my conversation with columbia threadneedle investment today. ♪ alix: u.s. stocks closing lower after a yo-yo session. all the attention on valeant pharmaceuticals. the question is "what'd you miss?". joe: the earnings keep on coming. we will break it down within the hour. >> canada feels the pain of the oil bust. is canada an emerging market? the oil markets are in a dead dog bounce. we begin with the markets.

not as much excitement there. about valeant, accused of using a strategy to record fake sales and phony customers. 88 million shares changing hands. the three-month average was under 4 million. >> it was the soap opera of the day. you can see what happened. bonded -- bottomed around 130. we got an announcement from valeant pharmaceuticals as a response. .e also heard from bill ackman >> he hasn't sold of any of his holdings. there's a lot of pain and for him another had fun -- hedge fund managers. close, $462 million in

losses. there's a fascinating debate on how valeant will look at sales. send it to the specialty pharmacy? >> a lot of questions. $900 million is a question. >> american express results crossing the wire. of $8.2arter revenue billion, $1.24 earnings per share, missing estimates. for $8.31ere looking billion. the story has to be how does it get itself back to position.

it suffered the loss of its partnership with cosco. as a great story and bloomberg businessweek detailing how that deal fell apart. there was a relationship that paid off. alix: what you do now? everyone's flocking to other credit cards that offer just as many points. things over to joe in london. my: i want to dive into terminal to look a story at europe that's not getting attention and may not be a huge deal, but kind of interesting. portuguesen the ten-year bonds. the spanish ten-year bonds. portugal pays more tomorrow than spain. the two lines move roughly the same until we get to the part i have in the rectangle.

the spanish yields and declined a little bit. that is because portugal is still having some issues forming a government. there is some talk that maybe the left could form a government, claim they can form a government with the majority. the incumbenthink conservatives are more likely to form a minority government. you can see in that slight divergence in the direction of spanish and portuguese debt. markets, i have a chart on how chinese stocks are making a comeback in certain areas. heavys the small cap tech index. it has been trending higher, a clear move up. last week, activity are busier than at any point before. it is at lessat

than half of its peak. shanghai that it is interesting that people continue to chase speculative stops -- stocks. it feels that momentum. >> take a look at something bearish potentially in the market. , then debt versus the s&p yellow line is the s&p. the red line is margin debt. you want to see a selloff and stocks when you have less margin. more margin, more people in the market, stocks go higher. margin has rolled over. >> you have to go over here. >> there we go.

we've seen the rollover here, yet stocks continue higher, so how does it resolve itself. you can see all these charts and more at our twitter handles. citigroup, one of my favorite guest, welcome. at $48.oil ending 2015 so said that you could see it falling to as low as the 20's. what is the probability of that? >> greater than 15% or 20%. bearishe some very aspects of the market. u.s. inventory builds relentless, not just u.s., but global. , porting up of oil congestion all over china, middle east.

demand int good for any way. the world is really much more glutted than we thought it was going to be. >> the key has to be that $40 a barrel level. $40 has one that being resistance for decades and is now support. we have not breached that on a monthly basis since 2004. if we close october below 40 -- now trading below what it was trading in 2004. just because you have that level does not mean it will happen. >> how fast do we go to the downside? >> it would happen quickly. it would happen because of bearish factors, inventory building.

there could be a surge u.s. production at the end of the year for complex reasons. the markets will see a lot of short positions coming in. their reigning government could be adding up two of million barrels a day, a confluence of factors by the end of the year. we have of the things seen as that spreads are widening. money not as loose as it was two years ago, so that could really kill the oil activity and help get the market back into balance. do you see that happening? is there enough money to keep the oil bumping and preventing that equilibrium? >> i think the financial flows will remain low in two different ways. se is with respect to the hale revolution.

there is a lot of money on the sidelines. it was financed by quantitative easing. the capital markets of the united states are becoming the swing producer of the world. robust enough to respond quickly, and in the short run a lot of capital they can move in very quickly. that is what caused the big bounce a couple weeks ago when fears of tightening of a market coming out of the middle east with russia positioning military clement in syria. equipment in syria. until we see it going up, i markete will be in a responding to financial turmoil. >> you could see a rise in u.s. production towards the end of the year, the hidden supply in the united states, doesn't get

talked about much. you did an analysis of how much we could see in the first two years, about 200,000 barrels a day on average. >> it would spike up quickly to 400,000 barrels a day. dakotaa from north growth, and the economic incentives would be a whole bunch of companies looking at their cash flow and balance sheets as we get closer to the end of the year and saying that it would be nice if we look at what cash flow we generate for the capital put in for completion, which is more than 50% of total costs. it could really happen. >> let's talk inventories. plenty of supplies stateside and globally, and we clearly have more oil than we need. 2015 running ahead of the three previous years. if this capacity universal.

does every country have far too much supply? >> there is a big shift in spare capacity, particular he saudi .rabia, a cushion in the market the tighter the spare capacity was, the more likely there would be a price hike. now the saudi's have upped their -- action by amerian million barrels a day. if it is 2 million arrows a day like they claim. it's probably a million a day. that means if there is a disruption to supply in nigeria spare capacity from saudi arabia won't be there. there is an inventory build. it is gigantic. strategic stocks

and commercial stocks, over 2 billion barrels, an awful lot of oil. this is true globally. that inventory can come into the market as a damper pretty quickly if there were to be a price spike. >> amazing. inventory and spare capacity, a brilliant note. stick with us. what the bullish case is for copper. we want to check on american express shares, bouncing back a quarterr the third miss, off by 2%. waiting for numbers from ebay and texas instruments. ♪

>> we have some breaking news on ebay. reporting results, earnings per share for third quarter, $.43, topping estimate of $.40. billionhigher, $2.1 versus consensus estimate of $2.09 billion. ebay is increasing its non-gap earnings outlook for the year, and also says it has reaffirmed net revenue forecast. when it comes to use of cash, says $2.4 billion buyback authorization remains. in termshas firepower of buyback and boosting earnings per share. you are seeing a move up in ebay .hares, 9% we will keep an eye on these results and get you more details as they cross.

let's get to mark crumpton. >> thank you. paul ryan is meeting with fellow house republicans about possible bid for speaker. it's far from assured. skeptical conservatives are deciding whether they can accept the conditions he set. ryan wants to be embraced as the consensus candidate i the end of the week or he says he won't be seeking the b. made it official that he will not be a candidate for president. joined by his wife and president obama, mr. biden made the announcement this afternoon. finalizes the democratic presidential field. benjamin netanyahu has ignited a controversy for suggesting a world war ii palestinian leader persuaded the nazis to adopt a decision to exterminate 6,000,002's. holocaust experts and survivors slammed mr. netanyahu's comments

. million jews. 6 experts and survivors slammed mr. netanyahu's comments. the national centers for environmental information say 2015 is on track to be the hottest of any you're going to 1880. that is your first word news. >> we do have more breaking news her. says their ceo will retire. he has named his successor. that they will have a

new chief financial officer. alix: here is something you may have missed. there is a bullish call on copper. nearingo do with prices production cost level. joining me now is ed morris at citigroup. when you see copper prices heading towards marginal production cost, what does that tell you? >> if you want to keep production going, -- it could happen in the oil markets, but if you shut it in and a market that is getting to be tighter and supply than you think, there could be a bounce. we do have a bullish call, unlike oil, which is for a lower price. beingbased on mines

postponed, shut in, and we expect a demand bounce. inventories are are being drawn down. we think there is the man on the horizon coming out of china. we think demand is essentially a function of decisions of state grid, seven grid, rebuilding the transmission grid. of copper is used and consumer electronics. i would not have thought that. towards thegeared consumer, not just a commodity. -- a capital expenditure commodity. isthe housing market shrinking in terms of vacancy rates, a combination of those two would also bring the demand that. the timing in the fourth quarter , maybe first quarter, but we are at the edge of that point. has been big question

the bonded warehouse inventory in china has been falling, but where is that copper going? , we knew it went into other warehouses, we don't think it is happening now for a bunch of reasons, including the losses incurred in those bonded warehouses. if you look at mine closures within china itself and the flow of imports which have held steady, it would tell you that the demand for copper is reeling going and into new fabrication. alix: what about financing? when the bank calls my loan, i sell the copper. how much of china's demand is wrapped up in copper financing? a significantly lower number than last year or the year before. it is hard to know. it became cheaper to finance other things not by financing

through copper. you didn't need the collateral to build new construction. , ascould borrow directly interest rates have fallen. the copper inventory financing story, a dual story based on the ford curve -- forward curve. supply, we back to seem disruptions. goldman sachs has a bearish call on copper. driven, it is demand and with weaker demand supply is coming off. how do you see that? .> it has postponed new supply some of it has been shutting supply in. we are all in agreement that there is going to be a crossing of the lines between copper demand and copper supply, the question is when. the more you postpone projects the closer to now that crossing

of the line will take place. alix: you heard it here. at morris sticking with us. scarlett you have more. thain will retire. taking the opportunity to say it is exploring options, looking to sell a $10 billion commercial air business and options for its canada and china units to complete its exit. it will speed up its transition to a u.s. commercial bank. shares are up higher in reaction to these announcements. we will have more coming up on "what'd you miss?" ♪

>> i am scarlet fu. "what'd you miss?" ed morris of citigroup is still with this. alix: the relationship between currency and commodities has been percolating in the market. commodity price index versus consumer production exchange-rate index. tell us what that is telling us. >> it depends on the consumer , as we see from the canadian elections, who is a consumer and producer as a country has gotten mixed up. that is also part of the story. the producers continue to price most commodities in u.s. dollars and i can be helpful or harmful depending on where you are in this business. let's look at russia, where we

had 47% depreciation against the u.s. dollar. you think that would be a constraint, but no. it was an ad on for their production. we have seen production growth because the cost of producing oil in ruble terms has gone down. the cost of production are on ruble terms. if you are a consumer of a oil,dity, let's stick with and your currency depreciate, the cost of the comedy that commodity has gone up. it works in two different directions. -- the cost of that commodity has gone up. it works in two different directions. some of dollar-denominated and others are local. down -- have pointed that commodities could down this could go down further. there are two sets of cost savings.

sf you think of that service sector as a demand-supply sector, and here you have an offshore drilling chart. of a sixcosts generation floater was $650,000 a date one year ago, and now the spot cost is $200,000 a day. 45-50 of these coming into the market over the next year or so. the market is saturated. the cost of drilling in terms of a well that might have cost $180 million a year ago my by the time we get to next year cost $120 million. that will be in the market for a good five years as long as we have this oversupply of rigs over demand. there is cost deflation from technology. we see that in the u.s. shale plays. we see that in the new hydro

carbon sources, deepwater and oilsands. technology goes up, cross come down. >> amazing. thank you so much. great to have you with us. o> we will dig into the eur next.

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we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. >> first word news. >> words of praise for vice president joe biden, announced he will not be candidate for president. hillary clinton called the vice president a good man with a record to be proud of. history is not finished with joe biden" she said. thank him for a

lifetime of service. fbi director says fewer americans are trying to travel abroad to join islamic state. the fbi is aware of six people who attempted to join the organization in the last three and a half months, that is in or so that the nine used to try to go each month. lawyers has filed a movement to impeach the president of brazil. this is following months of certainty -- uncertainty that have rattled markets and deepened the economic slump. it is the second time in the 30 your old democracy that the country has faced the possibility of residential impeachment. to host the set oscars, the second time, the first in 2005. the 88 academy award show will air on february 28.

that is your first word news. >> thank you mark. breaking news, texas and from its earnings crossing. earnings per share of $.76, beating consensus estimate of $.67. higher than the most bullish forecast. revenue was more than anticipated, 3.4 $3 billion for the quarter versus the estimate of $3.28 billion. texas instruments is looking for whenngs per share of $.64 analysts were looking for $.62. the lowest part of the range is higher than the consensus estimate. semiconductors have been so hot in terms of mergers and acquisition. they are looking for scale. ebay earnings, it can survive without pay tell, profit

and sales topped estimates. it spun up a pill in july. it has done very well. the marketplace rallying since then. data breach, google search engine issues as well, so those two factors had been weighing on ebay and they shook them off. >> up 7.2% in after-hours trading as well. over to you in london, joe. joe: i want to talk about canada some more. they just have this election. this is a chart that my colleague likes to point out. the white line is the canadian stock market. the yellow line is the msci emerging markets index. they are really similar. canada as annk of emerging market, but it trades like one. this is a 10 year chart. they have traded similarly. commodity exposure, china exposure, u.s. exposure, dollar

cycle. canada is a very stable emerging market. it is a surprising way to think about our neighbor. >> i would never have thought that. i want to look at what is happening in the u.s.. you are looking at the implied yield on one-month t-bills traded in the secondary market, and what do you see? here, due toike the fact that we are nearing the debt ceiling on november 3. this is a five-year chart. you can see what happened in 2011 and 2013. bank of america and merrill lynch saying we could see a similar jump in yields as we head towards this uncertainty in november. the market is not reacting that much, but the treasury is. >> maybe the freedom caucus it should look at that chart.

they would probably be involved in via. -- be emboldened by. oflook into the volatility european stocks. vix, a the european ratio at its lowest point since august. this indicates a return to complacency when traders were not pricing in big swings in equities. index in europe has only moved and daily average of 7/10 of 1% this month, the smallest move since march. they are waiting for the ecb to announce something, although that looks less likely. >> we will get that tomorrow. >> the ecb began policy meetings today and malta. press conference tomorrow morning. mario draghi help to save the

euro. there are signs that investors are doubting firepower because the euro has appreciated a percent against the dollar since the middle of march. joe: we are joined by deutsche bank director of foreign strategy. thank you for joining us. what are you expecting from the ecb? do you expect action or fireworks in the press conference? they are going to try to be dovish. they expect the ecb to be dovish, but it is too early for them to step in. the problem is which tool they can put to work to fight against low-inflation. it looks like it will be an extension of qe in december for not anths, but that is very powerful tool.

it's not the great gun you want to pull out and use. >> if the euro fair value now? >> the ecb has achieved what they wanted. it has repriced europe so that t there would be less pressure on the economy. that means the deflationary pressures building in the eurozone have on considerably. -- put itk at a chart back on -- you will have an idea 120, 125 area.nd we need to see the euro stay at these levels for some time. would not call it a fragile economy, but will have difficulties.h

the probability of easing for that ecb increase is significant. ability of thehe central bank to surprise investors in the market. some have said they have lost that ability. with the bank of japan having a meeting, is that a concern? -- central banks can surprise you. that is what they do. if they want to, they will. the usual tools that they can go for being limited, especially japan. it is the case for the ecb to some extent, but they could go for negative interest rates, it would be positive in a very negative fashion. it's not something that anybody wants to use anytime soon. joe: a few years ago, inflation rates were hiked, driven by oil, considered to be one of the

worst central-bank moves, distracted by oil. to what extent when we talk about deflation it in the the eurozone, are we getting distracted by headlines and commodities rather than underlying factors? b has a very strict mandate. if you look at the willingness of different sector banks to accept low-inflation, it has been fairly large, japan, ecb. position been in this a while back, it would have been far more aggressive. some people argued that it is the death of inflation targeting , and is a case of the inflation we have currently, issues way beyond a normal form of target. we have aging populations, demographics, cpi core is more

complex than before. >> you will be staying with us. we will talk about canada next. keep it right here. ♪

alix: i am alix steel. "what'd you miss?" jumpingstruments shares in after-hours trading, predicting sales and profit that he estimates on stronger orders for electronic components. rising,res also third-quarter profit and sales topping analyst estimates. ebay split from paypal in july and can survive without it. thanin is stepping down.

cit says the vice chair will step down as the same time as thain, but he will remain a board member. >> turning now to canada. bank of canada toned down optimism for economic rebound cutting gdp forecast for the next two years. central bank may have caught a break. with this is a director of foreign exchange strategy at deutsche bank. interpret the results of the election for us. say it is fiscal stimulus over austerity, what is your read? >> it is the fact that you are moving away from austerity. they still have a lot of fiscal tightening going through the economy. made,ll the promises they

it won't have much of an impact next year. most of the spansion will happen in 2017 and 2018. a lot of these are promises of infrastructure expending. they typically take longer to happen than we expect. -- most of the expansion will happen in 2017 and 2018. >> the idea it takes pressure off the bank of canada is misguided? is because you don't know whether they will do it. need to start implementing it, and that becomes something the bank of canada can focus on. monetary policy has a more rapid impact. and will be a worry in 2016 2017. canada will be a test case, but not immediately? >> not immediately. the fiscal story is probably

good for canada. they probably need to spend more to rebuild infrastructure. eventually that monetary policy will be a lot less loose than it currently is. canada says the economy is adjusting to lower prices for oil and other economies. expectationseduce for interest-rate cuts? >> there is some deflationary impact on the cpi side. we'll see if it went below the 1% threshold. nonetheless, there is a certain that oil prices could reach new lows. , a lot ofuestion people worried about household debt because it has reached a record high as a percentage of gdp. is canada headed for a crash?

>> it doesn't really have the triggers. in the environment of low interest rates, credit rates, they have been tight in the risk management, and if you look at the bubbles, they are very concentrated, vancouver, toronto, specific indices. >> thank you so much. look for that fiscal stimulus to manifest in 2017 and 2018. coming up, what a credit spreads and telling us. joe's conversation is next. ♪

joe: i am joe weisenthal. "what'd you miss?"

today withearlier columbia thread needle head of allocation, credit spreads and why it may not be the big red flag. you see widening and high-yield spreads. the widening we have seen did not result in recession. we look for cloths -- cross ,ignals, within credit markets the shape of credit spread curves. we did not find those doesrmation signals, which not mean it is all green flags here, but credit spreads are met with a green light of steep credit curves. if the widening credit

spreads are not a sign of deterioration, what are they signaling? malaiseare signaling from the energy sector. energy,ook at spreads x they are widening as well. health care has widened. why should health care widen as energy spreads? it is indicative of a nervous market, outflows from asset markets, and a market that is gearing up for a spike in default rates. 20% of u.s. energy companies are expected to default over the next 12 months, that is about 20% of the market that is energy and mining, substantial. joe: what are the opportunities there? i've increased exposure to european high yields, where

there isn't an energy concentration. where analysts are looking for frictional levels of defaults, rather than 6% out of the u.s.. riskoks like a nice premium opening up for new money to take advantage of. 10%e moved allocation up to in funds i manage. we: yesterday on the show talked about this general idea that as demographics change and ,he global workforce shrinks labor will have increased bargaining power, higher wages, higher inflation. you've done a lot of work on isilar lines, but your work in line. what does that mean from an investment standpoint? if we have a shrinking global workforce, rising wages, rising inflation, you take advantage of that? people think about

strategic asset allocation is being challenged by this. most pension funds around the sort of way similar of figuring out protective returns from bonds and equities, and then use historical correlations to build frontiers. if you are thinking about good, efficient portfolio management and risk adjustment of returns, you select bonds and equities which give good risk adjusted returns. if that data that that historical correlation matrix is based on a 35 year time of declining years and low levels of correlation with bonds, meaningfully outperforming cash, then this is sort of challenged if it goes into reverse. the place for government bonds in strategic asset allocations is open for questions. we have changed the way in which we manage our own pension funds away from the strategic way towards a more dynamic form. joe: you are taking these

things. you are already shifting the way you invest based on these big long-term trends? >> absolutely. , with government bond yields low, the scope for them to fall and cushion against equity markets brought eunice is ness is much more meaningful. you get a rise and discount rates coming through because of these demographic factors and ,he end of the local labor glut then that is another reason why you want to accelerate and move away from a strategic asset allocation to a more dynamic asset allocation. joe: are there any indications from on terry policy that will come from this? >> my goodness, what a big

question. joe: if are going to see a generally rising trend of inflation for these big secular reasons, house at central bankers are just to that? represents an opportunity for central bankers to continue with the tools that they have been using, and they are now questioning whether the tool bag is empty if these trends come around, then some of those same tools they managed the cycle by during the cyclical. will allow them to manage few -- future cycles in a future direction. trends may not see these materialize on a statistical basis for a decade, do you think that is fair or we can see the rising impact of this demographic shift the sooner? how long until we know whether you are right or wrong? >> 5-10 years on a secular basis, but cyclically we might also be at an inflection point, so the cyclical turn, where we

have stronger wages in the u.k., better wages and data coming out of the u.s., it has been moving up. if these things start to turn around on a cyclical basis, maybe that cycle is long enough to get us to that next cycle. joe: you do think that this reason the hand wringing over deflation and these headline inflation readings are overstated and that were starting to see firming inflation? >> i firmly believe that is the case. drop in inflation expectations in markets and amongst consumers is a function of falling energy prices. and how they are impacted by changes in energy fact thatbuy into the a change in the price over the past year does not tell you much about what inflation will look like 10 years from now. ,oe: that was my conversation

and we will be right back. ♪

scarlet: i am scarlet fu. "what'd you miss?" the company known formally as google will a reporting tomorrow with amazon after the bell. tomorrow is the conclusion of a two-day ecb meeting. what will mario draghi do? will they lower the deposit rates are more negative? more negative, technical term. alix: my term. joe: the kansas city manufacturing index comes out tomorrow morning 11:00 a.m. eastern time. we have been getting a lot of

these manufacturing readings, weak spots in the u.s. and global economy by any measure, but interesting to see if there is recovery. analyst are looking for a negative nine readin

>> we are cruising at 88 miles per hour. try to keep up. joe biden kicked the tires of the delorean and decided running for president would not be his density -- i mean destiny.