>> from bloomberg world headquarters in new york, good thursday afternoon, i'm scarlet fu. >> here's what we're watching this hour. >> there is no reason to continue to experiment with extreme policy settings. the feds james bullard says it's time to raise interest rates but is anyone at the central bank listening? >> cisco on the earning stage after the bell, will china be a drag on the company? >> architect, designer, and author will join us. the sustainability pioneer talks design with health in mind. >> we want to get a check on today's market activity. let's check in with julie hyman for the latest. lots of fed presidents speaking. what kind of aggregate impact is it having? julie: it doesn't appear to be

having much of an impact. i will get to that in a minute. i want to start with what's going on in stocks and commodities. that's what's driving the trading in today's session. all three major averages are trading lower. terminal, map on my you see energy and materials are the two worst performing groups. that's what's creating the drag. if you look at commodities prices, gold trading at its lowest in five years. oil prices falling to their lowest in months. lower trading at a six year -- copper trading at a six-year low. with gold it has to do with the fed. the outlook hasn't changed. we got the weekly inventory numbers for crude oil. that number climbing more than estimated by 4.2 million barrels. i want to call upon my terminal a chart of inventories versus production. going back over the past six months. these are the inventories which

are up for seven straight weeks. and you have production which has been falling but we have seen an uptick. you don't want to see in this environment inventories rising and production rising when you already have an oversupply. >> what's so interesting about oils slide is aside from this number, it has been hard to find some trigger for this new wave of selling. this dynamic has been well-known. it didn't tell us anything new. it has been puzzling for me. julie: you can say that about the fed, too. we know the fed is considering december to be live. whenever anyone mentions it, you get potentially some kind of reaction. again today as mentioned, we heard james bullard saying now would be a good time to raise rates. at the same time you hear charles evans of the federal reserve bank of chicago saying it's important for the bank to

emphasize the trajectory will be gradual. we are seeing buying in the treasury market. yields down a bit but relatively elevated levels. if you look at alex's new favorite function, which uses the market to sort of plot out trajectory of rate increases, the green line is where current expectations are. yellow is six months ago. people are looking for more of an aggressive fed but that is a gentle curve. >> that's a great point. isn't it cool to see expectations and how they move? >> expectations have been run for so long. >> thanks so much. on first word in news, mark crumpton has those from our news desk. mark: thank you both. fighters backed by u.s. warplanes are trying to retake the city held by the atomic state. they have launched an attack on

-- the major objective is to cut off isis supply lines. last year they overran the city, causing thousands of refugees to flee and led to the first u.s. airstrike. the next round of talks on serious civil war resumes saturday in vienna, austria. a politicaloposing transition that would last up to 18 months. quitting to a draft proposal obtained by bloomberg news, russia -- according to a draft proposal, russia wants to back airstrikes on the russian -- i islamic state. they say intervention is aimed at propping up bashar al-assad. it will partially admit to doping charges as it tries to keep its place in the summer olympics. officials may rule to band russia's track and field team from the games. russia says there will not be a boycott of the games if the track team is banned. in greece, violence broke out during a general strike.

police and demonstrators fought briefly in central athens. it is the first strike since the new prime minister in january. they were protesting taxes and tax hikes. the prime minister said he had to enact them in order to get a bailout. for disease prevention says kobe city still rising among american adults. women have overtaken men in the obese category. the rate has climbed from 32% one decade ago to almost 38% today. it is even higher among blacks and hispanics. ♪ mark: that is a look at our first word news. you can get these and other breaking stories at the new bloomberg.com. from the first word desk, i'm mark crumpton. after approaching a record last week, the s&p 500 has since retreated. it has reinforced that a rate

increase could be on the table. all 10 industries in the benchmark dropped with commodity shares tumbling more than 1.3%. >> what do you do when the markets act like this? we want to bring up the chief strategic officer at t3 trading group. you came along on wednesday, it was uneventful and today we get the s&p below its 200. >> once the trend breaks or composure changes, traders have to take a step back. it was fast and furious, we saw a 12% move in the s&p asked -- s&px. we saw a trade at 2090 which was tuesday, that is when they took a risk off. we are trying to figure out where to support and where people who missed the current move have to buy the dip for the year end. make sure you don't dip too far because them we are back in the range and hopes of new highs

coming in before the end of the year probably diminish. >> how does that correlate with the russell? in late august -- it hasn't recovered. is this a leading indicator for the big caps? >> sometimes the russell leads and sometimes it likes. in order to get back to 2100 you needed participation from the oil sector, bio sector. bounceback and be a catch up. that's all it has been. when you fail, like the russell kind of did yesterday and has weakness today and oil starts weakening and breaking upper ranges like it has for two weeks, the rally that has been narrow starts to lose steam and that's what we are seeing. it is a tougher environment. >> are you flat or putting money to work? what level would you need to see? >> i came in flat today which was good with the market down, i

said i would buy first 2056 or because i was the supply for the week. i bought some of the spiders, i think traders are using that level. i don't know what we are doing right now. if we break today's lows i will probably be stopped out of those positions and try a new level because 12-13% of the s&p and five weeks, you pull out two and a half percent, you don't want to pull out early. you can get run over. >> like toe dipping. very tentative. one of the reasons it fell to begin with in august was because of volatility in china. take a look at just how calm has returned to the chinese market. the yen has stabilized and gained 1%. that is your blue line. it is the dollar rate, i inverted it. the shanghai has tumbled but has since recovered to enter a bull

market. since this is normalized we're back where we started in august. what levels do you look at for the shanghai composite? >> the definitions of what a bear and bull market. to buy 20% allowed off the lows, come in now and don't buy the dip. a month ago we were saying the level has to hold. you probably want to see 2800 or 2900 and the shanghai -- in the shanghai. now back at 3800, the shanghai is at a resistance. 42% off the lows, you don't start dipping -- 22% off the lows, you don't start dipping toes. i would say the shanghai could hold 3400ish, it could break confidence. now it's all about the strong dollar and oil and the fed left off. >> isaiah mentioned to julie, i didn't -- as i mentioned to julie, i didn't see a headline

that would make this relevant. as it moved through the downside, are we in the 30's? >> we could be. what started was the hot jobs number. it made left off probably happen. >> you will drive more and go to work, more money, you can by mark asked. you think that would be -- by mark asked. you think that would be more positive. >> strong dollar, weaker oil, you think weaker dollar, starter commodities. now you have a strong dollar with weaker oil. inventories continue to build, so that is pressuring oil more. the market was comparable between 45 and 49. below 44 a headwind, people look at it and below 40 could spike again. all of a sudden, those oil and energy companies, the bonds could go next again. -- nuts again. >>

the dollar has been on a tear. the fed does not meet until december. what could interrupt the trend? >> speakers start coming out and be more dubbish. thinking maybe december doesn't happen. they make it seem like december does happen and the odds out there was 75% so not everybody believed it. the last two or three years they are saying it would rise and they haven't yet. we also have another jobs number in november so if that is not as hot, that may put pressure on the dollar. maybe first quarter of 2016 then. oil, howof shorts and what kindurious, of velocity could you expect? move which-13% off a nobody expected. crowded trades move fast so you don't want to be in looking for more juice at the bottom like you are at the top.

you want to be the last one standing. >> scott radler, think you so much. -- thank you so much. >> coming up, unusually low health care inflation has held down core pc inflation. what will happen in 2016? >> cisco announcing a partnership with ericsson. we will tell you what to look for when they announce earnings after the bell. >> we've had 11 months of depressed oil prices so is a rebound coming? or will more companies feel the pain? ♪

♪ >> welcome back to bloomberg markets. >> it is time for the bloomberg business flash, a look at the biggest stories. talk about a sure thing, investors are all but certain the european central cut interest rates next month. pricing in the 90% likelihood that the ecb will cut rates by a 10th of a percentage point. mario draghi signaled he is ready to add it to the stimulus. >> home prices in the u.s. are rising. in the third quarter they were up and 87% of the metropolitan areas. that's according to the national association of realtors. price, $229,000 up 5.5% from a year ago. >> black friday may be losing its mojo. target and best buy are spreading discounts throughout november. walmart is offering sale items online and in stores. customers are less interested in participating in the industry ritual. i went shopping one time on

black friday and loved it. it was so crazy. it was a treat to see what it was all about. >> i have to stay far away because i can't get into that. you can get more news a bloomberg.com. >> julie hyman has a check on company movers. he will stick with the retail scene. julie: i'm with scarlet. don't go into the stores on black friday for fear of being trampled. kohl's is doing well. afterock is coming back sales were better than estimated. macy's sparked concerns among retail investors that there was a big overhang in the department store industry. kohl's seems to be defined that with earnings ahead of estimates up 1.2%. i have been adding more on trend athletic products and national brands. that strategy seems to be helping.

macy's it self bounced back, at 4.8y coming back percent. full earnings tomorrow, it had comparable sales that beat estimates. macy's not bouncing back by that much but analysts at north coast as well as citigroup coming out and saying it's worth perhaps buying shares. we are looking at sally beauty, that chain has shares up more than 8.8% -- 8.5%. however, it looks like sales matched estimates and the company is looking at gross basis expansion in 35-45 points. it appears to be trying to rejuvenate the company. fallingporting goods arter a tr global -- global saying it is being cut from mixed to positive. warm weather seems to be the

culprit as fewer people come in to buy outdoor boots and heavy coats and other types of winter gear. >> it's like, what is the perfect temperature for shopping? >> people put off buying ski gear. continue going biking but they can't go into the stores to buy ski gear. >> where is winter and when will it come? >> winter is coming. >> they do so much julie. >> the one thing -- thank you so much julie. >> if you dig deeper, there are some places where inflation is expected to pick up. one is health care. >> the fed is going to be happy because health care costs are a substantial metric in what the fed uses for its metric for assessing upward pressures. you can see here that overall health care makes up 17% of the core pce which i didn't know. >> typically, health care

inflation rises faster than overall inflation. that has been the case from 2000-2012. since 2012 the increase was comparable. court pc and health care inflation rose at about the same rate. if you look at the chart, health services have begun rising at a slower pace than core inflation. >> a huge part of this is policy. we have a chart that comes from goldman sachs that outlines the contribution and policy changes on this negative health care inflation like sequestration. you had cuts to medicare, shifts in coverage, one-time payments. that has been a huge driver. as well.are probably the effect will start to fade a bit. one thing goldman sachs points out is that health care inflation is set to rise because you look at hospital wages, there's a large segment of

health care. goldman sachs advances it because it could make prices higher. >> goldman saying you see the pce price index having it rise 1.5% year after year just in the second quarter of 2016 that could add to overall inflation by about 15 basis points. the blue line there is a predicted cost of health care. 15 basis is not enormous but it is substantial toward the fed. two-pointo reach the -- 2% inflation. >> we are looking at a 2% target. >> it was a fascinating know. still to come on -- it was a fascinating note. fiscal earnings, all eyes on the recent partnership with ericsson. whether move pay off? what -- will the move pay off? ♪

♪

>> welcome back to bloomberg markets. cisco, the largest maker of internet network year is releasing fiscal first-quarter earnings after the closing bell today. >> this is the second earnings call for the new ceo chuck robbins. it is the focus of the west coast wake up. with insight from san francisco, is ian king. a lot of focus on chuck robbins, what has he done and said to show the direction he is moving cisco in? is one of the outstanding questions people have. his firstimeout was people are getting a taste of who he is and what he might bring. i spoke to investors and we want a bit more from chuck which is not john chambers that will show us what he finds and thinks is important for the company.

so far, all he's talked about has been security. he thinks this is a potentially big area they can expand into. security numbers were a bit disappointing last timeout. >> sales came in up 4% from last year, 3% growth before this quarter. will we ever see a cisco that goes back to 13% year on year sales growth? ian: that is the question on investors minds. about 4% this year, maybe the after that. people don't believe those nubbers are coming back. i asked robbins when i met him a month or so ago was it possible, he smiled and said we are working on it and these are areas we think can benefit going forward. look at the new devices that

will connect to the internet. something has to connect them, why wouldn't that be cisco? it was a generic answer and people are looking for more of a concrete roadmap for how he will fire that growth engine up. >> sounds like he's cap dancing away from getting a firm answer. ericsson joining together in a partnership that is not any kind of take over and no money being exchanged, that they are looking at a bump of one billion dollars annually. what kind of questions are there regarding this? ian: robbins alluded to that when he was on bloomberg tv. the whole industry is consolidating, customers are consolidating. some rivals are buying up people. why aren't you? giant mergers and acquisitions don't work. partnerships like this can give

and thecale and savings access to new customers without the headaches. this was his sort of answer. basis, you have companies that are leaders in slightly different areas. products or put in go to customers together, in theory, they have a chance to sell more stuff. >> thank you so much. bloomberg tech reporter in san francisco and will cover results when they come out. >> i.t. spending more, buying more stuff. >> oil prices still punching, what does it mean for companies across the energy industry? ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, 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. ♪ from bloomberg world headquarters in new york, welcome back. let's start with headlines on

bloomberg's first world news, or crumpton has those. -- mark crumpton has those. mark: the civil war talks resumed in vienna. russia is proposing a transition that would last 18 months. according to a draft proposal obtained by bloomberg news, russia once you and backing to carry out -- q and backing -- un ba tocking combat the islamic state. say russia is aiming at keeping bashar al-assad and power. the ability to travel between countries in europe without using a passport. ,hat plan is changing somewhat now that sweden has become the fifth country to impose temporary border checks because of the increasing number of refugees. in romania, to more people have died of burns suffered in last month's fire at a nightclub. that brings the death toll to

53. more than 60 others remain hospitalized. 15 in serious or critical condition. the fire began when a fire sparked foam decorations during a concert sending fans stampeding for a single exit door. two college students in missouri face charges for allegedly posting threats against black students and faculty. the arrests come in the wake of protests at the university of missouri that led this cools president to resign. he was accused of being insensitive to problems on campus. sifting through the wreckage of a small plane that slammed into a four unit apartment complex on tuesday. experts are puzzled because there was no distress call. of nine people on board were killed. seven worked for the same florida real estate company. that's a look at our first word news. you can get more on these and other stories 24 hours a day at

the new bloomberg.com. from the first word desk, i'm mark crumpton. companies, of energy what has been interesting is when we look at the deterioration of oil prices. you have seen damage done not just in futures and financial markets but it draws to my questions about company exposure. >> when you look at how bad the commodity route is, it is actually really bad. you look at oil versus its five-year average, a 50% decline versus that average. looking at the other issues in 2009 when oil fell off a cliff, or the 5% below that average and 40% -- 35% below that average and only 40% off all of the average winning we are worse off than we've ever been. >> at the heart of this is opec and not cutting production targets for staying with its

strategy of maintaining. >> it is not a demand story. have 200 million barrels of storage and the world, which is a record high, but opec says they will not cut. they will pump 31 million barrels a day. that is a dynamic keeping oil prices permanently low for longer. , the loweray be done for longer could mean a 20% consistent decline which would hurt a lot of companies. themeer for longer is the and that oil price is threatening to topple more companies in the industry. laura keller joins us with more. ,ho is feeling the most pain are the independent companies. >> it will not be the middle guys, it will be the smaller maybe more independent not integrated groups. that will be a lot of different companies. >> there is a toll in terms of

people who are employed. today's overall jobless claim numbers shows there was no real change but if you look at claims in the top 10 energy intensive states like arkansas, colorado, it has been rising to the highest levels since april. >> this leads me to the default question. how many have we seen and how many more might we see? how does that lead to bankruptcies? there are has said about 20 three different defaults through october and probably more through the next two months. next year in 2016, he will see almost doubling. updy's has said it will go to three point 8% which is higher than we've had since 2011 -- 3.8% which is higher than 2011. the head of that company, marathon, saying if we have oil at under $60 per barrel, we will

see 25% of all enp high-yield companies defaulting. if you think about who that affects, it will be a lot of people and jobs. >> what kind of companies are we talking about? last spring i heard this would happen. now we are saying next winter we will see defaults. what has changed over the last year and will change in the winter? >> i think you are right that every six months there's a new low and scare. some of this has to do with bank rate determinations with banks going back and saying you have to have less access to credit. i think everybody that looks at thought thing upcoming 2016 would be a worse year than 2015, but i think some of them are looking at it viscerally or have not looked at it as engagingly. as you say, it is a sort of

cyclical thing with oil prices down and people worry again. >> i noticed there's a gap between the number of energy companies defaulting on debt and a gap between those that file for bankruptcy. why? >> moody's and s&p count things called stress debt exchanges which is a company saying they unsecuredlion of debt and would like investors to go up in the capital structure. moody's looks at that and says it's a default. that does not mean the company will go into back up say. >> if you were -- into bankruptcy. a junk-bond investor, why would they take i to the market question mark we are looking at that the present. those losses have to be hurting somebody. >> some of the high-yield guys who may participate and did six months ago, for now they

have $2 billion of losses on $14 billion that is out there. they are not looking to go back into new deals and buy new debt. we are seeing energy companies with no problems not being able to access the market. some huge majors probably still could come, some are investment-grade but you are seeing most to need the money not going -- most who need the money not able. >> i know you spoke with oaktree capital, the cc an opportunity? -- does he see an opportunity? >> investors typically go through companies and find opportunities. their firm and others are coming saying is this a company that will pay me back? if so, when? there are opportunities you have to be very specific in what you're looking for. >> a lot of due diligence.

thank you so much. fascinating for the industry. minutes, next 20 siemens announced its second by back -- buyback. we will go to london to hear about it second quarter. joins us tonough discuss his many sustainable designs changing the nation's landscape. >> sharing thoughts with us, what does he think of uber and other unicorns? ♪

♪ >> welcome back to bloomberg markets. >> it is time for the bloomberg business flash, a look at the biggest business stories in the

news. employees telling they can come forward with information about how the company cheated on emissions tests and will be fired. they are protected by collective bargaining agreements that expire on november 30. up to 11 million vehicles worldwide are involved. >> he won't be scoring goals for the rangers or work for the next, what a new employee is getting a one-time hit with $40 million. david o'connor will receive a restricted stock grant. it is compensation for what he left behind at the agency. >> their global mergers and acquisitions group at goldman sachs will host something for the 202011 games. he will step down for his response abilities but serve the firm in a limited capacity. patrick -- magic johnson has been named vice chair of that group.

>> you can always get more business news at bloomberg.com. >> let's look at the action around the globe. were littleindexes changed. one market in the asia-pacific region has been outperforming. south korea is dominating asian equities. reporting from hong kong. >> companies driving impressive returns to korean shareholders. seven of the 10 best performers in asian equities are in south korea. 968 and 699% respectively after deals to sell lung cancer and diabetes treatments overseas. shares standout, its climbed by more than 100% this year next to positive reviews for its foundation cream. accolades are another for south korea which tops the innovation index.

on bloomberg markets, closed with mark barton and betty liu with earnings from siemens and rwe. spelling giving them more breathing room. what they did with the share signal results that beat estimates. they signaled they want more time to make the company more efficient. they did have a three-year, $3 billion share buyback. they announced when their 4 billion euro buyback ended. markets were finishing up high close to 4% on the increase. you look at the numbers, what we focus on with siemens is the so-called industrial operations unit. that's all there and come common better, about 200 million better than expected. that's a good sign for siemens because that's their energy growth.

the negative side is profit margins in the 10-11% range and has wanted to make this more of a lean and profitable company compared to its peers. and of course general electric in the states. prettyline numbers look good. there is concern about china and the ceo was clear. they don't know what the macro environment looks like. china, is it one of the biggest headwinds to come? has tried to diversify and so they have a lot of offshore wind turbines. that was one of their units that sold well. selling them in the north sea. a lot of oil services and oil bets are subject not only to what's happening in china and the service contracts but what's happening with the general price siemens boughtr,

another company to get into that shale explosion. that didn't pay out for them but they are diversified enough so it looks like to have a good quarter. i know mark always likes talking about trains. i like my train set. i want to talk about rwe. it got me thinking because of electricity prices in germany have fallen 10% in the first nine months of the year. that got me thinking, surely hans nichols'electricity bill has been reduced which means you .ave more space to buy we have the two biggest german utilities, a split approach. one reported yesterday they have moved off their cold fire assets and have a leaner clean energy company. this is a response to merkel's

agenda and wants to switch the company away from fossil fuels and nuclear. year,down 55% on the those are great numbers. >> for a look at u.s. markets, abigail doolittle has the latest from the nasdaq or she is d.com.g at j.d..co 3.8% afterles up they reported their numbers. the company said sales accelerated by 138% year-over-year and gross merchandise volume was up 140% year-over-year. global transactions accounted for 74% of transactions. withompany outlined these the #growth acceleration. these trades at a 64% discount e-saleou sell basis -- basis. the growth that analysts have modeled could help bring shares out of this and send them back

toward this year's high. these chairsneti, are up after they reported a strong third quarter. this company be adjusted earnings and present this revenues. -- revenues. >> she has taken her price target to 171 from 153. these chairs are trading near a record high. >> thank you so much. abigail doolittle reporting from the nasdaq. >> coming up, we speak with greens pioneer bill mcdonough. and the author of the book cradle to cradle. ♪

♪ >> welcome back to bloomberg markets. month,he end of the

officials from all over the world will meet in paris at the united nations annual climate change conference. >> one topic of interest is sustainable development. who better to speak with about than the pioneer, bill mcdonough, founding principal of willie mcdonough and partners and author of title to cradle which is what widely regarded as one of the most and port an environment of manifestoes. such a pleasure to have you on set. how is the world doing and companies? >> in our world, companies are using this moment to realize innovation is called for. businesses love the moment when they get to do massive innovation. we are at a moment in history where industry is about to transform and companies that take advantage of it will thrive. >> what kind of companies are leading it? >> smaller companies that do initiatives like what you just recently,antly --

home care products and personal care products, are important. but big companies are doing it. we see leaders in furniture, building. it started as a major movement in this country in architecture and construction. we now have green standards and construction. >> -- in construction. green, theree and is a deeper change that companies can undergo. change is the question of our values being translated to value and set of just looking at a number and saying what do we want to do less of and do more of. it's not about being less bad, ands about being less bad doing better and driving the charts of getting rid of what we don't want while we increase what we do. >> less bad, more good is a

virtuous goal for anyone but for a company especially a smaller one and bigger one to face investor pressure, the cost can be mind-boggling. how can you debunk some myths in terms of costs in sustainability? you find that regulations fall away if you do these things. youou designed this way, are not regulated because there is nothing to fear. second is cost. all of a sudden, it's 20% cheaper to make because you don't have to file paperwork and materials are safe and workers are happy. those are simpler things. the big ones if you want quick returns is in capex. things that save $35 million on day one in cap x which is equivalent with a car at a 4% margin of giving them in order for $900 million for cars on day one. this is the kind of thing you

have to put in your head and it's caused by leaders who have values that they deliver the soue but stick to our values the world once more of it and not less. >> what are you most proud of? bill: i think writing with dr. michael browngart was a real privilege. later, it is just exciting to see these ideas out. >> in terms of development and seeing a project you worked on, what are the highlights? bill: in amsterdam we are building a giant project with support from industries and companies that. we are doing a circular economy hub. it's a way of getting companies to engage with each other where we make and design what's next into what's now. make waste linear economy where we drop stuff off the end and it depreciates, we design buildings to be able to

be sold as commodities if they ever came apart so they always have value. thelook at services, company that made the washing machine still owns the assets so it doesn't depreciate, it is sitting there waiting for the company. we look at a company on by berkshire hathaway, warren buffett realized you are storing raw materials on customers floors and when they want a new carpet you take it back and just created a relationship that goes on and materials don't need ned.e remie it puts money back into your pocket instead of drilling a hole. >> what about governments and the public sector? what can they learn? bill: congress is the engine of change and they often chase businesses. when the government shows up to regulate they decide they don't need to. that's what they can learn. the government can benchmark

against these good practices and hold them out as the examples of what society is asking for. they say we like the sick products -- these safe products. reducing toxins, you can say, see these good people, copy them. we have carrots and sticks. regulators are sticks, businesses are carrots. the idea is create a caret big enough for the stick. -- a carrot big enough for the stick. >> has sustainability investment changed corporate interest in being more sustainable? has there been a flow-through impact? bill: people have decided there are things they can do that reflect aesthetics and cost performance but also have a green aspect. it is a very important idea and can be cost-effective. they are happy to know because they'd rather do this than do others.

we are seeing new financing mechanisms like supply chain financing and bunnies developing where they are -- and companies developing where they are creating whole new databases using metadata and we see that as exciting. we can put a qualification on the quantification. it's the internet of things all the way down to the molecule. >> great stuff, thank you for joining us. he is the founding principle of willie mcdonough and partners. and author of cradle to cradle. >> coming up, why is billionaire ron perlman worried for our economy? how tech valuations play a role. ♪

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alix: it is 1 p.m. in new york and 6:00 a.m. in hong kong. scarlet: welcome to bloomberg markets.

alix: from -- scarlet: from bloomberg world headquarters in new york, good afternoon. i'm scarlet fu. alix: and i'm alix steel. ron perelman is worried about the economy. used to auster galo yet win championship fights. now he promotes them -- oscar de la hoya. alix: macy's actually outshining its rival. scarlet: first, to the bloomberg markets desk where julie hyman has said officials having an impact. yes, aa fed of fact -- fed effect on commodities. time tot is indeed raise rates, but it will be gradual. basically reiterating what we

have heard, but a reminder to the markets. if you take a look at my bloomberg terminal, you have the declines we are seeing, really pretty ride based here. all 10 industry groups are down. in energyst decline and materials. there is not a lot of rhyme or reason in terms of cyclicals versus defense. utilities are doing poorly. staples are down. not indiscriminate selling. but very broad-based. look no further than your global commodity monitor. this has most of the energy complex down today. most of the metals down today. if you look at the bloomberg commodity index that matches all of these together, you see a decline of 1.8 resent today. since 1999.lowest

-- you see a decline of 1.8% today. especially when you look at oil, for example. you did see production rise in the u.s. last week, 20 5000 barrels, nothing big, but the trend -- 2500 -- 25,000 barrels. julie: right, and the trend is important. exxon mobil has been habitually week. freeport-mcmoran has also been week in metals. alix: thank you, julie hyman. scarlet: let's check in on the bloomberg first word news. mark crumpton has those. twin the death toll in suicide tax out of beirut is now 16. 40 others were injured.

explosions occurred minutes apart. hold outbeirut is a for the militant hezbollah group . vice president biden will travel to croatia for a summit of southeast european leaders. the white house says the november 25 meeting that will deal with european immigration and other regional issues. the presidents of croatia and slovenia will host the gathering. breakthroughrent for kurdish forces in iraq battling the islamic state. they say they now control a highway that was once the main .upply route for isis the kurds launched a major assault in hopes of retaking a strategic town the militants overran last year. they are being backed by us-led airstrikes. president obama awarded the medal of honor to a retired u.s. army captain who tackled a suicide bomber.

saving u.s.ed with soldiers. he was critically wounded, but has learned to walk again after three operations. hong kong billionaire joseph lau is having a week for the record books. on wednesday he paid more than $48 million for a 12 caret blue diamond for his seven-year-old daughter. that is the most ever spent on a gem at auction. and his company sold an office tower for 1.6 billion dollars, more than twice the previous record for a commercial sale. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. from the bloomberg first word desk, i'm mark crumpton. back to you. diamond, by that the way. i held it in my hands.

scarlet: how many bodyguards were around you? alix: it was in a secure location in the middle of new york. it was unbelievable. then after that, you had surgery for your arm. alix: it was much smaller and lighter than you would think. scarlet: william dudley says that the need for higher interest rates is "quite possible." >> that is not much below the growth we saw in the first half of the year. we are much closer to our goal of maximum sustainable employment. st. louis fed president james bullard says that now is the time to raise rates. what does this mean? brendan greeley.

we are having headlines across from that q&a with dudley, and he says if you wait for lift up, that could boost a hard landing scenario. he said yeah, but something interesting. he's sort of punk'd us. atsays we are looking inflation. we are going to lose control of inflation. this is a familiar story for him. he looks at the dallas trend mean -- i will not go into the details of how it is cultivated, but it happens to be showing much higher inflation than core pce, which is what janet yellen looks at. measure,your inflation you are closer to the target all of a sudden. here is how bullard kind of pun k'd us. he made another case, an

academic case for why we might be stuck as zero for a while, why interest rates are going down. let me walk you over to the board and explain what is going on. he pulled research by someone cochrane. these are very hawkish institutions. this is what he is looking at. this is the nominal interest rate for the g7. he is pulling data from everywhere. this is the crisis. here is what we see. nominal interest rates, policy rates go down. they have been hovering close to zero all the time. they got an initial bump. after that, it has been going steadily down. his point is, if you leave it at zero long enough, they change expectation and expectations of infant -- of inflation are part of what interest rates are composed of. he says, we have been looking at

these policy rates for seven years now. that is an entire business cycle. the more you keep them there, the more you change expectations. even if we are looking at a case for lift off soon, we do not necessarily know what has happened to expectations of inflation. it may be they are at zero. we have discussed this several times. it correlates with help -- with the oil price trend. and yet it feels like that dictates expectations. alix: which raises the question, are inflation expectations totally bs? say, look, this is a very simple model i am looking at. but when you look at core, when food, it'sut oil and not behaving the way you would expect. ago,they said seven years

we will see hyperinflation soon. that has not happened. takenot know if you can inflation expectations fiercely. we have talked before about how difficult they are to measure. alix: what else is interesting that bullard said, he said that qe had real effects on the economy. that was the goal. that was what was supposed to do. it can make me buy a house, but how can it make a company invest in workers, investing capex? brendan: this is what janet yellen said this morning. it does not work the way we thought it would. we can get interest rates to the way we want them, but we do not know what happens to the economy after we get them down. everyone is scratching their heads. what is the consequence of this going to be? scarlet: then there is the reaction function where it is all over the place. much, brendano

greeley, senior economics correspondent at bloomberg. scarlet: watching that is all it is. coming up, oscar de la hoya tells us what fight we should tune into. a back toyback to shareholders in 2014, but some analysts's are -- analysts are concerned money is not going to the right places. scarlet: no holiday cheer for macy's just yet. ♪

welcome back to bloomberg markets. i'm alix steel. scarlet: i'm scarlet fu. time for the bloomberg business flash. toes bullard says it is time raise rates because emergency policies are no longer needed.

he said this at a speech earlier today. >> a simple and prudent approach to current policy is to move the closer to normal level now is than when the goals had been attained. there is no reason to experiment with extreme policy settings. fed chairast year janet yellen said that a rising rates was a possibility. unemploymentime benefits unchanged last week. jobless claims have hovered around a four decade low since july. scarlet: goldman sachs is promoting a managing director, itsrom win the bank changed processes. goldman has 37,000 employees. you can always get more business news at bloomberg.com. alix: let's head over to our

markets desk. julie hyman has more on company movers. we thought you would name everything will person promoted at goldman sachs today. dow jones reporting that apple is in talks with u.s. banks to offer a surface to potentially compete with paypal's venmo. a source from piper jaffray hisng this would not change company's policy. google is says that having trouble breaking through into the payments business and one way for it to do so is to buy paypal. but it's not helping those paypal shares today. also we are watching a potential deal in the internet business. iac interactive has made an appraisal -- made a proposal to

buy angie's list. angie's list in the past has spurned iac's offers and share that offerng above price. is yelp, it looks like there more sales speculation. and very quickly, the pharmaceutical maker, mankind -- there was a question whether a deal go through. is really -- israeli regulators seeming to be blocking it. that deal is going through. scarlet: remember that fight mannyloyd meriwether and pacquiao in may? i'm a lot of people said it would not be worth it. alix: we got to talk to legendary fighter oscar de la hoya. be guaranteed

action. goesl is a warrior who straight in. my guy, he is a young bowl, a fighter who is just as strong. scarlet: he is 10 years younger, right? this is one of those fights where it can't miss. and people know that. i'm thinking manny pacquiao /floyd meriwether generated so many pay-per-view homes. we generated half the business. scarlet: then you are making? i know hbo is promoting this heavenly -- heavily, but how you get joe sixpack to pay $60 on pay-per-view? have been -- >> we have been doing this for over

year. we have one of the best promoters. auster has been talking up the fight. he has some huge fights. scarlet: and i heard that he has a bet with jay-z. [laughter] felt wass something we very important. auster are very passionate about their fighters. they wanted to bit -- but jay-z oscar are passionate about their fighters. this is not just for the hard-core boxing fan. this is a huge event. to get to the numbers we need, between one and 2 million paper of years, we need to get to the mainstream. we believe that this will be attractive to the mainstream operators. operators atr their surcharges, it will probably cost $70, which is a pretty steep price if you are

not in two boxing in our core have you ever watched or paid for boxing? alix: i have not. but i used to box. which is the whole point. you need a household name if you are going to splurge on $60, $70. you need might tyson or manny pacquiao. the top three draws of all time -- the first of three are floyd mayweather fights. the next top three are mike tyson fights. alix: that fight goes down november 21 in las vegas. scarlet: get ready to rumble. still ahead on bloomberg markets , where is all of that cash going that investors made in share buybacks? we investigate. ♪

scarlet: welcome back to bloomberg markets. i'm scarlet fu. alix: i'm alix steel.

stop buybacks -- some analysts say that money is not well spent . -- stop buybacks, some analysts say that money is not well spent. should they do other things question mark what should they do? scarlet: some point out that it is very high. radio,rom bloomberg carol massar and cory johnson have the story. ix, thank you for that. carol massar and cory johnson. you and i have talked about stock buybacks over the years. we've talked about this is not a good way for companies to use their money. you don't necessarily believe that? it's important to understand not all buybacks are created equal. when companies are issuing a lot of shares and buying them back, that is not really what we are looking at. we are looking at net buybacks. so, just to the buyback portion.

if they issued shares, we will take that into account. we also penalize companies adding a bunch of debt. that is because oftentimes, you will see that they are doing buybacks and acquisitions at the same time. cory: so, a company like ibm borrowing a ton of money, raising the dividend, the net profits are getting smaller. guest: right. a caveat, we do own ibm. debt they were taking did not trigger the debt provision. carol: so you have a company like apple that takes on a bunch of debt. that is an ok thing? lowt: apple would be a conviction buyback, because they are not buying back more than 5% of their shares. we penalize companies making

large acquisitions. if you have a earnings quality composite. it would catch a sign of recent acquisitions. these are all reasons why we would throw these things out. while we are looking for cyclically are high conviction -- ands -- 5% or greater very, very cheap shares. that is the key. cory: cheap as measured by -- guest: value composite. , free cash flow to ebitda, etc. cory: would you rather see bigger dividends or more buybacks? i have a hard time getting my head around the idea that a share buyback is legitimately returning cash to investors. for all the reasons you mentioned -- the debt. a dividend is returning something to the owners of the

shares. guest: historically we use something called shareholder yield, which is dividend plus buyback, but going back to the 1930's, buybacks beat large stocks in every decade from the 1930's through the aughts. cory: interesting. but doesn't that say something more about the kind of companies those are? the 1970's, 1980's, 1990's companies were very much utility focused, much slower growing companies that did not take on a lot of debt. and thus the concept of shareholder yield, which is being driven mostly by by backfield. i think if you look at the numbers historically, they are to their capital shareholders, because the numbers speak for themselves. if you look at the study we did between 1987 and 2014, all large

stocks equally weighted return 11.2%. large buybacks return 12.2%. large conviction buybacks returned 15.9%. large 10-year periods, buybacks beat 97% of the time. if you look at issuers, they beat over the rolling 10-year stocks 15% of the time. carol: money moving from investors to businesses in the form of ipo venture capital is less than 200 billion dollars. we see how this is compared in a perspective, if you will -- do you think buybacks still make sense? guest: absolutely. addave been able to

significant value in the portfolio over the long term. and one of the things -- carol: 10 seconds. guest: also you really need to focus on them when they are cheap. carol: a big part of this. guest: a big part of it. hasl: jim o'shaughnessy $7 million under management. i'm going to throw it back. scarlet: really interesting. scott -- stocks that buyback shares have not done as well lately. it has kind of turned. alix: much more ahead on bloomberg markets. the miraclemore for on 34th street for macy's. we explain. ♪

alix: welcome to bloomberg markets. you are a bloomberg world headquarters. i'm alix steel. scarlet: andi'm alix steel.

. -- andi'm scarlet fu. i'm scarlet fu. retake aoperation to highway that runs through sinjar was supported by u.s. airstrikes. president obama offering his congratulations to democracy kyi inr aung san suu myanmar's historic elections. her opposition party is on the verge of victory. myanmar's army has vowed to respect the results. the russian federation says it charges.t to doping officials may vote today to ban participation from the

teams. adults are still getting heavier . that is according to a new report from the centers for disease control, which says women have overtaken men. of ats thought decades rise in obesity have leveled off. but they fothsity climbed to 30% from 32% a decade ago. -- can get more on these and 238% from 32% a decade ago. you can get more on these and other stories at the new bloomberg.com. 38%. jcpenney reporting better-than-expected results. it's like the universe went sideways. scarlet: it is bizarro world.

one guest says there is no comparison between macy's and jcpenney. jcpenney hasuest: a market cap of $2.6 billion $13.6 billion and there's no comparison at this point. coversur correspondent consumer retail. do you agree with the assessment you cannot compare jcpenney and macy's? i think you can compare them. you are going after the same customer. macy's may have a slightly higher income customer, jcpenney's slightly lower income, but anything going up will take something out. reversion ofhis a the meme where jcpenney's is making this inevitable comeback because it went through such tough times, and macy's is

coming down after a pretty good run? reporter: there is no doubt about that. don't call it a comeback. jcpenney's is not back yet. at that macy's will have a harder time getting out of a rut. alix: when you blame the weather, these excuses -- is that legit? i think the weather is a consideration. if you are an international tourist, it is hitting macy's part of than others. every quarter there is something that happens. it will be interesting to see what happens he rest of the earnings season. you saw kohl's report today. the were not hurt as much. they did not have as much international exposure. jcpenney's not blaming the weather right now. scarlet: where macy's has done well in recent years is the on

the channel, developing online business with in-store business. it that went over really well. it seems like that was yesterday's innovation. what is macy's doing to innovate for tomorrow? shelly: that is a point. they were ahead of everyone and now everyone is catching -- that is an excellent point. they were ahead of everyone in no everyone is catching up. people are worried about -- is it too late to do that? alix: what is the risk in the margins for all of these players? islly: i think it certainly going to be a deeply discounted holiday season. himself said this will be the best holiday for consumers because everything is going to be on sale. scarlet: would talk about market share and how that is a big issue here. macy's challenges are very specific to its own business versus those at the retail industry overall, whether

it is macy's, nordstrom's, kohl's, or jcpenney's? shelly: i think macy's has its own problems to work out, but this is across the retail's pay her. consumers are changing the way they shop. this will affect everyone. nordstrom'st saw coming back and that is a divergence because they cater to the richer clientele. we will hear them report. shelly: nordstrom's is always doing well. really good real estate. they got into it -- they were one of the first to do the off-price segment. they really have stood out. they are also a lot smaller than a macy's. so interesting. you hear a lot you cannot have the lower income people buying to support the economy. you need rich people buying a lot of stuff to support it. the distinction between macy's

or tj maxx and a broader economy sense plays out. scarlet: we do see evidence of consumer sentiment. they are buying houses and cars and iphones. they are just not buying clothes. one thing we've talked about, macy's decision-making process is slow. they cannot pivot quickly like a smaller company. is a storieds company that has been through so many changes. i was speaking with one of the executives yesterday and he said, you know what? i have been here many decades. this happens every time. do they need to adapt their business model in a different way? that chart was staggering, showing they were unable to adapt to certain trends. the retailt is world. you were on top. you were on bottom. it is time to reinvent. we have to see what will come

for macy's next. thank you so much. our bloomberg columnist to consult -- who covers consumer retail. alix: the most complete limb replacement ever created. a prophetic that can be controlled by the mind. billionaire ron believes high-tech valuations are ridiculous. does he believe that uber is part of that? -- ilya nair ron perelman. ♪

scarlet: welcome back to bloomberg markets. i'm scarlet fu. alix: andi'm alix steel. time for the bloomberg business

flash. investors are all but certain that the ecb will lower interest rates next month. mario draghi signaled today he is ready for the stimulus program. a walkout by flight attendants at lufthansa. the strike is set to last through tomorrow. flew into munich on a rival airline. amnestylkswagen's covers workers affected by collective bargaining. millions of vehicles worldwide are involved in the scandal. you can always get the latest at bloomberg.com. the markets's go to desk were julie hyman has individual names. avon products?

we see something's happening in the stock. not very good things for investors long on this company. they are down by nearly 10%. discontinues a long slump avon continues a this long slip avon has been on. 90% if you look at that five-year chart if you look at that chart. it's a really ugly chart. the dollar is especially a problem because it does not have pricing power in the international business that it has, on which it relies. that means they cannot raise prices, maybe cannot attract representatives at the same rate according to bloomberg intelligence. this is trickling into the bond market in a big way. take a look at my bloomberg terminal. this is a scatter plot of -rated stocksand bb

in consumer discretionary. the yield is significantly in similar industries or ratings. that means people want higher interest to lend to avon. another way to express this, the credit default swap. this is the five-year credit default swap for avon. it is surging. investors think there is a higher likelihood avon could default. alix: i love that scatter. thank you, julie hyman. scarlet: this is the subject of our special issue of businessweek -- onx: we are focusing business and science. one man lost an arm to cancer, but his new birth basis may be the most complete ever created. why?

it is controlled by his mind. may be theprosthesis most complete ever created. in 2005, i was diagnosed with having cancer in my left lung. it was so aggressive. in 2008, they amputated my arm just above the elbow. chance at life. if you don't think that make me happy and gives me that much more of a drive, it does. >> ready. go. hold it. hold on. >> he has become something of a guinea pig for experimental birth edicts -- prophetic. what he -- experimental prosthetics. here is thelimpsing

future of how intelligence and machines interact. result of 100 $20 million of military funding and a decade of work. -- $120 million of military funding. >> this is the first time we are attaching a device and allowing a prosthesis to be physically attached to his skeleton. a problem with all of the arms i was working with. i was having skin breakdowns. tegration, it can next wrigley to the implant, so you can continue wearing it matter what. more impressive, he can control the arm with his thoughts. for this, he had to undergo another surgery to rearrange the

nerves from his missing arm. >> all right, we will start with the movement. ready. go. we are actually witnessing something that has never been done before, johnny really controlling that limb sibley by thinking about it with normal, intuitive thought. -- simply by thinking about it with normal, intuitive thought. he nows bands, and contracts those muscles. >> ready. go. hand open and go. rotate and go. and go. and go. and go. it is hard. i have done hundreds of thousands of hours of mental exercises, just trying to do the different bends, rotations, points, and you know after the

surgery, they think you step right back into it and start working. you are in for a rude awakening. it takes a lot of time. >> hand that to me. getting johnny to communicate with the arm is only half of the challenge. second part is getting the arm to talk back to johnny. soon he will understand how hard or soft something is, its temperature, even its texture. this is where robotics can go from being a tool we use to being part of us. >> i want the ultimate arm. i wanted to be as near natural a human arm as possible. [indiscernible] >> [laughter] cars orlike the model t the right brothers airplane. i am the beginning. as we progress, you will see us

move up to the maserati. -- i am like the model t cars or airplane.brothers' the future has begun. alix: wow, just wow. themore, be sure to catch year ahead special tonight at 9:00 for more cool stuff like that. scarlet: still to come, janet yellen making comments about that policy. yellen: policy makers should be mindful of new challenges for monetary policy. ♪

alix: welcome back to bloomberg markets. i'm alix steel. it is a very sunny san francisco. scarlet: and we are not there. we are in new york. alix: no, you've got to be in san francisco. scarlet: speaking of san

francisco, tech shares are at an all-time high. ron perelman weighed in on the validity of these valuations and the health of our economy. ron: i'm very concerned about the health of our economy. i see most of the companies we know and deal with regularly having softness and volume. i see unemployment still, real unemployment still in double digits. and i've got real concerns about the economy. some people look at the stock market as reflective of the health of the economy. i think they are two different and very significantly different issues. i'm worried about the economy. >> looking at it at a macro level we have seen mario draghi talk about easing in europe. this divergence driving up the dollar. how much of the head went comes from the dollar being so high?

-- how much of the headwind comes from the dollar being so high? reallydon't think that's the case. you have so much uncertainty around the world. you have so much concern around what central banks are going to do -- i think it is causing uncertainty and investments -- --investment by companies i'm talking at the macro level, the enterprise level -- and that is what is affecting investment long-term, that is what is affecting growth of jobs, that is what is affecting demand. stephanie: on that macro level, specifically what concerns you? ron: jobs. stephanie: jobs what? is too high.ment the idea of raising minimum wages is a great idea. it puts more money in the

pockets of those who need it -- stephanie: ken companies afford to raise minimum -- can companies afford to raise minimum wage? ron: so they raise prices. we have real issues. we are next two years, looking at real softness, potential softness, as i see it in the u.s. economy. >> we want to know where you are investing next. stephanie: buying, selling. ron: i don't know where i am going to be going fast. technology is going so fast, that in a garage teed up guys can come up with the next google, the next facebook -- two guys can come up with the next google, the next facebook. stephanie: we love to say look of the multiple, look at the valuation, but they don't mean anything. ron: valuations are ridiculous.

uber, great company. service to major cities around the world, a real boon to people -- stephanie: but it's not worth a billion dollars. ron: it is an apple. it is an app in a taxicab. -- it is an app. it is an apt and a taxicab. stephanie: how does that get corrected? ron: i think we will have yellow cabs having their own uber, anot uber coming in. people say, i'm going to take my money somewhere else -- but can you? when it is a private company, can you take your money off the table? seed investor in one of these companies, who is going to say i will take your

uber position? in theseon't invest positions. i do believe that there is a mechanism to sell positions. stephanie: what kind of tech are you interested in? ron: tech that improves the servicing of the industries we are in. we are the world's largest couponing company. we are beginning to attach a video coupon with a print coupon, so you will be able to scan the coupon, put it on your smartphone, and use that coupon wherever you shop. alix: dallas mcandrews and forbes chairman ron perelman this morning on "bloomberg ." private andk at public valuations, it is an a norma's run-up we have seen. come inside the bloomberg

terminal for a good perspective. that white line is public tech valuations and the green line is the money going into private companies. p.ey are both moonshotting u scarlet: but you could say they are getting stretched, and for companies in the public markets, it is a little bit of a back to reality moment. square is going for its ipo. when they last held their private round of funding -- now they are pricing shares at a considerable discount. alix: it is. scarlet: the former coo of square tweeted that the steroid era of startups is over. alix: you saw fidelity reducing its -- stake in snapchat by 25% in september. we spoke to an nyu professor who is the guru of valuations.

we spoke to him yesterday on "what'd you miss?" it is mode and momentum. mode and momentum can shift overnight. scarlet: it's pricing, not actual valuations. alix: he said they should not be in this space. they should not be in the space to be honest. scarlet: they are in the wrong, wrong forum. lot more to have a discuss on this. that will continue to be a factor. alix: coming bloomberg markets up in the next hour of, bloomberg markets -- in the next hour of, -- in the next hour of bloomberg markets, dealmaking having a banner year. ♪

>> welcome to "bloomberg markets."

from bloomberg has headquarters in new york, good afternoon. have been putting together a string of megamergers. does that raise alarms for regulators? liberty media's john malone figured out a way for you to do that. life in the fast lane, banks love the new highway bill. we will tell you why. bloomberg's julie hyman has the latest. julie: we are seeing a selloff today. we've had a number of fed speakers today, most of them emphasizing that december is indeed a possibility and that now could be the time, could be for the fed to raise rates. evanse heard from charles that it should be a gradual increase in rates and the fed ld