>> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> americans flocking to rooms to buy pickups and suvs's. >> everyone wants a piece of the shack and amazon is poised to snap up some of those stores if radioshack files for bankruptcy. >> doubling down why this hedge fund manager is one of the world has his best. you will hear from bruce richards. good morning, everybody.

i am erik schatzker. >> i am stephanie ruhle. >> let us pray again -- let us begin with economic news. fact deal -- factory orders are out. michael is with the headlines. >> is particularly bad news. new orders are down, the biggest decline since 2009. everybody has been very worried about what would happen with capital spinach is going into the year, particularly in the oil industry. capital goods orders excluding aircraft for overall business investment, down by 9.3% during the month of december. we have seen that all companies announced week after week they're cutting back on capital expenditures. the question is does it cut back on capital expenditures outweigh the increase we get in consumer spending from lower gasoline prices? at this point, it is about a type. we have to break down the numbers more and see whether

december was a particularly bad month. right now, it is not good with a three point 4% decline overall in capital expenditure cuts. >> the negative hits the economy faster than some of the positive does. the consumer might not spend the money for months to come. >> we did see that in the income and spending numbers earlier of last week. the steady rate came up even though we did not see increase an in the amount of spending. at this point, americans holding on a little bit. maybe they have got some christmas those to pay, but at this point right now, the downside is outweighing the upside. >> aren't michael mckee, with the latest on factor the -- factory orders. >> writing some big checks. lawsuits. s&p will pay about $1.4 billion to settle claims in inflated

ratings on subprime mortgage bonds. that suit filed by the justice department in 19 states and the district of columbia. the firm is settling a similar case with the california public employees pension fund. s&p will pay 125 million dollars. we may be on the verge, though i feel like i have been saying goodbye to radioshack. the chain is prepared to shut down any bankruptcy deals that would sell about half of its leases to spend and close down the rest according to people familiar with the matter. the new york stock exchange extended trading in the stock yesterday afternoon. meanwhile amazon may bolster its order operations by buying some of radioshack's property. shaq has more than 4000 stores right here in united it. the price of oil is up here that is right, up as much as 4%.

back over $50 and now -- a barrel before the first time in 40 days after more energy companies said they are cutting production. 94 rigs last week, the most in three decades. >> you know what cheap oil means, $50 a barrel. gasoline is cheap and that is one of the reasons auto sales continued to surge. general motors and ford and crisler reported gains of 15% last month. the best ois series pickup and is best month since 2004. let's turn to our resident auto expert here in new york city, matt miller. in detroit this morning is jamie butters. looking at the numbers we have received this morning, not just from the u.s. automakers, jamie but from the japanese, what can you say about the pace of recovery in the automotive industry continues? glass that is exactly right. the auto recovery is four years long and it will go into a six

year. it is often a good start. these are easy comparisons to last year. we have the polar vortex and nobody was shopping for anything, especially if they had to walk around on a lot, buying things outdoors. it started like everything would be the same, but everybody is double digits. all the top six automakers are coming in well ahead of last year. another start for another solid year. >> ok, new products out our exciting for car buyers. it is a lot warmer this january despite the great blizzard of 2015 here in the northeast. gas is cheaper. adam and morgan stanley pointed out these are perfect for lawmakers. it is very easy, and some may say even to easy, to get a car loan right now.

>> now we are talking autos? >> there are a lot of auto loans out there. it makes a huge force in of sales. subprime pleasing as well. i'm not comparing that necessarily to the subprime housing crisis. i'm just saying subprime are words are easily able to get loans on new and used cars area >> what is the story of crisler? you want to make a story about loans? >> mainstream leasing, prime believes in, is really in the sweet spot. there is still such a lack of used cars of 2, 3, 4-year-old cars. sales were still down in the dumps. the used cars were very valuable and that makes your lease payments very low. we are seeing leasing not just in the luxury space, but you know, honda, toyota, nissan and

they could not five or 10 years ago. >> how long will it take before some of the new cars that have been sold over the past few years begin to find their way into the used car market and that that begins to depress the demand for new vehicles? >> i was asking a lot of people that at the auto show last month. that is something i am really keeping an eye on. it is probably next year and maybe the year after. even though sales started getting better and have been increasing, there is so much demand for used vehicles right now that the guys from mannheim and all those experts, they are all saying two thousand 15, not so much. 2069 2017, we really start to see used prices come down and that will put pressure on leasing. >> this is why analysts are saying you have got to get ready for the fall here.

we're in an up cycle obviously, but we may be coming toward the end of an up cycle, at least the peak next year, 2069 2017. the carmakers are putting a lot into building new music -- new vehicles. they are not putting in march is because of the strong dollar and they could be poised to turn down. we're are getting closer to the beginning of the bear market. >> for the time being, crisler continues to kill it. >> what are they doing different? >> look at the five-year chart of chrysler's sales versus gm or ford. its sales are increasing at a vastly faster pace. >> marcio and he put the company up for sale.

it is no secret that every single press conference jamie and i went to at the detroit auto show were sergio showed up, he was kind of mentioning that there will still be big mergers in the auto industry. by the way, someone will buy a big player. it is pretty certain that crisler would be willing to sell at the right height because they are willing to get out as long as they can hold on to their stakes in for ari. i think that has to do -- a lot to do with the stock rising. the stock is up 50% which obviously blows away ford's 5% gain in the last 12 months and gm'6% decline. sales have a lot to do with it as well. >> let's talk about the japanese automakers. toyota and nissan in particular, they're much bigger than subaru. how much of a pricing advantage do these companies have over the victory right now?

question me, the detroit bureau had a great scoop. he interviewed bob shank, the day of earnings. toyota has a $10 billion boost advantage right now because of the currency? >> that was mostly in 2013 when the yen weakened against the dollar from 80 per dollar to 100. but we are also seeing a weakening going on in the last six months. what he is saying is it is the vehicles exported from japan that have the big advantage. that is really a toyota advantage. honda and nissan make a most everything they sell in america in north america. 21 percent of what they sell in north america here, and that is a lot, the lexis and the previous all come from japan. when the end is weaken the dollar is strong that gives them a lot of wiggle room in pricing and content oriented. cries all right, jamie, thank

you very much. our editor out of detroit, jamie butters. and here in new york city, our automotive correspondent, matt miller. >> when we return, he is one of the best hedge fund managers in the world. we will speak with bruce richards of marathon asset management. >> plus, the future of radioshack. there may not be much of one. ♪

>> welcome back. i am julie hyman.

we take a look at where stocks are this hour. we see gains once again, extended gains from yesterday's 196 point surge. the dow has moved from 100 95 in each of the five sessions. the return of volatility with a vengeance we have seen in 2015 is continuing. energy stocks have been leading some of the gains yesterday and today as we have seen them rebound in oil prices. i want to point out some of the stocks leading the way in terms of hitting fresh records. really interesting, you and i think a stock would be hitting an all-time high. as we have seen, the price of oil decline, i was just talking to alix steel, and she was pointing out the margins of many of these refiners are improving as their costs are increasing. automakers turning record quarter profits today and beating estimates thanks to stronger sales of new and used

cars. and fiat as well, we have been talking about the automakers this morning. crisler, their january sales up 14%, slightly above what analysts had been anticipating. many of the automakers reported double-digit sales gains for january as we have been getting the numbers for this morning. >> thank you. in france, three soldiers guarding a george community center have been stabbed in attack -- and attacked. security has been beefed up around jewishness facilities in france after the terrorist attacks in charlie have no. a quick resolution over the bailout according to persons familiar peer to drag on until the current amount of funding dries out in the spring. backing down from earlier demands at the euro area -- that the euro era deaf euro area write-down its debt.

the company's fourth-quarter profit beats estimates once adjusted for one-time items. after writing down because of those lower prices, the ceo told room -- told bloomberg oil is likely to stay low for quite a while. >> you look at the fundamental supply demand, it reminds me if we go into a time in this decade of lower oil prices. it will be a long time before we see 100 again. fax nobody in that this is wants to relive 1986. analysts say crisler will add 74 billion dollars next year. >> i will be enjoy market makers. we will be highlighting some of the best managers in the world, from bloomberg markets magazine 2014 hedge fund 100 list, these are the funds that had the best performances of the year. ranked number one, and bruises with us.

the ceo of marathon asset management, write 52 on the list up 9.7% in 2014. welcome back. what did you do last year? >> it is a phenomenal thing. although equity markets, all-time highs are at a couple percentage points, the residential markets are still about 15% lower than what they were at the index. the market real estate, both commercial and residential, the securities left for dead back in the crisis that we're still able to pick up in the marketplace reverse engineer, look for the cash flow of the loans, and find good value insecurities, we had a good year in our construction credit business. that is from cmts and the whole credit. they started off very well last year.

>> i have a question. who is it that wants to buy treasuries at 1.7%? >> start with the folks who want to buy the long bond. long bond is up 41% the 30 year, since january 1 of last year. >> why doesn't anyone talk about that? is it was up 11% last month. it was the best performing asset in the world. last year, the best major asset in the world. who wants to buy the yield? i do not know. it has been serving people well. the trend has been your friend and it has done very well. the question is, what comes next? >> exactly. so the fed, any quantitative easing in october, and ecb just announced $1.1 trillion in quantitative easing that starts next month and a year and a half. our fed did quantitative easing

for four years. how long do think the ecb will do quantitative easing for? years and years to come because of high employment, low inflation, and the economy. it will be a very interesting dynamic to see 11 central bank is doing quantitative easing while another central bank presumably later this summer, is starting to increase rates. the 64 dollar question is, when our fed starts to raise interest rates, those interest rates actually go up. >> what is the answer? >> a lot of people believe the answer is no and it will not go up. that is the big question. if rates do not go up when the fed raises rates, the federal ask the question hey, have we lost control of our number one tool? the ability to control interest rates through removing the federal funds rate. imagine that for a second. imagine you are chan yellen and imagine that you go to raise the fed funds rate in september and again in october and november

and yet interest rates do not go up. that must be a scary thing, because on the flipside of that if you want to lower rates and arrays do not him down you would be losing the number one tool they have for monetary policy. question does have something in her back out -- back pocket? >> it would be a big profit as we previously saw. >> the more you sell them, the lower the value. >> a very low basis relative to where the prices are now. >> you think that is what will happen? >> it will not happen initially when he raise rates. as emily, interest rates will increase. in the event interest rates do not increase, and this is putting the cart before the horse, because we are a couple of terms out here, the first time in the second time the rays to not go off, absolutely, all they have to talk about it is like a big bazooka and mario

draghi has not really bought treasuries yet, and yet you can look at where treasuries are. for trillion treasuries around the world are trading at negative rates. >> when will the trade workout? >> it is working out. look at this year, are you kidding me? s&p up in the day and down 1% and changed year to date. european stocks up 9%. i'm talking about the index for all the markets, up 9%. germany is up 12% this year. one month come up 12%. how do you like that? what i like about europe is number one, the ecb is just starting quantitative easing now. you will not see inflation but you will see asset inflation. that will mean three things. number one, treasuries across europe will be mailed to the moon for years to come. sovereigns at very lower levels. that is the first thing that happens with asset inflation treasuries rally. we saw in the playbook in the united states and the same thing in europe.

the second thing that happens is equities start to rally. now you have quantitative easing. the number one driver of equities rally will be lower yields but more important and that is the currency differential, the fact that the dollar has strengthened relative to euro and currencies around the world by 15-20% in the last year. >> bruce, we need to take a quick commercial break. researchers will be back with us on the other side of this break. a little commercial and then more bruce. >> without a doubt. stay with us. you're watching "-- you are watching boomer television. -- bloomberg television. ♪

>> stay here with us. we're speaking to bruce richards of marathon asset management. >> just occurred to me we are all color-coordinated. what is going on? >> we are.

we will also talk about radioshack when we come back. the companies talking about bankruptcy. a couple of the names want to buy the stores. too bad nobody wants to buy anything in them. ♪

>> live from bloomberg headquarters in new york this is "market makers" with erik schatzker and stephanie ruhle. >> welcome back and i'm erik schatzker. >> i am stephanie ruhle. is take you to the top business stories of the morning. almost all the big automakers posted january sales that beat estimates. fiat, crisler, ford, nissan all beat projections. general motors fell a bit short, but still recorded in 18 -- an 18% increase. a boost in consumer confidence pitch shows in consumer office depot and staples our story --

soaring today. activist investor has stakes in both companies. last month, they demanded staples hired advisers to work on a deal. once again, apple has gone back to the bond market to fund a share buyback. apple sold $6.5 billion worth of debt with borrowing costs that are some of the lowest have ever seen. apple now raised $39 billion from the bond market in less than two years. it is borrowing money instead of using their own cash, which, at last count, was a mere $178 billion. ups, united parcel service, said growth this year will miss the high-end of the target their the world's largest packet shaper claim higher pension costs and a stronger u.s. dollar. ups says full-year profit will increase 6-12% overall. >> all right, we are back now with one of whom are's top 100

performing hedge fund managers. bruised -- bruce richards. you have got europe. we talked about that. let's cover the second one. it is super exciting right now what is happening in energy. >> it is a miraculous thing when you take about the scale. 90 million barrels every single day. 90 million barrels of supply every day. you tip that balance by 2 million barrels, which is 2.2% and suddenly the price slides 55%. that is the stunning thing. thanks to the shell revolution in the united states and the fact that the united states is one of the great exporters and prisoners of oil these days. with that dynamic in place, we have what is probably the greatest distressed opportunity we have seen in years. the u.s. economy is growing 3% and the energy component of high yield is 17% and entering a time

of stress and distress in the coming two years. you will see phenomenal investment opportunities for distressed folks, whether it is in the private equity space and the hedge fund space and the energy complex. >> is there enough to find these opportunities? >> you have to remove or $1 trillion in went into energy to get us to energy independent in the last few years. 500 billion of that was funded in bonds and bank debt, and half of it is in the high-yield market, 250 billion dollars of high-yield bonds and high-yield loans. while arguably hundreds or so companies are not that large in size in the high-yield space, collectively, it is a lot of products. collectively, you're talking about multibillion-dollar capital structures, enough to complete 250 billion of debt. >> private equity has already started to make its move. blackstone drilling.

what kinds of things do people like you do? >> we will do similar things. blackrock, not the private equity side blackstone brother, the gs so side made that investment. >> that is more like your business. >> opportunity will be available. a lot of the distressed shots whether it is the asset based loan or debt cancels and cloud becomes available to secure against new debt, or against the second, whether it is a secondary buyback the company engages in a discount, whether it is a new money solution from a dip to putting money in when the company is going sideways or whether it is buying what eventually becomes the control of the equity of the company. >> you must have a view on where oil prices are going to go or what kind of oil pricing you will be satisfied with it order to make those investments right? it is just like other -- any other investor.

if it is losing money over the long run, he cannot be good for the debt just like the equity. >> right. within a range, you make it a wide range, the companies we are looking at should be able to work in that range. the view has got to be two-dimensional. i cannot just a one-dimensional. it cannot be the price fell from 150 and stabilize at 50 and then trend toward the futures market which takes the market up to $55 two years out. it cannot just be that kind of you. also has to be the depth of the fall and also the duration of the fall. let me give you an example. jpmorgan put out a report recently that said that if the price of oil is below $60 per barrel in calendar year 2015, the default rate for high-yield energy companies will be about 3.6%. the price of oil stays below 64 2006 same, but the fall rate

goes up sixfold to 21%. >> one more time? >> the default rate this year will be 3.6% for high-yield energy companies is energy stays at $60 or below. and it is not $50 and below. it is even higher than that. but if you keep it there, and that is why duration is important, you keep it there throughout the calendar year 2016 and go through the cash burn of the companies, the default rate will go to 22%. >> from 3% to 21%. do people realize this? why has no one told us this yet question mark have you heard this before? >> yes, similar things. >> that is crazy to me. >> no. some of those consumers are not economic. they are already economic at $90. >> yes. those presumably are not the ones you're looking at. you have your metrics, 60 dollar

oil. $40 oil for a time of duration for a couple of years at those price levels which are the weakest and strongest dominoes and they will tell you which ones you want a short and initially, and eventually, the domino falls with pieces you will be picking up. >> do you have any idea now of the 21% of companies that might default, names that might default, if oil prices remain at $50 or less through 2016? how many of those were what percentage of the universe becomes attractive to someone in your business? >> all of those names become attractive. they have already put the rate there. they have put their in. and little bit of maintenance once it starts pumping for oil. you then look at the reserve and what is pumping, understanding there will not be future

spending and future revenue. you have a price you will pay for the debt. certainly, equity will not be anything under consideration for those companies. these assets will be pretty valuable for the space. it is for the service companies. it is a pretty large opportunity. europe, the opportunities were capitalizing out in the banks of europe. all the companies in europe. the depreciation you see as a result of the ecb. secondly, the energy complex. not to say there are not other opportunities. you have the two biggest anchored sees in the history happened in the last seven years , last year with $40 billion of debt, and this year about $20 million of debt. >> what is your overall view? >> high-yield backed up considerably. you have to run it energy.

equity those that put out, it was interesting to see what was disclosed was how much energy each manager had. as part of their complex. everyone is starting to differentiate, what does your high-yield or folio look like and what does it look like x energy. you talk about high-yield anyone stock about high-yield in general terms, but about x energy. i would say the high-yield complex looks favorable because the fact that the economy is strong and rates are relatively low capital markets are open for the company is i think the high-yield space, when rates go off and when the fed tightens, i should say, when it does tighten, high-yield generally does well. energy is a completely different story because you will see a lot

of distress in the segment that will push the default rate up. you have not seen an industry, a segment of the high-yield market, blow up. that has been the largest industry sector since telecom in 2002. telecom was the biggest subsector in 2002. global crossing and level free. you remember all those names. you fast-forward, and energy was 7% of the high-yield market just five or six years ago. it is 17% of the high-yield market today. the biggest energy subsector. >> of all the energy horsepower you put to work at marathon every day, how much of that is going to energy? >> a big chunk, not today, because we have many shorts, but right now, today, it is five

6%. over time, it could be one third. >> lout. bruce, always a pleasure to have you on. thank you so much. bruce richards, the ceo of marathon asset managers verify -- >>, coming up chipotle has been a problem -- having a problem with pork. investors, however. ♪

>> time now for some of the top headlines in the world on this hour. a signal for europe's i'd against deflation. yields on germany's 10 year bond. they fell below japan's. japan has been played several decades by slow growth and falling summer prices to the inflation may turn negative for the first time in five years. the russian auto market is bad and getting worse so says the ceo carlos.

he spoke to bloomberg television. >> this is not the first decline. more than 11% decline in russia, followed by a forecasted decline of 20%, one third of the russian market disappeared in a couple of years. it is already pretty bad. with the forecast you have we should be, hopefully, at the end of the tunnel. but you never know. >> they have an interest in the leading russian automaker in ukraine evacuated civilians in eastern part of the country. pro-russian rebels have stepped up their attack in the region. the new fighting has led to calls for a military buildup in both sides, the u.s. is considering military aid. >> and mcdonald's may be struggling, but chipotle is thriving. its stock is near record highs and will report fourth-quarter earnings later today or at investors are apparently unfazed by its recent problem with its main supplier of pork.

let's bring in julie hyman, who took a closer look. all right. it is amazing to me that investors do not mind they have got an issue. what are the details? >> i hear from analysts that the sales of their pork rodarte at the restaurant accounts for 7% of sales. it is not their main protein that they are selling at the restaurant. what i have also been hearing from analysts is that chipotle is taking the risks that people will not see an 80 to sign on the door they are not serving it and turn them away. instead, they will just come in and earn some -- order something else at the restaurant. it is a good pr stand to take that they're sticking close to their so-called food with integrity line. that seems to be the take away. >> remind us again what the problem is with the supply? is the issue according to aaa is that it discovered one of its supplies are's -- suppliers were

not adhering to pull a standards. we know it has to do with the housing of the animals. there is also a big debate going on in the pork industry about so-called gestational crates. in other words, what has become the industry norm is for the sows to be confining crates, and in some cases, crates in which they cannot really turn around, while they are pregnant and nursing, in different stages. >> atchafalaya's standards are much different than mcdonald's there it >> mcdonald's said it would move away as well, but chipotle is broader than that in terms of what the pigs eat, how their house. it has tighter standards than most others in the industry. one of the main suppliers if not the biggest is a network of 700 farms, most of them in a radius of processing lance in iowa and pennsylvania. just looking at what the ranch

charges for pork chop per pound versus let fresh direct charges per pound, we do not know if this is what is the charts to aaa, but there is definitely a premium for the product. nonetheless, there is a limited supply out there and a limited number of farms willing to raise their animals in this way. >> thank you very much for the update on folate. meantime, we have more breaking auto news out from toyota's january sales. matt miller, another company coming ahead of expectations. >> right, it is routing to be a very strong january. last january, you have the polar vortex. but they are all proving, so far, to be slightly better than estimated, with the exception of general motors. we were looking for 18.8%. toyota is better than estimated as well. the game compared to the analyst

estimate of 13%. one of the reasons is the 31% gain. cheaper gas prices and using credit helping out these carmakers as well. >> thank you for the breaking news, matt miller out of the newsroom. when we come back, talking to your kids about money. a new book tells you how. we will talk to the author in a second. ♪

>> it is a subject we sometimes dance around with our kids here in money. how much we make,, siu saved how much we struggle. an author says it is time to take the commerce -- take charge of the conversation for your kids own good. it book called "the opposite of spoiled. what is the punchline? >> we need to have more conversations with our kids about money because there is a direct connection between talking about money and teaching kids all the good values we want to imprint in this silly little brains before we shut them out into the world. >> you think we were taught about it or has it

never happened? >> i think many of our questions were brushed away as something that was age-appropriate or impolite, something you do not talk about, not just with people who were blood related. >> i thought you meant, here's how you save money. are you saying to tell kids here is how much money i make and that how much i am struggling? >> it comes as a result of the questions kids ask from the very beginning. the first time they often handle money is limited to the very comes. they want to know, this is great, what can i buy with it, and how can i get more money? >> if you talk to your kids about money the right way, what happens 10 years from now? how does their behavior change versus what they might otherwise become? >> here is that we had to worry about that we do not have to worry about 20 or 30 years ago.

we have got 16 and 17-year-olds making six-figure decisions about college as they approach the question of how to pay for college and whether to take on tens of thousands of dollars of student loan debt. these are teenagers making these decisions. it is lunacy but the reality we are dealing with peer they need to be ready and they need to lay 10 years of groundwork so they're ready to make one of the biggest financial decisions of their life. >> do you -- do you call this financial literacy? >> when people hear the term, they think about things that happened in schools. what goes on at home. if you believe as i do that there is a direct connection between talking about money and teaching kids values, you do not want to outsource that to a teacher, even though a teacher -- this is something you want to be in charge of yourself, and you want to be doing the download because you want your kids to stand for some of the same things you stand for. >> is the fact that you can charge so many things make it harder for kids to feel

connected and understand money? my kids do not even see it that often. >> it is true, you want to look are opportunities so you can see the visceral use of actual green cash money in your everyday grown-up life. as kids, we want them to be collecting allowance over many years, 5, 6, 7, 8. in coins so they can count it and watch it grow and see it happen. then maybe they can go virtual after that. >> if it is good advice to tell our kids how much we make, what if the number is gargantuan? i was talking to a guy who works in finance a few weeks ago. he makes $20 million a year. what happens if you tell your kids you make $20 million a year? questions as are, if you make that money, they will find out already. >> do you really want them saying that number on a playground? 20 million, how'd you like me now? >> no, you don't. you do not tell them until they are ready. the issue with having a lot of

money is if you have that kind of money if the kids google your name, they will find out stuff about you and may not be ready. if you're shutting them down and not answering the russians, they will end up with the wrong impression in the wrong information, thinking they need to turn to the internet to get their answers. >> if it -- is there one way you found to successfully imbued children with the right values around money? >> the thing i would focus on is helping your kids understand why it is that you give the way you give, some uri family that gives at least some money away, bring them into that conversation. the asset allocation of your charitable budget says something about who you are and what you stand for. if you stop to look at it that way, you may set -- you may decide or your kids may help you decide that it does not really fit with the family stands for and it may be time to do something differently. >> congratulations. it sounds awesome. stay with us. you are watching "market makers"

right here on bloomberg television. ♪

>> live from bloomberg take orders in new york, this is "market makers." >> the price of oil finally heads north. west texas intermediate october $50 a barrel. did the market finally hit bottom and start to recover? >> radioshack is on the verge of filing for bankruptcy. who will end up with it stores? >> we are talking to the most top-performing headphone managers. -- hedge fund managers. welcome to the second hour of "market makers."

>> we are going to start you off with the bulletin. ford and general motors posted the biggest auto sale gains last month. cheaper gas means americans are snapping up pickup trucks and suvs. the gmc truck brand gained 29% in terms of sales. ford's got light had its best january in 11 years. shares of office depot are up as much as 21% today. staples and office depot are in merger talks. the activist investor star board capital has been pressuring both to pool their resources. they have stakes in both staples and office depot. a warning about dietary supplements in new york. the state attorney general's office has accused for retailers of selling fraudulent product. they did not have the herbs named on the labels including gnc, target, walmart and walgreens.

president obama is putting limits on the national security agency. the administration says data collected on foreigners will be deleted after five years if it is not relevant to national security. the white house will reveal spying on foreign leaders in the wake of edward snowden's leaks. >> it is game over for radioshack. people tell bloomberg the nearly century-old retailer is officially preparing to liquidate after years of absolute losses. it would sell about half of it store leases to sprint and shut down the rest. yesterday nyse suspended trading. an inside look at the fall of the iconic electronics retailer in the latest issue of the magazine. cory johnson is with us. he does not follow radioshack he loves buying remote-controlled cars there.

i feel like we have telling -- been telling this story for ages. how is it still taking? >> this store has been going out of business for 20 years. it is amazing it has managed to go out of business for so long. >> what is the most surprising thing you learned about radioshack? >> it has been a mess for so long, that it is surprising to remember how beloved this store was at some point. >> in the 1980's. >> way before my time. i did look for radio controlled cars there when i was young. a lot of people went there to build things. they associated it with being able to make things. just go there to buy batteries. >> cori?

>> i read the 10k about 10 years ago and did not think it was in the realm of our technology. they made an aggressive turn to embrace the mobile phone business. they have a great operating business in selling cables and chargers and the things that connect headphones to other things. the inventory is under control, and it is a smart business. it is not a high-growth business. they try to add on the business and made partnerships with the likes of sprint and t-mobile. the problem was, they focused on the phones that were selling best at the time. the flip phones. they focused as the smart phone emerged on those lower-cost phones. it was a huge mistake. they could not get away with it, and that is the thing that has

rammed this business into the ground. >> what is the lesson for retailing? >> things will massively changed your business. if you make the wrong decisions about responding, you can be left behind. >> it happens to lots of companies, no. microsoft, not just retailers. >> what's up with the management? it has been a mess for years. how did they lose their way? it is not just they were selling the wrong products, this thing is a stink pot. >> the revolving door of ceos shows that there has been issues in fort worth. the fact that so many companies are showing up to look at this real estate. sprint and amazon and brookstone and people within radioshack think there is a way to shut down the real estate and

keep the brand alive. if the location was ok, what they were putting into those locations was the problem. i have spoken to people, and they said the management is very resistant to change. let's not forget, in a turnaround plan, they offered up -- talk about slicing the marketing budget after running weird ads at the super bowl. they are vacillating from one idea to the next without having a clear goal. >> so much about retailing is real estate. how good is real estate -- radioshack's real estate? >> they have about 4000 stores. that was a big advantage for the retailer for a while. it has been a big problem lately . it wanted to close down 1000 stores, its lenders did not want

to let that happen, because they figured, even if you close down the store, you will still go to bankruptcy. >> did the lenders truly believe in radioshack? >> to the -- they do not own a lot of the stores. there are 900 stores that operate in a franchise model. these are leases, but they are long-term leases and good leases . when you hear the discussion of sprint/radioshack, keeping the name alive it may be to keep those leases from triggering a renegotiation. that might keep the name alive and therefore keep the rates low on those rents. >> doesn't make sense that amazon would want to take over some of the stores? >> amazon is a company that

tries things. they experiment a lot. if you look at what jeff bezos has said, let's try new things. i think that amazon will take a look at this and see if there is a deal to be done. the grander scheme for amazon is to push distribution as close as they can get to the customer. they decided to change their business model when they decided to pay state and local taxes. they could then enter high tax places like new jersey new york, california and get close to the consumer. you cannot get much closer than the radio stack store on the corner. this could be another tool. i'm sure that his wife amazon wants to look at the books. -- why amazon wants to look at the books. >> around cory johnson -- our

own cory johnson. >> when we come back, oil it is back above $50 in the united states, does that mean we saw the bottom at $43? ♪ >> we are profiling hedge fund managers. we will be speaking with jason buttrick. ♪

>> i will bring you top headlines from around the world. in australia surprise interest rate cut. they cut its bench rate to a record low. they said australia's growth would be weaker for a longer time. australian stocks surged to an almost seven-year high. the australian dollar had a 5.5 year low.

the german chancellor does not expect a quick resolution over talks about the greek bailout. she expects the talks to drag on until the current round of funding runs out in the spring. the new greek government come -- appears to be backing down from earlier demand that the eurozone ramp down its debt. eight former top u.s. officials are urging president obama to send weapons to the ukrainian forces. they called the united states and nato to send $3 billion of weapons to ukraine over the next three years. administration officials says sending weapon could hurt and testified a political solution. oil prices are making something of a comeback. a brent crude is on his best three-day rally since 2009. in the united states, the benchmark west texas intermediate is back about $50 for the first time in a month. the theory is that companies are curbing production -- are they

curbing that much production? >> i am so skeptical of this rally. we did see a u.s. count followed up 5%. that would be good for oil in terms of you are getting less production. that was in a not shale basis. we are not talking about fracking. you have to look at the market as a whole. we are short heading into last week. to get headline news, you get short covering. that is what we are seeing today. some fundamental, and that triggered technical buying. >> some companies some operators are curbing productions, they are curbing oil service contracts and capital expenditures. >> true. we are not there yet. citigroup said we need to see oil prices around $30 or under to actually curb reduction like oil sands.

to shut production. drillers are getting more efficient. they have a lot more expertise so they will not shut down altogether. oil production is still higher than it was eight months ago. we are not seeing it. >> oil producers are on very efficient -- are very efficient. they have capitalized on new technology to drill, resources that were not available previously and to drill at lower costs. what is the possibility that these low prices of oil will drive the industry to be more creative more aggressive, and that some of the projections that people are making about the production that either will be shut in or will not be developed as aggressively maybe those projections will prove to be unfulfilled?

>> that is the conversation. saudi arabia was caught off guard. they thought lower oil prices would have an immediate impact on u.s. producers. that did not happen, they became much more efficient. we had the thing called and hast oil recovery, different ways to get oil out of the ground. you can use something like soap that you pop into rock and get water out. use carbon dioxide to get the oil out. they have not been economical until now. if they got the right technology, it would make it that much cheaper. something very different than what we saw in the 1980's with -- that put so many companies out of business. >> he is interested in oil. he and many other distressed people see huge opportunities. they may not want to spend money

on capital expenditure, if they buy an asset at a distressed price, they will try to wring as much cash flow as possible. wells that might otherwise may not be drilled will, because it will be that capital available. >> bloomberg came out with a note talking about m&a, about the permian at basin, they will see a lot of consolidation within that area. we are already seeing consolidation, they know the stuff is good. it does not say, we do not want it, it's as we will continue to drilling there because we want to make the money. alix steel raising questions about the durability of oil above $50. next up, we will stay on oil with an investor who is hoping to profit from the plunge. you should listen to his ideas. ♪

>> welcome back to "market makers." i am stephanie ruhle with erik schatzker. we will be highlighting some of the best hedge funds manager. these are the funds that have the best performances of the year. bill ackman's pershing square was ranked number one. we spoke with bruce richards from marathon and that we are happy to have jason mudrick here. it is a distressed opportunity fund up nearly 16% in 2014. they were right number 17 on the list. -- ranked number 17. how did you do it?

>> u.s. distressed. >> where? >> there has been a perception that there is not a lot to do in distressed. we have been very busy. even before energy. it is exciting. in terms of what we did last year the difference with our firm, we manage about $1.2 billion. most guys who do distressed are very large. i know you had bruce on. we estimate that 90 or 90% of distressed are -- >> do you have enough resources? you need analysts, lawyers, so much support. you have enough assets to support the kind of work you need to do to find those great deals? >> we do, especially now. we are actively hiring.

a billion dollars is a lot of money. when i started the business, the largest fund was $500 million. we have significant resources. the most interesting thing about how we are positioned competitively, if you look at companies that get distress, high-yield issuers. 60% of them are middle-market or small-cap. 60% of them are less than $5 billion of enterprise value. >> not large enough to a tracks distressed. >> it is hard to move the needle on your portfolio. that is a big position for us. a lot of the market and the distressed ratio, credited is three times over in the sub to the dollar enterprise value. >> while bruce richards gets excited about opportunities like tx you or caesars they are not on your radar screen?

>> we had a position in the fih. we can also do icon fitness, a profitable winner. a bond. we can do the large stuff, the medium-sized of, the small stuff. that's not true with the $20 billion plus guys. >> let's move to oil. does oil eggs i you as much as it excites bruce? -- excite you. >> it is a massive opportunity. >> where, how? >> energy-related companies have been the biggest issuers of high-yield credit. about $1.2 trillion. leveraged loans, depends on who you talk to is probably another

$200 billion. you're talking about $400 billion of paper, issued by companies. this is a massive opportunity. >> when did you start studying this? how far did oil have to drop? >> we started in the fourth quarter. we stepped up our efforts in january. i had six people in houston for weeks. the team is heading back to houston in march. we have been to six cities and had 80 meetings. we are selling a lot of resources. we are not stopping everything else we are doing. energy is very interesting. >> are the deals starting to happen? are things beginning to happen? from where i sit, it does not look -- oil is back at $50

today, but it has been there or less for weeks and the only deal of size that i can recall is the blackstone, linn energy deal. >> a lot of these copies have liquidity and hedges in place for this year. you will see a lot of need for capital next year if oil stays here. what you have seen is the funds and firms and individuals that lent to these companies, most of this happened over the last couple of years, what is happening is they are running for the hills. the companies we have invested in, we have seen price moves as much as 60 points. >> what will happen to those funds? >> hopefully they have a diversified portfolio. these 20 weren't working. >> you think this move will force funds to shut down? >> if you had a lot energy exposure last year, it hurt.

>> we will be back to continue our conversation with jason mudrick and just a moment. we are talking to one of the top 100 performing hedge fund managers in 2014. the conversation continues. ♪

>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> welcome back. >> we are about to see the close of european markets. people are wondering what does greases new leadership do next. there is concern that these new leaders are taking a hardline against creditors. there has been concern him and that is easy and it is lifting european stocks today and sending government bonds lower. >> the recovery in oil prices that you are discussing is a factor, because basic resources

in energy companies are leading the advanced any the stoxx 600 index. another day another record high for the german jack's. at it all up and the afc had its best today rally in years. -- the ase had its best day in recent years. the yield on the 10 year moving up to 34.5 basis points. that is lower than japan's ten-year jg beat return of 35.6 basis points. yields on greek and italian bonds -- the biggest decline in 2 weeks. we will monitor the rest of the u.s. market action in a little bit. >> thank you. jason mudrick is one of the top

performing hedge fund managers of 2014 according to a definitive ranking by bloomberg's markets magazine. >> 17 is high on the list. >> it sounds a whole lot better. how long do you think before the opportunities present themselves in oil? it sounds as what you're doing is in the secondary market. how long before you have the opportunity to become a principal in a reorganization? >> host of what we do is in the secondary market. the deal i think you are referring to in rescue financing and for what we do restructuring, probably start after this year. assuming oil stays here, and gets much more abundant.

>> why the preferred the secondary market? >> we are credit guys. i heard any prior segment you talking about oil prices -- we do not have a view on oil prices . if you are going to buy equities of these companies, you have to have a view that oil is going back up in the near term. it may. we by senior loans and senior bonds. if oil goes back up, we will do well. >> you do not need a corporate the fall, you just need them to move. >> if commodity prices move, we will do well. but, if oil states here for a while, these copies will default , will convert debt to equity and will end up owning these businesses at attractive valuations. the oil opportunity for the next

two years -- i go back to what i said earlier. it is hard to significant outperform the market when you are large. it is a reality. >> isn't it weird, all those big ones are only getting bigger. >> every time we buy something, there is not a lot of retailer investors in distressed credit. their somebody selling it to us and not because they think it is going up. i am not buying it because i think it is going down. that is a sophisticated person. we have a great group of guys who work really hard. we have a competitive advantage with our size. we got it right last year. >> how many people you employ? >> 15 people. >> what you think it will be like for the overall hedge fund community? will we see more or less hedge funds next year?

>> i think that depends on what the markets do. there is a lot of data in the hedge fund community, unfortunately. if the markets do well, that data will produce good returns. if it does not, there will be a lot of dispersion. it is easy to perform well when markets are going up. if we go sideways or down, you will see the strategy shine. >> what about the rest of high yield. if you exclude energy, what is the prospect for default? >> the good news about the oil slide is it is good for the economy. there are a lot of consumers that have more money in their pocket than they did six months ago. even before gas prices move down, the economy was doing well. we are sure a lot of high yield but we are short because spreads are very tight. it is a cheap hedge and a hedge to a number of our stressed long

possessions. i'm sure high yields as a -- we are shorted through single names and default swapping. >> how long before this credit cycle turns? >> aside from energy come i think you will need to see an economic interaction before you see default. >> were you involved in radioshack? >> i was and am. we were part of the syndicate of lenders that provided them rescue capital in the fourth quarter. >> did you think they had a viable this mess -- business? >> the loan we provided was senior in the capital structure. it was a 95 issue oig. limited risk. a high return, limited risk. we think it is four times covered. i would not have made a loan because we never were convinced

it needed to exist. >> you still think that is money good? because of inventory and receivables, yes. >> is there anything in that business you believe in? >> management had a turnaround plan that they believed. we did not believe it. we do not take flyers. we do things we have a lot of conviction in. there were cost savings, unprofitable stores, the new formats were doing well. there was an opportunity. they ran out of time and liquidity. >> it makes perfect sense for you to come in where you did in the fourth quarter of a super senior level. you will get paid in all likelihood. there are so many people who gave the money that are not going to get paid. >> had a turnaround work, there was a lot of leverage in the junior part of the capital structure. you would have made a lot of money in bonds or stock had it

worked. they ran out of liquidity. >> they've been out of selling things that anyone wants to buy. >> jason, thank you very much. yet another of bloomberg's top performing hedge fund manager. jason mudrick. we have more "market makers" coming our way. ♪

>> now for some of the top headlines from around the world. great bonds are rallying after the new government backed down from its demand for a deadly. greece's finance minister said the country would be in favor of a swap. it would -- an ominous signal for europe's fight against deflation. for the first time ever, yields on german bunds fell below japan's ten-year debt.

a japan is plagued by several decades of slow growth and falling consumer prices. germany looks different, but their inflation rate turned negative for the first time in five years. bp is feeling the pain from the collapse of oil prices. therefore quarter profit, while beating estimates, adjusted for one-time items, came in at a $4.4 billion loss. their ceo spoke to bloomberg and said oil is likely to stay quite low for a long time. >> you look at the fundamental supply and demand, it reminds you of 1986 where we could go into a time that of a lower oil prices. it will be a long time before we see 100 again. next analysts say oil prices will average $74 next year. it was not the most popular super bowl ad, but it is the one

everybody is talking about. have another look. >> i'll never learn to fly, or travel the world with my best friend. i won't ever get married. i could not grow up, because i died from an accident. >> at nationwide, we believe in protecting what matters most. your kids. together, -- >> you probably feel the same way about that at as everybody else does, which is to say, kind of a downer. >> that is an understatement. >> we want to know. we are wondering, what on earth was the company thinking and, we had planned to put that very question to nationwide's chief marketing officer. he was going to be on "market makers." he canceled about an hour ago. he said he had a scheduling

conflict. most never happens. -- almost never happens. >> nationwide was joining us to play defense. they need crisis management right now, following the advertisement and all of the negative press. i am scratching my head, why aren't they here? >> defense up to a certain point. maybe this was by design. >> we are not talking about mcdonald's, we are not talking about coca-cola, we are talking about the nationwide ad. advertisements sell product or do they raise awareness? >> is bad pr, good pr? >> only 12% of the tweets around this ad, and it had the most twitter traffic, were positive. here is an idea of what we saw. >> an idea of what some reviewers who saw the nationwide ad have been saying.

i will not watch katy perry because i have died. that is very tongue-in-cheek but it gives you an idea of how people felt about it. >> the seahawks have not completed a pass, but on the plus side, they haven't killed -- i have not killed any of my kids #nationwide. >> by the time that tweet came out, the seahawks had not completed a pass. it was early in the first half. >> i had really young children and they were watching the first half and set their, because they love the ads, astonished. i would love to ask nationwide the question, what were you thinking. >> why to drink -- stop trying to make me sad. >> the point of this is to illustrate the genius or crazy the ad got people talking.

to your point, generated much more twitter traffic. i would say, and it is a shame we do not have the opportunity to talk to their ceo, that it worked. next they do not cancel because of a tragedy. they just canceled. their chief marketing officer, you understand how marketing works, come back tomorrow. >> coming up, forgotten but not gone, we will see what consumers think about radioshack. if they think about it at all. ♪

>> we have already talked about the apparent end of the road for radioshack. it is close to liquidation with plans to sell half its stores to sprint and shut down the rest. investors who have been wiped out may care, but do regular people? we asked potential customers how much they really know about the shack.

>> i do not really know what radioshack sells. >> that is a tough one. electronic parts. >> radioshack sells all manner of accessories and doodads for accessories. >> electronic devices and equipment. >> they sell batteries. >> batteries. >> nothing best buy does not sell. >> radioshack has been an impromptu place for me. >> i am surprised that the store still exists. >> i do not know what they sell. >> diet best buy. low-calorie best buy. >> radioshack is antiquated.

>> radioshack is local. >> radioshack is right across from my office. >> radioshack is an last-minute option. >> i would feel terrible. >> if radioshack went bankrupt, it would not affect my life. >> i do not go there, so i would not feel like there is a void in my life. >> i do not see a point of a radioshack in 2015. >> maybe not in 2015, but when my husband was a kid, he spent several hours each week at radioshack. they sold a radioshack grabbed back, and in it were spark plugs, wires, a battery, a matchbox car. every week that's where he spent his allowance. the radioshack business plan it stopped working 25 years ago. >> it will be a tragedy if they

cease to exist. i have a receiver that stopped working, the only way to get it start working is to get capacitors. where will i get them if there is no radioshack. we will be back in two minutes. ♪

>> that is going to do it for "market makers." >> this handsome devil will be

out for a while. >> that is true. kudos to my partner who has soldiered on through the soap feeling under the weather. >> or are you tweeting, stop coughing, i will try. >> tomorrow, oil is on a roll. has the market finally bottomed out? tomorrow, stephanie will put the question to the ceo of rocky mount and resources. he has to have an answer. >> for now, it is 56 past the hour, it means we are taking you on the markets. scarlet fu has more. >> thank you. u.s. stocks extending yesterday's late surge. prior to today, jimmy figured out the dow had moved up or down by at least 195 point in the last five sessions. we could make it six in a row. here with me is kevin kelly. you and i were talking about how the bigs has come down, so

volatility is cheaper, what kind of opportunities does that present? >> investors are coming in at two times the amount of put are being traded versus the call. during this year, we have traded around or above 20. now that the picks has moved around 18, urc traders put on those put spreads. that compares to last year when he picks average around 14. -- the fix. >> what are you looking at in terms of catalysts? >> the theme will be earnings. that will be the focus and it plays into greece a little bit because currency is impacting earnings. some companies are giving guidance. they do not know how it will impact. the euro has come down 20% since last may. oil has come down significantly.

we are seeing a sharp moves and companies do not know how to react and give guidance. cfos are trying to figure out how to balance for the rest of the year, and that includes share buybacks. >> disney is supposed to report results. about 75% of its revenue is from the united states, more protected than other multinationals. what do the options activity look like? >> they are getting the vast majority of their earnings in the state, the implied move is around 3%. yesterday, you saw two times the amount of the daily average volume trade in the options. they were not trading above the 52. you will see about a 3% move either way. they had the number one selling toy on amazon, elsa. the third best-selling music album and that is behind taylor swift. they have met or beat earnings for the last 15 quarters.

everyone is not anticipating something surprising, so they are shrugging off this measles epidemic that is going on. >> is anyone blaming disney? does it have an effect on their stock? >> everyone is living washington. >> that an jenny mccarthy. you have a trade for us on amazon. it had a great start. got a huge pop after earnings. >> the strategy is the stock has run about 50%. you want to go out and put on a put spread in july. you want to buy the 340 put an sell the 300 against it. it cost around $10. page yourself, because they beat on the bottom line, but they missed on the top line.

one of the interesting things, for guidance, is negative earnings for the first quarter. it plays off of what microsoft did. they had a significant currency hit. everyone thought they would do well on the pc upgrade, it happened to deal with their os. this is another one of those place where you want to hedge your position. >> amazon's next earnings report is april 24. money clip is next. ♪

>> welcome to money clip, where we bring the best stories, interviews and video all in business news. here is the rundown. in motors, gm and ford have been tearing it up when it comes to selling cars and trucks. why have their stocks been falling for months? greece backs away from pushing europe to write off its debt. now it has to convince the european union it can spend, spend and spend. in politics, boxing over the budgets. paul ryan in one quarter, jack lew in the other corner