>> from bloomberg world headquarters this is bottom line, the intersection of business and economics with a main street perspective. we begin with breaking news. the federal reserve is releasing minutes from its meeting in january. our washington correspondent has the details. >> you will recall that fed policymakers upgraded their assessment of the u.s. economy and repeated their pledge to be patient in raising interest rates. that is a plan they plan to hold two.

the key section many participants indicated there with the beginning of policy normalization in keeping the federal funds rate at an effective lower bound for a longer time. at the same time, some thought it was appropriate to start firming policy. the reasons they might push back would be the need to see further improvement in the labor market more evidence inflation is moving back to the 2% target and that wages are moving higher. they did have concerns about overseas, including china. they all agreed lower energy prices were a plus. they discussed the communications challenge to indicate that liftoff was approaching. some expressed concern that the financial markets might overreact, resulting in tight

financial conditions. the minutes go on to say that participants discussed some possible communications about which they might further underscore the data dependency of the decision regarding when they will tighten monetary policy. they are struggling with some new language. they did not come up with a solution according to the minutes. i have a discussion on the subject of inflation and what it might take to get inflation expectations moving to the 2% target. there was also a significant discussion about the exit strategy and some policy tools will use going forward it comes time to start normalizing policy . according to the minutes, that time maybe further off than some people thought. >> thank you. let's get reaction on wall street and see how the equity markets are doing. julie hyman is of the breaking news desk. >> equity markets have not made a dramatic turnaround, but we have seen them go back to little

change. they were lower before these minutes came out. that is because of what peter was talking about, the fed may be on hold for longer than investors have anticipated. there have been investors and economists that were skeptical that the fed would raise the rates this year, or are investors on the other side of that trade. where is a few minutes before the minutes, we were lower, and now we have very little change. you have to take a look at what is going on in the treasury market as well. we saw a reaction a little bit more of a dramatic reaction where we saw a pop in treasury prices and they dropped in year the yield, definitely seeing a reaction there. finally, i want to take a look at the dollar. there we are not seeing much of

a reaction. if you look at the dollar index it still where it was before these minutes came out. in the equity market, we are seeing a little bit of movement. now we are heading lower once again. >> as we were going over the fed minutes, we do get some breaking news out of greece. >> the latest is that we are hearing that the ecb is going to be increasing funding for the banks in greece emergency liquidity assistance. that figure has stood at 65 billion euros. apparently, they will increase that to 68.3 billion euros. basically that is that greece lenders had asked for additional is an -- ascendance -- assistant because her had been the punter withdrawals. -- there had been deposit withdraws.

they are not feeling confident in the business and the country. again, that's another think that's another incremental change for greece. this is for the bank funding. >> thank you. we will have more on the fed minutes coming up at the bottom of the hour. tony crescenzi executive vice president at pimco will join us from newport beach, california. u.s. homebuilders vote on fewer single family homes. the commerce department reported that housing starts declined 2% was month, falling just short of survey estimates. mark zandi is chief economist at moodys. welcome back. this retreat on housing starts, it was broad-based three or four regions in the u.s. all the kleins good what happened? >> there's a general upward

trajectory. to go back to the teeth of the recession, 500,000 phones -- homes. it's going to move up and down and all around each month. the trajectory is positive. quick the u.s. labor market indicators are showing strength. isn't that supposed to underpin home sales question mark -- sales question mark -- a salesperson mark -- sales? >> the quality of the jobs are improving. i think the rate the labor market is getting to wage growth. >> the starts for single-family homes fell down nearly 8%. have builders concluded that there is more profit in constructing multifamily dwellings?

>> there is profit in both. there's a lot of action. there are a lot of millennial's, 18-34-year-olds. >> there is profit in both. they are going to rent. there's a lot of room there. vacancy rates in the multifamily space are low. >> we did see an acceleration of home price growth. with that continue this year? >> i see mid single-digit house price growth. that is consistent with income growth. that's what i would expect. >> when the federal reserve is we just talked about finally does talk about raising interest rates, borrowing costs that have been near record levels, they're expected to rise. was that going to mean for people who have been on the sidelines on buying a home. are they going to miss the train? >> what matters for mortgage rates is long-term interest rates. they will rise, but they will rise slowly over time because of a lot of things that are going on over the world, like the ecb

-- so it's not one of those things where they will miss the train. >> are those international headwinds go to find their way over here? >> no. i don't think so. it's possible. there are some dark scenarios, but they would have to be really dark. our economy has a lot of momentum. you can see it in the job market. that is fundamentally key to optimism. >> no concerns when you hear stories about greece, about what's going on there? >> there's reasons to be concerned. things go badly wrong. >> what about american exposure? >> it would take a dark scenario. the odds that greece will exit is low. the cost is substantially to their economy. >> i'm speaking with mark zandi

chief economist of movies analytics. there's a story out today about student that and the shot at buying a home. we refer to data from the new york federal reserve. student that grew to $1.2 trillion. the biggest ever number for student debt in the united states. that is also showing the average balance for each borrow last year was $27,000. what does it mean for the housing market specifically and what is it mean for the american economy that millennial's and even people in their 30's and 40's paying off their student loans. this is a problem. >> over. a decade or two, where then is

he that student loan debt has been a significant weight on the housing market, the ability of young households to buy similar family homes, and on the broader economy. this problem is growing deeper with each passing day because the growth in student debt is rapid. this ideal -- i don't think it matters for this year or next year, but over a longer. time it does. >> we have young people who don't live out their parents dream. they don't own a home. when they get out of college they can't find a job to make enough wages to pay that loan back sooner or their board and by crippling debt. >> if nothing changes that something we need to board about. i do think we will respond to this. i think everybody recognized that the student loan debt problem is a problem and it needs to be addressed. the obama administration has put forward a number of tweaks to

the program to ease pressure on student loan borrowers. i can't imagine future residents not taking a crack at this. ultimately, i think we would change the way we do this. >> i want to go back to the fed for second. let's assume that a lot of the economists and analysts are saying the fed may move on rates in june, maybe the signal might be because they keep talking about language that they will move patient out of their language that can signal on move that could, to meetings down the road so if they take it out in march, april, may, maybe june. when the movement happens, how will the markets react. is this priced in. >> i think it is priced in. june, september, there are folks who think december but we are splitting hairs here. i don't think the markets will react in a significant way if that is the script, if they begin raising rates in june or september.

i think the market has that under control. they do need to manage their communications when they dropped the patient language, they have to be sure that a couple of meetings down the road that the going to pull the trigger and raise interest rates, otherwise they will upset expectations. i think expectations are solidified. thatwhen they're going to raise is just rates has been in place for 18-24 mons. this is something we've had in place. everyone is on board and understands this. i think the markets will be fine. >> mark zandi chief economist from moodys analytics. breaking news bloomberg has learned that vice media ceo shane smith paid for a $300,000 vegas dinner last night. stephanie ruhle joins me from the newsroom with the details. >> my be question was where was my invite.

this took place in early january. the computer electronics show. shane smith, cofounder of vice media, was in vegas for the show , but that's not all he was doing. yet a big week gambling at the blackjack table. he took those winnings and hosted an impromptu dinner at the bellagio where at least 12 people join him for dinner. the total was $300,000. how that dinner breaks down whether we talk about caviar wine, on top of champagne, i'm clear. that's a very big number. right around that time david carr of the new york times actually tweak it what media company executive that i watch when $100,000 a blackjack last night. he was speaking about shane smith. can't, gambling is not his only vice.

vice media known to be the guys who go big or go home. certainly shane smith did when he was in vegas the last month. it wasn't just all about technology. >> thank you. coming up, the bigger threat to debt markets. we will look at what is calling bond managers increasing concern. my colleague joins me when bottom line continues in just a moment.

>> went switzerland decided to scrap its policy of capping the frank, echoes were heard around the world. brokerages had to close. it was just a snapshot of how disruptive volatility can be. lisa brummel it's joins me now with more on this story. how much concern on volatility versus rate hike. >> what i'm hearing from investors and analysts is that ball iteris -- volatility is

increasing in the debt market. that could be a bigger threat than a sustained, gradual rate increase. volatility is a bigger threat than rates rising. it's partly because there is a complacency that is setting in in the markets that rates will remain low, that inflation will not pick up over a meaningful time. people are planning into longer-term bonds, going back to the that's -- that's -- bets that were pummeled. >> of their holding their investments, how does this bond volatility matter? >> can they get out when they want to or with a hold the maturity, get payments, get coupons? people are concerned about

whether this will turn into a panic scenario. data points showing more inflation risk really disrupts this complacency and causes people to be unable to trade debt. what would happen is that companies would be able to borrow easily. what would that do? meanwhile, what tools do central banks have to combat that? >> what's causing the turbulence? >> a lot of factors. where are the bonds? central banks are holding them. over here, you're seeing the graph of the move index, which measures implied volatility in treasury yields. it surging.

it is at the highest level since 2011. it shows how much things are swinging. the not making markets in the same type of waves. they're not using their own capital facilitate trading. that buffer isn't there. next the biggest risk to the markets if all until the increases is what? >> some kind of credit crisis. larry fink was talking about this. he expects there will be another crisis where marcus do seize up because of this volatility the inability to trade. the big fear is that this will affect corporate america companies around the world being able to borrow, consumer credit it will have her efforts of central banks throughout the world. >> is that psychological at this point? you talked about a fisher, is something psychological going on with this is happening?

>> i think there's a question of perceived volatility versus actual volatility. central bankers have been suppressing a lot of volatility with their programs, so there might have been price swings if people were action able to trade based on what they were believing to be the actual value of certain debts. when central banks start to have less power based on the fact that other central banks are stimulating the economy and based on the fact that their efforts are nearing the in -- in the -- end is a question of single volatility. >> how does the feds minutes factor into this. >> they may not hike rates as quickly as some people were pricing in. do we care about the strengthening dollar? don't we? people are back to the same

question. >> thank you so much. when we come back, over is looking for more cash. we will have those details in a moment. ♪

>> welcome back. breaking news on uber. >> it's the latest in the tech funding race. we got the lead is -- latest news about snap chat. uber has expanded its fund-raising round. this is according to a representative of the company. they submitted a filing to the

delaware secretary of state to bump up that fund-raising to $1 billion. there's been a lot of demand here. they have been on a money raising tear. they raised $1.2 billion which by you at $40 billion. again the company expanding its fund-raising round two $1 billion. >> joining us from the breaking news desk. coming up, more reaction to the fed minutes. i will speak to tony crescenzi tim kos market strategist about policy and the outlook. bottom line on bloomberg television continues in just a moment. ♪

>> welcome back to the second half hour of bottom line. i'm mark crumpton in new york. let's get you some of today's top stories. the price of crude oil and the close of floor trading. crude down about 2.6% today at 52 14. we were talking about oil a few minutes ago and how that factors into the inflation picture. we will be discussing that. another sign of the real estate

recovery is an evening is that housings starts fell 2%. a drop in construction of single-family homes offset a rise in work on apartments. factory production rose less and forecast in january. there was weaker demand for construction materials. motor vehicle assembly so down. factories are holding back production because overseas customers are not ordering as much. that's a look at the top stories we are following today. for more on the fed minutes, we turn now to tony crescenzi executive vice president, market strategist, and portfolio manager at pimco. welcome back. good to see you. >> thank you for having me. >> this patient and there's the feds version of patient. what is the limit of their patients at the time. what do policymakers need to see before they start to alter their language. >> the fed seems to be struggling.

there's a whole section on policy planning, which an investor should take as a survival guide for what will replace patient. the fed is trying to tiptoe through the tulips, so does the. being very cautious about its intentions. removing the word patient from the march statement would indicate that the fed might move to hike rates in june. the markets will move forward with it by tightening financial conditions, lowering stock prices, raising bond deals. the fed has been cautious about that. many participants want are more inclined to keep rates at the current level for longer. one positive reason the fed might decide to go in june -- keep in mind that these minutes were before the release of three major reports, the employment

report, the employment cost index, and job openings. it might clip the tail off of risks associated with the fed moving too late, so perhaps the fed might think of getting started so that markets would say were moving early so we won't have to do as much heavy lifting could get done sooner rather than later. that is one possibility. we will hear from janet yellen next week. >> reason acceleration and economic growth, ok, that's fine. globally and u.s. yields a low. why? >> there are many. one reason is one statistic that is telling me were the european central banks policy was i want the private credit statistic long growth hasn't been strong.

the money factories haven't been printing money, producing money and ways they used to. for decades they did. imagine you go to a bank and you have a thousand dollar around and you will pay it off, and you do, and the bank decides not to replace your loan with a $1000 loan to someone else. it extinguishes money. advantages from the system. it's no longer there. -- it vanishes from the system. pimco concurs with the idea that policy rates globally will stay low through the rest of the decade. for investors that means staying overweight on credit. that's the major reason. michelle gerard is the chief u.s. economist. >> she told us that the big

question can policymakers raise interest rates without more tangible evidence, in terms of wage and with the inflation numbers. issue right? -- is she right? >> it said there are too many data points to communicate to markets in terms of what to watch so it simply said that we want to see policymakers, and order to approve those hikes continued economic growth that is strong enough to keep labor market in krugman's continuing. that means growth rates and low to mid to percentages. projections are for growth to be in the high two's this year,

which will be very strong. the fed wants to point 2% to two point 5%. becky is pressure down on the unemployment. cash that gives pressure down on the unemployment. that is a precondition for the hike. june is still live for a day to move on bond rights. we have about 30 seconds. >> i have to ask about oil. it's helping to keep a lid on inflation. >> its impact on inflation is interesting in the minutes the fed sites that the mean rate of inflation, the fed strips out whether a big price and greece is factored in. -- a big price increase is factored in. oil is a big deal, but we see

the impact their of likely diminish because our oil likely stabilizes and goes farther. because of the huge plunge in the rate count that bloomberg uses to see that has moved from 1900 to 1300 or so there's not a lot of room. it probably is. one final point, the fed predicts growth above potential for the next three years the unemployment rate falling and upward pressure on inflation to bring it back to the 2% target. >> executive vice president, market strategist, pimco. coming up, the latin american report. bottom line continues in a moment. ♪

>> it is time for today's latin america report. gross domestic product will shrink. if it happens, it will be the first time since 2009 as the central bank raises are wearing costs. latin america's largest economy since is a decline in commodity prices. austerity measures, and a drought is putting millions of people at risk. that is your latin america report. a programming note. on charlie rose, mike morel for the hour, deputy director of the central intelligence agency from

2010-2013. he served twice as acting director. mike morel at 7:00 p.m. and 10:00 p.m. new york time on bloomberg. coming up, the feds patient pledge. we will look at the communication challenge and how long he could stay patient. ♪

>> let's check bloomberg world news. the european central bank is increasing greases emergency liquidity assistance. the original fund aimed to help greek banks with 65 billion euros. greece is showing signs it is willing to compromise. the greek government will ask for a six month extension. that is according to a government official. greece has demanded that europe ease up. >> we are at a critical and

sensitive point in negotiations. we are submitting puzzles and hope we will turn this corner which will give us the possibility of moving forward. >> greases parliament has elected a conservative law professor as the country's new president. his president -- election ends and impasse that triggered early elections. in ukraine, government troops are withdrawing from it key town. it felt to russian back to separatists who hoisted a flag in triumph over the town. the ukrainian president has confirmed that he has ordered troops to pull out. the islamist insurgent group boko rom -- the nigerian army had launched an offensive.

they have stepped up its six-year campaign to impose islamic law on nigeria. a bloomberg exclusive. forget about cables and cell towers, mark zuckerberg is turning to drones and lasers to wire the world. he is using the latest and greatest to connect billions of people not online. how challenging and costly is this project? emily chang set down with mark zuckerberg to find out. here is a preview. >> drones and lasers you have a lab working on this. when will they be ready for launch? >> we will be testing some in the near future. i would be mistaken if i gave you an exact date on this. that's one of the big technical barriers. they are our people who don't

live in range of a network drones satellites laser communication, microwave communication are going to be some the solutions providing more cost effective connectivity to people where there are no existing cell phone towers or infrastructure. >> you made it clear that facebook will be ramping up spending. how much of that will be going to internet.org in these efforts? >> we are investing a bunch. >> you can see him's entire interview with mark zuckerberg on studio 1.0 tomorrow night at 8:30 p.m. new york time on bloomberg. federal reserve policymakers repeated their pledge to state patient and raising rates. minutes also show the policymakers discussed how to communicate their next apps, especially when to drop patient from their statement.

some expressed concern that the financial markets might overreact. trish regan joins me now with more on the story. maybe they are telegraphing to us? >> pmi, janet yellen. what happened to the days where you had to guess? you had to value assets when you guessed at a marketplace by you wish and. -- at a marketplace evaluation. >> why is that a bad thing? >> i don't know if it is necessarily a bad thing right now because of the u.s. dollar. fundamentally, it is bad because

you have an environment and the if violations and you start to say, how much of this is raised on what the market really will bear and how much is based on the assumption that you have to put money to work. companies are doing creative financial engineering, buybacks dividends, enhanced earnings. how much is coming from fundamental demand? that is the thing that has been missing. the fed has learned that you can't affect in a way that it would like. until that changes, you are in a tough environment. >> the fed is keeping patient and because they don't want to scare the market.

as i was speaking earlier about volatility it is the fed of fraid of creating too much volatility and stirring the markets? >> it absolutely is. that's a problem. the fed should not be worried about what investors think and what the markets are doing. yet, it is. some of that sentiment is reflected in the minutes. we are in an environment where we are going to go six plus years at zero interest rates. the dollar is so much stronger than every other currency. he's made the point that you need to be working, it can't be

a byproduct of everything else. >> when that patient language comes out, i guess we will know because it will be two meetings down the road. maybe june, that's when it moves. >> they are communicating so much. you hope they stick to their communications because you look at certain examples of what has happened overseas in switzerland . one stick day the central bank is saying one thing, the next day they're doing something else. i think that they are very deliberate in terms of this communication. we have to take them at their word. it looks like no hike any time soon. >> street smart coming up at the top of the hour. stay with us. we will have the wednesday edition of off the charts on the other side of the break. bottom line continues it just a minute. ♪

>> as oil prices stabilize, do oil companies cut back on production? julie hyman is in the newsroom. they look at everyone's new favorite metric. >> alex is into commodities.

the rest of the world is just now coming around to this measure. rig counts are how many oil rigs we are seeing in the united states. >> we have seen a 30% drop. it is very steep. the last time the rig was this low was 2012. the idea being that you get less production. we are not seeing that. output is that 9.2 million barrels, a 40 year record. >> it seems counterintuitive. you would think that production would be falling more. >> the devil is in the details. it is what rigs are being cut. all you care about our horizontal, shale.

that is where the majority of our production is coming from. you're seeing that the client only 13% versus the others double that. >> the others are more expensive? >> they are cutting the least efficient output first. then they're keeping the efforts going where it makes a difference, that is shale. the permian basin production will rise 28%. the main areas of shell production are still rising at double digits despite a fall in rig counts. >> oil prices have bounced off the bottom. how is that feeding into the rig counts and production equation? >> this bounced all them to hedge production giving them a

barrier so they can keep producing if oil prices do fall back. it's actually going to keep spurring production. producers got more pricing power. they can go to oil services and ask for discounts. we are seeing 10% to 20% of cutting costs to producers. ironically, saudi arabia lowered the cost by refusing to cut output making it easier for producers to keep pumping oil regardless of the price. >> ironically because saudi arabia wanted to do the exact opposite. >> they wanted to put shale producers out of business. >> ironically you ask a different person you have a different answer. >> most analysts say it will go lower and bounceback higher. once that runs out, you will have a market flood again.

>> thank you. i appreciate it. >> thank you so much. get the latest headlines at the top the hour on bloomberg radio. that doesn't for this edition of bottom line. i am mark crumpton reporting from new york. thank you so very much. street smart is next. i was you tomorrow. -- i will see you tomorrow. ♪

i'm trish regan and we have investors guessing for news out of the fed. policymakers arguing for leaving rates lower longer. still, the central bank morning of risk from a strong dollar and from greece and ukraine, we will focus on all aspects of this report. plus, we will be joined by steve forbes -- his case for investing in the u.s. and the gold standard. "street smart" starts now.