>> live from bloomberg headquarters in new york. this is "market makers." >> alibaba gets battered. investors are punishing the commish giant after revenues fall short. jack mine is spending more money to attract shoppers. >> why the rest of the world loves america. our economy is the least -- >> we will talk to a food evangelist who wants to make sure what you eat saves you. good morning everybody. welcome to "market makers yuriko i'm erik schatzker.

>> i'm stephanie ruhle. eric was under the weather this week. >> i'm happy to be back. breaking news about the housing market. home sales for december are out. scarlet fu is in the newsroom. >> unexpected decline in the number of contracts to buy previously owned homes. it comes from the national association of realtors. a drop of 3.7% for the month of december. that is the biggest decline in the the year. on a year-over-year basis, pending home sales increased 8.5%. that a small at the what economists were looking for. they were into speeding an increase of 10.5%. s&p 500, paring -- it is extending losses following the news. we have the 10 year yield pretty

much where it was. we will continue to monitor all of this. the fed has said it is data dependent. this shows the housing industry's recovery is still on even. >> that a scarlet fu with the latest. >> let's take you to the bulletin. top is the stories. shares of alibaba are getting beat up today. the stock fell as much as 7% after the chinese e-commerce company reported quarterly revenues that missed estimates. alibaba has been spending more money to attract customers on mobile phones. the collapse in oil prices means big cuts at royal dutch shell. shell will cut $15 billion worth of investment over the next three years. it is the first of the big oil companies to report earnings since prices plunged. fourth-quarter profits missed estimates. shares of mcdonald's are rising today after the shakeup we heard about last night.

ceo don thompson will step down march 1. he will be replaced by steve easterbrook, who is credited with turning around the u.k. division. donald's is stuck in its worst u.s. sales slump in more than 10 years. bill gross says the fed will raise interest rates late this year to save capitalism. gross just came out with an investment outlook for his new employer. i feel it bill gross works for himself. he says the global economy is at the point of breaking down because of 0% interest rates. president obama wants to put an end to the budget cuts. at a retreat for democrats in philadelphia, the president will propose a spending boost for domestic programs in the pentagon. that would reverse the across-the-board legit limits known as sequestration -- budget limits known as sequestration. i do not think there is such a

thing as a retreat in philadelphia. >> what would you call it? >> and off-site? just saying. >> the stock is currently trading below the first day after its -- brendan herne is th. paul sweeney is here as well. brendan, is the revaluation of alibaba below that first day pop justified given what we have seen from the past two earnings reports? >> the company had a fantastic quarter from the business perspective. the business had a great quarter. going from revenue to net income, we had a large stock compensation expense which brought them net income. >> can you break that down wartime? -- one more time? >> the company grew gross

merchandise value to $126 billion. they grew revenue 40%. about $4 billion u.s.. getting from revenue to net income, a 4 billion rmb which is about -- this is a net income miss. the business is very solid. you have an overhang, the state administration of industry and commerce had a report. this was last july. counterfeit goods, the company defending itself. they are calling out the actual individual government official who took a minute sample size of goods sold. this is almost a year old. white is coming out now, -- why

it is coming out now, we think it is overblown. >> joseph size -- joe tsai says their signature coney in approach. -- peter coney and approach -- age or coney and approach. >> the company is growing very quickly. you have an issue around the counterfeit goods issue. additionally, for investors msci announced it will be adding alibaba to their indices in november. $1.5 billion will be coming into alibaba in november as index funds need to own the stock on the third day in november. >> that is a good data point. what is impacting the stock today, they had a revenue miss and the question is, what is going on on the top line? what is happening, 49% growth of goods and services.

more and more of those goods and services are being transacted on mobile devices. ali baba monetized mobile users at a lower rate than they do pc-based users. the fees you can charge to list goods and services, the advertising rates are lower. they had a revenue mix issue they did not telegraph well to the street. that is impacting the stock. this issue with the government. you never want to get into a shoving match with the chinese government. >> is ali baba going to be offsides with the chinese government? >> they were very aggressively responding to the charges leveled by this report. i think the level of aggressiveness they came back with surprised investors. playing nice with the chinese government is job number one for any company, including alibaba in china. they called it out in

the risk factors. >> is it possible that concerns or questions over what ali baba is going to do with that yahoo! spin co are playing into the situation? i want to play in at cirque from what joseph -- from what joe tsai had to say. >> we do not anticipate entering into an agreement with yahoo! or spin co. this is something that is the right of yahoo! to do. their board has decided to do the spinoff. from our perspective, operating the business day today today we have a 15% shareholder in us, that is yahoo!. after the spinoff, another 15% shareholder. it does not change anything. >> are investors disappointed that alibaba is not going to do

a $40 billion stock i back to taking out the spin co? >> that is what investors were hoping for. despite the company's comments eventually, they may consider -- it is an efficient way to reduce their share count. at some point down the line, they will take a look at spin co. >> i want to move on to facebook. it reported another jump in earnings. zuckerberg can do no wrong. that makes up nearly two thirds of its total ad revenue. the company has said it will be spending as much as 70% more on mobile this year. zuckerberg says he is focused on new technology to drive future growth. is mark zuckerberg turning into the new jeff bezos when it comes to spending? >> shareholders hope not. this is something -- >> when the ipo came the whole issue was the did not have mobile rights. he leaned into it focused on

mobile, spent all that money and now it works. >> the good news is, they beat revenue expectations. they've done that the less several quarters. that is bought him some time to say 2015 is going to be a year were we spend more because we get payback on our spending. this is still a profit story. people want to see profit growth. as long as they continue to drive the top line, the street will give him some leeway to invest in the business. frankly, there is upside. they've not begun to -- $22 billion on a rush -- he is getting leeway but i think it some point, people want to start seeing revenue from these acquisitions. >> one thing facebook is done well is, they're driving the monetization of that movement to

mobile. alibaba will be increasingly focused. about 3% non-mobile non--- monetization. alibaba has a lot to learn from facebook about how to monetize that movement to mobile. >> they have not won you over. >> not yet. whether it is ali baba or facebook, we've seen these numbers. analysts will revise estimates. each of them is trading at 40 times forward earnings. how'd you price a stock like this? >> one aspect that is been talked a lot about is you have a low interest rate so you have that dividend discount or growth model which is of low interest rate, it creates a higher evaluation. the valuation concerns are

driven by the low interest rate environment. investors globally need growth companies in their portfolio. alibaba and facebook are two such companies. >> does that mean investors are overpaying for growth? >> you have to be thinking about what is coming ahead. to paul's point, how did the integrate that? that is been a drag for alibaba. facebook is further along in integrating companies. >> i want to talk about the revenue they are generating per user. we have it pulled up graphically. i want to get an understanding. can they be making more of each individual user? what are they make off of me nothing. all i do is get my heat ealing's heard -- all i do was get my feelings hurt on the talk about teeth whitening. >> for facebook, the monetization issue is a big

plus. it is $2.81 on a blended global basis. over six dollars for u.s. facebook users. for the rest of the world, it is less than a dollar per user. after growth continues to grow internationally, the challenge is to monetize their international users to the extent that they can monetize western european and u.s. users. there is the delta. the question is, can they do that? they remain confident that they can. there seems to be expectations by the company that they can increase the monetization of their international users. >> are they ever not confident about anything? >> no. 40 times earnings, that breed confidence. >> alibaba is creating a credit scoring system. they know what buyers and sellers -- if they are paying on time. they created a company that will be providing credit scores within china to facilitate

loans. >> that is because alibaba has information about the way people actually spend money. what information does facebook have that moves the needle? ex boyfriends i like to look at? [laughter] >> facebook has a lot more information than google does from search. facebook goes to advertisers and says, we know users better than google knows its users. you should pay more to reach our users. alibaba is buying a piece of a life insurance company in china. they can see, are people buying healthy goods or not healthy goods? what you want to sell life insurance to people who are buying healthy goods? think about the information advantage alibaba has. they are the largest -- their money market business is $85 billion.

>> i do not like any of that. thank you both. brendan ahearn and our own paul sweeney. >> fortis putting two dozen 14 behind it and says wait till this year. you'll hear from bob shank. >> we heard it last year in.'s -- in davos, billionaires love the u.s. ♪

>> this is "market makers." erik schatzker, with stephanie ruhle. the government of malaysia has declared the missing flight 370 was an accident. all people on board are presumed dead and that will help families get financial assistance because it is illegal --

there is a sign that doctors are winning the fight against ebola. new cases of people in west africa have dropped to less than 100 per week. the epidemic has lasted more than a year. the islamic state has set a new deadline for jordan to release a convicted terrorist. militants say if she is not released i sunset today, they will kill a jordanian pilot there holding. the islamic state is threatening to kill a japanese journalist. >> lots of other earning's stories. including ford. it beat estimates for the fourth quarter, even as its net income disappeared coming in at just a penny a share. matt miller -- >> owner of an f1 50 -- of an f1 50. >> arguer homesick matt picked

me up on the snow day in his monster of a truck. that thing was hot. >> the biggest engine you can get is a 3.5 liter v-6 with turbos strapped to it. and, i'm concerned about their forecast. they did better than analysts had estimated in the fourth quarter. yes, they are expecting or forecasting higher profits for 2015. they are saying the loss in your might be worse than they -- the europe -- the loss in europe might be worse. here's a great chart they had in a conference call this morning. 2015 plan, it is going to start out weaker in the first half of the year and get better in the second half. that compares to the 2014 actual

results which got worse as they started the changeover to produce the new f1 50 -- f-150. how will it stronger dollar affect ford when they compete against german carmakers? especially japanese carmakers who have a huge advantage from super weak euro and yen? >> the cars that ford is selling in europe and overseas many of those are manufactured overseas. >> japanese will to you the safe -- the same thing. if you ask jim lends, he will say all the nissans were made he'll -- we sell here are made here. it does not stop executives from getting angry about the change. mark field has kept his cool. if you remember last year, alan mullally was very angry about the fact that the yen has

depreciated so quickly against the dollar. he said it gave japanese carmakers and advantage. i do not think he was just saying that. i think there is a lot to that. a picture of the new ceo, mark fields who is really excited about the new truck. >> why are they releasing less models this year? >> they released so many last year. fewer this year, but still a lot. >> thank god eric is back. >> i appreciate the grammatical direction there. 15 is still a lot of new models to release. that is going to slaughter profit in the first half of the year. the remaining question is how lower gas prices will affect. products are more fuel efficient. does that mean consumers are less likely to flock to dealerships? >> that is a matter of choice. >> gas prices are cheap today let me buy a guzzler. that is ridiculous.

>> the concern is that since gas prices are cheap, people will not go out and buy more fuel-efficient cars. >> that is what i'm saying. they do not feel they need a fuel-efficient car. >> that is what a lot of analysts -- >> that seems crazy to me. >> they are saying the same thing. >> i'm going to go back to tweeting. >> >> will be speaking to bob shank, the market -- next hour on "market makers." >> stay with us. you are watching bloomberg television. ♪

>> gdp growth feels good but are we simply the best of the worst?

people are saying the u.s. economy is back. >> she has been called the erin brockovich of a few -- of food and she is taking aim at a number of companies. stay with us, you're watching bloomberg television. ♪ . .

>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. + you are watching -- >> you are watching "market makers" on bloomberg television for stop i am erik schatzker. >> people may not be feeling it but the country is far better shape economically than the rest of the developed world. this was the principal theme of president obama's state of the union address last week. >> the growing economy, shrinking deficits, bustling industry, booming energy production -- we have risen from

recessions freer to write our own future than any other nation on earth. >> bloomberg has been well ahead of americas economic comeback, so it is once again the focus of this issue of bloomberg "businessweek," you can read it online and at bloombergbusiness.com. peter cory wrote the story and he is here with us. peter, a triumphant return for the american and economy -- not quite, right? >> roar eagle, roar. you guys were both in davos. without the feeling around the u.s., it is not what was in a 2008, 2009 when people were either ridiculing or despising the u.s. for its role in the financial crisis. >> i have a great way to answer that. listen to on tuesday and, of deutsche bank talking with u.s. economy. >> this u.s. economy feels very real. it is not just running on one

turbine, it is running on multiple turbines. technology, interest rates consumer and demand, shale. it will have a stimulative impact on global demand. >> you might accuse an american ceo, but you cannot really accuse a german ceo. >> is anshu jain considered a global because he makes most of his money in the u.s.? >> he has to report to german regulators -- >> i cannot think any european ceo can sit there and boast about how great the european -- >> no. precisely. >> that is the point. that is a great quote. i almost wish i had in our story. we had a quote from a canadian pension fund executive who said pretty much the same thing and he is putting the money where his mouth is. brought in new york -- bought a new york sky scraper

participated in the purchase of petsmart. where can we return to a stable country with some sort of a stable future, and they are turning to the u.s. >> people across davos depending on where they are from, depends on where their sentiment is. europeans are cautiously optimism. people in china fill aeel like they did not know it was in store, but in the u.s., they were feeling it. >> you don't want to turn it into like well, everything is fine, because it is not, and the u.s. have a lot of problem's. the inequality theme cap coming up again and again and again. you cannot just look at the gdp growth. you have to look at per capita household income in the median household income in the u.s. adjusted for inflation is lower now than it was in the year 2000. that is not a good sign. >> but from an investing standpoint, you have just put your money somewhere, and the u.s. is that are than anywhere

else in the world. >> and has been. >> has been. >> scott minor of guggenheim partners has been on the show. >> we do know him. >> he is bullish on the american economy in the sense that he feels it is strong. he does not feel like it is a good place for equity investors for the very fact that investors have caught on to the theme. he said -- he compared it to a company that is like good company, bad stock. >> peter, what sense are you getting that the slowdown in europe, the persistent slowness of the european economy, the slowdown in china, the struggle they are having in japan is owing to make it difficult for the american economy to keep trucking along at a 3.5% rate? >> the u.s. is more insulated from the rest of the world. it is such a huge economy -- >> and a huge consumer economy. >> writes, but trade still matters. that is what i wrote in the

article. unless there is growth abroad it will be a problem for the u.s. right now with the dollar soaring, that is an additional headwind for the u.s. economy. on the one hand it is a reflection of how well the u.s. is doing, but it could in the future growth. >> how has the american economy done during past periods of dollar strength? >> it is not a one to one relationship as you might think where strong dollar, weak economy, but there is some loose correlation. >> all right, peter, thank you very much. as always, our economics editor from "businessweek" peter coy. do read his entire cover story for the pet over to our new website to find it, bloombergbusiness.com. >> even if you do not want to read peterson story, head of two that was that if it but i do want to read your story. >> thank you. >> when we return, it is not your typical three-bedroom home in the suburbs. we will be seeking to the architect who designed homes for the superrich.

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>> welcome back to "market makers." i am stephanie ruhle. how are the ultra wealthy living bizet's? our next guest knows douglas wright, the founder of douglas c. wright architects committee oversaw the redesign of the historic building at a golf club. this had to be a harry project. when you start on a historic place like that with so many influential, very wealthy people , how do you satisfy so many tastes? >> yes it was quite an extra ordinary undertaking. you walk into a room with a lot of people who are well aware of all of the tradition of the place, and you walk in and you listen, and you hear what they want to do and it was definitely do not touch any of the golf because they are extraordinary golf courses as everybody knows, but the buildings overtime had changed quite a bit and maybe were not

as well taken care of, and they had to do a lot of adjustments to it, so we went in and did a full master plan of the campus we studied how you got in and out and what the condition of the buildings were, and we did a new pool house as part of the plans and read in the locker room. the locker room was a particular place that was like hands off. >> why? [laughs] >> the stories -- >> like what? >> ben hogan, sam snead, all of the greats were there, so it was really a hands-off. >> whether it is redesigning the clubhouse at winged foot or homes, you have an unusual group of demanding -- at winged foot do you have an unusual group of homes of demanding, or do you know what they want? >> it is a little bit of both. i worked with people who have worked hard for a very long

time, and they come to me and they have hopes and dreams of what they want to do, and i sit and a listen to them, i hear what they want to do, and i translate those hopes and dreams into architectural form. >> it is not like hiring someone who will come in and do what they want, to hell with what you want. >> exactly. i'm an architect and i have studied for a long time and have worked for a long time, and i have learned a lot over the years post-up i know how to make a great house in a building, but i think what i can really bring to it is working with these people have a vision. some people want a really comfortable place, some people want a really grand place, and i'm able to make that happen. >> how hot is the luxury market right now? >> it is good. obviously before the recession, we were doing 30,000 square-foot houses. we are back down to renovations during the recession, and then people are getting back into newark now, but what is really happening is we are combining a lot of those things into like a big great room. >> what is the hottest, most

high-end, coolest project you have ever done? >> well, i have done some really big ones. >> like what? >> extraordinary things in the hamptons, giant places, 30,000 square feet with tennis courts, pools -- >> why aren't they doing 30,000 square-foot places anymore? we see the statistics but people who can afford to build a 30,000 square-foot home have as much money now or more than they did before the recession. >> it is amazing. i think people are working very hard, they love putting those amenities into their primary homes now, so you are getting the tennis courts and the basketball courts and all of that in the primary house. we have a wonderful project going on right now with a beautiful rolling landscape where those items like a swimming pool, are being put on over the hill so you do not see them during the winter months when they are not so attractive. the idea of a lot of owners is when i am home, i want to be

able to have all of those toys and fun things to do so i want to have them in my house. there are still lots of second-home markets of course and things are good. >> is it weird at all to have a view into this level of expense and extravagance? >> i have been doing it long enough now that i guess i understand it. i mean, all of us have hopes and dreams of how we want to live, and i think, you know, perhaps these are people who are able to achieve these hopes and dreams on a somewhat larger scale but these are definitely things we all share. >> is there still a game of one upmanship? >> absolutely. >> really? ok, like, the highest end of the "i want to top that," what is the most ridiculous, over the top, i have got to have that? >> the most amazing thing i've ever done is i had an owner who wanted to do a very simple house he said with no basement, and at about a month later he get to me and said "you know i think i

would like to have a half-court buffalo courts, wine cellar simulator room, and a theater in the basement, can we do that?" >> after you have started construction? >> not after, but it was after the drawings were done, and it is an amazing engineering feat to do that. >> the stuff you do not see above ground. >> doug, thank you for joining us. doug wright, founder of the architecture firm douglas c. wright architects. >> we will begin with german inflation turning negative for the first time since 2009. prices and europe's large st economy have fallen. they wanted to spend more than a trillion dollars to stop a deflationary cycle. foreign ministers are disclosing

-- are discussing whether to impose more sanctions on russia. yesterday, the eu failed to extend travel bans and assess freezes on russian politicians and military officials will stop in greece, shares of bangs soccer on the rebound today. banks had plunged following controversial comments, among them pledges to boost the minimum wage and halt privatization. the deputy prime ministers blinged -- blamed those mars on an experience will stop that is what you have when you have a new government, people start shooting their mouths off. >> when we get back, despite the healthier food, you will be meeting the woman who is leading the charge. stay with us. you are watching bloomberg television. ♪

>> welcome back to "market makers." i am stephanie ruhle. if the food we give our children making them sick gekko that is the question robyn o'brien set out to answer after her child had a dangerous allergic reaction one morning at breakfast. since then, robyn has taken her fight to major food companies

advocating for sustenance without pesticides, artificial colors, or gmo 's. she has been dubbed the aaron brockovich of food and she is with us from denver. robin, welcome -- robyn welcome. is it robyn vs. monsanto? >> not at all. it is the children of the nine states and the future of our economy. >> what does that mean? >> it means we have a generation of kids that is sick or than any generation ever before, and they have earned the title of generation rx because of the allergies or asthma, and if you consider the fact that they are only 30% of the population but 100% of our future, the future of our economy is totally contingent on these kids. my work is to -- how can we better protect the health of our children? ultimate that will better help the health of our economy. >> who is hurting us right now

specifically? >> you have to sit back and say we have inherited a food system we are waking up to the fact that it is full of all kinds of artificial ingredient in additive that did not exist 25 years ago. our own american food companies make their products differ only for eaters in other countries, so they do not use all of these additives, but here in the u.s., they have on to our foods for all of these artificial ingredients, artificial growth per month, artificial -- artificial growth hormones artificial dyes and it is done for the possibility of margins, but overseas, they are not using this artificial stuff, and a lot of the reason for that is those countries said no, we want to exercise precaution, we want to protect the health of our families our children, and our economy, so they have literally just kept that junk out. here in the united states, we have had to use this additive "organic" to describe food that did not contain that junk. our grand parents did not need the word organic, basically called it food. in 1990, we introduced the usda

organic standard to literally define food that does not contain artificial dyes, artificial growth hormones genetically engineered ingredients, and all of these toxic pesticides. >> robyn, i'm sure you recognize one of the problems or one of the challenges you are up against is that it is awfully difficult to prove that additives and artificial ingredients and other aspects of the food system that have grown up, let's say, or been developed over the past 20 years are directly responsible for things like allergies and autism. is it a question of quentin is as opposed to correlation? -- is a question of coincidence as opposed to correlation? how do you persuade skeptics or companies that make money off of these things? >> correlation is not causation absolutely. i was on a team that managed a $20 billion in assets, and i get that better than anybody. when you look at the introduction of a lot of these

additives and the escalation of all kinds of conditions and diseases -- we are not just talking about kids. the president's cancer panel says 41% of us are likely to get cancer in our lifetime, one in three men and one and two women, and if those numbers not jaw-dropping, i do not know what is software can we exercise precaution? when all of our trading partners are eating food that does not contain this stuff, are we at a disadvantage competitively, as is our economy at a competitive the savanna? health care -- at a competitive disadvantage? how can we better protect the health of our country and these food companies that you are talking about, they do not use these areas in the product they distribute overseas because of those standards, so you have got to sort of say well, which one is it? they are using them here. which one is it? >> so going back to the changing behavior part, how do you get them to do that? if it is monsanto, mcdonald's,

frito-lay, the division of pesppsi it doesn't matter the list goes on, can you persuade to change their behavior, or is it the usda or the fda that has to regulate a change in behavior? >> i grew up in a really conservative texas family, and i do not think it is a policy for regulation it is a persuasion thing. we look back and say look, the 20th century food system that we have inherited, maybe it worked in the 20 century, but it does not work for 21st century families. those that you mentioned that were icons of the 20th century run the risk of becoming relics, so we see companies like annie's coming in, and they are not debating the science for we understand you have a parent with cancer and you are paying attention to what you eat, and with understand that you want food that is free from all of this artificial junk. so they are simply there meeting

the needs of the 21st century consumer, and if you look at a company like annie's, they have the biggest opening day gain of any ipo in almost a year when they debuted in march 2012. that means wall street got more excited about this bowl of macaroni and cheese that is not contain any junk over any other technology. i do nothing and is about policing a regulating anything -- i think you truly meet the consumer where they are, which is looking at free food, and you look at same-store sales of a donalds and a steady decline a have been seeing the fact that 19 to 21-year-olds are bailing on that brand, and i think those brands that are not willing to meet the need of the 21st century consumer they run the risk of becoming obsolete. >> mcdonald's and ceo, don thompson, we learned last night is stepping down for stuff do mcdonald's ceo opportunity to change who they are and obviate 20th-century relic brand and become relevant in a plant we care about today? >> i think there is huge opportunity in front of these

companies right now, and most of these companies have the baggage from the 20th century for such a put down a move into between first century and meet the consumer where he stands. >> can they afford to do it? let's look at mcdonald's, for example, versus a shake shack. i live in downtown new york city. i say i would never take my kids to mcdonald's because shake shack is next-door, but the reality is shake shack is significant in more expensive than mcdonald's. we talk about income inequality does lower income people have less money than ever. how can they adopt this right way to live, these two principles when they just need to put food on the table? >> that is a great question for stuff you ask how can they afford to -- if you look at their share prices in the steady decline in their earnings, it's how can they afford not to not to make these changes, but i think it speaks to the greater issue of unfortunately as taxpayers come all of the money we put into our system, which goes into the big food budget for our country, that money is allocated for this chemically-intensive system, so it makes the cost of production cheaper.

while the guys doing things organically, which means by law without all of these artificial in gritty is and without all of these additives, they get charged fees to prove it is safe and they are charged fees to label these things, so the whole cost of production is higher. once i understood that fundamental equilibrium in the structure, that is why i have been doing this for a long time because ultimately that is what has to change. >> robyn, you mentioned a couple of moments ago how enthusiastic investors got about a stock like annie's. does it encourage you or disappoint you when you see a company like annie's, which had that vision, get acquired by one of these sort of legacy food companies like general mills? >> you know if i totally unplug my heart on this thing and get back to our was sitting on a desk that is a brilliant decision by general mills because the conventional grocery category is really not growing as opposed to organic, which is growing at an upper trend at about 28%, so the fact that they are going to come in and hire these companies is a smart business for these bigger brands. it is up to annie's now. >> robyn o'brien, t

wessel must come of the author of "the unhealthy truth." ♪

>> live from bloomberg headquarters in new yorkt this is "market makers" with erik schatzker and stephanie rule. >> surprise. mcdonald's investors applauding its decision to replace its c.f.o. in the middle of the worst year. >> and telling us what the central bank should do. >> and ford says, wait until this year. the auto maker promises the sales will soar in 2015. we will be speaking with the

c.e.o. >> welcome back to "market makers" i'm stephanie rule. >> and i'm erik schatzker. the top business stories of the morning 26789 signs of the housing industry is recovering is uneven. pending sales of existing homes unexpectedly dropped last month, the most in a year. many are shutout by higher credit standards. and sales growth in the fourth quarter was 49% compared with 63% a year ago and leading facebook c.e.o. is investing more in messaging and mobile advertising. >> ford is predicting profits this year may rise as much as 51% due in part to the new aluminum ford f-150 truck. you will hear from the chief financial officer, bob shank. and the fed will raise interest rates to save capitalism.

and in it, bill gross says the economy is in trouble of breaking down. >> and suing a former house aide and that adam lavin threatened to kick down documents he -- he was a department press secretary and it's called a shameful attempt to discredit a whistleblower. >> a spokesman for the spokesman? i like that. >> ok. the sales slump at mcdonald's has cost the c.e.o. his job. he had been in the top seat for less than three years and hasn't seen its u.s. growth in such a slump for over 10 years. so chief brand officer easterbrook is going to be taking over the reigns so what can he do that thompson could

not? a restaurant analyst will join us. whether it's thompson or easterbrook, is the issue the c.e.o. -- who the c.e.o. is or that mcdonald's is full of garbage and people don't want to eat it anymore? >> certainly investors like it but the problem mcdonald's is facing runs a whole lot deeper. the fact remains that in the past 30 months thompson has been in the a reigns the mcdonald's grew same-restaurant sales not in other 30 months. >> but they have sliced apples and salads and if hi taes but people throw them out or don't eat them. >> and mcdonald's was at 87 menu items and until recently it was 145 funnels in a system that prides itself on speed and

efficiency. >> would you ever eat a salad from mcdonald's? >> i have. >>what was it like? >> that's the bizarre part. how does a company turn itself into something that tastes like a burger? >> the thing that really propelled mcdonald's to success historically was focusing on a few items and doing them well. other time it may have to be to the point where mcdonald's may have to consider food quality and more natural ingredients. >> so mcdonald's should follow shake shack? >> maybe not to the same exact price point but over time as consumers depend more anti-by outic-free proteins and the like i think over time that will be the direction mcdonald's will be headed toward. but they have to focus on the speed, efficiency and value portions and that will take time.

>> our colleague susan bureaufield writes today persuasively about the system, the fact that mcdonald's is like intel's copy approach. everything has to be done the same way around the world. is it wrong to suggest that consistency which is effectively what this is all about turn a strength into a weakness for mcdonald's? >> certainly if you go around the world there are a few menu items mcdonald's will have in local markets. they will not have in india a beef hamburger. there are a few things they have to do consistently. if they want cust myization, they will go elsewhere. one test thompson was starting was create your taste. where customers would be able to create their own burgers and

that's at odds with what they do. >> if they just perfected their big mac and fridse and fat straws. that's what people go there for. >> i would agree with that. >> now you're agreeing with yourself. hang on a second. >> what do you think? >> i don't know. i don't spend enough time at mcdonald's to go. i do find the appeal of cust myization at a fast-type place like chipotle good but mcdonald's is not in the fast casual business. mcdonald's is in the fast food business. >> look at wendy's and burger king and other places have succeeded. sonic and wendy's is focused more on the higher quality to where as burger king is concentrating on value. >> burger king's menu looks a

lot like mcdonald's. >> with regard to what each has to do not just in the u.s. but in asia, the supply chain leads to concern. in japan earlier this month there were samples of things found in the chicken mcnuggets. >> you wrote it was a matter of time before thompson was forced out. no surprise at some point don thompson has to go. why wasn't decor russ singing louder? why wasn't mcdonald's a feast so to speak for activists? >> i think the alarms probably should have been sounded at the end of 2015 -- 2013 particularly when they tried to sell mighty wings. it's a product that speaks to the core of mcdonald's problems.

when 70% of mcdonal customers go through the drive-thru lane eating in their cars that's just not a product for mcdonald's customers. >> eating mcdonald's in your car. that's just gross. steven anderson is a food analyst at miller today beck. >> and the fed will come riding to the rescue later this year. what would its objective be? bill gross with us after this break. >> and from soft drinks to snacks, this company is always one of the biggest advertisers of the super bowl. we will be speaking to pepsi's chief operating officer and find out if he really gets his money's worth. ♪

>> this is "market makers" i'm scarlet fu at the breaking news desk. we wanted to tell you about the drop in soil prices. dropping to a new six-year low below $44 a barrel.

the new six-year enter day low for crude oil. no surprise energy stocks are leading the decline in u.s. equities. >> all right. thank you, scarlet. it is time now for some of the top global headlines coming in at this hour. shares of alibaba are getting hammered today down as much as 9% after fiscal quarter third-quarter revenues missedest mats. >> and the best-selling smartphone in china? apple's iphone moving apple into a tie with samsung. each has about 20% of the total market and china is not importing commodities the way it used to. that sent a measure of global plunging to a 28-year low. the ballotic dry index fell more than 5% alone today.

china will import 6% more coal and iron ore this year. and bill gross says we are at the point where capitalism is about to break down. the culprit? 0% interest rates. on the phone from newport beach, california. bill, welcome. capitalism breaking down in what do you mean? >> well, thank you, stephanie. i didn't say it was about to break down. i said there was a danger of it breaking down, and the danger comes from the distortion of monetary policy which offers 0% interest rates in some countries like germany and switzerland. very negative interstraits. investors require a return on their money in order to take risks or to lend their money to another party and to the extent their -- they are at a negative

or 0%, they can just as soon is that you have money in a mattress than invest it in a company. so these rates have been too low for too long and i think what the fed is going to do in six months or so so raise it up a little bit to try to eliminate this disstorgs. >> bill if capitalism hasn't broken down yet, how would you describe the state of capitalism right now? >> well . it certainly has morphed eric. and it's not in great shape. you know as we see in japan and in developed countries, 0% interest rates have failed to generate any real growth, and that typically has been the historic result of lowering interest rates to entice investment in the real economy. so capitalism at the moment has

morphed. it's been distorted by quantitative easing and the like. and what an investor in the real economy requires, which is what the fed is ultimately pointing towards is an attractive return on investment. the problem with that is that the returns in the financial market are so low that they have dragged down returns on investment. cap rates and so on with real estate and other historically lucrative types of returns are in the 4%-5% category, and there's simply too much risk relative to what they have known in the past. >> you write in the investment outlook, bill, that returns on equities will be quote, unquote, supported. what does that mean? >> well, it means japan will more than likely most likely, continue to implement their

policy which means they will print lots of money. more than we did over the past several years and it means draghi will likely follow through with his promise that a trillion dollars or so over a period of time even though the united states for the moment is out of the game. so the e.c.b. and the b.o.j. have stepped in to take the place of the united states and money and liquidity on a global basis is being provided. >> so we'll see another year of is 1%-12% returns on the stock market? >> oh, i don't think so in the united states. perhaps in japan and in countries where those quantitative easing policies will devalue and continue to devalue their currencies, but in the united states where the dollar is appreciating and being devalued against, it's just the reverse type of concept. but i think ultimately the

global lick withty will put a floor under stock prices in the united states. but the days of wine and roses, so to speak, are over. >> well, bill, you've tied the game of monopoly to current fed action. how? >> well, you know, as you go around the board in monopoly of and collect $200 it's basically being provided with more cash and liquidity to buy hotels. that's basically what a central bank does is provide more money and credit in order to generate growth in the real economy. the problem is that, at the moment, that's not happening. that money isn't going into the real economy. it's basically going into the community chest, in the jail, back to the banker. so monopoly as we knew it is changing as well because of the inability of new cash, $200 per

trip around the board, to generate sufficient real growth. >> well in 1937 the fed preeveryonetively raised rates and then we fell right back into a resefplgts with janet yellen -- >> i don't think we have seen anything through bernanke's tenure. he was very well aware of that. a student and master of the depression in temperatures of what happened and the effects of it. i -- that's not to suggestinging that janet yellen is not following in his path. i think she is. and i think you need the central bank because when they raise interest rates much like the taper tantrum or suggesting they are going to raise interest rates, it could have a high level of -- she will raise

interest rates in july or august i think but it will be very slow. the curve suggests in 2019 february, they will finally reach 2% in terms of the fed funds rate. and i think that's about right. but it will take us three or four years to get there. >> bill, do you think phoenix now and then the 10-year treasury could test the 2012 low yield of 13? >> to me eric, that's a stretch. although and let me just hedge a tiny bit. you know, our treasures are compared to german money and u.k. money on a competitive global basis it's true that the current yield of 176 is this much more attractive than the yield on the german bund.

so u.s. rates will be dependant on where the u.k. goes and german -- they are negative so if they get down to 10 years or go negative like it has in switzerland, then our rates get dragged down as well. those rates are ultimately so artificial that at some point investors controversy take the bait any foote. and so i think it's possible that they go lower from this point, but where they go in terms of the ultimate destination, i think is dependent upon the conditions in euro land and germany and elsewhere. >> are investors ignoring some of the fundamental flaws simply because the u.s. is doing better than the rest of the world? >> well, i think the u.s. is doing better. we will see a g.d.p. number

tomorrow i believe, and it's probably going to be a 3% number although i point out that because of no inflation, it will probably be a 3% nominal number as well, which is very important. because it's the nominal growth rate which determines profits and determines debt service relative to the historicical norms. so we're doing better. think as the year winds on you know,and as the boost from lower gasoline prices dissipates that we will move back to a 2% and maybe even a 1% economy by the end of the yeafrlt -- of the year. having said that, it's still better than to what we see elsewhere like in japan and euro land. >> if you're right and bond markets and investors stop taking the bait, what happens to that money? where does all the liquid city

that's been pumped in go? in into what asset classes? >> well, it could go under two separate areas, eric. two tales. some investors would prefer simply to put it in a mattress. and that's a metaphor. they would simply put it in 4 a bank, because a 0% interest rate is close to what they would be taking on a 10-year treasury in terms of its better risk and return. other investors as we have seen over the past several years will go to the other tale and invest in equities under the assumption that real growth ultimately will be the result of the policies. what we have seen so far is that certainly has been the case in the united states. so stocks have rallied significantly during quantitative easing and the like. but if real growth fails to continue to demonstrate its strength like it has in the

past few quarters, then those tale investors that are dependent upon growth for equities will be likely to move back to the -- >> bill, we're running out of time. i just want to ask you before we go. now that you are with janus and not pimco. do you feel you have more freedom to express your thoughts and tell us what you think? >> oh, not tell us -- tell you what i think. it's smaller. so the ability to move in markets is different. but i've always told you what i thought. >> ok. bill, thank you for joining us and if anyone was listening you could hear an instant bloomberg ding. so glad u using your bloomberg -- bill gross of janus capital. ♪

>> coming up on market market, production of the alum numb ford f-150. what is it going to mean for their profits? find out from their c.e.o.

>> live from bloomberg world headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> traders and investors in european markets are calling it a day. scarlet fu is looking at the action overseas along with renewed weakness in oil. it appears that everyone is trying to digest implications of the greek election. >> live from bloomberg world headquarters in new york, this if you look at what is happening across europe, it looks like a mix day looking at the stock 600 index but you have to dig deeper into the different sectors. let's start out with the dax.

it's 10 to gain in 11 days. not at a record high but has been making record highs before the retreat earlier this week. the athens stock exchange index saw a bit every recovery from a three-day slump. i just checked and it is still 13 percent below where it was before the greek elections. certainly a lot of handwringing over what the elections mean for the greek economy, austerity and for banks. the greek banks seeing a bit of a dead cat bounce this afternoon from their 27 percent plunge from yesterday that wiped out $11 billion in market value. all five greek listed banks rose including the national bank of greece and alpha bank. ready large numbers, but given how far they've fell yesterday important to keep in context. royal dutch shell fell on the

work earnings but also because it said it would cut exploration spending by $15 billion over the next three years. a lot of people think that is what shell is doing and so will everyone else. nymex crude give up its earlier gains and turned lower, below $44 a barrel. a new six-year low. a new intraday low. looking for a reason for the catalyst for the latest leg lower. not really seeing one. we had inventory numbers that show plenty of supply in the u.s. that certainly pushed on oil yesterday, but not clear why it took another leg down. maybe everyone was anticipating that stocks would follow oil. >> wti trading in the 43 neighborhood. thank you for the update scarlet fu. >> you know what i say when that happens. wtf wti.

>> when a dead cat bounces, what sound does it make. >> thud. >> i was hoping you would say meow. >> ford motors says to watch out in 2015. you will hear from the cfo of ford motors bob shanks. ♪

>> ford be profit estimates in

the fourth quarter. hard to get too excited since net income fell to just a penny a share. ceo mark fields says pretax profit could grow by 50% this year. matt miller is standing by with a chief financial officer of ford motor company bob shanks. >> thank you. we are looking at a pretax profit forecast of a boost of 8% to 9% in 2015. bob you are optimistic and i assume that is because you are getting changeovers to the new f1 50 and you can sell these new higher-margin vehicles? >> absolutely. good to see you again. that is what we talked about through 2014, that it would be a set up year for very strong growth in 2015. f-150 has been an important part of that. we have added a third crew in kansas. the time they get to the second quarter we will have the whole f-150 system up and running.

very strong results. so far the product is moving quickly, high mix. we are very excited about 2015 and particularly the f-150. >> one of the things you do by shipping 700 pounds off the truck, making it with aluminum, is to increase the fuel efficiency of the vehicle. a lot of people wondered if low gas prices would reduce the incentive for americans to go out and buy this more fuel-efficient truck. how are you seeing low gas prices affect your sales? >> we have not seen any impact in the marketplace yet here it only still too early. first quarter is when we will see how consumers will behave in a new environment we are in. although we expect in the longer term for oil and gas prices to go back up. the important thing around the f-150 the at series of trucks is cost of ownership. better fuel efficiency and on top of that lower gas prices

every time you fill up, that has to be a positive. historically we have seen a positive reaction in terms of segmentation when we see gas prices go down. we will have to wait and see but that could be a positive as we move into 2015. >> i am sure you saw a piece where they took a sledgehammer to the f-150 tried to get it repaired and said it would cost more than just buying a new steel truck and that may affect insurance rates. how are you hearing executives reacting to that story? >> unfortunately, that is not accurate. we know the insurance rates are going to be about the same and we have seen evidence of that from people that have purchased the vehicles and purchasing insurance. in this case, they would do a deal that was not certified not among the 750 dealers or thousands of independent body shops that we have certified for repair. the information they provided

was incorrect. we expect the cost of ownership and repairs to be very competitive on the new f-150. and we designed it that way. >> let's go over to europe. on the conference call, mark fields said maybe losses in europe would be more than the 250 million dollars you were projecting in september. that is because of the crazy situation in russia but also because of the strong dollar. how is that turning out? >> it is not so much the strong dollar. it is really more the relationship between the euro and the ruble. most of what we shipped in comes from europe. it is more of that relationship than it is the dollar. the progress we have made on the transformation plan in western europe, the traditional part of our market their, has gone very well. when we put our plan together for europe, we expected russia to be a growing market

significant contributor to the business. we participated in that. rarely, things have changed hermetically over the last year. 2015 in russia is looking difficult. that is the impact that we talked about today when we talked about the guidance for europe in 2015. >> you produce most of the products you sell in europe, in europe. japanese carmakers produce a lot of the cars they make here in the u.s., here in the u.s.. a lot of the currency fluctuation affects may be negated. on the other hand, doesn't it give the european and japanese carmakers and advantage because they can afford to take a margin loss when they are selling vehicles here in the u.s.? >> you are spot on. as we look across the entire global business, we do not see the strong dollar having a material impact in terms of exchange rate impacts itself. the big factor that we are concerned about is the competitive advantage it gives

to particularly the japanese. one of the reasons why in the transpacific partnership trade agreement under discussions we are insisting on having strict enforceable currently rules as part of that. >> thank you so much for your time. we appreciate it. did not get time to ask about the new gt 350 but i will the next time you are on. >> thank you. bob shanks with our own matt miller. >> a blue-chip investment for pepsi. we will see how many of these companies as will advertise on super bowl sunday. ♪

>> it is time for some of our top headlines around the world. let's begin with foreign ministers from the eu discussing whether to impose more sanctions on russia. fighting has escalated between russian-backed rebels and ukrainian forces. yesterday, the eu failed to

extend travel bans and asset freezes on military officials. there is a sign doctors are winning the fight against ebola. for the first time since june, ebola cases in west africa have dropped to less than 100 oh week. the epidemic has killed almost one -- 9000 people. in germany, the inflation rate turns negative for the first time since 2009. last week, the european central bank committed to spend more than $1 trillion in an effort to verse the specter of deflation. >> i have to talk about this weekend. when it comes to the super bowl pepsico brands are everywhere. as the parent company of frito-lay, not only does it sell the gatorade on the field but the salsa and this year pepsi is back as the big halftime show sponsor, which is a hefty price to pay. so does the super bowl actually deliver?

from phoenix, arizona we are joined by the chief marketing officer of pepsico and the chief marketing officer at frito-lay. let's begin with you, simon. monday morning when the game is over and we have all woken up, talking about the ads the team m.v.p., how does pepsi actually win? >> the first thing -- it will probably be monday afternoon for me, honestly. >> that does not sound like you will be drinking pepsi. >> pepsi will be involved. for us it is a season-long effort. we start in september with the combine. it may go through the preseason the initial kickoffs. thanks giving is a big event for us. the super bowl is a culmination of six months of work for us. our measurement of success is not just the weeks after but the last six months. we are having a good time in the

marketplace. when you go into a walmart or 7-11 you will see displays and executions of our snack and beverage brands. you will see over 6000 executions over the country. we feel great about that. the other thing we mention engagement. we will expect to have a huge amount of conversation around pepsi and mountain dew among which is launching a new game. and gatorade is running a book in vegas over what color the dunk will be at the end of the game. >> that might be exciting, but will it get any went to drink more gatorade? you are not making any money off the spread. >> if you look at gatorade, we are the epicenter of sport, we are the beverage of choice. you rarely see any game in the u.s. without gatorade present. it continues to build our credibility and our presence.

we are at an all time high branch air in the u.s. right now so we feel pretty good about what we're doing now. >> the businesses of media and advertising are changing so rapidly. i'm curious to know, what works best? is it a halftime commercial, a sponsorship of the halftime show . maybe a gametime commercial. or product placement, like gatorade? >> the first thing is less about the game day itself. you really need to have a host of activities leading up to the game day to make it pay off. that is the point simon was making. we have an integration starting with the start of the season. the super bowl is on me ask consumers to submit ads. then we pick a finalist and then we ask them again to pick the

ads that will air on the super bowl. by the time you get to super bowl we have already won because we have had millions of views of our ads leading up to game day. it is more than being active on that single day. it is the seven months leading up to the super bowl era that is what makes it pay off. >> we actually have a 12 minute commercial for pepsi, right in the center with katy perry. >> because you are sponsoring katy perry. what is your total super bowl spend? it seems astronomical to me. >> you would be surprise, it is actually efficient for us. we have a long and enduring relationship with the nfl. this is just one part of our relationship. we do a lot of work around things giving, with the individual teams and players. it has proven to be a very efficient way to get our

business growing at the end of the year, to build our brand. doritisos has built up a lot of its brand behind this event. >> because you do so much, do they cut you any discounts? >> if you could call roger caddell and tell him, that would be good. >> is it like the airline business? boeing can quote a 737 at however millions of dollars. when we read a super bowl ad costs $4 million, how much of a discount should we put on that? >> every year we negotiate with and that will -- network folks and we do not get a discount erie but as simon pointed out the value of having a long-term relationship is building on what the consumer wants what the nfl fans and pepsico fans. >> to go back to the scale of the relationship, we have such a deep relationship with the nfl and we have assets and profits

that we can use be on television. >> since the beginning of your relationship, you have spent something like $75 million in total on the event. is that accurate? >> i don't know. we would have to check. >> you don't know? i believe everything else you have said but i don't believe that. >> you are putting on your own halftime show. what happens if it is a major success and all of these millennial's who don't do traditional tv are crazy for you to? what does it mean for katy perry and a star-spangled attack you learn you are putting on? >> we can safely guarantee that there will be between 110 and 150 million people watching the halftime show on sunday. there will be some second screen experiences but we guarantee it will be a must see live event. >> who doesn't love katy perry? >> the other thing to simon's

point, we will be on the second and third screamed that the millennial's will be using. it is not just a one-time engagement on the tv. we are active through our other brands. that is where a lot of the interaction with the consumers happen. >> you talk about the second screen. how much of the investment that pepsi is making is going into those ancillary media like twitter or facebook? >> from a beverage point of view, twitter, facebook, instagram are becoming such an important part of our communication platform throughout the year. it will always be an and conversation. i would not say they are ancillary. it is core to our communication. we have tv campaign supported by tv campaigns, vice versa. it depends on your objectives. this weekend we are having a massive presence socially digital, and on tv. >> last year there were 250

million tweets. 80% were about the ads. as simon said, we will be doing a lot of conversation doing twitter. >> what gives you confidence that you have your ads right? this has to be a moment of high pressure for you guys. >> yes. [laughter] pepsico is a great tradition -- has a great tradition with market share. there was an article a few weeks ago about pepsi being in the top 10 commercials of all time. we have some good testing techniques. as ram said, with doritos, the consumer is helping us decide anyways. we feel pretty good. >> what are you going to do to surprise us? >> tune in on game day. [laughter] >> of all the pepsi and

frito-lay products, you have to tell me what your favorite child is. what is your favorite? >> that is a difficult one. >> i am going to say i am a big fan of mountain dew kickstart. >> you are cheating. you are behaving like a marketing got because it is your new product. if you would have said doritos cool rant, i would've thought that was a good answer. marketing the new product -- failed. >> my favorite is not joe cheese doritos. >> old-school. >> ram, just to let you know you just won the interview. have a good weekend. we will be watching. hopefully it will pay off big time. the chief marketing officer of pepsico and the chief marketing officer of frito-lay. thank you for watching "market makers" today.

>> it is just about 56 minutes past the hour which means bloomberg television is going on the markets. here is karl through. >> starlet -- stock indexes are higher. the s&p 500 is flat after jobless claims fell to a 15-year low. and investors digested defense assessment of the economy. the big story is oil falling off a cliff in the last two hours, at its lowest level since march 2009. old futures heading south as well. joining me today is the senior market strategist at trading advantage. i was trying to look for a catalyst for oil and i cannot seem to find one but stocks are not taking their cue from oil this morning. >> not at all. for one day maybe oil has taken a backseat to the overall market here and we see the news out of mcdonald's.

could be short-lived but that is helping things. even facebook was hit overnight positive now. but we are seeing a turnaround. some of the laggards that we have seen over the last few weeks are may be putting in a short-term bottom here. at least for a day or so it may look like oil is taking a backseat to the overall market. >> looking at the mix, it has come down a bit at 20.28. the last couple of spikes we have had since mid-december have come up right away. what are you seeing in terms of options for the mix? >> there is a lot of downside put buying going on with the vix. we were trading up over half today. i think what we will see with expirations still a few weeks out for the near-term vix

options, probably see it near the 17 .21 level, but i'm seeing some puts in here. >> last week ups preannounced and the stock tumbled 10%, now below $100 a share. what are you looking for? >> they announced next week, but the pre-announcement last week was discouraging in the sense that they really had this well-thought-out plan for the holiday season that did not work again, two years in a row. even though we saw the stock dropped 10%, it really stabilized in this $99-$100 range. i have a cheap upside play. i will buy the february 1001 -105 spread. the options market right now is pricing in about a five dollar to six dollar moved out to february expiration. if i look at that and i like the upside, that puts me at the 105

area, which is the option where i would be short. long 100, short 105 for about one dollar. i have four dollars of upside profit potential. >> in a position to profit handsomely if it goes back above $100. thanks for joining us this afternoon. "money clip" is up next. the s&p 500 is little changed. dow industrials up by almost 49 points. ♪

>> welcome to "money clip" where we bring together the most important stories, the stories, and videos. in companies, nobody wants a quarter pounder anymore. mcdonald's is shaking up its office to get customers back to the golden arches. in tech alibaba comes out swinging in its earnings call but it's not about the profit miss but about the chinese government crackdown. and in motors, ford beat the estimates as drivers cannot get enough of the new f-150. in nation, the eagle rides a hog.