stephanie: don't count out the brakes. mohamed el-erian on why you should get markets another look. -- gives markets another look. happy tuesday morning. welcome to bloomberg go. i'm stephanie ruhle. david: i'm david weston. stephanie: i spent all afternoon yesterday at the robin hood investment conference. david: you got some fascinating interviews. stephanie: i think we will get some right here next to us. david: shannon pettypiece is here. it must be a retail day. and an exciting new addition to bloomberg. stephanie: our new announcement gadfly comes out today. we've got a lot to cover.

david: let's get to vonnie quinn. vonnie: secretary of state john kerry and francois hollande talk about taking significant steps together against isis. the meeting was held today after calls for a global effort to defeat isis in the wake of the paris attacks. hollande will travel to washington in a week. president vladimir putin is vowing revenge against those he blames for the crash of a russian jetliner in egypt. a bomb was responsible. the head of russian security service told putin that traces of -- were found in the wreckage. president obama is in the manila -- is in manila. ship that hasvy come to represent philippine resistance to china over the disputed south china sea. the white house says the issue is likely to be discussed.

you can get more on these and other breaking stories 24 hours a day at bloomberg.com. matt: we are just getting breaking news. walmart earnings are crossing the bloomberg. of $117.4venue billion. wouldat looks like it miss adjusted estimates by a long shot. we were looking for one dollar $1.42. the numbers continue to stream across the ticker. we are seeing $.99. walmart saying fourth-quarter $1.40. let's see what the share reaction is.

the pre-market share of about 2.6%. -- up about 2.6%. wall street has estimated lower profit. walmart has a real problem with margins right now. that's what has driven the struck down over the last few weeks -- stock down over the last few weeks. higher wages and foreign exchange issues are hurting its sales over here. just to reiterate, walmart had third quarter profit from .30.inuing operations of $1 x leases $.99. it looks like investors are not unhappy with this report. david: this is early going. walmart in following

their attempt to turn around. stephanie: it is definitely a turnaround story at the company now. it looks like a strong quarter from the early numbers we are seeing. it's a bit better than analysts were expecting. they didn't lower their guidance. they seem to be continuing with what analysts are expecting. maybe the shares are going to be up a little bit today but the company has already come out and said it's going to be a long time until we get to the growth that wall street months. meaning a few years. this is not going to be a quick turnaround story. they need to get a lot more momentum before we start seeing the type of group people are looking for. stephanie: what's the broader retail story here? walmart is coming from a place. the street has really turned on this massive retailer. as we get number after number, everyone seems to be that and the plane has been on companies not shifting to the internet fast enough. >> that's pretty much what

walmart's turnaround story has been all about. how do we compete with amazon? everyone is trying to do the same thing. honestly, at this point, can anyone truly compete with amazon? >> that's what i don't think is actually possible. walmart probably has the biggest opportunity. but the retailers will probably be better served by finding their own strategy. stephanie: and walmart always points out sometimes subtly that they need to make a profit. amazon doesn't necessarily. they are being held to a higher standard. they have the brick-and-mortar stores that they have to carry and the costs that go with that. they have international operations. they will always have foreign-exchange affecting them. amazon doesn't have to worry about those things. stephanie: those are also opportunities to make money. don't cry for me, argentina. well my god, we have stores internationally. how big is amazon in

relation to traditional retail? some retailers say actually it's not that big. we are talking about trying to group on half $1 trillion in sales. that takes a lot of momentum. amazon sales from online merchandise are about $80 billion. david: so $80 billion compared to $500 billion from walmart alone. : it would be spread out among the retailers. stephanie: could one make the argument that the internet has heard walmart? there was so much access to online shopping. addictednsumers became to price matching, they simply walked into a walmart because that was the store that sold you everything. could one say it's the internet that her walmart the most?

>> walmart was the original everything store. amazon spent a long time actually studying walmart figuring out how to apply that online and do it faster. what walmart is finding out is that -- stephanie: they did it. >> they did it. shannon brings up the $80 billion of revenue, but the growth in retail -- almost all that is going to amazon. stephanie: but the stores are also -- it could be part of its strength. getart strategy has been to people to buy things online and pick them up in stores. a lot of people hate going into a store. still 150 million people each week who walk into a walmart store. buy are hoping people things online and go to the store and while they are in the store they say, i need groceries. i'm going to check out the tvs. stephanie: that happens every

time i go. david: e-commerce sales continue to grow at a steady pace but growth is not increasing. to 2000.s goes back the pace of sales growth has remained relatively stagnant over the last five years. e-commerce sales continue to grow but they are not growing at a faster than they were last year or the year before. david: this is talking about how we divide up the pie of retail. is it growing? >> it depends on what you define as retail. macy's, nordstrom out with disappointing numbers. but home depot is doing awesome. that's going to be one to watch. everyone is retail apparel saying, people are spending the money on their home and on electronics. stephanie: you are buying something from home depot, a big

item in terms of home improvement or electronics, they just don't make that much money on those products. t-shirts they make a lot more. david: apple makes a fair amount off electronics. what is your take away as you look at this retail landscape? it just seems like a negative slump across the board. walmart is finding out that they can't grow sales and profits at the same time. you are doing one or the other. you are either trying to get the share,r and the market or you are running a profitable company. it depends on what your outlook is. stephanie: except that those consumers are addicted to discounting. margins are getting smaller and smaller. >> you train the consumer to look for those things. stephanie: they are trained at this point. it would be a lot easier in setth care where you can

whatever price you want for drugs. david: home depot already reported and it is better than expected. we see the shares moving up in the premarket. .866 2/86 aout $ share. to blame the like weather, you are not going to do it on bloomberg go. thank you so much shannon pettypiece and welcome to bloomberg go. and thank you shelly banjo. gadfly is our new fast commtary section. you don't want to miss it. now we are covering a new bloomberg story showing which bankers are up for a pay raise this year and who may see a cut. health care bankers, 20% of a pay rise. media and tech bankers, 15% cuts. traders of distressed debt.

guess what, you may be in for a fantastic 2016. when we return, we will take you to brussels were european leaders are divided on policy following the attacks in paris. you're watching bloomberg go. stay with us. ♪

stephanie: welcome back to bloomberg go. i'm vonnie quinn. home depot posted a third-quarter profit that beat estimates. higher real estate prices are encouraging consumers to spend more money on their homes. home depot store sales were up 5%. volkswagen is offering discounts in europe's biggest auto market. october is the first full month since the emissions scandal became public.

it offers customers an average of 11% off the sticker price. york one issue in -- draft kings and handle operating. duel operating. david: here with this is neil ferguson. he is a harvard university professor and author. we're going to discuss global go. in brussels, the recent attacks in paris are shaping issues across all of europe. hans nichols is inside the european consul. is schengen dead? >> effectively it is dead. what we have now with the paris attacks is a state of emergency

in france. gets his totalde powers for a three-month extension. that effectively imposes border controls and there's a recognition that even though there is a temporary surrey -- suspension, that's a violation of what shenzhen stands for. right now there are border controls all up-and-down europe that are going to intensify. that basically spells the end of shenzhen if not in name than in fact. stephanie: what do you think? >> there's a little bit too much being read into this. borderlessich allows travel between european countries is not really the key to this. most of the people who come into europe at the moment overseas come into greece and then they leave and then they come back in. they go through the balkans. the real issue is europe's border as a whole. europe has a vast border to defend. much larger than the border

donald trump is assessed with between the u.s. and -- obsessed with between the u.s. and mexico. there is a sea border that's very hard to protect. suspension is important and it signals a loosening of european integration, it also vindicates the british decision not to join. his native country is not part of schengen. >> people are realizing more and more that britain was right to opt out of certain aspects of european integration. these aspects have not turned out really well. the key is the fact that people are able to come in in hundreds of thousands through europe's wider border. peopleber alone, 220,000 entered the eu over sea. think what that means if it continues at this level for a year. millions of people pouring into europe. david: pick up on what neil

ferguson has said. what about keeping them out altogether? that would require a massive amount of both money and world power that hasn't been evidence throughout the entire euro zone. of 2015the better part standing on this balcony talking about what a big deal greece was and how it could be the end of the european union. then we came here for a lot of migration stories. greece look small after that. standing back on this balcony having spent the last couple of days in paris, the migration story seems both the grand smaller. bigger because it is so tied into the larger terrorism debate, but smaller in that this is a much bigger problems than just securing borders on the south side of europe's flank with asia. here,s about communities where you have some tough areas.

outside of paris, you have these areas -- they said they have 7000 people they need to monitor. that simply too much to monitor. it's internal, it's external. one of the bombers potentially in october was part of that 220,000 the cross in -- crossed in. there is a record of him coming in. we know his tracing up through europe. he spent time in austria. then you lose his trail and you identify him by his severed finger which was fingerprinted in both serbia and greece. that is a problem for angela merkel. david: hans nichols, thank you very much. when we come back, u.s. chief technology officer megan smith will tell us how the white house is innovating in america. ♪

stephanie: you are looking at a

beautiful morning in our nation's capital. we are headed there to see our next guest. she is a u.s. chief technology officer, megan smith, one of the most powerful women in technology and washington, d.c. a former google x bp. she is tasked with bringing innovation to every american. launching ause is major initiative today that will bring untapped talent to technology. tell us more about it. >> good morning. we will be in baltimore today. we are adding the 35th city. initiativeresident's to bring more americans to these better paying jobs. we have 5 million jobs opening in the united states and the largest portion is in tact. -- tech. whether it is digital marketing or cyber security or coding, these jobs are open and we need to get supply and demand working

to help all of our companies fill these jobs. re isat's what tech hi about. stephanie: all the stories really seem to be about outsourcing to india. >> one of the things we want to make sure is that americans can come into these jobs. we can bring all kinds of immigrants to these jobs. in such an important sector to the united states. inuse these code boot camps addition to our two-year degrees and four year degrees so people can train in months, not years. we saw him working in st. louis and philadelphia and we want to get this ecosystem moving. employers open up to take anyone. if you have the skills you can get the job. they pay 50% more than the average american salary. these are fun jobs. we want more americans in them. how do you help people know they are there and also trained in months not years? that's what these camps are

about. so baltimore will be the 35th city that joins us. just yesterday, president obama speaking about the attacks in paris last friday was talking about how savvy the terrorists seem to be in terms of social media. terms ofthe balance in cyber security and managing this process and those who have used social media to infiltrate it and use it for terrible purposes? >> our hearts are with everyone in paris of course. the challenge is just making sure we keep pace with all the skill sets we need. and keep building economic prosperity for our country as well as the security that we need. one of the greatest strengths of the united states is our diversity. those who came here across the ice bridge hundreds of years ago

and those who arrive today. had we make sure all americans have access to great training so we can tap the talent of this country? we hail from all over the world. using the most creativity and ingenuity that americans have always shown, making sure that's available on these very hard problems. and making sure everyone is included. stephanie: thank you for this initiative. big day in d.c., big day in baltimore. megan smith, thank you for joining us this morning on bloomberg go. we will be back with more. when we return, neil ferguson talking paris, europe, and global economics. ♪

david: welcome back to bloomberg go. we are here with harvard professor neil ferguson. now we are joined by mohamed

el-erian. >> we can just have a three-hour symposium. stephanie: vonnie quinn has little news. vonnie: john kerry says the u.s. and france will join together to strike at the isis. francois hollande after the attacks in paris. the countries agreed to exchange more information. tolande will travel washington next week to meet with president obama. vladimir putin says a terror attack was behind the crash of that russian plane in egypt. the head of russian security service says a bomb brought down the plane. russia is offering a $50 million reward for information on who is responsible. new york city is preparing as though it is the next target of terrorists according to police commissioner bill bratton. they have a special counterterrorism team of more than 500 officers. it is designed to be a rapid

response team in case of an attack. david: thanks very much. morning must-read. appearinge ambassador with us in the very early hours yesterday. i love this phrase. it's like neil ferguson wrote it. retail terrorists -- individuals or small groups carrying out armed attacks against soft targets in open societies -- are extremely difficult to deal with. the threat and the reality of attacks will require greater social resilience and i possibly a rebalancing of individual privacy and collective security. that is the heart of the matter. how do you impinge on democratic processes -- which every nation -- how do you amend him critics certitudes to go after these people? we had the former

homeland security head on yesterday and he said, we must defeat and destroy isis. so a starting point is, what is the goal? stephanie: that's a great statement. david: the what does it mean? -- but what does it mean? king ableptical about to do it from the air and unfortunately that remains the president's policy. we've been carrying out airstrikes for over a year now. state stillmic survives in iraq and syria and escape full of carrying out a massive terrorist attack in paris. -- is capable of carrying out a massive terrorist attack in paris. so do we need to increase u.s. ground forces? he suggests may be up to 10,000. i wonder if that might not be enough. it seems to me the important thing in a situation like that is to crush the enemy. there needs to be an absolutely emphatic destruction. it is not militarily strong. it is losing ground in iraq and

syria. nutley's because of the effective forces the kurds are deploying. we need to do more. -- not least because of the effective forces the kurds are deploying. we need to do more. the longer it survives, it's credibility grows. youthppeal to radicalize all over north africa and into europe grows. stephanie: mohammed? >> what i find interesting is it's not just about dealing with nonstate actors. the retail segment of the nonstate actors are much harder. i agree with the article they -- you need a response in terms of more force, but the issue of diplomacy, creating safe havens within these countries so that there isn't this incredible push out. this notion of you need a whole menu of responses and not just one.

and you need to do it in a coordinated fashion. about talked yesterday charles pierce's blistering op-ed in esquire magazine saying, where the gulf states? -- where are the gulf states? do you have an optimism that the gulf states can join us in a new realism about these retail terrorists? >> i think you will get a response. but they point out is, where's the leadership? everybody looks to the u.s. for the leadership. if you are going to coordinate a broad-based response which is what you need, you are also going to need a conductor of that response. tom: what do you look for from frencht -- i remember, jets took off from dubai. >> the uae is not the problem. let's talk about wholesale

terrorism, not just retail terrorism. stephanie: what does that mean? >> the years over which the saudi's through public and private funding have supported jihadism throughout the world. that's the biggest problem. we need to exercise leverage. the saudi's are in a very weak position politically. there were in yemen is failing. their economy is in deep trouble. -- their war in yemen is failing. their economy is in deep trouble. if you want to continue to govern the world's largest gas station you need to stop financing extremist -- stephanie: who are you blaming? has beenuse of saud's the direct sponsor of terrorism. agent to is the change affect behavioral change within the leading arab petrol states? niall and i always have a way

of disagreeing. tom: how do you change that behavior? >> a lot of what we feel in the west is felt over there. the terrorism that we have experienced here is experienced 10 times more over there. there is a common understanding. it's the implementation is falling short. policy you look at u.s. for the policy response there -- tom: can there be a generational change? mohammed,spect to there is no country where social media supports the islamic state is higher than in saudi arabia. this is the thing that really alarms me. the younger generation -- not all of them by any means. there's a great deal of revulsion in the region at what is being done by the extremists. unfortunately there is also significant support at the grassroots level amongst disaffected youths who see no

real future for themselves in the region. it's a huge problem. david: a good part of the history of u.s. foreign policy has been written in unintended consequences. to put pressure on saudi arabia when they are particularly weak in the oil dollar, you wonder whether it could destabilize the regime and you might end up with something worse. >> that's a real risk. we have to be very worried. at some point soon we will have the equipment of 1979 in iran and the caliphate will gain control the holy places and the oil. a revolution in saudi would be the biggest shock i can imagine. we have to be very careful that doesn't happen. that's why i think putting pressure on the saudi's is also about making sure there isn't a pro-islamic state revolution in that country. stephanie: i want to share some points you made. this came out in the boston globe titled, paris and the fall of rome. the roman empire in the

early fifth century, europe has allowed its defenses to crumble. as its wealth has grown, it's military prowess has shrunk along with its self belief. it has grown decadent and its shopping malls and sports stadiums. at the same time, it has opened its gates to outsiders who have coveted its wealth without renouncing their ancestral faith." wow. it has been a while since you said the fifth century on the show. in fold inthe events paris, my thoughts were given the decline and fall of the roman empire -- the scenes were so reminiscent of the sack of rome. i thought to myself, why has this happened? because it isn't just about the crisis in syria. it's also about a mass migration into europe and a hollowing out of european self belief. -- moral relativism stephanie: we need some facts.

map thats is a tes thattes the rou immigrants are taking. through turkey, greece, austria into germany. or into paris or rome. we found these world bank rule of law indexes which are fascinating. being -2.5, the best 2.5.g + turkey is right about the zero line. climbing up the white line is the u.s. although it's not really relevant to this conversation. my question to dr. ferguson is how can people from this culture a not necessarily obeying

court's ruling, not necessarily sticking to a contract, not necessarily listening to police officers, having the integrated into this culture and do well so quickly? >> it's amazing that syria is actually visible on this chart. of civils a result war, the rule of law in syria has basically ended unless you mean sharia law. david: they haven't put out this years. >> even last year, the war has been going on since 2011. we have to be a little careful of this data. law onry hard to enforce asylum seeking in southern europe. the broad question you ask is interesting. it's really poorly the failure of european labor markets to absorb immigrants over two generations that were talking about. most of the attackers were not from syria. maybe one was. most in fact had been eu citizens born in the eu in

france. here's the point. it's been a failure to integrate those people into continental european labor markets and a failure also to assimilate them into european culture. the persistence and indeed the growth of the extremist islam inside western europe is a key part -- tom: i think people understand your caution and gloom on where paris stands. i would suggest that you disagree with the level of the gloom off of this tragedy. what is the resiliency or optimism that leaders can bring to diminish terror and move the continent forward? >> look at the resilience of the markets. ask yourself, what are the markets seeing that we're not seeing here? why is it that the markets -- they took an initial shock and they reacted exactly how you would expect of them. equities were lower in asia. the euro was weaker.

and then we bounced back. where did this come from? probably two things. stephanie: candidates speak to the selfishness of the markets? -- can't it speak to the selfishness of the market? >> i think it's more than that. as long as you don't get a tipping point -- people believe that central banks are attended and engaged. and that is really important. there is this geopolitical concern for less not forget that there's another part which is the resilience of western economies that so far has served it well. i think we have to understand that that is the reality. we live in this multispeed complex -- tom: can we tilt back to a conservatism within what has been a post-world war ii liberal continental europe? did they become more anglo-saxon on friday at 7:00 p.m.?

>> the major concern is we end up delivering what the terrorists want. byslow down our economy overreacting, we trigger a series of tipping point. we have to be really careful about how we respond to this. if you shut down the french economy completely, because you are so worried about any event, what's going to have? gdp collapses, trade collapses. the french are worse off. >> nobody's proposing doing that. is a longe seeing overdue crackdown on the thousands of sympathizers and active supporters of islamic state inside france. financial markets don't always get the future right. what we are dealing with is a threefold crisis. a massive escalation of conflict in the middle east which is right next door and north africa which is right next door. secondly a massive influx of people in the millions, mostly heading for northern europe. some of whom, only a small

minority, probably terrorist sympathizers. and the emergence of a fifth column over generations within europe of supporters of extremist -- i don't expect financial targets -- tom: this is the critical point. did francois hollande become more anglo-saxon on friday? >> what i would like to see is the united states get a little bit more french. the french have been eager to intervene effectively against islamic state. it has been britain and the united states that have been holding back. tom: fair. >> need to be more french. the french have the right attitude. you have to smash these people. but they also have to get tougher domestically. the french and the belgians have been slow on the uptake. stephanie: yesterday, very stern like blamed president obama -- sternlich blamed president

obama. barack obama has made no bigger mistake in his presidency over syria. he is the one that held back. he drew a redline. it turned into a pink dotted line. he handed responsibility for chemical weapons over to the russians. he really has let the russians back into the middle east. this has been the biggest mistake of his presidency and it has cost more human life than bush's intervention in iraq. both mistakes. the two sides of the same coin. a bungled american foreign policy. how should mr. lcc respond to the events in paris? to be on areshing set and be on the optimistic side of a discussion. tom: have should you respond to these events? >> he has been trying to

respond. the russian airliner came down a few days before what happened in paris. he has been living this. let's not forget what's been happening in sinai. he has been living this in real time. there have been bombs in cairo. he faces the same dilemma that the west faces. -- how far don regressing your population in order to ensure its safety? that is the fundamental balance that has to be struck. let me say one thing. the middle east is a very complicated part of the world. stephanie: which is why there is not one thing to say. >> right. and this notion that outsiders can mess it up all on their own is simply understating how complex that part of the world is. right? talk to people there. there was an amazing survey done of the youth in the arab world.

what are they worried about? isis, terrorism, and unemployment in that order. yet 60% of them believe that their future is more optimistic. because they feel more empowered. they feel that they can now control more of their destiny than before. 40% of them want to have their own businesses. that's a complete transformation. as complicated and messy the middle east is we also have to focus on the positive transformational elements. that's why i go back to this notion -- it's a menu approach. component,litary diplomatic, and critically a component on the ground something those segments of society that wanted better future. stephanie: there you go. great discussion. tom, thank you for joining us. niall and mohamed, we're not letting you leave just yet.

goldman sachs turning its back on brick economies. i want to talk about a place more -- that i want to go more than any place on planet earth. to see the northern lights on full display in parts of the northern hemisphere. here's a photo taken in iceland. are above a pond in alberta, canada. this shot is from norway. last i checked, bloomberg occasion policy is not going to let me hang in iceland waiting for this. stick with us. you are watching bloomberg go. stick with us. ♪

david: we're back with niall

ferguson and mohamed el-erian. you have a new column out this morning in defense of tricks. -- bricks. you wrote, goldman made the right decision by merging its brick front. these countries remain and important source of demand. o'neillin 2001, jim came out with this simple concept to signal something very important. that a group of american economies would have systematic influence on the global economy. at the time that was quite a revolutionary concept. we have started to go into this enormous emerging-market pessimism. merged of the, goldman ds because it was suffering outflows.

the you have this whole narrative, that's the end of the brics. stephanie: just because goldman was suffering outflows they change their narratives? ric concept is no longer a good investment the because it did -- it doesn't diversify enough. i understood as an indication of large economies growing fast. is this a concession that they are not going to grow that fast? growey are not going to that fast because they have internal issues and the external environment is less accommodating. but it was a recognition by goldman that sometimes an analytically valid in is not investment valid. three things about this country. not only have they become much larger, not only did they continue to have an influence on the financial side, but they are starting to push their weight around in the global economy. slow reform ofhe

the imf and world bank, they are constructing different types. they created the new investment bank which the u.s. opposed. said, we are going to influence a construct of the global economy and i think that's important. david: aren't the brics geopolitically important at this point? >> we should remember -- he's lord o'neill now. there has been such divergence. been india or china -- the problem is that brazil and russia have tanked. growth is deeply negative in both those economies on the order of -3%. had -- and india have still been grown. it's being overtaken by india. india looked like the slow coach and china looked like the

sprinter. mainly because of demographics. this is one third of global gdp. here i agree with my good friend mohamed el-erian. he's dead right. the still matters. but i think the big story is divergence. will we see brazil and russia bounceback? i don't see a bottom yet for brazil. it's a political and economic mess. but russia is interesting. putin is winning geopolitically at this point. he's getting his way. i wouldn't be surprised if he got sanctions relief at some point this year. and we will see if further rallying in russian assets. stephanie: do you agree? >> the whole emerging-market as a class is very diverse and we need a differentiated approach them. not just among countries but among market segments. he's absolutely right. two of them are in recession.

and i don't think it's going to get better anytime soon. what i think is interesting is 'sat if you apply niall differentiation to what has happened in the marketplace you get a very weak link. they tend to overshoot on the way up and the way down. smart investors understand that that is when the investment opportunities are greatest. 2016 could see emerging-market recovery but only where there is no political risk. great conversation. thank you both, mohamed el-erian and niall ferguson. we will be back with more. you are watching bloomberg go. stick with us. ♪

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david: room at the end -- marriott creates the world's largest hotel company. they will talk to the ceo.

we will talk to the ceo of take two interactive. and -- breaking news, how long before inflation gets close to defend target? we will get the latest number in this hour. welcome to the second hour of "bloomberg ." i am david westin. stephanie: i am stephanie ruhle. we have a special guest, marriott ceo arnie thornton. we have a lot to cover, including this big deal with starbucks. before we get into it, we will get into the news. bonnie: thank you. once again, the eiffel tower has closed. there is no word why it shut down. it reopened yesterday. last night, it was lit in the

blue, white, and red of the french flag. secretary john kerry says that could be a cease-fire in syria. once the talks begin, the cease-fire is expected to take effect. in russia, president vladimir putin is vowing revenge for those that he blames for the crash of a russian airliner. the head of russian security foreign-madeputin. parts were found in the explosion. now to matt miller on the market. a look ats take futures, up across the board. we're looking at a gain on the s&p minis of six points. up 69. jones, europe is up across the board as well. we see the strongest rally in europe that we have seen in six weeks. the stock 600, a broader mission

of european stocks up 2%. a gain on the dax in germany just germany. -- in germany. big gains over in europe. we are seeing part of that being driven by materials producers, even though we do not see huge gains in materials. copper is one for example. is plunging to a six-your low. it is continuing all, even with dollar movement we seen. also, take a look at european debt. tom keene -- tom cruise? stephanie: nothing like tom cruise. slighthere is a difference. out to see theed german bond unchanged. that is what you get when you lend the german government money for 10 years.

walmart earnings, better than expected. $1.03 was the number after you take out a few things and adjust it. we were looking for $.98 on that level. the beat, you can see, helping to boost the shares about 2%. dick's sporting goods came out with a big miss on the terminal and the forecast. we'll be talking about that throughout the morning. stephanie: we have to talk about marriott. shares are upt following this starwood announcement. help us understand. when we heard starwood hired lazard, you were not interested. what changed your mind? mr. sorenson: signed a confidential agreement. we try to study the company edit look to be expensive and a huge bit of work. something yout is would deftly want to buy -- expensive and too much work -- let's do it. mr. sorenson: initially, we

pulled back away from it, and as the summer went on, we watched, and stocks moved in our favor about 50%. the economics of video became meeting -- 15%. economics of the deal became meaningfully more attractive. about google using hotel is finder to make reservations. -- hotelfinder, to make reservation, alibaba -- all these technology platforms investing a lot of money into the travel business. without binding bigger we would not have to support that many utility-like systems, revenue management systems, property-management systems, and we could spend hundreds of millions of dollars more on consumer-facing technology in a to tie our relationship to customers. stephanie: in hotels and hospitality, the thing that appears to be the growth opportunity is airbnb and others like that. why would you want to make a move staying in the traditional

universe with starwood, which seems to have lost a screw a little bit? well, the product that we offered is a great product, and there are still the vast majority of travelers that as opposedn a hotel to the uncertainty of staying in someone's apartment. we think that will be the case for many years to come. we do not see that changing. we've not seen a material impact from airbnb and our business. stephanie: really? mr. sorenson: we are trading at record occupancies. stephanie: this is so important. i feel the universe has airbnb fever, and people assume they are taking business from you. mr. sorenson: it is the latest widget. the -- inaying it is the pope visit, the peak rates were a little less, for example, the day to day travel, new york, paris, other place, we see great performance. stephanie: i said down with very

very, the founder -- stern, the founder behind stanwood, -- starwood, and he talked about the industry behind airbnb. mr. stern: this was done to fight the potential threat of airbnb. with one million rooms, do you really want to leave the starwood season? --? system there are loyalty programs merging together. you will see global consolidation. this probably will not be the last deal. that, again, ota's , airbnb is one of them, but google, alibaba, all of these platforms tried to create marketplaces that, sometimes, get right in the middle of our relationship with our customers. so, the ota's, they are not offering products. expedia, for example -- they are selling our room and competitor

rooms. stephanie: the other surprise, this was not a chinese bidder. many thought the chinese would step in. i have so much money. surprising that we saw you step in and not china. sternlicht: i haven't been contacted by several chinese bidders, and they are slow. it is hard to run a company without a permanent eeo. it -- ceo. it is still possible they could show up. stephanie: it is possible they can show up. the deal is not done done. mr. sorenson: we a binding merger agreement, and a breakup fee, but there is a process to go through. we have to get through the antitrust review. our shareholders and their shareholders have to vote. this was a company that was for sale for seven months, broadly. everybody knew it, and we did

not win it because we have nice smile. stephanie: but guess what, girls get a lot prettier when a guy likes them. suddenly everybody likes them. david: i would like to go back to the strategic reason for making the decision. prices one thing, a moment in time. one way to look at it is future growth. why is it you believe starwood and starwood assets could grow faster and better as part of marriott than they would on their own? david: there are --mr. sorenson: there are two reasons -- we have been growing on average in the 2% to 3% range and that is because of focus, relationships with owners and franchisees -- all the hotels are owned by other investors. stephanie: is that not a risk to hotel operators to not own the real estate? mr. sorenson: that is the model

of the industry. area, we have what 300 hotels. we owned less than 10. stephanie: why is that a good idea? in retail, when retailers are feeling people say to the thing is they own the real estate. mr. sorenson: our business model is dramatically better. we get fees on the top line of the these hotels. we do not have capital tied up in real estate. our system alone is probably 100 $80 billion of real estate. there is not a real estate company in the world that tested if we try to do it all that size, we would be smaller. david: you think you can get the 2%, 3% growth rate of starwood toward your 6%, 7% of marriott. other reasons you you can grow? mr. sorenson: we will deliver efficiencies. their profit will go up because we will be supporting you were systems, using procurement leverage, other things. david: reductions in overhead combined? mr. sorenson: reductions in

overhead, but at the hotel level, for owners, reductions in cost. those are examples of the kinds of things that will drive it. the other piece, of course, is this lifestyle piece. recruiting is interesting. starwood got in with w first. barry was the genius behind it, but others say they provide the idea that barry took. if we can pull these two companies together, with their lifestyle fluency, our lifestyle think,we end up being, i in a strong position in that segment of the industry. stephanie: to those consumers, what happens to that point? they are concerned. mr. sorenson: they'll get more and more point. it is usually positive for the consumer. -- use -- hugely positive for the consumer. stephanie: this is the first of many deals we will see in terms of consolidation in your industry?

mr. sorenson: it'll will be fantasy. our announcement surprised the market. stephanie: surprise, but didn't spur the market? mr. sorenson: i do not know. it is one day. we are 24 hours into this. our competitors had no clue we were going to do this and undoubtedly they are sitting there talking about what it means, but we've not close the deal yet. it is not as if these companies are growing on trees, right? they are all for sale. this one was for sale and it was available. david: what is your projection for when it closes? ? mid-2016.on: stephanie: arne sorenson, president and ceo of marriott. --come back, check will be chuck will be with us. we will be talking about take two interactive. that is his business. we're talking consolidation in the media industry and what games are going to be hot this christmas. stick with us. you are watching "bloomberg ." ♪

vonnie: welcome back to bloomberg go. i am vonnie quinn. here's your latest business flash. -quarterposted third profits that were better than expected. they said next year's earnings will grow by as much as 12% and that sent the stock up but the most in 27 years. home depot recorded third -quarter profit that beat estimates. one shoppers have held off discretionary items as as clothing, but are spending more money on their homes. home depot said same-store sales were up 5%. -- willin new york will not reject in order to keep daily fantasy from running. the company says new york's attorney general has wrongly classified their businesses as

illegal gambling. byid: we are joined now strauss zelnick, the ceo of aiming company take two interactive, and the founder of k company, which invests more broadly media. it seems like every day there is a new deal announced. stephanie: good for bankers. david: exactly. in the night we had john malone with cable and wireless. what is your view on consolidation? mr. zelnick: i think you are seeing the kind of consolidation announced yesterday a matter of instruction -- infrastructure. it makes sense to aggregate programming and distribution separately, perhaps not together. you obviously create fewer fixed cost, yucheng technologies, you have an enormous footprint and a lot of customers. david: you find distribution

more separate from content than in past years? mr. zelnick: there are some people that disagree with me, but it is the initiated by the power of online distribution. stephanie: mila kunis liberty deal, it sounds like he is saying what i did in europe 10 years ago. i will now move into latin america. you see reaching into the emerging markets as the next great opportunity? mike freezes on the board of televisa. he does know the landscape. thezelnick: he does know landscape well, and i'm not sure anyone knows the media business better than john malone. i would not that against them. david: john malone is on both sides of the content institution. he has a lions gate deal with starz, there is talk about amc. he is trying to consolidate, and he also has an interest in

discovering. mr. zelnick: in each of those instances there is a program cap and an institution path. the direction the world is moving as for those paths to remain linked, but separate. stephanie: for you, in the world of media, when you think if there is a place i want to be in terms of content, what is it that we think -- yes, we know live sports -- but put on your expertise and background, what is the most valuable place to be? mr. zelnick: the valuable place to be going forward -- i am eating my own cooking -- interactive entertainment is the only growth area and we are the third largest company in the interactive entertainment space. we have been betting on that since 2007 and it has been a pretty good bet. there is no miss growth with the advent of this week -- digital distribution, and with the output on connecting consumers to intellectual property. stephanie: what does that mean? creation of the

recurrent consumer spending, something that did not exist five years ago -- online play, virtual currency, downloadable, add-on content. five years ago you bought a game. paid a good price. played it, moved on to the next title. today, you play a game, and you stay engaged and perhaps buy items in the game or purchase virtual currency. that exchange can go on for a long time. grand theft auto online was launched more than two years ago and we still have 8 million active users every week. david: you said it is the only part of media that is growing. mr. zelnick: media content. david: i'm cycling media content. the rest of it is just dividing netflix,ifferent ways, "house of cards?" mr. zelnick: it is a low growth business. it is selling different kinds of

ties, cakes, cookies -- it is a television. the value prescribed to linear content is growing slowly. the very prescribed two interactive entertainment is going much more rapidly, well above the rate of standard, 23 -- 2%, 4% -- 3% growth. david: does the market reflect what you said at this point? mr. zelnick: as of the summer, i think it does. there has been a wreck mission that over the top television -- a recognition that over the top television will change. the moves that occurred with the growth of netflix, the launch with the hbo direct-to-consumer service, with the result of companies that aggregate -- we have seen what happens. the news was older than the memo that came with bob eiger's statement about yesterday and christian levels.

i think people have an understanding. i am not counting out the big, diversified media copies at all. they are well-managed, have good assets. the distribution assets are valuable. they are valuable unit in way. stephanie: you're not going to count out a chair media, but everyone seems to have technology fever, specifically for the unicorns and all of those darlings in silicon valley, so yesterday at the robin hood investors conference, i got to sit down with the author of the four-our work week, and a big angel investor, tim ferris. we began with his favorite investment, uber. you make some great calls with investments in facebook, twitter. what do you think of the climate right now? mr. ferris: i think there are overvalued companies. i think uber is undervalued. some people point to that as the ultimate unicorn, but they have

such strong cash flow and such a strong -- dominant position that if they want to change the economics of how they are doing things to lower their cost per acquisition, they are in a great position to do that, so i am extremely bullish. because ii am biased am involved with them and have been for a long time, but i think if you look at companies that are advertising-based -- the revenue amounts are advertising-taste, if there is an economic downturn and creative ageies and big brands are cutting back, they will be in a copper must position if they are focused on -- compromised position if they are focused on eyeballs now. --er companies with models an example would be airbnb -- they are in effect his position. if the stock market takes a crash, people get laid off, or they are looking to supplement their income, they would be more inclined to rent out their place or rent a place through airbnb.

they would be more inclined to get extra income to the possibility of using something like uber. isphanie: if you think uber undervalued, should they wiped out lyft, or do you think lyft is undervalued because there is a huge separation in the valuation of lyft and uber. : you are- mr. ferriss good at the questions. any businesses that have a strong market affect, the personal is the most drivers gets the most riders. -horsek it could be a two race in the u.s.. i do not know what the future is for lyft. stephanie: some people say feed investors -- if you wanted to

cash out today, could you? : no.erriss part of the reason i have been successful, i cannot become mr. market, ask myself if i should buy or sell every day. stephanie: isn't it dangerous to be an emotional investor? dandruff miller said the biggest investment mistake he made his when he got -- stand drunken miller said the biggest investment mistake he made his when he got emotional. mr. ferriss: the way i mitigate against that is i make investments that are locked in and are binary. stephanie: there are many startups. biggest of the best will say i will not talk about probability, but i really think a lot of money. mr. ferriss: i think we will see that unicorns, but that is not new. startups are a high-risk asset class and very risky for most people to participate in.

if the belief is, let's just say, out of 10 investments, you know, five we'll lose money, three might make even, and you hope two will actually knock it one, you canrk, or apply it to unicorns the same way you would apply it to earlier-stage companies. someone disagrees saying it has been de-risked, but much money they have raised, etc.. there is a surplus of capital. stephanie: what are you most excited about what you see today? mr. ferriss: i am biased, but over. stephanie: dale. -- there you go. uber. when we see companies have to run down there in the -- right down investors -- investments and traditional investors racing to get into these private deals, many are starting to have doubts. mr. zelnick: i do not have a religious point of view on it. my point of view is if you are

going to apply a valuation to an asset you are assuming it will generate -- the valuation is 10 cans the cash rate you generate at maturity. if you will value something that $50 million, you will believe it has five million dollars of utah. mature companies like -- a baton. companies like google do trade that way. i look at it and say what are the odds that can be the case. and those companies make money. coming up next, we'll be speaking to tim o'brien. ♪

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what. you don't have a desk bed? don't be left in the dark. get proactive alerts 24/7. comcast business. built for business. tand that's what we're doings to chat xfinity.rself, 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. atphanie: you are looking fantastic new york city, and that is where we are. welcome back to "bloomberg . "

-- strauss zelnick of take-two with us, and tim o'brien -- first, i have to ask, asave never heard of uber undervalued. have you ever heard of that? is there a universe where they will make that? have anick: i do not crystal ball, but that is a big hill to climb, or to drive up. stephanie: critical. we have the breaking economic data -- the cpi number. what does it look like? matt: we have a number that is in line with the estimates we have on the bloomberg. cpi, x food and energy, which is the number of people will be looking at first, because that is what we think the fed target is, about 2%, we were expecting 1.9% in our survey of economists and we got 1.9%. you can break down the numbers. it is in line.

but 1.9% as the number you will be looking at. may not change expectations about what the right is doing because we had -- that is doing because we had the producer four monthsdown for in a row. we're not getting the inflation that we wanted. here you can see s&p futures -- very little reaction, still up about 3/10 of 1%. cease-fire in syria may be weeks away according to u.s. secretary of state john kerry. the agreement would be a big help in the fight against islamic state. , syrian opposition leaders are expected to announce a delegation to negotiate with government can's once negotiations start, a cease-fire supposed to take effect. meanwhile, senator john kerry and francois hollande talked about that together, one day

after friends fall on called for a global effort to defeat islamic state after the paris attacks. manila andbama is in his first up was a symbolic one. he toured a navy ship that has come to represent philippine resistance to china over the disputed child sign -- south china sea. you can get more on these and other breaking stories at the new bloomberg.com. stephanie? david: it is actually david. thank you anyway. let's get to the morning meeting -- morganowak,' stanley's internet strategist joins us. we'll talk a little bit about airbnb. we had the ceo of marriott saying it is not meaningful. very sternly said it is. tell us what the truth is, and

if you have numbers, that would be great. nowak: we essentially found that 12% of overall travelers have tried airbnb over the last 12 months, and we see the number going to 18% over the next 12 months. it might not, can big number, but only 50% of the people in our survey only heard -- actually heard of airbnb. it,ou have heard it, -- of there is about a 25% chance you have tried it. we think it is scaling well and will ramp. survey have anr indication of how many times i have used airbnb? mr. nowak: we do not have frequency data, but the average person looks four nice per-person -- nights per person per year. they will generate 80 million in 2015 versus about 40 million a year ago, so they will double in

size. david: so you are tracking the growth, the delta on it. mr. nowak: correct. us about online travel agents. sorenson fromnre marriott on that. c airbnb as a bigger threat to the online travel expedia,-- priceline, more so than the big hotels. the online travel industries over-index toward leisure. wheelhouse.nb's those of the demand dollars they are attacking from hotels, that in breakfast, vacation rentals -- bad and breakfasts vacation rentals. do you have a sense -- can you give us a sense of the size of the online travel agency business overall? mr. nowak: the overall online

travel market, about 35% overall elements are booked online right now, and of that the business is split about 2% going to online 60%el agencies can -- about going to online travel companies, and essentially, now, airbnb is a small piece of the pipe, less than 5%, and we see that ramping to a double-digit percentage. david: brian nowak, thank you very much. stephanie: we have more to cover. bloomberg gadfly is our new fast commentary section launched yesterday, so we gave it one-day grace period before putting tim o'brien in the hot seat. he is the executive editor. mr. zelnick: is still with us. --strauss zelnick is still with us. what do you love the most? tim: we have a group of deeply, very informed writers and they

are writing right off the news -- on everything in the news. we are aiming to be up within one to four hours of an event. we had malone and bmw of this morning. we will stay on those topics. stephanie: i love this piece on oil -- the response we've seen in the oil market allowing the terrorist attack. tim: that was a great piece by liam, he popped a pain in the balloon -- pin in the balloon. it is a supply and demand story. there are 3 billion barrels of oil voting around the world where to go in the market really does nothing crisis are going to come up. that is what is driving everything in the market right now around oil. paris is a blip on the screen. broader- stephanie: than oil, the paris attacks, while horribly traffic -- tragic, have not seem to have

had an effect on the markets. sadly, i think terrorist attacks are the new normal. it is terribly tragic, and perhaps the understanding that this will, i think, cause a greater response to isis, is offsetting fears about continued attacks. i think most people who study terrorism believe that more attacks in various locations are inevitable despite best efforts. so, the best thing we can do is try to combat the source as aggressively as possible, but also wisely. we have to balance the need to avoid unnecessary bloodshed, including that which we create. david: the terrorist attacks are tragic on a personal level. at the same time, i wonder whether your piece is not indicate there are larger forces at play here, for example, the supply of oil. tim: this is a profound geopolitical event. whether it is a marketing that

is a complete separate issue. i think we are in the business of trying to tie these threads together, but i think this is one we should pass. syria is not a major oil producer. i think the real, long-term thing affecting the oil market right now is wrong supply and demand. stephanie: for you, as it relates your business in any way, when you look in geopolitics, clearly the paris attack is another example that things are not in our control. you cannot simply look at u.s. markets. when you look around the world, does it make you say maybe europe is not a place i want to be right now? mr. zelnick: you know, it is such a terrible tragedy for that country and for all of us. i am gratified that america, new york particularly, is standing in solidarity with paris so much. i am lows to compare it -- loaded to compare to anything commercial. i think it stands alone. we go to ourselves and our own sense of dignity and feeding to keep conducting our daily affairs as normally as possible,

otherwise the bad guys have won, and we cannot let that happen. stephanie: we can in one of the2 interactiv --take-two interactive games. tim: the oil markets have gone through all sorts of a people. the commodity markets have. the unexpected, not assuming we can control any of the stuff in the near term. stephanie: tim, good luck with gadfly. tim o'brien, executive editor of our new fast commentary piece. you can find more on the bloomberg terminal if you type in gadfly. strauss zelnick is just getting warmed up. when we return, a closer look at take-two, how to monetize the digital experience, and i need them to tell us what the hottest games are out there. ♪

vonnie: welcome back to

"bloomberg " i am vonnie quinn. here's her latest business flash . angie's list is down as much as 5%. the board has decided not to pursue an unsolicited offer from iac. shares of angie's list as -- have risen 50%. u.s. highways are likely to be more crowded by 22. forces in 15 years, two out of every new -- five auto sales in the sporting vehicles. cheaper gas and car loans are getting the credit. toyota's first fuel-cell vehicle has come to the u.s.. sold 34 of toyota its cars in california, the only state where it is available. the price, $50,000. -poweredrgues hydrogen

cars are a better resolution to cleaner regulations and battery-powered cars. david? david: thank you. it is david this time. i must confess i'm not a big game, but my 13-year-old son is a big gamer. take us into your world -- you have had success with "grand theft auto," as well as with your nba game. where is the growth coming from? growth isk: the coming, externally to us, to what are now current-gen platforms from microsoft and sony. we expect further growth in the holiday season. that creates a talent for the industry at large. our growth comes from continuing to put out hits. every instance 2007 we have put out one new, massive franchise. we are not only "grand theft wwe, civilization, many others. how dependent are you

on having two, with those his? i look at something like zynga, once "farmville," went out to pasture, we thought zynga who? it is a tremendous investment. any entertainment company is reliant on hits, and it is nice to see our catalog row. catalog revenues were about 35% of our net revenue. it creates some certainty. there is no action -- every success you had before is yesterday's headlines. you have to do it again. thatanie: the live event exist -- business that exist in gaming -- is that the future, an investment opportunity? mr. zelnick: we invested in which. we were early believers. is it a great economic opportunity?

it remains to be seen. they do not monetize the events themselves, but they monetize the online activity surrounding the gameplay. i do think that videogames games are the growth industry in the entertainment industry, and people do enjoy watching professionals. it is exciting. you enjoy watching the? -- do you enjoy that? mr. zelnick: everyone knows i do not play video games, but i enjoy watching my kids. matt: it's a five-year chart, and this is normalized, but i can tell you take-two has doubled, tripled in that time period. so, the interesting thing is not just a new titles, but i bought gta title, but i spend more money than the initial purchase price -- i spend more money in the game. even as i am trying to save a

little money right now, i was to spend $10, 20 dollars, $30 buying things in the game and i wonder if that is the growth for these games. matt hasck: so, describe the evolution. five years ago the business was by a great game, play it for a while, move on to the next great game. for us, and some of our competitors, the business has become by a great game and stay engaged and through the course of the engagement, we offer you further opportunities to be excited, entertain, and to spend money. that is what we call the current consumer spending. stephanie: could one call that taking advantage of adrenaline addiction -- you have people in the moment, and that is an opportunity to exploit that excitement? mr. zelnick: when you start to think about it that way, you have to be in trouble. you think about the entertainment business and delighting the tumor, and then you worry about my -- the consumer, and then you worry about monetization.

the minute we launch a product and make it yellow because we see a spike, we are no longer in the entertainment is. abouteative people worry what they are passionate about, and then we talk about how to make money. other areas ofut growth -- international and mobile -- in you, the whole story is mobile these days. stephanie: four walmart, they have is international stores. that is hard. david: international and mobile. mr. zelnick: right now the business is a bit in north america, but about what effect percent comes outside -- about 45% comes from outside. u.k., asia specifically. it's enormous growth in emerging markets will we had made investments. mobile is not really the issue. whether there is a wire attached or not is not the question. the question is whether it is a casual game or a robust

experience. you are referring to a casual game. we expose grilli to the market in asia. we have the biggest sports title in china with nba2k online. exposed to what you call the mobile market, the casual or free-to-play market. we see it as a growth area. stephanie: you see the effects of a reported china slowdown? you not see it at all. it does not mean it does not exist. the numbers are holding up nicely. david: it's about virtual reality. there is buzz about virtual reality in gaming. do you see that as an opportunity? mr. zelnick: it remains to be seen. we are in r and d mode. there are some issues.

it has not been something consumers have wanted to do that. you and buy a headset right now that creates a great display to watch a movie, and i do not know too many people that have done it. i am not saying it won't work. the jury is out. the use for interactive entertainment remains to be seen. our view is that there is a market there, we will be there. stephanie: i want to go back to china or a moment -- how much or do they sent to your content? preciselyk: it is not censorship. before we release anything, you need government approval. if you have the right product and the right are, for example, content, i would say it is not hard, but complicated. stephanie: is that the most crucial, to have a problem -- partner like 10 sent? ron perlman said he did not have the right partners. even if you have the right product, unless you can get on the inside, it is a waste of time. mr. zelnick: particular young

media, we are obligated this particularly in media, we are obligate to have a partner. 10-cent has been a great partner for us. we know, but more importantly we know what we do not know, and when we decided to enter the china market we want to go in with as much power as possible and we wanted to avoid errors. by partnering with 10-cent, we were largely able to do so. we have had a great result there. david: do you have a product release schedule? mr. zelnick: yes. david: how often do you, with a new product? mr. zelnick: ever since we took over the strategy has been between five and 10 big, meaningful releases every year, it will try to do and we have been successful is put out one new hit franchise every year. right now, the company has 11 franchises that have sold over 5 individualts with an release, which is extraordinary, and we have 45 different titles that have sold over two million.

that is a wrought 10 of -- broad intellectual properties. every year we bring to market new electoral properties and a number of sequels. that is our goal. stephanie: how much do you wish you had open those star wars? "star wars?" mr. zelnick: today, we all wish we had open star wars." "star wars." as you are saying that, we're thinking about our kids. you are right. is nothing: if there you want out there, you do not buy anything. if there is a lot you want out there, you buy at all. matt knows that. stephanie: matt certainly does. strauss zelnick thank you for

joining us. strauss zelnick of take-two interactive. " hasberg --"bloomberg a lot more to cover. when we return, this woman knows commodities. we will find out where she thinks oil prices are headed. stick around. ♪

next, the founder and ceo of gall terror invest -- rene joins us. we will see what she is -- sees opportunity. stick with us. you are watching "bloomberg ." ♪

david: we are now 30 minutes from the opening bell here in new york. welcome to "bloomberg ." i am david weston. stephanie: i'm stephanie ruhle,

joined by our co-anchor, erik schatzker. erik: good morning. renee haugerud is with us for the hour. she is a farmer's daughter. she now runs galtere, a global macro hedge fund focused on commodities, and she is among the few survivors in the business. it is great to have you here. ms. haugerud: thank you. i appreciate the invite. erik: before we begin the conversation, let's turn to vonnie quinn. vonnie: david cameron was to use british air force against the islamic state syria. britain -- the british prime minister says britain needs only nato's ok to deploy jets in the region. russia, meanwhile, is offering $50 million to find out who brought down one of its airliners. the security chief says a homemade bomb broke the plane apart over the egyptian desert.

oh -- all 224 people were killed. the mayor of minneapolis wants the justice department to investigate the shooting of a black man by police. witnesses say a man was handcuffed when he was shot. his family says he is not much support with a head wound. you get more on these and other breaking stories 24 hours a day at the new bloomberg.com. here is matt miller. matt: just a half hour until the opening bell, and we see gains across the board in features. up, up eights now points. 87.minis up looks at where treatment for a positive open. i also noticed the chances of a said move in december heaven -- a fed move in december have increased. you can see a graph of the probability of a fed move. it continues to rise. there is no doubt market

participants don't see the attacks in paris as weakening janet yellen's chances to raise interest rates in december. very interesting alone. also, when you look at the fact mario draghi is likely going to expand his qe program, that weakens the euro even further. we see it all in to a dollar seven this morning, $1.06 in change -- and change. .he euro stocks are up the dekes is up 2%. the cac 40 is up 2%. here is the euro. i jumped ahead of myself, but 1.066 zero.1.6 6 -- dick's sporting goods released a forecast with earnings that disappointed wall street quite a bit. you can see shares down 16% in the premarket. the stock is already down about 20% year to date. this is not good news for a

consumer that seems to have showed up at home depot, but not to buy golf clubs and baseball bats at dix. next dick's sporting goods. stephanie: -- dick's sporting goods. stephanie: i am not counting them out. matt: hopefully you are not long, because you would have lost almost 10 your money. stephanie: but if you invested from beginning, i think you would the ok. matt: yes, and i like to shop there. erik: what is it they say about investing -- timing is everything. it is time for the five stories that matter to markets now if we begin with this -- some of the world's top investors are abandoning stocks. drunkenmiller is among those who held a lot less inequities. drunkenmiller cut is disclosed holies by 40%. of course, that bets did account

for some of these declines. a $2 billion drop in disclosed holdings and david einhorn's greenlight capital. did anyone ended up selling one quarter of the sun edison stake. renee haugerud, you are in the commodities world, but you are a macro person. you look at what these things investors are doing. what do you think? ms. haugerud: we agree with them. we think we are at the precipice of a big rotation. in fact, we have been selling into rallies on a macro level. that is not what we do. we are not an equity trader, but as an overlay with commodities, we have been selling into rallies. there is the possibility of one more -- i have a technical system, a proprietary technical model, and it is signaling 1600 to 1800 on the s&p over the next 12 to 18 months, but we could have one more blow up to 2180.

i do not think that will happen, but that would suck the last bulls in, and we think we are in a rotation right now, but we agree with reducing current equity holdings. stephanie: is it getting harder and harder to be a macro person? now that there is so much information out there and everyone has it at the same rapid pace, how much harder has it become? it is really interesting. this has been one of my most difficult years, year-and-a-half of really getting your pulse on the trent. since 19 -- trend since 1980. i believe it is more to over-extension of the markets both to the upside and downside. we will have big trends, but the over extensions on both sides, as people are absent of taking advantage of that disequilibrium, as they used to in the long term because of fear of volatility. volatility hasof increased, and i agree with the piece that mom and el-erian put out -- we have -- mohamed

el-erian put out, that we have a paradigm shift in volatility and the markets have made it difficult to trade what you have in the past and we need to make an adjustment. we are making that, but it is important to recognize the over-extension. david: that is important. let's go from macro to somewhat more micro. walmart -- we have crunch the numbers this morning. they have its third.---third -quarter profit. yellow not a dose of good news after a gloomy -- the outlook brought a dose of good news after a gloomy start to last month. they said earnings would decrease 6% to 12% next year. this is a little bit of good news in retail after stephanie: last week, where we had so much madness. -- last week, where we had so much that news. stephanie: it is. despite the fact that we are

it is this shred of like, kind of positive, as you look the u.s. consumer. erik: i guess. it is short-term. walmart sold off the coast of allen said we would sell -- sold off because doug macmillan said we would selloff to build a business that was more like warm -- amazon. the markets had i hate that idea and sold the stock aggressively. here, once again, short-term guidance, and the stock is worth more. stephanie: i sat down with whitney tilson yesterday and he retailers, it is the kiss of death to try to compete with amazon. if you try to get in the amazon space, yes, maybe you can make it work in a specialty, but if you try to get in the way of just results, try something else -- jeff reseau's, try something else. the index shows while germany is

grappling with a slowdown in emerging markets at threatens exports, it is benefiting from record low unemployment, cheap credit, and weakened currency. you, when you look at the global economy and the euro, what kills me is the perverse effect of stimulus -- the fact that things are so bad and there is more stimulus on the horizon, we go long the market and it gives people a warped idea of how good things are. ms. haugerud: right. and what we think about the global economy is we do not we abyss.ling into an we are on the precipice in the u.s. of hiking rates while still adding to me with in china and europe -- adding stimulus in china and europe. we think the global economy will child along. for several years we have the global growth be zero to 3%. every time there is actual stimulus, people say you will overheat.

we think were -- will stay -- it might go to percent, but we are in a child along economy -- chug along the economy. we think the weaker currency in europe will put some balance under that economy and, hopefully, it will not get into a bubble from too much to miss. david: ok. the number four story affecting the markets right now -- in a year of potentially record high global deal making, executives are turning a cold shoulder to buying companies in china, brazil, and other emerging markets. the culprits seem to be geopolitical uncertainty, marketing currency volatility, and slumping commodity prices. deals to buy companies in emerging markets are headed for the quietest year since 2009. it strikes me that brazil and china are terribly important in your world -- brazil for the producing a commodities, china on the consuming said. ms. haugerud: two things.

from china, we are drifting from an export-led economy to a consumption economy. this does not happen overnight. yes, demand is lower. yes, exports are not nearly as high. so, you have the perfect storm of both slower growth and slower exports, but we think it is going to chug along, and, in fact, many of these financial transactions in a lot of commodities from copper to crude oil to soybeans -- yes, it has reduced demand, but we think, in fact, a lot of these warehouse inventories that have been used for collateral for loans have already been sold, not 100%. we think a lot of the move down has been exacerbated. removed,demand will be but it has added to supply over the last six months and we think we are in capitulation. brazil has had political uncertainty.

the currency weakness -- we think it is a major opportunity. stephanie: cattle, coffee, cocoa -- erik: here is a question -- i'm not really asking it. retirement fund manager breaking the law in brazil -- it is raised by a "new york times" investigation. the company has amassed vast holdings of farmland in brazil in the five years since the company puts strict limits on such acquisitions by foreigners. the land in question is a focus for environmental groups because it has been before is that and the revelation could be a craft. for tia --phanie: that is his margin mantra. i'm only learning about this today, but it does not seem like tiaa-cref would

consciously do. erik: we will see. my question is is is a warning sign for some that have their eyes on farmland as a super long-term investment? in order to acquire it, they will have to go to many different companies. ms. haugerud: i do not think this is anything new in brazil. we have had several trips. we buy commodities. we have been to brazil several times. we do not advocate converting the amazon land to farmland. many of the agricultural purchases have massive set-asides for the environmental persons this -- purposes. sometimes as much percent, 70%. we advocate proper investing in farmland that is there, but i do not think this anything new. i do not know anything specific about tiaa-cref, but i think this is something known all along, and i think a lot of the practices have improved rather than gotten worse. erik: all right.

insiders perspective from renee haugerud. those are the five deaths five stories that matter to the markets -- five stories that matter to the market now. stephanie: renee haugerud will be with us for the hour. i would like to know where she sees oil prices. when we come back, we're speaking about parents here it french president francois -- speaking about paris. french president francois hollande france is at war. ♪

david: welcome back to "bloomberg ." yesterday francois hollande declared french is at war, formally asking the eu to invoke its mutual defense clause, but also asked for sweeping changes inside of france. brendan greeley joins us from france. tell us about what is going on with this 90-day emergency order he has in place.

me?dan, can you hear ok. i am afraid we have lost brendan greeley. theere going to talk about 90-day emergency orders and what is going on inside of rats as they try to clamp down security insidet it means for -- france, as they try to clamp down security and what it means for francois hollande. ♪

erik: welcome back, everyone. this is "bloomberg ." alternative lending keeps getting hotter. one company uses a unique algorithm that includes academic performance to determine which

borrowers should receive loans, so if you got a c-, no one is lending to you. here to tell us how it works is upstart cofounder and ceo, dave. welcome. tell us about your business, how it works, how is it different from banks? are you a lender, and originator -- who ends up leaving the loans, stuff like that? help get money from investors, retail investors, we are a platform middlemen. a talent sheetot lender. market david: we are a lender. -- fight: cycle scores go scores are not what you use. look at it,ay we about 80%, 85% of the people in

the u.s. have not defaulted on a loan and in our view are unlikely to come over but only of them0 -- one-third have access to credit, so our notion is to bring data to bear to more properly identify risking people and that more than access to inexpensive credit. then who are you lending to the traditional lenders would not? david: younger people, generally millennials, because most look for people to have 10, 20 years of robust credit history. if you only have a handful of years, you are just out of school, it is really hard. you pay more for credit cards, auto loans. atk: but you pay a fair bit upstart as well. what kind of interest rates are they paying? g.: it is about 11%, 20

-- 12%, compared to an average of 22%. nonperforming loans as a percentage of total loans -- ?here are you guys on that 95% of our loans are performing well. the model is 95% of the principal default every year. erik: how much? david g.: 5%. erik: 5% would default. that is a lot. .7%.rforming loans are at they have come down and they were much higher during the post-crisis period when all of those mortgages were defaulting. how is it that your model allows for a 5% default rate? that would destroy banks, by the way. 5% nonperforming loans from here

to eternity, you would be out of business. stephanie: they are also making much bigger loans. erik: because of leverage more than anything else. david g.: the way to think about it is our loans have an average its rate of about 12%, and the target return on a three-year loan is 7%. we have some borrowers, we would thataa prime borrowers default rates are far less than 1%, and others that can be single-digit percentages. erik: how much do you get paid? banks do it on net interest margin. you guys? david g.: we make money on fees we charge to the borrower and investor, and you can take about as roughly 5% of the value of the loan. erik: is the fee blended into the interest rate that you were talking about, 11%? david g.: that is what you call the apr -- the interest rate plus the fee structure. stephanie: thank you for journey

as, the cofounder and ceo of upstart. be sure to check out my interview with t-boned pickens. -- t boone pickens. we will stick with commodities with renee haugerud. ♪

erik: good morning once again. time for some investment a macro hedge fund focused on commodity. investor wantses to know one thing. how much longer is the slump going to last? has been very protracted. erik: and painful. >> and painful it we think we are not there yet, but we are close. we think we are experiencing multi-year bottoms and many commodities. erik: i mean, prices now are lower than they were, depending on what index you use, but lower

than they were in the immediate post-crisis cracks. >> absolutely. someto 2001, 2002 for indexes. in many commodities, we're back to 1995 and 1996. erik: it is ugly. when you say not much longer, what are we talking about? think within three to six months. i am not predicting a big rally i any means. i think we're going to be experiencing bottoming. we're going to chug along here it we think we have had a perfect storm of extraction of demand, along with accelerated selling. >> is the root of the slump supply driven or demand treven? >> it is supply driven. we think demand will continue to chug along.

we will have pockets of reduced demand. it definitely is supply driven. erik: can you pull of the iron or graphic? i think this helps. if you look at iron ore production by three of the largest producers in australia and here, the green line, purple line, blue line. the iron ore price, the price delivered to china, the white line, two separate axes -- anyway, it is a little confusing. but the point is, that is a textbook definition of insanity. price goes down and you produce more. that will not solve the slump, does it? not think it is confusing at all. there is a clear trend with china. it is headed down. rio tinto seems to be the only one finally understanding what is going on. you see bhp billiton here in

purple. they continue to increase production as the price continues to fall on their biggest buyer. in might as will be there only buyer. erik: but it is a rational decision that they compete on marginal cost. marginal cost of extraction is not that high. >> i liken it to it is turning a barge. it takes time to turn a borage. commodity production is a long-term business, and long-term trade. commodities were the first currency of the world. before paper currencies existed and even outside of gold, commodities were currencies. a think it is more like borage, and in order for some of the supply to turn around, just like we accelerated into the 2008 2009 -- 2007,

in fact, i have been meeting with investors from 1998 with my saying we are having emerging markets move up the food chain. everyone ignored me. i mean, i had big, big funds that only approached me after meeting with me every year from 1999 in 2008 and then wanted delivered product. we think it is the reverse of that right now are not quite to that point. >> on agriculture, when we are looking at cost price is at multiyear lows, what is your outlook for 2017? >> it will be tough to it we are right at and below the cost of production, but there have been significant increases in yields, which have offset the decrease in price this year. year, ratiose bad have come up a little bit, but they are at so low by historical

standards, we could have a pretty big jump. for instance, albania, which looks like it will be one of the strongest we have had in several years, in fact, there has only niño'so back to back el since the 1950's, one of those 1988, in which we had a 30% reduction in corn supply and a major rally because of drought. we are not predicting that yet. we're watching the el niño. it is one of the strongest we have seen. we need a little bit more of the tradewinds to dissipate for it to be over two to three. but if we get there, we could be on target for a pretty massive el niño, which in one year could take the excess reserve of grains and stock to maybe not a deficit, but certainly rationing demand. stephanie: wow.

erik: can we talk about oil? we are almost at the one-year anniversary of opec and saudi arabia's thanksgiving day surprise. back then, you know, lots of people thought that oil would average, i don't know, 75 dollars -- i think you might have been in that camp. instead, oil has proven far less resilient. stephanie: some thought we would thet $100 by the end of year. eric and here we are at $40. what about a year from now? >> i am kind of boring on the subject, but i think we may chug along. i think we will settle out in the $35, $37, to maybe $55 range chug along. i'm not looking for another big move back down to $20. i think that, again, the supply has been exacerbated by the lineslation of several that held onto it structurally, as well as all the financial contracts that it was used for

collateral for cheap loans, which now you do not need because interest rates and reserve requirements of come down. as well as, and not a lot of people are talking about this, the commodity markets have a huge short position from cpa's and momentum traders. stephanie: one more time, this is super important to its aid again. >> the commodity markets have a huge short position held in for thattum traders and cpa's have exacerbated short-term supply p at stephanie: so this is a technical kospi algorithmic so this is a technical cause by all graphic trading? >> no, it is definitely fun a mental. the decrease in prices are financial do two supplies, and at the same time there has been an extraction of demand. it is exacerbated by heavy cpa's selling heavy omentum short and capitulation of long-term structural traders.

we think this is kind of the perfect storm of that barge of moving from an export economy to consumption. that,nie: given all of give us your portfolio construct right now. >> this is where i go back to where we were discussing earlier , we're pretty under leveraged right now. i believe i am paid to know when to hold them, when to fold of them, went to stand on the sideline spirit we think right now that we are in a capitulation phase. i cannot predict when it will happen. i think we're making multiyear lows. i truly believe in the check élan of the global economy. we will be there to opportunistically jump in. i am end structured coffee and cocoa, long. if the el niño continues to develop, these are two commodities that have a little bit of a supply deficit with increasing demand here and we think one more leg down on grains. even though i am short corn, neutral on beans, i will be in

there to buy fairly quickly with another leg down in price. stephanie: and putting kenny rogers into the portfolio, that is a winning trade. see were stocks of opened for trading. stephanie: kenny rogers, video games -- erik: wal-mart's international earnings. digge a quote from sporting good spirit we are up across the board. not seeing the gains that were indicated by the futures. but the s&p is up about half a point. .03 percent. the dow jones of about 17 points right now. bond yields reacting to inflation data, maybe the more interesting story than equity markets. the 10-year yield climbing up to 2.29%. the two having year yield is moving, as well, also climbing, percent.

investors feel comfortable enough to sell out of debt. that pushes the bond yield up, and they buy into equities. not a lot of it right now, but a little bit. the regional picture is amazing. on the plus side, walmart worries about fx and headwinds, considering they do not get a bunch of revenue from overseas, but they actually get 20% of revenues from overseas. home depot and tj maxx also impressing the investors with their forecast. i want to talk about dick's sporting goods. this company disappointed with third quarter warnings, down almost 16% right now. another sporting goods company also down. et seq. over at --a member of dick's says athletic apparel is moderated by the impact of record warm weather. so he brought it with the

weather excuse. he says the warm weather is one dick's reasons that missed. abigail is looking at another loser in the retail space. abigail: urban outfitters down your the company said november is worse, suggesting that the fiscal fourth quarter is off to a rough start. the big news is that the company said it is lying a pizza chain. bloomberg dad fly says the deal makes a lot of sense at at time when brick-and-mortar stores are struggling to differentiate themselves. this could drive shoppers into stores. with shares of more than 40%

year to date, investors are looking for a turnaround. these editors say the pizza deal is at least an appetizer. abigail whenou, we come back, we will be talking about gold. a special conversation. ♪

welcome back. yesterday, francois hollande declared that france is at war, urging a new coalition against isis, and he is the eu to invoke its mutual defense clause. he has for sweeping changes inside france. we're going to go again to brendan greeley and get it right this time. he joins us from terrorists. we have heard about fighter jets taking off. tell us what is going on the inside french and with the french government is doing in terms of security and the investigation. brendan: there is a huge police

presence here, as you know the eiffel tower was briefly opened this morning and then closed again to her just around the corner from our bureau at the opera house, some of the left a duffel bag on the front steps. the police can buy them blew it up. people are uneasy. it is beginning to look like french society is going to change. when he made his speech yesterday, francois hollande did a number of things, but internally, he recommended a constitutional change. you are a lawyer, so i will walk you through this. there is a state of urgency right now and also a state of siege to the state of siege imposes military law. he is recommending that the two states be constitutionally joined so that there can be some aspect of military law among the civil emergency. what he is trying to tell france and what france is expecting is that this is a different kind of war that needs a new constitution.

what does that mean for civil liberties, for privacy? french arell, the somewhere to the right of the u.s. on these matters. they have had a law since may of this year after the charlie hebdo attack that allows for the collection of metadata, allows them to place a bug in the house without a judge's approval to it so they have a different understanding of the role of the state and security. this event, these attacks have shifted france even further to the right here at the proposal that francois hollande, and socialist on the left made yesterday, it looks a lot like a plane that was drawn up under new quiz sarkozy several years ago, but he cannot get it passed because he do not have the will and the national sibley. france is really changed in behind me is the monument, anna saw a cartoon this morning where two surveyors are looking at the

monument, and they are saying that it is hard to tell, but the blast shook it to the right to that is what has happened. i believe it is a permanent change. >> is it too soon to tell, but are they blaming francois hollande or are they rallying behind him because they feel attacked? brendan: i think i lost you, but one thing that has happened, politically, this cut the knees out of the right. marine le pen them all she could say yesterday was, well, those or nice words. she cannot really go on the attacker the proposal he is making, these are things she has been saying for years. i spoke to us about who specializes in french politics, a professor, and he said the right is getting what they have been asking for. the left cannot really say anything right now in france. things have changed. likes thank you very much. proposition,ue controversy -- here is a question not just for hard derivatives that for all you

gold bugs. is gold a commodity or is it currency? what do you say? >> we think it actually has three identities. we think it is a currency, and equity, and a commodity, and we think it's identity as a commodity is least important. ,n fact, other than jewelry does not even have the industrial demand that silver does. really, it is an investment demand. we think it oscillates right now between a currency and and equity. so when the equity market is down and the dollar is up, it has a double whammy. stephanie: what are you looking for? : gold. stephanie: in terms of investments, what do you see in your portfolio? renee: we do not have any gold right now. we think it probably goes down to $900. we're getting fairly close to we were shorting it. as ave been long gold

dollar bear play. with the dollar moving back up, we think it has another leg down. it is an equity. the etf's for commodities are really gold, crude oil, copper, and goal being one of the biggest etf's. when equity markets go down, gold gets hits, even if the dollar is falling. erik: matt, i suspect you're looking at the same thing i am, gold against the commodity conflict spirit why is it selling off with commodities? renee: because it is a commodity. it has really be of the dollar rally. the dollar has been rallying look back to when the dollar bottomed last june, july, and gold started falling then. so it is a currency. erik: as it turns out, matt is looking at something else. matt: in white is the price of

gold. these bars are chinese gold imports. you have seen a huge jump in chinese gold imports. when the equity market goes down, people, at least in china, are out buying gold. i am puzzled at how gold can be a currency. i can buy more things with bitcoin then with gold. i cannot go to gamestop and by the new star wars with gold, whereas i can use bitcoin to do that, or at whole foods to buy lunch for her to where do you use gold as a currency? thinking of the investment aspect. matt: you cannot buy anything with it to stephanie: she does not need to. matt: isn't that what currency is? renee: currency you can invest in, currency you can buy things for you cannot take a bushel of wheat to the store today and buy

something or they can make an argument that sundries are currencies. i do believe there is a significant change, and i know golda lot of people buy and silver as an alternative store of value. for when the world is falling apart the chinese imports, it is pretty significant. we think the decision on thember 30, the imf with fdr, even though it will not have a short-term effect on gold or currencies, we might even be topping in the dollar when the fed finally raises the rate, because we think the long-term shift in the fdr and the basket of global currencies with the introduction of china and for the fdr is going to be a significant new regime. that could support gold on the next leg down. stephanie: i think the decision for one hour here is genius or next, highlights

from the broadcast and final thoughts. stay with us. ♪

erik: welcome back. let's look at some of the day's conversations. >> every passing month, the so-called islamic state survived, it is credibility -- it is not just about dealing with nonstate actors. it is the retail segment of the nonstate actors that is much harder. target about wholesale terrorism, not just retail terrorism. a direct sponsor -- >> the terrorism we have experienced here is experienced 10 times more over there. we end up slowing down dichotomies by overreacting to next thing we know, we trigger a series of to be points.

>> it looks to be both expensive and a huge bit of work. stephanie: that is something you would definitely want to buy, expensive and too much work. >> as the summer went on, we watched. our stocks moved in our favor about 15%. so the economics of the deal became more tractive. >> you always have to think about the entertainment business and delighting the consumer. the minute we launch a title a product at to a glock in the morning and make it yellow because we see a spike, we are no longer in the entertainment business. stephanie: what are your final thoughts? i'm looking at twitter questions pyramid a people are asking about the dollar. at theif you really look dollar, it has been moving down for 30 years. i hate to admit this, but the first time started trading currencies was in 1985, and we

46 on dollar mark. now we have rallied back up to about 1.80 it i still watch dollar mark. we could get back up to two dollar mark. 5%, 10%.ll a good long-term, we think the dollar continues down here at it is a regime shift. stephanie: renée, thank you so much. the founder of voltaire. tomorrow, much more on the markets with the aberdeen ceo. when we will be talking about the refugee crisis in europe or that does it we will see you tomorrow at 7:00 a.m. thanks for watching. ♪

>> welcome to bloomberg markets.

betty: good morning. here is what we are watching. stocks fluctuating after the retreat in energy shares offset positive energy -- positive earnings reports from home depot and walmart. and the navy working with french warships on targeting the islamic state in syria up it we will hear from tb in pickens about the future of what we are all watching, which is oil, after the genetic price decline over the past year. we are about a half an hour into the trading session. i want to go to the markets desk. julie hyman has the latest. julie: things are fluctuating. between gains and losses. we saw a big gain in stocks yeda