. alix: and i am alix steel. ♪ alix: the stocks are closing higher for the first time since august 18. joe: the question is, "what'd you miss?" we will have aig earnings out in just minutes. predicted investors information on our show on halloween and now they have a new prediction about natural gas. visa'snd we talked to cfo later this hour. course: but we began, of , with the markets. you can't really say it is positive, it is just in a lurch right now.

the s&p 500 is at about their highest since late july. joe: the market is really impressive because we did not out oft kind of data china, but still the market is pricing in december, so it is not like we have expectations way off in the future. alix: but we did have a pretty strong rally in the euro, as opposed to the dollar enough down. one area that was really ugly, though, was chipotle. it was at its lowest levels since july. it has raised $1 billion in -- dropped $1 billion in market value just today. this could actually hit fourth-quarter eps by $.62 per share. this is not nothing. joe: chip only makes a really big deal about its food safety, and so that is a kind of notable

problem for them recently. dive i want to take a deep in my bloomberg terminal and talk about this issue that we were just talking about. what we have is the goldman low balance sheets stocks and take a look, guys. look here. they are both up on the day, and that means that you have a lower quality and the higher-quality both rallying. it is broad-based. joe: so they are just throwing money at everything. itrlet: within the nasdaq, is pretty much fine with a 10 day average, but it is still a little bit lighter than what we would like to see. joe: i wanted to dive in my terminal 2 look at a very important market story that is essentially out of turkey. president erdogan did much better in the election then he did earlier in the year.

obviously issues with his government and it was a big , whichr the turkish lira is what i am looking at in my terminal. there are a couple of things that are interesting. leadurkish lira had a huge today, and it has been leading for a while, if we zoom in. since the bottom of september, it has been gaining. but the purple line there is the two day average. and if we look up -- oh, and it is gone. oh, there it is. it has never been able to break through that, so perhaps if the turkish lira is able to break through, it could be the sign of a real turn around their. scarlet: for my deep dive, i want to talk about spinoffs can -- spinoffs, because air ig was looking into splitting. paying off.ally

the green line is the bloomberg u.s. spent off-line and the orange line is the s&p 500. they were a sickly and neck for the first part of the year, but then they split in the second and third quarters, and in the war of quarter, that broad market, the orange line, has fared that are. joe: i wonder to what it stands -- to what extent spinoffs help and i wonder if these are strategies just based on financing and stuff like that? did it make as much sense before -- alix: or did they wind up preempting that? scarlet: you can see all of these charts and more on twitter. binky biddy johnna -- binky chadha.

hope thatt would seasonality measures could take care of these issues, and we are wondering whether we can do one, so if we inc. back year now or basically 10 months the time,bout 85% of that is sort of like, 8.5 months through 10 months, you have all of these sort of negative data surprises, which is sort of unusual when you look at the index. when you look at the last 20 or

30 major data releases, there are basically about four or five weeks where this is washing out. directare relying on interpretations of the data, so for the u.s., we have a fairly unusual and long streak of data surprises. when just hang on there you are talking about data surprises. scarlet, you have some new information? does it look like a beat? scarlet: yes, it looks like a beat. fitbit third quarter adjustments there is a beat. even better, the company is raising its guidance on the revenue side and it is looking for as much as one point 80 that is allars and

better read on the revenue outlook for fitbit in the fourth quarter. the company is also talking about margins. likely, this would have an impact on the share prices of the after our trading. at thegoing to look fitbit results when cory johnson joins us later on. right now it looks like shares are down for fitbit marginally. yes, it looks like it spikes higher and then it goes down. joe: there is something, binky, you talk about this move out of stocks. but here we are looking at the stock market that is almost back to an all-time high. how do youion is, take this information and apply it to investment decisions? -- binky: sure, i mean,

the simple point is coming you don't just want to look at demand, you want to look at demand as well as supply. years, thereseven has been a lot of buyback and on a net basis, about $450 billion on an nual rate, and that is $9 billion a week. so if you only focus on the demand side, it is actually still positive. the reason why i bring this up is that people look at the u.s. equity market right now in comparison to the middle of august and it masks the fact that there was an enormous flow out of the u.s. into europe and japan. there is the forward-looking point that we have to look at where at some point the u.s. will get better and the rest of the world will get worse. that will sibley add to the buybacks and then you will see a

much stronger market. getting ae are correction on the fitbit results. it looks like that beat was a lot better than we reported. we are now looking at an adjusted earnings per share at 54%. so a much bigger beat than anticipated. has pared some of its losses and it has basically been unchanged and it is basically splitting between gains and losses right now. this binky, we are at point in the earnings season where we have had surprises, maybe not in the case of fitbit, of it when you make you look at a chart like that and you are ready see so much negativity in the stocks? our analysts getting this really, really wrong? binky: what i would say is that the most important thing to keep in mind for the s&p 500 in terms of headlines is the enormous rise that we have seen, so we

look at the earnings from year-to-year, and we look at the earnings of quarters two and three compared to one year ago and if there is an 18% rise of the u.s. dollar from year-to-year, that means that the dollar is doing better than it was in 1973. you know, this is a really, really a deal. -- really, really big deal. joe: what about investors who are still chasing qa? think that the bank of japan is communicating quite clearly. alix: they left the door open, do they? binky: i'm sorry? alix: didn't the bank of japan

leave the door open quite a bit? of big banko sort things that would change expectations to divide it a little bit more and you have to change that impact and you have notndicate that it is really working, but it is true that in europe and in japan, they have basically encouraged inflows. in the case of europe, the simple point that i would make is if you think and believe that in september, there is a pretty good case for europe not to move, and that may mark a turn. isx: all right, binky chadha staying with us because we are seeing massive flows into bonds for the latest couple of years. we will look more at this rotation when we come back. ♪

alix: i am alix steel with "what'd you miss?" let's go straight to mark crumpton. mark: in the egypt's sinai peninsula, a russian passenger plane went down over the weekend with more than 220 people on board. there was a warning that specifically cited the use of anti-aircraft weapons. the plane's cockpit recorders

recovered, which were spread out over seven miles. trying to breathe life into his presidential campaign. 13%as increased from 4% to in september. ben carsonrosurgeon is in second place with 16%. former president jimmy carter promised he would lighten his workload after his cancer diagnosis but he admits that hasn't happened. mr. carter admits that he feels just fine. he was diagnosed in august with brain cancer. and people second by an e. coli restaurantschipola restaurants inle washington state and oregon. more cases are expected to crop up.

that is your breaking news, back to you. alix: thank you so much, mark. and scarlet has headlines. scarlet: third-quarter operating earnings per share is rough lee -- roughly half of what people expected with aig, and aig also 500aying that it is posting million dollars in pretax restructuring expenses and other -- $500 million in pretax restructuring expenses and other costs. said all of that, restructuring will generate about $400 million to $500 million. visit does, on the heels of carl icahn looking to push aig into

three different companies for shareholder value. alix: yes, and it is declaring a dividend that he might not like. ,e are back with binky chadha the chief global strategist of deutsche bank. divergenceng at the of u.s. stocks into a euro banks and in japan. you are seeing that bond flows are currently $800 billion above normal, which is pretty incredible. binky: yes, and the shortfall in equities is even eger. -- even bigger. absentchanism has been from this cycle of normalization, so how long could this go along until the fed begins to normalize rates? so if the fed begins to normalize rates in december, it is going to come to a time in

the cycle when the market needs to regulate prices. the curve, which typically happens, at some point in the rate cycle, at that point basically you will see a reality situation in equities. we have a recent example of that. alix: we are looking for the fed we arealize -- scarlet: looking for the fed to normalize this, but we don't think they are going to move right away and other central banks might continue to ease? binky: sure, and most importantly, the point i would make is as far as currency, for example, the euro is the primary driver or determinant in the financial situation in europe. that really depends on if things are relative, so you don't really necessarily need to lose it. thereou talk about how has been so much more invested in bonds rather than equities and you say that when there is a

rate hike, the erratically we should see a reversal, but we have seen a relatively huge rallies in bonds and equities since the start of cut -- q3. are we a little naive to assume that the bond market can dive or could we see a selloff in both? binky: sure, i think depending on how the fed depends on raising rates, if they say things are very comfortable and we use that basically as a way of coming to the point in the cycle where historically and typically is what is done, and that has generally been the way in the bond market where a rise in equities is reasonable, so i would point out, again, the simple point that if you look at the 10 year yield and you look at equities or equity return,

that is strongly, strongly positive. it is because it both markets are basically -- because both markets are basically reacting. rates,e fed is raising we look at the sustainability of the recovery. shortfallmention the in terms of equities at $4.4 trillion. that is that extra money is not going from stocks to bonds? binky: it is sitting in cash. [laughter] binky: it is sitting in cash. i would argue, equities, if and when this happens, we have sort of move away from being cautious and having a faltering recovery to having a sustained recovery. we have spoken about the very clear channels of economic indicators and we will look at

those rather than looking at every point that we would fall down. it hasn't happened in seven years. nky, what do you think of the exposed risk of liquidity concerns? do you think that is a likelihood where you are going to get a lot of redemption in equities that can't get out of credit quickly enough? binky: no, i think that basically the biggest liquidity rates that are out there in markets is if you have a macro dominated market. everybody tends to go on the same side at the same time and that is a problem and that is why having all of the market waiting for the feds for six or seven years is from a price discovery point of view, it is not an easy situation. important forery the feds to continue to

communicate and to communicate that there is plenty of time for us to get there, so i actually think that the fact that people have very, very different views in markets, whether it you believe we should finish normalization -- whether you believe we should finish if the fedon in q3, tells us it is going to do x and everybody is prepared to do y, we need to be able to act quickly. alix: binky chadha of deutsche bank. scarlet: coming up, a deeper look into fitbit earnings. by the way, fitbit shares are falling in after hours earnings. ♪

scarlet: i am scarlet fu. "what'd you miss?" ,e are joined by cory johnson our bloomberg editor at large. fitbit's numbers were better than anticipated, but the stocks have fallen after trading. people were expecting much more? cory: perhaps, the fourth quarter is a big quarter for these guys. the numbers look really solid. if you just look at the revenue numbers, think about these little things that they sell. ,hink about the fitbit surge the surge is not a guy, it is actually a watch for runners. but 75% of sales in the quarter, and for the quarter, the company is showing really terrific growth. millionevenue of $409

per quarter is really fantastic for this nascent business and fitbit may have launched the category, but with all of the competition they face with nike and with job own and the apple watch him in these guys are still the dominant player in this -- jawbone and the apple watch, these guys are still the dominant player in this. scarlet: d think they can increase market share? -- do you think they can increase market share? cory: yes, it is really an interesting thing to see. with theave seen margins is they have come down a little bit. that is done quite a bit over the previous year and maybe that is the one concern, but it has a full load operating profits -- it has flowed through their

operating profits. they are looking at a huge fourth quarter. cory, if you take a look at their revenue growth, it was down on quarter on the quarter, and you can see that the sales are slowing. cory: let's take a look at this. which companies does it matter and which companies does it not? kind of to look at the ways to compare it. fitbit, as we know, is a very in thel product, and fourth quarter, these things are given as gifts and for all we know, they could end up in the sock drawer. lovely giftd make a for any of you shopping for me right now for the holidays. [laughter] alix: thank you so much, cory johnson, bloomberg editor at large. coming up, more

market news. ♪ we live in a pick and choose world.

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scarlet: let's get the first word news this afternoon. mark: president obama has signed a bipartisan budget bill suspending the debt limit. congress approved the deal. it increases discretionary spending by $112 billion over the next two years and suspends the debt limit for march 2017. investigators have positively identified the wreckage found 15,000 feet deep into the sea as the cargo ship el faro. the ntsb says of the survey of the area will continue. the ship went down october 1 during hurricane joaquin.

33 people were on board. no survivors were found. another democrat has dropped out of the race for white house. lawrence lessig blamed debate rules for his campaign demise. he joined in september after earning more than $1 million in donation pledges. but he did not pull high enough to earn a spot in the first debate. the u.s. supreme court is rejecting the use of the image of bob marley. merchandisers used his image to sell clothing without getting permission from the children. that is your news. back to you. scarlet: let's get a recap on how u.s. markets closed. it was pretty much a straight rally through the afternoon. the dow jones erasing its loss for the year. five stocks rose for every one. the dow and s&p closing at its highest since late july. they looked past mixed global

pdi numbers. aig is coming in with results that missed analyst estimates, $.52 per share compared to the consensus of more than one dollar. while aig was falling in after-hours trading, it will cut 400 senior-level jobs and taking a charge for pretax charge for restructuring and other expenses. alix: i want to take a deep dive into the terminal. earlier this afternoon, it was about the fed loan survey. surveying how easy it is to get money right now. this is dealing with commercial industrial loans for large and medium-sized businesses. you see an increase. 7.4% of respondents are tightening their lending standards when it comes to medium and large businesses. we want to max it out to get a good perspective. it is a lot better than 2008-2009, but it is at its heights level since 2012.

scarlet: tighter conditions, which is unusual. this is a change. is it a blip or something more significant? i want to take a look at hong kong's property market. thank you to matthew brooker for featuring this chart. it tracks housing prices compiled by a local agency. up and away. the green line tracks transaction of the secondary market, they moved in tandem until 2010. but now, there is a huge gap. one local property agency suggest the green light fell to a 20 year low. when will we see the bubble burst? joe: i want to dive into my terminal to look at something that was brought up which is the city economic surprise index. you can see this chart goes back several years, but the red horizontal line is zero meaning anything below that is net. economic data points are disappointing.

all year, they have been disappointing. economic data has disappointed all year which explains why the expectations for the first rate hike is getting kicked back. right now they are thinking december is the day they hold up. who knows? the data may continue to deteriorate. scarlet: i didn't realize it was that all year long. alix: deteriorating lending standards and tightening conditions. for more, let's go to david, chairman of cumberland advisors. last time you were on, you made a pretty big call. here is what you said. david: you are in the window of entry right here in the season which ends in halloween. by halloween, the market will have turned. alix: if you look at the s&p 500, it came true. congratulations on the call. what drove the october turnaround? david: i don't know but i think i should retire right now and quit. what we realize -- we realized

the central bank of the world is still easing. money is still around zero. we realized that is going to be here for a long time, even if the fed takes a hike. -- irter point in december don't know about that. it could be march, june. there is a mixed message coming from the fed. we are not going to have a debilitating interest rate rise. number two, the u.s. economy is recovering. we will see a little sign of that on friday. we'll create not robust, but adding jobs. the growth is there. inflation is not a threat. those are wonderful things for rising stock prices. we went through a correction and now we are green and we went through halloween. joe: congratulations on the phenomenal call. one thing in this rally is tech outperform the broader market.

do you expect that to continue? david: i do. -- we were able to rebalance in the selloff. we are overweight today. coryeason -- you just had on a few minutes ago and he was talking about margins. take a look at the sectors. where do you have a wide margin that translates in a global -- growing sector to rising profits? you see it in the large caps, microsoft -- you see it in the large cap, tech sector in the broadest sense of the word and you have companies which participate worldwide in terms of bringing that together and translating it in u.s. dollar terms. the large caps and know how to hedge currency. it is not over. scarlet: the relative strength of the tech sector versus the s&p 500 comes on the strong

heels of good earnings. we have seen the same tech companies announced share buybacks. is that reason to pause? a company like google should be plowing the money back into its business. david: i don't think so. if you were running the company and you can finance yourself at next to zero, wouldn't you prefer some debt at very low cost rather than equity? that is a decision we will continue to see. i think we will see it around the world as long as these interest rates stay very low and they are likely to be low for several more years. scarlet: years, ok. what about overall sectors? if you take a look at midsized, small caps, it has been the large caps outperforming as people seek the buybacks and dividends. does that continue with the strong dollar or do we see the

small caps take some heat? david: i would stay favoring large caps. the dollar is going to get stronger when the fed moves. the gap between the advanced countries that are easing with weakening currencies and the u.s. dollar will only widen. the dollar will get stronger. large caps tell a story. the energy sector is a different thing. we nibbled at it. natural gas when it broke below two dollars was still underweight but we have a natural gas division with an etf that captures the sector. joe: could you go further on the natural gas? this is going to be the great call in september and now you are taking another stand. go further into why you think it will be good and when we can have you back on to say either this turned out to be right or wrong? david: you can have me back on

anytime, but i need four to five years for this call or something less. i'm not ready to commit asked to time. here is the story. natural gas is in abundance. 97%ently, we consume 95% -- of the natural gas. we are creating terminals. we are going to liquefy. we will ship around the world. this will be a growth industry. the construction of those terminals is underway today. we will expand volumes. volume is the key. volume on an infrastructure in place adds profit margin. that is the way natural gas looks to us. we have a lot of it. we will sell it around the world. we will make profits doing it and the stocks have been crushed and they are cheap. joe: come back here in five years. scarlet: it went up 20% and five weeks. we will have you back in about four or five years.

thank you, david. david: thank you. alix: the visa stock following the most in the s&p 500. coming up, we sit down with the cfo after the company reported earnings and announcing to buy these in europe -- visa europe. ♪

scarlet: what did you miss? it is time for the bloomberg business to look at the biggest news. allstate says its third-quarter profit slipped 27% and it was slow in the business. the net income decreased at $650 million. ago.from a year the stock is slightly higher in late trading. alix: more pressure on volkswagen.

the epa is expanding its investigation. the agency says some models were equipped with cheating software to defeat emissions tests. a top executive told u.s. lawmakers last month it was the work of a few engineers in germany. they could be on the hook for fines is high as $18 billion. scarlet: almost $500 million from an account run by bill gross. money invested last year after he left pimco. the redemption as a setback who struggled to attract assets and made mediocre returns in his first year. it sold 1.2% this year which trails 72% of soros' funds. that is your bloomberg business flash. in other company news, visa announcing earnings and agreed to acquire visa europe in a deal valued at $23 billion. the cfo vasant prabhu joins us now.

thank you for joining us. vasant: hello. scarlet: when you look at visa shares, it was the worst performer in the s&p 500 in an overwhelmingly positive day. visa share set a new record last week, but i wonder if there are any parts of today's earnings that investors may have in -- misinterpreted? vasant: we talked about our outlook for 2016. it hard to know in any given day why your stock moves. the momentum in our business is great. we have had extraordinary secular growth. we had a great year in 2015. in 2016, we tell people we have had some things that will affect our numbers -- the exchange rate, volatility. an uneven global economy. of those or something investors are digesting. the transaction creates long-term value. a complex transaction. it is hard to know in any given day, but we are very delighted

with the fact we are reuniting the visa family under one roof in a transaction that we think gives all opportunities for all companies. scarlet: when do investors see the benefit because there is some concern it can take a long time? vasant: we expect the transaction to be in fiscal year 2017 which is the first full year we will have visa europe as part of visa inc. high20, we expect single-digit percentage point in our eps. this is going to be very creative, but more importantly, it is extraordinary for the visa brand and business around the globe. it creates banks in europe who get access to all the visa resources. visa inc. shareholders, they get to be in more countries. 500 million more cardmembers.

$1.7 trillion in payment volume. all in all, we are very confident that a lot of long-term shareholder value is there. alix: just to add another big number -- visa europe is owned by more than 3000 banks. getting so many of them to agree to a deal like this is something visa has said it would take a long time to do and would be difficult to do. having said that, what was the catalyst that made this all come together right now? vasant: a variety of things. first of all, i think visa europe knows the mode of payments is changing. they need access to the best technology, the financial resources of a global enterprise that visa has. for us, the timing was good for a host of reasons. we are going to optimize our capital structure. we will add debt for this transaction. it is a good time to put a

long-term capital structure. we were able to mix in cash, stock and it works are everybody. the stock gives visa europe members a stake in the future of visa inc., as well as affords visa inc. some protection if there were some litigation risks in europe. it gives all opportunity for parties to build long-term volume. visa inc. will do extremely well. this will outperform far better than anybody expects. scarlet: quick question on raising debt, raising money. you plan to purchase up to $16 billion in debts of fund the purchase. i know you are fund is rated investment grade. to you see anything overall given the discussion of liquidity issues? vasant: we generate a lot of cash. $7 billion of cash flow in 2016.

we announced that this morning. we generate cash at a very fast clip. we also have a lot of cash in our balance sheet right now, so we are an a plus rated company. we are one of the best credits. we have never had a lot of debt. there is a lot of demand. we think our debt issue will be very well received. scarlet: thank you for your time, vasant prabhu, joining us from san francisco. alix: saudi arabia's net foreign assets are falling. it has been downgraded by s&p and the government is said to be ready to cut spending. our next guest says the country's debt has been greatly exaggerated and he will explain. ♪

miss?what you the fall of oil prices puts heavy pressure on saudi arabia. the economy was downgraded last countrys&p and the is burning through cash. it is the lowest level in nearly three years. we are joined by john, a middle east director at the ashmore group and comes from us in london. thank you for joining us. just today, we saw five year at its highest level since records began. you say the saudi economy is not dead so what are investors missing here? john: first of all, they are missing the fact they should be visiting the country. it is very hard to get the pulse of the country if you are not seeing it yourself. often enough, i'm asked what happens to the average saudi citizen.

is this creating any problems? i tell them not at all. safety nets are there. the economy is still vibrant. it is growing at 3.5%, more than any other emerging market economies. joe: you mentioned the quality saudilife for the average citizen. shopping is still doing fine if you look at retail stocks, construction stocks are doing well. what is holding it up? we associate saudi arabia with oil. you say the economy is growing but why? john: because for the last 10 udi economy has been growing at a very high pace rate. that has been very positive for income, purchasing power. if you compare it to other erms, saudiin ppp t arabia has greater strength in canada. the government still spends money.

a lot of people are entering the labor market. the women's labor force has increased since 2005 by more than 1700%. that is the story people are missing. scarlet: what happens when spending gets cut? the government is examining rates, domestic energy prices. overall employment might not look bad but youth employment is still around 30%. alix: saudi employment is about 11.7%. if spending gets cut, ball that trickle down into jobs and domestic spending? john: if you do that for 10 years -- i don't think spending will be sizabley decreased. it will still spend enough money and has enormous physical strength and cushioning. so, they have the lowest debt to gdp ratio in the world. the u.s. and other european countries would take that at any point. it still has more than 100% of

its size in reserves, even if you pointed out, they had been depleting reserves. they have enough money to spend for quite a few years. joe: one of the biggest bulls, john burbank has been making the point taht saudi arabia's stock market is pretty closed off to outside investors, but as they open it up, there will be a huge inflow of money. where are they in the process of opening up their markets to outside investors? john: it is funny. i'm in london for a major event. it is the first roadshow of the saudi soccer teams. we are seeing a lot of interest in saudi arabia because these valuations look fantastic at this point. having said that, i think the first step was taken back in june when for direct investors could invest directly into the market which is a market of more than $500 billion -- bigger than

brazil. scarlet: if you look at the rate, some people would say there is a buildup of stress. it is now 65 basis points above the u.s. equivalent. do you see a need for saudi arabia to depeg its currency? john: not at all. i don't expect whatsoever for saudi arabia to depeg. if they do that, that will send the wrong message. i think the authorities will peg because it creates stability and predictability. this is what everybody wants to see in difficult times, for an economy to produce predictable policies. scarlet: thank you for joining us. john is from the ashmore group and we will be right back. ♪

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4 -- scarlet: i am scarlet fu. expectations are in and there is "consumermp up after reports" with drew's termination of the latest tesla model. x: durables and nondurables are kind of yucky right now and that could be a double whammy. joe: one thing that i am looking at is u.s. vehicle sales come out tomorrow. tends to track pretty well with jobs to read that makes sense if you don't want to go out and buy a car if you don't have a job.

alix: i sense a deep dive tomorrow. yol, that is all for "what'd u miss?" this evening. john: i'm john heilemann.

mark: and i'm mark halperin. donald trump: and i am donald trump. and with all respect -- and with respect" to the campaign trail, this is thick ice. ♪ this show will be a long playing production every day of one hour instead of dirty minutes. that is right