earnings less than the index. what we see is some of those -- alibaba, amazon, twitter, some of those newer stocks not in the s&p 500.

those are the ones that are selling on expectations. overall, it is so different in what we saw in the bubble of 1999 and 2000. at that time, it is incredible to think about it, but the s&p five sector was selling at .early 90 times earnings six times more than it is selling today. i do not see speculation. i see solid values in the stock market and attractive values in the stock market. given the low interest rate world that we live in. >> what do you think is driving this? corporate earnings that are exceeding said -- exceeding expectations? is it low interest rates? is it a combination? combination. i think the realization -- i thought at the end of last year

-- they asked me about the 10 year treasury, i said it is going to 4.5, we're going to start the hikes. i rethought my whole interest rate scenario and i'm convinced that the interest rates will go up in 2015, but not nearly as much as most people believe. as bill gross said, the new neutral fed funds rate is going to be around 2%. that is going to be one or two years out. in that environment, dividend 4%,ng stocks yielding 3% or they are going to start attracting money. people need income. the baby boomers are retiring and beginning to give up on bonds and interest rate instruments because they are not high enough. i think that movement from bonds to stocks is going to continue in 2015.

>> could you attribute another reason to this layout -- light up because europe is worse than we anticipated? >> it is true that there is money flowing to the dollar. we see -- i think against the euro, we're going to see it even higher. europe he the euro, and stocks are selling at 15% to 20% this counts on u.s. stocks. there is value there. it is a question of how far drug he wants to push the euro in order to spark a recovery. dollar-basedsk to investors. there are sound values in europe. an unbelievably son -- sound value in emerging markets. china has come back, but russia and any other currencies -- when people ask me, next three to

five years, what stock you thick is go to do the best? i think the emerging markets as a group will be the best performers. >> specifically, where? >> i'm not going to pick individual stocks. if you do not think russia is going out of business, you're getting them at three or four pe ratios. in china you're getting 10 and 11. china's growth is not going to go below 3% or 4%. it will be a 6% or 7% grower. i'm not going to try to pick particular winners in the emerging markets. a lot of wonderful emerging market etf's you can invest in that spread the risk around. as an asset class, it is attractive, even though u.s. is going to do well, i think emerging markets, three to five years will get the best returns. >> any concern that risk is

being mispriced in the bond market? bonds are too high? take a look at what is going on with oil. there is going to be headline inflation, perhaps negative come in the first six months of the year. this is going to pull prices down. are we going to see the fed tightening in a zero inflation environment? , they areg hawks leaving the fed in two or three months. when you talk about the voices that are going to be there, they are not hawkish. they will not be increasing the rates anytime soon. that is a wonderful environment for the stock market. >> professor siegel, always great to get your thoughts.

jeremy siegel of the university of pennsylvania. like anotherounds reason why you do not want to be a short-term investor. if you are a professional investor that has to offer liquidity's, how are you going to navigate this market? >> is the opposite of a perfect storm. -- it is it the opposite of a perfect storm. >> ron baker be a day trader. -- wrong day to be a day trader. republicans have reform laws in their sites. there are more than a few bankers who like the sounds of that. usain bolt may be the fastest man in the world, but that did not stop me from giving him the race of his life. my interview with the sprinter, coming up. you are watching "market makers yurik." ♪

>> welcome back.

i'm stephanie ruhle along with my coanchor for the day, ill: -- bill cohen. republicans are taking aim at dodd-frank. weakening the law is one of the toplican congress' priorities. dean baker, the founder of the center for economic and policy research. let's start with elizabeth warren. she has made wall street public enemy number one. what do you think? >> it has been striking. the big issue that senator warren was raising was this item in the omnibus bill that passed that took away a provision dodd-frank requiring big banks to pull out their derivative trading divisions are you a have to separate them from the insured bank. this was slipped in at the last minute and senator warren set this was a giveaway to the banks.

citibank's lobbyists had written the legislation. she could not stop the bill. the democrats were divided on it . the republicans mostly supported it. it was laying down a marker. she is going to fight tooth and nail. we will see big battles in the year ahead. >> i want to share comments she made on the senate floor last week. >> there is a lot of talk lately about how dodd-frank is imperfect. there is a lot of talk coming from citigroup about how dodd-frank is not perfect. let me say this to anyone who is you,ning, i agree with dodd-frank is not perfect. it should have broken you into pieces. >> is that a constructive way to look at the banking world? what fuels the u.s. economy? what is that? was a reasonable

proposal. forof the amendments getting the cosponsor from delaware, that would have broken up citibank. got into this, we mess because of reckless behavior by the large banks. they were bankrupt. if we left this to the market, citibank is out of business. the government stepped in, brought them back to life, and now they are dictating policy. citibankactly is "dictating policy." i do not understand. >> they literally wrote this item that was put into the ill. -- put into the bill. they essentially wrote this process -- provision that reverses one of the provisions in dodd-frank. >> is that not what lobbyists

do? so you and i can go there with lobbyists and say hey congressman, x, y, and see. -- theyeason why they know there is a ton of my behind it. they are getting their way based on the fact that they have a lot of money and power. the reason they have a lot of money and power is rather than let the market put citibank out of business, the government save them. agree thati can there was an opportunity where the market could have worked its magic and the banks that could have failed would have, but that did not happen. that is history now. comments from elizabeth warren are gratuitous, especially about citigroup. especially since she was the sponsor of this 21st amendment

act that is going nowhere in congress. instead of being gratuitous, which i think she is. she has been gratuitous about the antonia weiss nomination. why can she not be constructive instead of being on her high horse? we have to figure out how lines are being drawn in washington. when it comes to working in citigroup is going to win every time because they have the money -- >> how are they going to win every time? >> please, let me answer the question. they say, you want support for your campaign next time, they are there. most of the public is not. you need gratuitous comments from senator warren that sharply framed the issue is she -- because she has to get the spotlight on it. i have been talking about

this for years. >> you would not have me here talking about this as a new issue. she had to make a strong statement. she has to motivate the public. in that context, she has a chance of winning. >> how exactly do the banks win when they are paying billions of dollars in fines? how are the winning there? >> it is better to pay billions of dollars in fines and have your bank open up and personally end up in jail -- bank broken up and personally end up in jail. people passed on fraudulent .ortgages no investigations, note prosecution. when you are a chilean dollar and, -- when you are a trillion dollar bank, it is a small price to pay. is wholdn't we say, here we have, let's run things in a constructive way?

are you going to punish people for things their predecessors did six years ago? >> i was not a big fan of those fines. i would have said go after the individuals who committed the fraud, but we gave them a blank check and get out of jail free card. going forward, we should have broken the banks up. given that we did not, we need vigilance on that. people opposed it, including the obama administration. they said, we will watch them. senator warren is saying, we will have to watch them closely because we know what they do when we do not. >> some of what you say, i agree with. we should have been more vigilant in the prosecution of wrongdoing. raking up the big bank does not make sense. the problem -- britain up the big banks does not make sense. they were the saviors for the

investment banks. let's talk about something else that you and i will perhaps disagree on. you have come out and said you are against the antonia weiss nomination. antonia used to work for me at lazard. i know him to be the kind of person we would need at the treasury department in this kind of position because he brings a certain knowledge about the way markets work. lazard is not a too big to fail bank. lazard got zero dollars from the fed at the bailout. i cannot understand why a guy with that kind of knowledge would not be the kind of guy that you and elizabeth warren could support. i am mystified -- >> let me back up. and bank of america both would have gone under as with many other banks. your plenty of commercial banks

that were involved. -- you have plenty of commercial banks that were involved. doreference to mr. weiss, i not know the guy personally. i cannot speak to is he a good person or not. i'm sure he is a very good person. the point is, we have a history of horrible regulation. .e have regulators many of these people were the brightest students at the best liberal arts colleges. the fact was, the best and brightest ailed us. -- failed us. all those people were there during the housing bubble years. we need people who have their first priority focus on the public. other mr. weiss fits that bill, i do not know. baker -- dean baker. we will be back. ♪

>> welcome back to "market makers." erik schatzker is off. we brought in a special cohost, bill cohen. before we get into more time together -- >> special holiday time. >> the top global business stories of the morning. a huge read on gdp as we head into the new year. third-quarter growth was revised up to 5%. that was higher than the top economist estimate and is the fastest growth we have seen

since 2003. one economist tells us the fed probably will not make too much out of this single data point. >> the fed is looking at a longer-term trend. they will not base monetary policy on one quarter past data alone. given the weakness we are expecting to translate into fourth-quarter gdp, around 2% gdp rate, that leaves 2014 at an annual pace of just above 2%. on par with what we have seen the past several years. not to take away from what we've seen in terms of growth, but looking at that on a longer-term trend, leading us in the range of growth we have seen for some time. >> the dow smashed through the 18,000 mark after that gdp report. dow, s&p, and nasdaq -- nasdaq is down sliced -- down slightly today. totook less than six months

move from 17,000 to 18,000. hamm will cut spending at 41%.ompany by that is after the huge plunge in crude prices. hamm is the founder of continental resources which was one of the first companies to get into shale drilling. ham tells bloomberg his company is nimble and can adjust to oil price for tuition. -- oil price fluctuation. failed insamaras's his effort to get lawmakers to back his nominee for president. he has one more chance. and a vote earlier today, the candidate fell short of 200 ballots. if he fails in the third and final vote, parliament will be officially dissolved. there has been a lot of handwringing about holiday sales.

there is one segment that may have held up. or -- markets correspond correspondent, julie hyman has been looking at the boom in jewelry sales. i do not believe anyone in my house is contributing to this boom in holiday sales, but other people are. >> a lot of the jewelry sales are self gifting as we now call it. people buying jewelry for themselves. i spoke to sever quindlen, -- sarah quindlen. she says 421 straight months, we four 21 straight months we have seen an increase in sales. is $2600ge price point . that has been a big increase over this time last year. people are spending more on jewelry. she says it does express the confidence people are feeling in

the economy. there is another data point which looks at this that the total size of this market in the 36 --at jewelry stores is $36 billion. >> who are we talking about? >> we are talking about a lot of independent jewelers. that same data told us that more exist for0 businesses jewelry sales in the united states. i talked to sarah quindlen about that idea of going to an independent jeweler. this is how she explained it. >> this is the personalized relationship people are seeking. we see this in smaller business spending pulse as well. which is been wanting this perspectiverom that , people want that personal relationship. it is a trust purchase they are making in the first place. they want to do it from someone

who knows them and someone they know. >> a lot of it is independent. >> is that why you would say there has not been more consolidation? >> there has been some consolidation. now,u look at signet right as well as sales -- zales. been thatas not consolidation. this might be a contributing factor. if you look at tiffany and signet together, they account u.s. jewelry of sales. it is not a huge amount. theit -- i'm thinking about jewelry i'm wearing and most of it is from independent jewelry stores. >> have commodity prices helped jewelers? >> they have had some pricing

power. it could help or hurt. it could help on margins but you could also have consumers pushing back and think gold prices have fallen, wiser price of my jewelry not fallen -- why has the price of my jewelry not fallen? they are not seeing a lot of pressure on what they are offering to people. what is interesting is if you look at the breakdown of what people buy, diamonds is by far the largest chunk -- >> they are a girl's best friend. sharetinum is taking a from gold as that becomes more popular. >> i think $2600 is a lot of money for an average price. >> it is. >> yes. it is. think any jewelry gets are coming to my house. thank you for giving us the latest. for we returned, the battle the skies rages on. how does cheap oil factor in?

that and more when we returned. -- when we return. ♪

2014.are wrapping up when you look back on this year, what are your most standout events? >> oh my goodness. i think the whole russian implosion. the implosion of our relationship with russia. their invasion of crimea i think is one of the biggest events of the year. >> does it surprise you that jeremy siegel would say it is ok to invest there? lot to be said for that. i know a lot of smart investors in russia who think there is a great opportunity to invest. it is not for the faint of heart. >> we are going to talk about the skies.

airbus delivered its new a350 model airplane yesterday. the first in a line of superefficient planes that will compete with boeing's dreamliner. are these new fuel-efficient aircrafts in high demand? let's talk about the outlook with george ferguson, a senior airline analyst with bloomberg intelligence. what do you think of these falling fuel prices and what is it going to meet for airlines? -- mean for airlines? >> they are starting to think more about using used airplanes. they are cheaper. you have to do the analysis on how much extra fuel you will born -- burn. fall, i think the equation is turning to using more used airplanes because you're never going to burn the money you will spend on

buying a new airplane with all of the fuel -- >> the fact that travelers are for a new airplane, does that factor into the decision making for these carriers? the inside of the airplane definitely matters to you when you get on it, but i think a lot of travelers do not know the difference between a brand-new airplane or a used airplane where you just refitted the interior. 767 and frankly they had just done the interior. it looked as good as a 787 interior. travelerthink the notices as much. they care about cheaper ticket price. as with the airlines are driving for. -- that is what airlines are driving four.

r. >> i remember pictures of the mojave desert with a were killed with used airplane -- filled with used airplanes. is that still out there? what is going on with that? are a lot of airplane sitting out in different deserts, parked. that ifore concerned you are alaska air, southwest, ryan air, you have a bunch of 15planes, maybe they are years old and you are thinking about the refresh cycle now. maybe you take the order that is on airbus' book and slow down deliveries. we're going to fried -- fly these air planes longer. that is the concern we would have, not bringing old stuff out of the desert. >> who has a stronger outlook? both blue sky-ish

outlooks. >> you are positive on both? >> you are talking about my personal outlook on the company's performance? i think what you are going to find is they turn in the same industry and they are going to be faced with the same challenges. see an interest in flying some of the older quitman longer, it will affect both of them. both of them -- older equipment longer, it will affect both of them. airbus makes an airplane called the a 330. we think they have a couple years of backlog. they are starting to talk about potentially bringing production rates down for that a 330.

boeing has the same issue with the triple seven. they're trying to bridge these airplanes to new airplanes coming in the next three or four years. the near-term deliveries may not allow them to keep the lines open at the rates they're producing now. both have their challenges. >> there is no stopping the long-term trend of more efficient -- fuel-efficient aircraft is there? always wante will more fuel-efficient aircraft. the question becomes, how quickly will you refresh your older fleet to get to that newer plane at lower fuel prices? save moneyput on or and give that back to the customer at a cheaper ticket price and get more people to fly your airline, you might decide to take market share instead of having the brightest shiniest new airplane. it may slow down that progress.

i do not think we will change the improvement of gent engines -- jet engines. >> is it not all about the cheapest ticket price? >> is a combination. i do not want to sit in a cave. i just checked ticket price. thank you for joining us george. return, i challenge the world champion of sprinters, usain bolt, to a foot race. we will have that and more. ♪

thesain bolt is known as fastest person ever. he holds six atlantic gold medals -- olympic gold medals. he is using his popularity to endorse his favorite brands including a watchmaker.

i spoke to him in miami florida. >> you're a sports star with a $26,000 watch three it what makes it so special? it has my signature on the back. also my signature pose. it has the jamaican colors. i was excited just to have a watch. virgin, yousamsung, are the face of palma. why these brands? >> different brands are bringing different perspective. puma appearsp -- -- appeal to a different set of people. >> we see kevin durant get paid over 3 million -- 300 million bucks for his shoes, i'm

guessing your shoes are more important. >> i try not to worry about that. therefrustrating to know are such a big get for different sports. i will just do what i have to do. i personally cannot do anything about it. >> should you get more from the sport? deal of the committee has made so much off of you. do they ou more -- do they ou more? i do not try to stress about it. i try to focus and do what i have to do. i cannot fight about it now. -- i have been in the sport for a while so i cannot complain about it now because i stepped up the game. i enjoy promoting the sport and making it better. you and your stardom and

dancing -- if you and your stardom did not make it into track and field, would we care about it? >> i know i'm responsible for a lot of people who want to see track and field. you never know what would've happened. i'm happy that god gave me a chance and i came out here and i did it. >> if you were not a runner, what you wish you would do with your life? >> i would definitely be in sports. >> you love music. would you like to be a dj? >> i would be the ultimate job. you get to listen to music every night and be among great people. >> in 20 years, what do you want to do? me, i just want to relax. a guy who works out six hours

a day does not want to work too much. >> surprisingly, i'm very lazy. i'm just a hard worker because that is what my dad taught me. >> surprisingly, he says, he is very lazy. he says he would do something else in sports. he loves soccer. fastest runner in the world, he calls himself best athlete of all time. he is the 50th highest-paid athlete there is. you have dozens of football players, basketball players, soccer players get paid more than he does. you know that is frustrating. >> you raced against him. did they pay you to race against him? >> they did not. here we go. i did ok. >> better than ok. >> he was not running very fast. his last olympics, after he won, he did push-ups. i'm not so great at push-ups.

all he did was stand there and yell at me and tell me to do more. -- brandranded master in bassett are for about six ambassador for six brands. he is not as lazy as he claims to be. >> i feel a nike contract coming your way. >> maybe i am more than under armour woman. nike, you have to be a hard-core athlete. >> after that victory, i think nike is coming your way. >> i am more lifestyle than hard-core. i want to talk about someone else. this man likes some of the hip-hop music. david rubenstein recorded a holiday video for his investors. it was not talking about their biggest deals of the year. he took a page from dr. dre. carlisle was one of the top investors of beads headphones

before -- beats headphones. pick up the phone and give us a call. carlyle group is the place to be. we are global, mobile, we aim to please. ♪ i have not done anything like this since my bar mitzvah. >> i had the pleasure of seeing this already. >> i'm glad to see he is putting his duke education to work. >> i think that was pretty impressive. there is not too many hip-hop songs with mezzanine in there. >> i think he should keep his day job. he does it well. that was humorous -- >> when you are this successful,

you can do whatever you want. i am pretty sure everyone who works for you is going to tell you you are the smartest, funniest guy at the party. >> i do not know how to answer to that. >> when we come back, we will go 18,000,the dow, hitting even higher at this point. we will find out how far the walls have to run. stay with us. ♪

>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> i am stephanie ruhle. erik schatzker is off today. >> so you brought in a very special cohost, phil:. i love that he said, who better really? the top level business stories of the morning. we have to start with the blockbuster gdp report out earlier today. the u.s. economy grew at a 5% rate in the third quarter.

that is the most and 10 years. it is another sign of spendingning as we go into the new year. the report helped send stocks to new record highs across the board. as if he and dow forged ahead. bmw is the latest automaker to issue a recall because of faulty takata and backs. it affects bmw cars made from 2004 two 2006. no problems have been officially reported. the federal government has pushed carmakers to recall older vehicles with airbags by takata which has been linked to five deaths. curie is recalling coffee

systems after reports of people being burned by hot liquid. includingincidences 90 burn injuries. we are talking about the systems thatplus were made in the last five years. pope francis made a comment in his usual cheerful christmas and lifted 15 elements of the curious including cap parker to you and agreed. help watchers have never heard a public dressing down like that. the cardinals were not happy and barely applauded at the end. leading to news talk bloomberg's best. .ike reagan is a stock editor and karl is a former colleague of mine.

>> what you think of this day? chart day. off the the initial print is of significance to the market. by the time you get to the second and third round of revisions, it is not very important. this shows us that all of the forecasters who dismissed the q2 this assist the payback from q1. it is not true. .e got a solid q3 report i think economists who are stuck in the pessimistic mindset will be surprised again when the q4 numbers are released. init is too cold to dance the street, some people are buying equities. >> whenever you talk about the dow and around number, people on

wall street will roll their eyes and tell you the limitations of the dow index. , whichrice rated was great in the 1890's, but not anymore. confidenceolster the of your average retailer, i will they look back at the past round numbers that did not have such happy endings like 2000 and 2007? >> most of america is not invested in the stock market. most americans missed to the move from 6500 to 18,000. have these great gdp numbers. a lot of americans do not feel like they are benefiting. how do you reconcile the good news with the bad news? >> this goes down to the core acting members of the fed. the fishers who are saying let's let the economy run a little hot

. they are conducting a grand monetary policy experiment to see if they can run the economy hot and bend the slumping labor force participation. >> a trickle down economics? like a lifting tide? to call it ant trickle down. but if it goes on long enough, people in the margins will be brought in. it is not trickle down, but it is akin to the 1890's where we saw demographics of people who were not normally participating in the labor market and brought into the economy. that helps issues like social security, tax payments, and whatnot. isn't the qb cracked? is that why the economy can run so hot? qe was able to jumpstart

the economy when we needed it. now it is getting legs of its own. we are at the point where the fed can start pulling back on the aggressive steroid have given to the economy. >> interest rates are part of both discussions. at stocks forlook returns on the long haul. so much of the market was bracing for higher interest rates. everyone thought once the fed started telegraphing the end of qe that would go up, and it hasn't. we are getting the benefits of the qe without the qe. will the evaluations continue creeping higher or have we hit the 18.5 evaluation on the s&p 500? some point the market forces will take over with interest rates? and they will inevitably rise? >> you make a good point.

it didn't happen in my 14 so we are getting the benefit now in stocks. it has to have been some time. you look at stocks compared to bonds, and the relative value of the two. the famous role of 20. marketadd the p of the to the inflation rate it is around 20, which is where we are now. if the inflation rates go up the valuations will have to come back a little? >> this up as the ante for janet yellen next year. it can all be destabilized if the market loses confidence that the fed is on top of achieving price stability as part of its dual mandate. if the public thinks the fed is behind the curve, we could see a backup in interest rates that could be damaging. the market loved last week's

announcement. if we get another payroll print in december like we had in november, 3000 plus, folks will start to worry. inflation is low but the fed is a long way from its neutral policy rate. you can get too much of a good day. gooduld get too much of a thing. >> the dow is strongly outperforming the s&p and nasdaq. a fewes me think that big downing's are pulling everything up. >> the s and p is outperforming the dow. that goes back to the waiting of the doubt. of the dow.ting rally. big cap

there sat -- there has been a shift to quality stocks. >> always great to get experts who come from bloomberg. michael reagan and carl riccadonna. korea's internet as backup, at least as much as there is an internet in north korea. it was cut off for half a day after president obama promised a response to the cyber attack on sony. was this it? jordan robertson is with us in washington. north korea policy internet went down yesterday, is that the u.s. u.s.'s response? >> probably not. the hackers aligned with the anonymous hacking group claimed responsibility. technically we heard it described is not all that

challenging. north korea has four outbound internet connections. that is not many. .he u.s. has over 150,000 the average north korea does not have the external internet. only the upper elite in the government do. it is not hard to accomplish. we heard from some of the hackers. it is likely, this is not the u.s. ld in the average north korean even know that the internet was down? >> that is a good question. the media is highly censored. they may not know difference at all. some might. a few folks may know this is happening, but the media is heavily censored. >> when the president said this

is cyber vandalism, and john mccain said it was an act of war, what is it? what action can the u.s. government take? >> they want it to be proportional. they don't want to provoke escalations. they're lacking of a lot of things, but they have one of the top five cyber warfare units on the planet because they get capabilities from russia, china, iran, and siberia. they are a formidable cyber warfare force. it is not a confrontation that is in anyone's best interest to escalate. security attributes are very difficult. the president believes they have strong evidence, and they probably do, but attribution is never bulletproof in cyberspace. there are lots of factors that could be behind this.

you don't want to risk an escalation because north korea could do a lot of damage. >> anonymous has taken credit. do you think the u.s. government had a hand in it at all? wink and may be a an odd kind of thing. benefit toe u.s.'s expose the weakness of the north korean infrastructure. but this is the kind of attack that independent hackers can launch easily on their own. that is just as plausible. >> it shows a frailty, but it shows there's not much we can do. they don't have an internet infrastructure or a multinational corporation to go after. there's nothing we can do. >> the leverage is with china. all love north korea's internet connections go through china unicom.

that is where the diplomatic pressure will be applied. in my estimation. that is probably the standard way this will be resolved -- will be resolved. .ot by hacking act attacks there is more that can be accomplished through diplomatic channels. >> thank you for giving us a different perspective. that is bloomberg zone jordan robinson. we will stay on cyber war with a man who specializes in diplomacy. the top aide to hillary clinton in the state department will be here, and he has thoughts on the code more we are about to get into.

>> north korea's attack on sony may be a new kind of warfare. not a cold war, but a code word.

hillary clinton's digital guru at the state department. helping her combined diplomacy with social media. what do you make of this? what should the u.s. government's response be? >> air, land, sea, space, are the traditional domains of war. we have a new one. it is cyber. .e are chapter one unlike traditional warfare that is between a country and a country it will be like what we saw with north korea and sony. where it is a company versus a country, a company pursues a a company versus another company. >> what does washington do? there is in a country to go after and there is not an

internet infrastructure? >> the most important thing is to think of this like nuclear weapons. there is a difference between cyber weapons and nuclear weapons, but one of the ways we weapons tot nuclear not reek have it during the 1950's, 1960's, 1970's, and 1980's was we entered into weapon agreements and treaties that governed the use of the weapons. we are at the point with the u.s., and other governments, create a treaty structure around cyber weapons lest they be used with no control. one of the issues is it is not just north korea to the u.s. or sony. it is our own country. edward snowden is a perfect example. will we see more and works -- will we see more edward

snowden's spreading our secrets around the world? >> i have very optimistic by nature. this is where i'm pessimistic. i think we are at the beginning. it is a tough road from the internet security stand point. we had a 20 year run from 1994 to 2014 where the commercial internet was mostly open and where the hazards were mostly inconveniences. we are at the beginning of the time with security and privacy concerns will dominate the internet experience. there will be more north korea hacks and edward snowden's. >> what is to be done? >> we need a new set of protocols between the private sector and government. one thing that is been eliminated by the problem with sony is it is not clear where is the line with government and the private sector. there needs to be unprecedented

industry-government collaboration with rooting out causes and collaborating on defense. it is time for grown-up behavior from washington, beijing, moscow, tel aviv, and elsewhere. so the big players come together to set norms. .> let's get realistic is there any chance that will happen? there are players who love the hacking. >> there aren't. right now it is north korea who is not a real big player and russia. i think china hates this. china, for all their work in cyber as being nausea are for allinvested in -- their work in cyber espionage, they are heavily invested in stability. >> when the internet and north

beinggoes dark, who is punished? when you put more sanctions on north korea, it doesn't matter to their government. they are happy to punish their own people. >> the people punished with the north korean elites. beijing was angry at the elites, the couple of thousand people who have access to the internet and north korea, and was reminding them that we are the ones who run the networks. if you want to attack big companies, run it by us. >> so china is upset that the companies security system was hacked into by north korea? >> they are heavily invested in stability. they are the second largest equity holders of big american companies in the world. second only to america. a few days ago there were messages from the obama

administration to the chinese government asking for assistance . it would be easy for the powers in beijing to flip the switch to turn the internet off in north korea. >> if they turn the internet off in north korea and definitely, would that send the message and make north koreans believe they lost? north korea feels like they want across the board. we are still talking about them, and they crippled sony. >> the united states is the loser in this. china, reminding north korea that it is a satellite state, and it is putting it in its place. having said that, i don't think kim jong-un and his cronies will think twice about doing it again . i think they are proud of it. >> i think so too. >> that is quite a revelation,

no question about that. >> when we come back we will move from north korea to cuba and take a closer look on how its citizens use the internet, and how they will in the future. stay here.

>> coming up, we didn't always go to the movies. blockbusterswer and smaller box offices, but that could change next year thanks to a movie called "star wars." i'm sitting with a man who has two sons. >> grew up on star wars. a huge role in my house. i think it is an incredible

movie. my house is expired -- i house is excited about it. hutt, princess leia, we will be back with more. ♪

>> live from bloomberg headquarters in new york, this with erik makers" schatzker and stephanie ruhle. i'm stephanie ruhle. erik schatzker is off today. i brought in the very best, bill cohen. the white house says cuba has one of the lowest internet penetrations in the world, less than 5% of 11 million citizens are connected. i want to bring back alec ross a developer andion

fellow at columbia university. what does the internet mean to cuba? >> i don't think cubans will tweet their way to a butersonian democracy, allowing communication on an island has to change the way that people in cuba see themselves and the outside world. this is a decision made by a couple of old men, fidel and who are seeing the end of their lives before them, and are taking this measure to hopefully open the island a little and leave their people was something before their own demise. >> do you think hillary clinton would have liked to have been the one to open cuba? was that something important to her? >> it was very important to her.

the credit needs to go to a lot of people, including barack obama. president obama, to his credit, you have to give him credit for this that see -- for this gutsy policy move. i know my old boss, madam president talked with obama about this more than one store the end of the 10 year and is delighted that he has pushed it through. >> how tight do you think the interest it -- the internet restrictions will be? >> i don't know. i have the feeling that cuba is a sufficiently poor country, and they cannot put iran or china style controls on it. the interest th -- the internet will come to cuba more slowly than people believe. it takes millions of dollars to bring a commercial internet to an island as big as cuba. what has to be in place are

ofentives for the verizons the world to come and say we are going to build $300 million networks because we can get a return on our investment. >> they don't need to. you have companies whose entire business is putting down those networks in the developing world . the government in cuba is saying they want to be open. do they really want to open the floodgates so that cubans can get any and all information from the outside world? >> i don't think the castros are ready for an information revolution. i don't think they understand the box they opened. the only way i can rationalize it is that they are both understanding their the end of their lives and the only way for cuba to succeed in a global marketplace is to have access to the open networks. until they actually flip the switch and there is a real

commercial internet in cuba, we all have to be a little circumspect. we can't get to euphoric to quick. >> is there nothing there now? is this a complete opening? going from zero to 60? >> it is very little. less than 5% has access to the internet. of the 196 countries on planet in termsis the 190's of its access. is that the bottom. those who have access 10 to be government employees accessing it at work. this will be people getting exposure to the real internet for the first time. therere is an amazing -- is an amazing social logical study that can be done at this moment. if what you're saying is true few people have access to

the internet, and they get it, you can see how dramatically the internet can change a society. if it happens or if it stays the same. >> it is happening right now in myanmar. one of the main accomplishments from hillary clinton was to open myanmar. they had a 0% internet penetration. it is now shooting up. we are seeing good and bad come from the connectedness. economic activity, communications, are going up. we're seeing how the internet and religious and ethnic hatred. cuba is relatively homogeneous, so we won't see that, but you get the good and the bad comes with connectedness. >> the inter-web. >> you don't think that they are prepared? >> i don't think so.

i think that the castros are at the end of their career. barely holding on. i think they're thinking about what is next. this is an interesting step they are taking at the end of their lives and careers. >> thank you for joining us and giving us great perspective on north korea and cuba. alec ross is a current senior fellow at columbia university. and we return we are talking about the movies. it was a year to forget. that could all turnaround thanks in part to some jedi masters. ♪

>> have you been to the movies lately? more americans are answering no. with competing interests and fewer blockbusters hollywood is hoping 2015 will not be at repeat of this year. we have been looking at the hits

and misses of 2014. how do you explain the decline? we were saying how much we liked "fox catcher." but it is not making that much money. i am not getting a t-shirt and lunchbox. >> maybe a hat? >> not even a hat. 2014 was poised to be one of the worst year since the financial crisis. so far see very clearly up until december 21 $9.7 billion. i spoke to an analyst to told me $10.5e appended at billion, but nothing compared to 2013. enviable to be in the position behind 2013 where there were so many great movies. the year just wasn't that great.

you had many movies that people did not want to attend. attendance was down 7%. >> could it have been because there was no family movies? the more family movies you have, my children will buy the products, the dvds, and will go to the movie multiple times. >> so there was no movie you want take your husband or girlfriends too? it was not a lot of anything. many individuals said i would rather go home and play on the internet, and do other things. anything besides going to the movies. it didn't help with the whole sony and north korea scandal that people are terrified that they could go to the movie theater and something bad will happen. >> what about the prices? $15 a pop? >> everyone knows that they will

have to shell out money. we had hits and misses. the biggest hit was "guardians of the galaxy" -- >> a family movie. and "hunger games: mockingjay part one". cohen is that phil excited about "50 shades of grey." for me -- what i'm looking forward to? "jurassic world." "fox catcher?"

>> did you see "gone girl?" good.hought it was i am not a ben affleck fan. mia giving us the blockbusters and losers. when we return russell wilson will give bloomberg tv and exclusive look on how the seattle seahawks are using cutting-edge technology to get back to the super bowl this year. ♪

>> with all the talk of winners and losers we had to bring in my loser wholoomberg sat down with russell wilson, who may have left the seahawks --.ictory, but often

our bloomberg west editor-at-large cory johnson sat down with russell wilson. merry christmas, it is good to have you here. >> we didn't actually sit. >> i know you had a walking meeting. >> he is an interesting guy. he is a quarterback who succeeded. 6'5" not one of the giants. he has had great success. this is different than -- this is different across the nfl. it began with research done with the seahawks by microsoft. the way to use technology on the sidelines. listen to russell wilson about how they're using the tablet and using it to diagram plays. >> to be able to quickly process. because of the surface pro three.

thecan really go through pictures fast. especially on the third down when the game is on the line in the fourth quarter playing the san francisco 49ers in the championship game, you have to know what to do. that really helps for me. i thought it was useful to be able to go back and forth to see what did they do last time, the second time, to be able to go back and forth. sort it to where you can see everything. that helps me. what they do the first time on third down? the second time? a lot of the times we are not as smart as we think we are, and you can see patterns that players are trying to do. >> is it more collaborative between the offensive coordinator? you may see something that he doesn't or he may see something that you don't? >> more than anything you trust your preparation through the week. when it shows up, you know

they are doing exactly what you thought. then, like we played the 49ers them, for and we beat the first half we didn't play well. we were able to go into the locker room and on the sidelines and make adjustments because of it. replayed played us a little different. it was unique game for us we had to change, not our plan, but i thought process throughout the game. >> what kinds of things did you see that you can see in the field? >> we see it on the field. but when you see it on the sideline you have time to process it. you can notice, what are they trying to do with the defensive line? how they are trying to play me, for example. trying to keep me in the pocket. but they are rushing differently than normal. and how they are playing with their defensive backs.

when we figured it out, we were able to get big passing and running plays. , notdidn't see the rush just because willis is out, but it into the rush and previous games. >> that is something that you notice on film, on the surface. i was able to throw a big time touchdown. in, afterrubbing that the 49ers loss. to watch him diagram the plays and to use the technology in ways they haven't in previous seasons -- the seahawks are doing a better job of that than other teams and the wall. their turn their season around by figuring out how to use wilson better using this technology. -- youou actually think are million miles away, this sounds and looks cool, but is it really affecting the way that football is being played? will it actually be used or is

it big product placement? >> it is certainly very placement.roduct microsoft has paid hundreds of millions of dollars to have their service plastered around the nfl. what we are seeing is grammatically different. old technology was kept old bureaucratically until last season. was giving black and white printouts with crummy resolution. what they're looking at now, the ability to zoom, he showed me how you could sue men and see how this guy is on his toes or leaning back. how they can go back and forth from series to series. it is a different set of input. it will stand to reason they would be able to deploy that better and make faster adjustments this season. >> is this unique to microsoft?

is apple or samsung going to do this? >> a lot of the players are using the surface week has it is being fostered on them off the field as well. the nfl is restricting surface use. >> add to cut you off. cory johnson, we will be back. ♪

>> that will wrap up. did you enjoy yourself? >> i did, and happy birthday to

you tomorrow. >> thank you. 39 years old tomorrow. it will be a christmas eve show on "market makers" lots to cover. thank you for joining us. i think it was a great show. it is 56 past the hour. bloomberg is taking you "on the markets are go -- >> you don't look a day over 30. >> let's talk markets. 18,000 in the books. the s&p 500 and the dow are extending their record highs. you but this bull market in perspective, the bull market has gained three thousand points since may of 2013. the nasdaq is off by a fifth of 1%.

joining me is mark sebastian, the founder of options pitch. i good day to you. one stock we are watching, if we look at what is happening, is avon products. they have fallen to their lowest level in a week after bml downgraded them to underperform to market perform due to currency risks related to russia. what does the options look like for the stock? buyerterday, we saw a big $.10. january 10 a on the surface someone may think that is bullish. when i look at that, i think it is a big short hedging off risk in case avon magically does catch a bid. ryan to that, tons of open interest on the nine strike. out to april. most of the action looks bearish.

>> you have a treat on walgreens. the stock hit an all-time high. why are you bullish? >> again, great earnings and revenue. for theress is good likes of cbs and walgreens. the power has been delivered deliverers than the producers of the drug. i would like walgreens to push toward these all-time highs. i like a trait that it will not explode higher, but it could creep slowly higher in the first quarter. i like april 75 calls. $3.65.ollars or in january, 77.5 calls. all told, three dollars on a diagonal spread. the idea is gaining on the long-term april call. hopefully walgreens doesn't blow through my seven strike and i

can just keep the income from january. it is days below the seven, seven or half strike it will be below 80. if it turns around, at least i am offsetting some of the cost of the april 75 call that i lost. the 18,000, a little higher than that now. i we had the psychological mark? will this have implications for how investors should position themselves in the new year? oil ande been watching the s&p. the correlation has broken. the s&p is moving independently of oil. that is positive news in the near term. one thing to watch is the vick. the last times he had a big up vix ending on a high,

the last following years did not end up so well. something to watch. i like the s&p on the market .nto the first half of 2015 there is an interest rate risk. who knows what could happen with europe and greece. watch the vick. is typically not long-term bullish. >> happy holidays. thank you mark sebastian.

>> locum to "money clip." i olivia sterns. here's your rundown. 5% in the third quarter. the dow hit 18,000 for the first time ever. the s&p is also trading at all time high. the planet man on talks business and give stephanie ruhle a run for her money. we have the whole list from miata to mercedes. and