>> welcome. we have full coverage of the stocks and stories making headlines today. another drop in crude oil prices.

peter cook is on capitol hill, previewing the republican response to tonight's state of the union as we ask who is joni ernst. we begin with phil mattingly on president obama's six address to congress. >> we always knew the state of the union was going to be heavy on economics. we learn that focus would include major tax increases on some of the country's highest earners in order to pay for tax breaks for the middle and lower income. those tax increases would include the capital gains rate for couples earning more than $500,000 a year. it will move from 20% to 28%. it will target money that comes after the death of an individual. that would have a new capital gains rate applied to it. they will try to move some of

that money towards the middle class. despite the great topline economic numbers the middle class is still struggling. >> if republicans are opposed what is the strategy? >> republicans wasted little time coming out against these proposals. they say it is an attack on the wealthy. there's a couple of things administrations administration officials are looking to do. they are happy to have this fight over and over again but they're also setting down a marker. they are trying to do corporate tax reform or individual tax reform. this is the opening proposal. perhaps your publican's can come to the table with one of their own proposals. the idea that this would move forward in a republican congress, it will not happen. >> this is been a different rollout ?

>> the viewership on traditional media is not the same. there is a 20 million person difference between when bill clinton was speaking and president obama speaking on network television now. they have tried to go around. much of the rollout has been focused on social media, blogs, youtube, twitter. those are the focus. we see that the white house digital team is pretty good. their goal is to engage with people following on twitter. those are the demographic they want to hit but it may be a demographic that helps to push and support these proposals. >> how much does it give the white house leverage and controlling the message? >> quiet a bit. the president will sit down with three youtube stars later this week. everybody in the white house

press corps would love to have that interview. the knock and against the hardest questions when they sit down, but it helps them to control the message. they are going around old media and reaching the viewers directly. >> thank you. bloomberg news will have full coverage of the state of the union address tonight. our comprehensive coverage begins at 8:00 p.m. with a special addition of with all due respect. that is followed at 8:30 p.m. by bloomberg politics state of the union preview. at 9:00 p.m., followed by the republican response by joni ernst. stay with bloomberg for comprehensive coverage. the gop response is high-risk. our chief washington correspondent, peter cook is on capitol hill with more white joni ernst was chosen for the role. >> good afternoon.

just two weeks into her senate career, joni ernst has been put in a high-profile position to respond to the president. she is there because republican leaders want to showcase someone they see as a rising star in the party. they think she is somebody who can connect with the american people, particularly women. a lot of people don't know that much about joni ernst. take a listen to this ad in iowa. >> i am joni ernst. i grew up castrating hogs on an iowa farm. when i get to washington, i will know how to cut pork. >> that one moment interest -- introduced her to iowa voters. maybe some different language tonight than what we saw in that ad, but her story is something the republican leadership hope resonates. she is the first female combat veteran to serve in the u.s. senate.

she was a lieutenant colonel in the army national guard. she ran a battalion there. they are really hoping that her hometown's story from iowa can resonate with the american people and that she is indeed one of the rising stars of the party someone who can make a difference on the national stage. >> it gives her a big spotlight but talk to us about the risks. >> it is a big spotlight, and not everyone has succeeded in this position. two years ago, marco rubio made a pretty good speech, but everyone remembers that moment when he had to get a drink of water. bobby jindal, also high-profile his speech and not go well. it is high-risk, high reward for joni ernst. she has to do a compelling job leave people wanting to hear more from the gop. >> before the president speech,

a key republican is dismissing the latest tax plan. tell us about it. >> i spoke with senator orin hatch. he is a critical player. senator hatch is not impressed with the presidents latest proposal. take a listen. >> it's more and more of the same, robbing peter to pay paul instead of helping both peter and paul to survive and help this country be on its way from a physical standpoint. >> senator hatch conceded it will be an uphill fight to reach agreement with the white house on anything with regard to tax reform. he did not take it off the table. a bigger focus might be a business tax reform, but even senator hatch said that will be tough. train will be a likely area of bipartisan cooperation on the hill. >> thank you so much. coming up, more on the state of the union. we will preview tonight's speech and discuss how much of the

president's agenda is likely to get done in the coming year. stay with us. bottom line bloomberg television continues in just a moment.

>> welcome back president obama will face the largest group of republican lawmakers and more than 80 years when he delivers the state of the union address tonight. kim wallace is an executive managing director at renaissance macro research nominated by president obama in 2009. he served as treasury assistant secretary for legislative affairs. we know what the major themes are. does this strategy of this strategy give the white house the ability to control the narrative? does he give the republicans an opening to take it apart piece by piece. >> any of that is transitory,

but initially it will benefit because they will be up to give factoids to media. it will take some time for find out which pieces they want to push back on. i expect the other side to catch up. >> in one of your newsletters you write that one of congress's main challenges will be avoiding self inflected headline or economic drags that would worry voters and markets. voters are used to partisanship in washington. do the markets price in the fact that stalemate on some key issues is inevitable? >> sure but they count on some of the gridlock being beneficial. what i was referring to.

>> you write that beginning in the next decade the united states is projected to move towards a 70% debt to gdp ratio. do you see any meaningful legislation near-term that democrats and republicans you can unite behind? >> i don't. the fiscal balance continues to improve. the economy continues to improve. we are spending less at the federal level and bringing in revenues. that is not an environment that forces action in this town. the last 12 major tax bills came because of economic or physical

pressures that were expressed by the markets. to have that condition for the next two years built a sweet spot. i don't expect legislation on the physical side. >> i am speaking with kim wallace. one area that shows bipartisan cooperation is trade. peter cook was just discussing that. how does the midterm elections change the political dynamic? what needs to be done to finalize trade deals with europe and asia? >> on trade, it was more the economy that has changed as opposed to the political landscape. now that the economy is growing both parties have elements that support trade. they are funded by people who expect trade legislation the past. the transpacific partnership has been worked on now for five years. it is close to idolization.

the transatlantic trade investment partnership is earnestly needed by europe. i would argue that some of the exporters in the u.s. also need that. those two things are likely to keep a bipartisan bid. >> let's examine infrastructure strategy. is talk of of an infrastructure bank just that, talk. given the deadly collapse of an overpass here i-75 in cincinnati, is the urgency in congress to fund improvements that would likely result in roadways and bridges and create tens of thousands of jobs? >> on the infrastructure bank the idea what fourth by chairman dodd was not perfect. it would now have been funding projects for at least two years if they had pursued it. you don't speak to anyone who follows this who would argue against the notion that we are woefully underinvested and

willfully means that you are structured breaking as we have seen last night, as we've seen in minneapolis previously, all over the country. my guess is that of events like this will help push the two sides together but in washington it is going to take compromise between people who think public-private partnerships are the only way to go in funding these projects and people who believe that any new infrastructure only increases pollution. those two sides will eventually have to settle their differences for there to be a major bill. we remain slightly constructive about the prospects, but only slightly. >> we have 30 seconds left. look into your crystal ball for me, if you would. what is up for the next two years? are we going to have stalemate or movement? >> we will have limited bipartisan accomplishments wrapped in partisan messaging and a lot of mudslinging for which there is plenty of time in washington. >> and executive managing director of macro research

joining us from our washington studios. always a privileged to have you on. thank you for your time. >> thank you. >> a reminder we will have full coverage of the state of the union address tonight. our conference of coverage begins at 8:00 p.m. washington time with a special edition of with all do respect. that is followed at 8:30 p.m. by bloomberg politics state of union preview. at 9:00 p.m. come the state of the union address followed by the republican response given by joni ernst. we are live streaming. we are at youtube.com/bloomberg. stay with bloomberg tonight. we will have complete analysis of the state of the union tomorrow on bottom line. i will be joined by jon huntsman. he is now chairman of the atlantic council. it promotes constructive leadership and engagement in international affairs. that is tomorrow afternoon.

the bp oil spill trial as the penalty phase gets underway. we will see if the settlement might be a likely outcome. stay with us. bloomberg continues in just a moment.

>> we have breaking news concerning standard & poor's on the securities and exchange commission. let's go to the breaking news this. >> that is right. we have details of an upcoming settlement between the fcc and standard and poor's. according to people familiar with the matter, s&p will be suspended for one year for rating part of the commercial back securities. this is part of a $60 million settlement between the fcc and standard & poor's. it has not been announced yet. it could happen as early as tomorrow. this is according to bloomberg reporting.

this would rub percent the toughest action so far. this is tied to six commercial back securities. it would result that part of it. it would not resolve investigations. s&p is also facing a penalty on those investigations. that is separate from this particular one. as ins&p will be suspended for one year for rating parts of the commercial back securities market with a settlement with the sec for which it will pay $60 million. >> thank you. stay with bloomberg television. we will have more details on that story as an is a become available. bps third trial for its role in causing the largest offshore oil spill in history for us today.

brandon, thank you for your time today. the third trumpet's underway today. with the end of this trial finally mean the end of bps liability for that 2010 deepwater horizon spill? >> unfortunate for vpbp, this is not the end. it is the beginning. it is a trial over the fines of they could face under the clean water act that the united states is bringing. they have 100,000 claims outstanding. they have securities class actions in houston that could cause them upwards of $5 billion. they also have a group of cases in which there are businesses alleging that they suffered economic loss because of the moratorium on gas leasing and offshore. >> how big are the fines that bp is facing?

>> according to what united states senators opening statement today was, seeking between $11.7 billion and $13 billion. >> were kind of momentum are they caring into this trial? >> until thursday, i would've said zero, but as of thursday they have gotten a very nice judgment from the court where in the second phase of this current trial, the court found that ep has only spill what bp had estimated whereas not what the united states had estimated. this lower their potential maximum penalty from $18 billion to $13.7 billion. >> in the first couple phases of this trial, was bp given any credit on how they tried to handle the cleanup? >> the first phase still with who was at fault for the actual

blowout and leaking. the second phase dealt with the cleanup. that second phase is the finding we got on thursday. those were in favor of bt, finding they were not grossly negligent. >> is this case likely to settle before it's over? is that a possibility? >> it's always a possibility in litigation, but at this point during trial, it seems unlikely given that both parties has so much invested in the process. liability has been determined. all that is being done now is the presentation of evidence as to what the fine should be. >> what are the criteria that the judges will use to set the size of this fine? >> under the statute, he has a different criteria that basically go to how severe was this bill what did bp do in response, and how they react afterwards, and it anything they do mask how the united states might have relied on what

they're doing? a lot of good news from that second ruling that i got on thursday heading into this trial. >> how long with this last? asked the court says three weeks. we will probably have posttrial briefing and filing, which would put us into april. the court will likely make its decision in may or june. >> bloomberg intelligence litigation analyst covering the industry going over the bp trial. thank you for your time. >> thank you. >> coming up, if you've been seeing more ads on your facebook and twitter feeds, expect more. advertisers are beginning to like these forms. those details on more when we continue in just a moment.

>> welcome back to the second half hour of bottom line. it is time for the commodities report. su keenan joins us. >> we are seeing enough rough -- another rough close. we have seen an advance in gold both related to the imf slashing its forecast. check out the numbers. oil close to the low the session , just below $46. natural gas is higher. this has to do with the fact

that you're seeing warmer weather ahead. there is a one-to punch for oil. a surgeon direct a production. we continue to get news of these rising supplies and the shaky economy. he says the iraqi production will only add to the supply glut. he points out the imf report that shows oil down 50% since june. >> the traditional sources of demand for oil might not be there going forward. china is a prime example. if we are growing at 1% or less, it does mean we will not be consuming as much oil. the other thing we have to consider is the efficiency of the utilization. >> demand-supply is a concern. gas prices continue to plummet

to six-year lows. according to aaa, the national average is close to two dollars a gown. pump prices can be found two dollars at gas stations in 28 states. >> we are seeing the seventh straight gain in gold? >> it has a lot to do with the imf saying there is slowing growth. there is fallout from the fact that the ecb will boost stimulus , all pushing gold higher. looking at the highest level since september for gold futures, today's game makes it the longest rally and 11 months. it's not just gold making a comeback. palladium is making a comeback. palladium is used in catalytic converters. >> su keenan with the commodities report. 2014 was the year we saw more media companies deliver content

on the internet without cable or satellite. bloomberg intelligence has released its 2015 media outlook ahead of u.s. research. pulse when he me now with the details. we're going to see more court cutting? >> we might. we saw the first signs that pay-tv declined. when you add the satellite cable, and telcos, we saw a decline. existing subscribers are disconcerting their service. then there are the people who have never subscribed or want to subscribe to smaller services. these are all challenges facing the pay-tv industry. >> the stocks of outperform the broader market for the past four years. how much pressure are cable stocks under? >> there is a challenge going forward. some of the headwinds are the subscriber story, there is

rising competition from online video as consumers spend more time consuming more video on their phones and tablets and potentially bypassing the cable tv package. that is one of the key issues. when you think about competition, the internet overall, when it comes to time spent with media, it is fragmented even more. the traditional media companies need to figure out a way to deliver their content to wherever the consumers are and whatever devised there on, and get paid for it. >> the advertisers are jumping in with both feet. >> if you take a look at overall ad spending over the last five years, it has been a solid 5% growth business. the ad spending on the internet has been growing 50% per year. we are seeing some big shifts in market share. newspapers, magazines radio have all lost. internet is the big lender.

the fastest segments have been online media and also social media as a source of growth. >> the traditional media companies what are they doing to capture the growth of online video? >> there saying, if you can't beat them, join them. they are saying that they will make content available over the internet direct to consumers. it is similar to the netflix model. we have seen hbo and cbs a they're going to deliver their content directly to consumers over the internet, bypassing the atv package and an effort to reach those consumers who aren't paying for that tv. >> will they go into this kicking and screaming? >> they may be late for the party because the existing business that the cable companies and the big media companies find themselves in over the past 40 years has been a great business. everyone is making money. content creators are making

money. consumers are paying more and more every month, but clearly the consumer behavior is changing. people are consuming more content outside the pay-tv package direct over the internet. the media companies have to be there with a business model. >> would you consider this the sign of a seismic shift? >> it is. it is being driven by the consumers. what media companies have done well over the past 50 years is followed where the consumers go. whether it is from print to radio to tv to cable to the internet, advertisers determine what is going to be a viable business model. we see consumer spending more time on the internet. that has been a challenge. some of these traditional media companies continue to be good businesses broadcast television, cable businesses however they have to manage the change longer-term. >> does viable mean new?

>> i think these make media companies have to walk a fine line. they have to protect their existing business model because those are very good businesses very profitable, tremendous amounts of cash flow, but at the same time, they have to invest in some of these new technologies. >> we have about one minute left. let's look at the in ma outlook. are we going to see merger momentum in 2015? >> it might be some consolidation on the distribution side of the media equation, comcast buying time warner, at&t buying directv. the distribution side is really consolidated. the question is will the content creators, viacom disney, with ac consolidation on their side of the business to level the playing field?

we might see some of the smaller content companies that need to bulk up and get leverage take advantage of that. >> thank you so much. i appreciate it. coming up, chocolate, cartier three staples that just got more expensive. we continue in just a moment.

>> welcome back. it is time for today's latin america report. state run oil companies rallied after deciding vince reduced feel prices paid the finance minister told reporters that increase taxes on fuel would

raise revenue by more than $7.6 million. alan gross and his wife judy arman 22 guests to the white house tonight, invited for the state of the union address. mr. gross was an american government contractor working in cuba when he was arrested in 2009. he was later sentenced to 15 years in a cuban prison for trying to deliver satellite telephone equipment. he returned home last month as part of a deal between president obama and rowel castro. -- role castro. stay with bloomberg. we will have live updates from havana. that is your latin america report for this tuesday. the big news thursday was the central bank letting its currency off the leash in switzerland. the frank dropped 17%. the money will not go nearly as far as before. that is bad news if you're off

to the world economic forum. tom getzen reports. -- tom getzen reports. >> spending francs will cost you more, thanks to the central bank. they just relax the cap value which made the currency sore. here in dallas, preparing for its busiest week delegates should expect a break the bank. your rings at a local jewelers cost 5500 francs now it's nearly 6100 francs. well that's no major problem for the world's elite the local residents have the rest of the year to worry about.

>> we are shocked and a little bit scared. if you work in the export industry you could work with this, but with tourist money it's much more expensive now for everybody coming in here. >> a seven-day lift pass costs 365 francs that's a 13% increase for skiers. >> why should a german tourist now come here when he can go to austria without exchanging his money? the same applies to the filing that buying of real estate. they will stay away now, even more than before. >> was a little one of those expensive countries thanks to tight regulations and heiliger costs. the residence of debt davos may

have been with her faith in the beauty of the mountain in which the town lies. >> global business and political leaders will meet in switzerland for the world economic forum to discuss a range of economic in juice -- issues and current affairs. bloomberg is there live on wednesday. coming up, president obama lays out his plan to bridge the wealth gap in america. we will look at that when "bottom line" continues.

>> there are multiple ways to watch bloomberg tv on the web, on mobile devices, apple tv, and amazon fire tv. in tonight's state of the union address, president obama is expected to focus on the gap between rich americans and middle and lower income households. one is a tax credit to fund higher education and childcare. trish regan joins me in studio. orrin hatch was on peter cook this morning. he said the president wanted to rob wealthy americans. >> this is class warfare. we will hear much more of the same rhetoric of tonight.

it is an activist vision. i don't know how he gets anything done. you do have republican cultural commerce. -- controlled congress. he is taking an hour and you will hear a lot more of the same , the wealthy need to pay their fair share etc.. he is talking about raising the tax on capital gains. instead of paying 22.8% they would take 28% on anything couples who were making over $500,000. if you're going to take on five points more to take capital risked. that is not good news. >> what does wall street want to hear from the president of the united states? >> wall street would like to

hear that the president is willing to work with republicans to get some real stuff done. they would like to hear about corporate tax reform. that is something that might be able to be accomplished. they don't want to hear about raising taxes on people or families making more than $500,000 for capital gains to pay for community college. that will not be welcome. they would appreciate hearing more about corporate tax reform. >> if the president does talk about that capital gains tax increase, watch your screens when they pan and you will see the republicans sitting on their hands and the democrats clapping and saying, this is what we need. >> this is setting the stage for 2016. on the one hand, you might have hope that the president came forward with a proposal that could get done. instead, i think this will be a politicized speech, where he will emphasize the haves and

have-nots. this is a familiar theme we have heard from him. >> we will continue that the mantras -- the theme on street smart. >> david côte talk will talk about what these proposals might mean from a market standpoint. we have it all covered. i look for to seeing you all there. >> thank you so much. stay with us. we will have another check of the market movers on the other side of the break. "bottom line" continues in just a moment.

>> that doesn't for this edition of "bottom line". thank you for joining us. on the markets is next. i will see you on wednesday. ♪

>> here is where financial markets are trading. the gel jones industrial average is up by four points. it is headed for its mullahs move this year. european stocks build on their gains ahead of the ecb meeting on thursday. the yen is drifting higher. gold is gaining for the seventh day. it's up about 9% so far this year. only silver has done better in 2015. oil is trading at $46. copper is down. within the s&p 500, energy shares are the worst-performing group over the past month. the energy sector fund is following suit.

the etf is down 5%. managing director green capital joins me now. oil seems to have found some stability. the dollar will continue to feel way here. >> production has to work its way through. some companies have to produce to keep their leases. some have to produce more to meet cash flow demands. maybe low 40's to low 50's. if we can get back above 50, that will be a good time to rally. we are not ready for that yet. >> wouldn't be time to go into energy companies question mark or do you want to their subversive i -- or do you want to diversify. >> there is some value in individual bonds and indices. within the energy space, companies with less exposure

there are opportunities there. we will be starting to neville at the energy space again. >> what about within the commodity sector? copper has taken a leg lower. it is down again today. as it found a bottom? >> i don't think so. we have to have three things the strong dollar will continue to put pressure on commodity prices you've got the fact that china has changed their stimulus and what they're trying to do. they have moved away from hard asset building. finally, weirdly enough, as energy costs come down, it becomes cheaper to produce a lot of these other role resources and raw materials. we will see increased production in the near term. >> doesn't actually happen? -- does that actually happen question mark

>> just like the energy took six months to play out we will have that same sort of timeframe in the copper space. >> what will it look like at the end of the week after the ecb meeting? >> i think we see weakness. everybody is waiting for the ecb announcement. we will see a faint, and in will come back to some sort of reality that low energy prices are actually not just a bone to the u.s. economy. they actually cause problems. weakness will slip into the equity markets. that will be the time to buy. managing director at green capital. >> thank you. ♪ . .

>> hello, everyone and welcome to the most important hour of the session. the show. we have 60 minutes until the close of the session. this is "street smart." i'm trish regan. the s&p 500 trading up about a quarter of a percentage point, investors looking at orderly results from morgan stanley