i am joe weisenthal. "what'd you miss?" u.s. stocks closing lower. the dollar strengthens. joe: the question is "what'd you miss?" an improving economy put the december rape increase back on the table. rate back on the table. we begin with the markets. she said december is still a live possibility. it december raid >> i don'tcreased

understand what she said today that was that surprising market tookly, the it to mean that they are serious about december. financials it didn't move. usually when we see a rape increase, we see an increase in financials. we did not see that today. you have to wonder whether something else is going on here. joe: there was that isn services number. him -- ism services number. alix: let's take a look at the two year yield. this is a three-day chart. you can see this spike higher.

if you go back five years. the yield is now at its highest level in four years. it was already going higher before her testimony. joe: what happens when the fed raises rates. short term rates are already rising. it is not a binary thing. it is a process ongoing. she startedefore speaking, yields were back to their pre-19 -- 32017 hive. pre-2017 high. the services of economy seems to be boring. here is a look at the dichotomy in the economy. the employment sub index is the

yellow line. you can see the huge cap. services are doing well. manufacturing continues to decline. a much bigger part of the u.s. economy. here is the split. manufacturing is much more sensitive to the dollar. the domestic service economy is looking good. to what degree the services sector is much more sensitive to inflation. i'm getting facebook results coming out now, beating the consensus estimates. higher than the highest estimate out there. revenue for the quarter, $4.5 billion versus $4.37 billion. higher than the second quarter.

monthly active users, 1.5 5 billion. that is better than anticipated. was 1.5 2sus estimate billion. users for september -- june, 968 million. advertising revenue, 78% of total revenue. the estimate was 78%. they're getting 78% of revenue on mobile. most companies can't even begin to how the going to monetize mobile. wondering wille facebook be able to crack mobile. now they are clobbering it. >> you wonder how they will

monetize instagram. --ing past that two oculus to oculus and some other businesses. cory johnson has been digging into the numbers. cory: we talk a lot about twitter. they added zero users in the u.s. for two quarters in a row. is re-accelerating user on a monthly and daily active user basis. great had fallen down to 3% on a sequential basis, and that is the right way to look at it. 5%, then 3% again. much better than the 3.4% increase last quarter. monthly active users, the growth great went to 4%.

are accelerating their growth great even though it is the biggest group of users of anything ever gathered since beer. they are growing their audience size and the amount of time they are on facebook. one statistics has been there are great or how many users on the service, and then using it every day. i call it the conversion great. that is holding strong at 65%. that is really impressive. 65% of the people on facebook are using it every day. that's a really impressive number. alix: it absolutely is. great point. also joining us is david patrick -- kirkpatrick.

rates, 78% of revenue now on mobile. daily users.to what is your first blush here on this? has donea company that two things that are difficult, sustained the value, and turned into an amazing execution engine. everthan anyone would have imagined. predictable being on bloomberg talking about their quarterly results. they have been so good so many times. execute, figure out new ways to make money, to create a mobile business is astonishing. this was the biggest question when they went public. joe: what is the biggest question now? big question long-term is

how do you monetize users in developing countries. this is where the growth is. this is where the country is becoming a powerhouse in every country in the world, but in most of those countries there is not an advertising market. can facebook created? zuckerberg has been on a charm offensive in china. how big of an opportunity cost is china for facebook? china is a high priority for mark zuckerberg. i don't think it is an opportunity cost to not be in there. they are growing fine without it. at some point, they will get in china. there is no other explanation for why mark zuckerberg is speaking chinese to xi jinping

and having that conversation. for chinaf regulation visited facebook's office. there are a number of signs that they are softening towards facebook in china. alix: we have other earnings out. stock down 9%t, after earnings miss. big earnings miss. $.16 of adjusted earnings. the consensus estimate was $.34. on the revenue side, also a mess, $3.4 billion. unexpected decline in fourth quarter comparable sales, a drop of 2/10 of 1%. analysts were looking for an increase of 7/10 of 1%. more if theyown had not bought back up billion

dollars worth of shares in the first half and increased its dividend by 4%. alix: turning back to facebook. are looking to facebook's cost management. $780 million for capital expenditures. one of the things that facebook will do is spend whatever they need to spend. to surprise most often in terms of the way they have spent big money, whether marketing or research and development. they are fairly consistent in terms of their spend this quarter. all the numbers are bigger. the percentage of sales this quarter, research and development was 28% of their revenue, which is a big number for any company.

that is up from the previous year at 19%. it is consistent with what they have done this year. 30% of revenue devoted to r&d. it shows you the investments they are making in the future. the money they are spending for marketing and sales and sales staff, getting more advertising on facebook, percentage of sales has come down a lot. one year ago, the percentage of sales -- it has gone up a lot. that was 12% a year ago. it is 16% this quarter. they are spending a lot on marketing, sales, and a boatload on r&d, and yet still delivering powerful results. you very much, david kirkpatrick. and our own cory johnson.

coming up, friday jobs report. >> before we go, a quick update on other breaking news. is being sold to expedia for $3.9 billion. this is a stock and cash transaction for home away, agreed to be taken over by expedia. alix: that is a 19.5% premium. thank you julie hyman. home away stock higher after hours. expedia is slightly lower on that news. on wholequick update foods. ,djusted earnings per share $.30 versus consensus estimate of $.34, still a mess. alix: the home away stock has halted. we are seeing expedia's stock

trade lower. we will be right back. ♪

alix: i am alix steel. "what'd you miss?" >> cnn reporting the latest u.s. intelligence suggests the crash of a russian passenger jet was most likely caused by a bomb. the british government says evidence indicates it may have been brought down by a bomb. the voiceirming that recorder of the russian plane is damage. information from the data recorder it was successfully copied.

there was serious mechanical damage to the voice recorder. five people were stabbed at the university of california today, but none fatally. the male suspect was shot and killed. classes were canceled for the day. carrying oute are raids throughout germany to crackdown down on international human trafficking networks. the hundreds of thousands of refugees who have flooded into germany have paid human smugglers. that is your first word news. friday's jobs report is critical following comments today that a december great rise is on the table. after two months of disappointing prints, expectations have come down. have they come down enough? >> i think they should be revised up. i think we will get hit by a seasonal shot of 200.

the fed has shown that they have become much more difficult, reacting to markets than ever before. what about the wages? do you think there is any pressure? be steady asg to you go at the 2% annual great. rate. the number of hires is the lowest it has ever been. they are not buying people. they don't need to. they can do over time, part-time, but any thing but full-time. you can wait. the ford job

growth reflecting more difficulty in finding workers? >> that is part of the reason why they are looking for that perfect worker. why not? they can wait. had you hire somebody? you go to your competitor and offer 20% more. that's why we don't see wage pressure. will we see structurally lower wages then? we see middle income moving to lower income. as i can create a structural change in the wage world question mark -- world? >> when you have jobs replaced -- machinery, those goods are essentially flat. the service sector is where you can have some uniqueness.

that is where you will find the wage pressure, if any. joe: we have initial claims tomorrow, running at an extraordinarily low level. what do you make of that? not the fact that people are out there looking for jobs, or their unemployment benefits have run out and they are not going back. how slow is that domestic labor market? so far, the signs are good. alix: much more coming up with bill lee. next, does the fed actually care about the economic data? break, listen to democratic congressman brad cheekn give his tongue in reason for why janet yellen should wait until the spring to raise rates. >> god's plan is that things rise in the spring. if you want to be good with the

almighty, you might want to delay until may. ♪

alix: i am alix steel. "what'd you miss?" we're back with bill lee. janet yellen says that the door is open for a december rate hike . volatility matter more than the data? volatility is a proxy. janet yellen and the fed seem to be reacting to market conditions than data. joe: how do you quantify that? >> the fed should be following

, and here is the bond market volatility index. this is a rolling regression of their coefficient, how they react overtime. it is more and more negative. they ease in the face of on market volatility. push you the market around. thatosses violating cardinal rule that every young economist has learned. that makes it more disturbing that the boss, ultimate insider, is violating these rules. bankste shouldn't central be influenced by markets? companies are influenced by it. they delay mergers, don't hire workers. so, because the

markets finance what goes on within the corporate. it is the market that looks to the fed as an anchor to where monetary policy is going. feeding backot be onto policy itself. that is what we are seeing. joe: was there a moment that the fed switched? yellen said we will deviate when we have a crisis. 19 any it, they deviated, but came back. 1998, they deviated, but came back. institutions were falling, so they deviated, but it has been seven years. they've not only deleted from the dual mandate, but are also paying more attention to the markets. that to me is scary. this one to making the fed lose credibility? have a losshey

credibility in tels wh u it is they should be looking at. they said, we are not going to let markets push us around. we will let that macro data guide is. s -- guide us. that is not the case. they haven't learned how to be careful communicating to the markets. look at september. we let china somehow influence us. why? theuse china influenced markets, and the marcus causes to lose confidence. that market mechanism was at the center of their delays in september. joe: to take the opposing argument. years,go back seven there has been no inflation discernible. clearly employment has been elevated until recently.

other measures of the employment situation have been much higher than a have historically have just asn't that plausible of an argument? is why you should deviate, because of these headwinds. the macro data that provides data for anchor for policy and markets, but instead we have deviated so long and the fed is reacting to markets, that feedback rule could lead to a dynamically unstable situation. fundat do you think of fed futures? >> that shows you the power of words. chair yellen was able to raise the probabilities from 30% to 50% by pointing out that we will be doing what we are supposed to be doing at the next meeting. figure that one out, right? as the fed fund futures

have jumped, we are seeing a solid stock market. the stock market not worried about a rate hike question mark -- hike? >> we will see what happens. if we have something that causes more volatility, i bet you they will skip december. you haveh regulation, hold onto different assets. fory keeping rates at zero so long you have distorted prices and markets, and now they are so out of balance and out of mandate that nobody knows where they should be going. >> your call is for march? >> i have no clue what they're doing. it's my hail mary. i'm waiting until december. alix: thank you so much.

bill lee fired up. the bank of england set to make his decision tomorrow. we will discuss that. ♪

scarlet: i am scarlet fu. "what'd you miss?" a little over a year and tell the presidential elections, new hampshire's filing. started today. martin o'malley was among the first. donald trump also filed. the primary date is february 9. 's trip to jordan was delayed due to sand storms. initiativeoting an promoting girls education. say cloud herlice

car into a crowd during oklahoma state diversity's homecoming parade is facing charges of killing four people. she is being held on a $1 million bond. a judge has ordered a psychological evaluation. the changing of the guard begins today in canada. justin trudeau was sworn in as the nation's 23rd prime minister leading the liberal party into power. is canada'sold second youngest leader ever. that is your first word news. today janet yellen signaled that a strong economy would spur a december raid increase. the bank of england decides tomorrow if it should stay at its record low right. eric, you have said that spare capacity in the u.k., the bank of england should go first, but it won't.

-- why?ark . fed for twoof the reasons, one you don't want to be the one who goes first if you have to take it back. the other thing is that the u.k. has ay, the government bigger deficit and more fiscal tightening coming in, so a little more uncertainty on the the most excited than the u.s.. economic datahe that is pushing the boe? >> it is almost everything. you can have an argument about the output gap. you don't quite know whether they come back. the labor market is supertight. you saw the pmi today for the service sector, around 2%.

what the heck are interest rates doing at these levels? u.k. productivity is lower than the u.s., right? what is the snap back potential? >> that is a good question. i don't know the answer. -- the u.k., compared to france, germany, spain, and we don't quite know. one possible answer is that they have indeed the labor market and you get statistically poor productivity. it's a mathematical fact. the other possibility is that we to measurehow productivity and a country so dependent on the service sector. it?news how you really do fascinatesing that

me is the different gents between u.s. and u.k. labor force participation rates. the u.k. is hitting its highest level in decades and the u.s. is at its lowest level. what explains the difference question mark -- difference? it's not just the u.k., it's all of europe. you have unemployment rates above 10, so what is it? it is a lunch of efferent rings. -- things. the crisis has forced more people into the labor market.

u.s., iin -- in the don't know the answer why suddenly all these people are leaving the labor market. alix: why are the markets missing all these data points? see a 50% chance of a rate hike until may of 2016, so why are markets getting that wrong? >> it is very strange. i agree with you. in my opinion, they put them at different standards. biggest deficit and u.k. history. deficit, andiscal nobody seems to worry. 5% of gdp net. people don't seem to worry. i don't know why people get it wrong.

i suspect that there is confusion because of this forward guidance, which we have failed it. said, look at what they ultimately they wanted to wait for the fed could i'm completely sure that is what has happened. scarlet: you say that when central banks miss their targets, they say they will act? >> if the labor market does this, it's time. if the labor market that, we are looking at something different now. ,very time there is a goal post they put up another one. was certainly changing in the reaction. as i said, i can only come up with the conclusion that they have an overarching need to wait for the fed. england super

thursday tomorrow, inflation outlook on press conference, the decision. would you looking for question mark -- looking for? >> growth outlook. pmi numbers we got today are consistent with quarter on quarter. if they buy on to this one, then i think you will see it on the board for a march hike. alix: you are staying with us. i want to bring in emily chang. what did you learn from facebook 's david wehner. this is a killer quarter for facebook. the have reaccelerating growth of users and add growth. facebookople who use are using it every day.

telling us across the board a really strong quarter, really pleased with results. it continues to be a story about the success of our advertising business fueling our growth. they are seeing the strongest at growth of any quarter this year. as for what kind of advertising specifically, he said it is our product and innovations in advertising across the board contributing. we are seeing good performance , video, andbusiness instagram is starting to make a contribution. that adds a lot of curiosity. some estimates that perhaps $300 million or 5% of total ad revenue coming from ever core. that we are very pleased with the progress we are making. we are still very focused on user growth. another thing we were curious about is spending. on a loteen spending

of different things. what is the plan for spending over the course of next year. greatd we benefit from a business with solid margins, but are aggressive on the future. we continue to see great opportunities to invest. that aggressive spending will continue. a lot of questions about when they will monetize what's app, now nearing that one billion user mark. telling us that there isn't anything magical about any one in terms of user growth. the focus for messaging efforts is to continue to build a great experience for people who use the products. a lot of questions about whether mark zuckerberg

going with this family of mobile apps. he said we really have our own approach there. our big investment priorities are centered on our mission and investments. they all center on the mission to give people the power and the tools to share. it doesn't look like a type of alphabet is in facebook's future. >> one thing that cory johnson is that 61 percent of all north americans of every age are on facebook once a month. 77% are on every day. alix: thank you for that incredible number. we will be right back. ♪

alix: i am alix steel. "what'd you miss?" qe, low rates, nothing seems to be moving the needle on inflation. why? when you look at that chart, you can see inflation is not taking up. what is the number one reason why? coreu have to take the inflation. if you look at the change in the core inflation numbers. with theorrelate that

size and change in the out put cap. the output cap in europe is big. it is probably sizable here, but not nearly as big. you're sitting at 1.8% or thereabouts. it is on the line. part of this is a fundamental misunderstanding between good inflation and bad inflation. europeissue is that in on thee it's so targeted ecb getting back to 2%. the real issue is when they want inflation, that one good inflation, inflation driven by , growth that is closing the output gap. get inflation

being messed around by external factors. joe: how do we know what it is? how would you define it? slack we must have more because there no -- there is no inflation. how useful of an idea is it? a useful concept. it is difficult to measure. 's resources that can't find employment. capacity inspare factories. who could go to work in the united states if they were incentivized or could find a job. not in britain so much or germany. so,he 90's states, probably they call them in active, right?

you visit culprits, you can see that most have spare capacity. know what the output gap is? the fed had some idea where they thought the output gap would be hit. how would you try to quantify that? >> you try to estimate potential output growth number. forcech does the label work and grow, and what does productivity do? there is a lot of uncertainty. you could easily get estimates that very by 1% or 2%. when you see a recovery in the is modesturope that back to trend growth.

there is still this big gap that we haven't felt. couldyou think the hole be filled by fiscal stimulus in part. here we actually have fiscal stimulus eventually coming to the rescue in the united states once the budget deal got through, more spending, does this help to solve the problem? >> yes, definitely. and we see the same in europe. crisisany, the refugee byexpanding the deficit maybe a quarter percentage point. in italy and france, fort different reasons but related. for different but related reasons.

is the public that numbers. that in thenote out middle of the biggest crisis in peacetime we tighten fiscal possibly -- policy here and in europe. surprising, interest rates went quickly to this new territory of policy expansion and that is where the limitation start to come. then you ask yourself today, you can borrow money in europe at basically zero as a government. investment, no schools, no i.t.? alix: i love having eric. up, changing global

demographics could play a huge role in how assets are allocated. ♪

joe: i am joe weisenthal. "what'd you miss?" some of our guests have been talking about changing global demographics. have hugeould implications for people who manage money. thank you for joining us. one of the biggest things happening in world demographics

is the surge in migration, particularly asylum seekers in europe. it is very significant that we have seen asylum seekers at a stage in the global economic circle where growth is weak. , we tend to think of demographics counting people are looking at age. demographics is about consumer and worker characteristics. the migrants who come have a different role to play. they come for a variety of reasons. work, family, humanitarian reasons, or they could be displaced.

what we see is that over the last 24 years global migration about 50% more than the global population change, and that is significant. why? when we are in a world where we are saying that productivity is , it is not enough to just count the number of the people. look atd that if you the oldest five countries in the if age was the only statistic, then all five countries would be very similar. they are not.

all these things matter. behavior matters. what we show in our research is that all the people in the united states, germany, u.k., and japan are working more. younger people are working less. the refugee crisis can be explained by looking at what sam huntington told us in his book. joe: you mentioned age. you make a really interesting point is that there is a relationship between age and stockmarket valuations. the relationship between changing demographics and p/e ratios in the stock market. >> i think this is the biggest mistake made. if you read my paper on asset prices, counting people and

putting them and one group, calling them savers, basically this happened in the late 1970's, the fund managers said who invest in the s&p 500, typical people in their 40's. out, people in their 60's who put it into treasury bills and cash. between the ratio savers and spenders would predict the s&p 500. that has been used by banks and virtually every investor. now the professors say this is ridiculous. they say it is a case of spear correlation. just counting the number of people does not give you the same kind of buying values. if it look at that, worked for the u.s., it doesn't work for germany and japan. it short.ve to cut

thank you so much. we will be right back. ♪

scarlet: before we take a break, home away has resumed trading. has agreed to buy the site. shares slightly higher. disney reports after the bell tomorrow. time, disney reduced its forecast. alix: it feels like one year ago. currency,o watch this up 93% since mid august. a ferocious rally for bitcoin. joe: to date points on the labor market tomorrow.

we will see if those numbers converge. alix: all ahead of jobs friday. that is it for "what'd you miss?" thank you for watching. ♪

>> i am mark helprin. >> with all due respect to marco rubio, what is in your wallet? ♪ >> happy national king todd today, sports fans. ginsberg and james carville, but first marco rubio. from the are flying press and rival campaigns. today, he used an interview on gma to talk