"what'd you miss?" stocks closing lower. the s&p following for the fourth time in five days. crude at the lowest level since 2009. joe: the question is "what'd you miss?" alix: energy shares sliding. are we at the bottom or still sinking? joe: are we ready for the fed rate hike? we take a look at bank of america's 2016 outlook. how demographics drive our economic future. we have the charts. we have to begin with the markets. it was an interesting day. data, chinese trade global stock selloff as imports and exports disappoint. s&p downing 13

points, but well off the lows. joe: it seemed like there was a lot of panic, especially in the early morning hours, european trading, energy, mining, oil all getting slammed. it was similar to yesterday, where we have this intense selling in the commodities and energy spaces. it did not fully translate to equities. the equities selloff was later. material, energy, and industrials off by 1.5% to 2% on the s&p. freeport mack moran, copper and 2002,lowest level since producing a time of copper, increasing production next year by 24%. joe: on the plus side, you saw outperformance and biotech and the fang stocks.

that's what the nasdaq did not have a bad day at all. alix: we talked about the relationships between stock and oil. -- looking at the function were you can tell a correlation, s&p versus wti. the correlation is strong. it's about .4 right now. go 20 days, tighten a correlation you're looking at, you can see, still positive, but we've actually come down a bit. we are now at .2. the correlation is less than you would think when we get obsessed about oil. joe: the market is shaking off oil a little bit? alix: which is what you were saying yesterday. joe: i want to look at something and does look correlated, that is the lusted lives -- london listed minoner.

are doing terrible, liquidating access, laying off people, hitting a new low against the dollar. they are cutting the dividend and nothing is going right. getting destroyed the chart speaks for itself. there's nothing more to say. alix: there really is in. you can see all these charts and more on twitter. , want to bring in our guest cofounder and chief investment officer of cambria investment management. he joins us today from phoenix. good to see you again. on: you do a lot of work market timing, cycles, and stuff like this. commodities, at the getting destroyed. what are the things you would look for as signs that we are finally at a bottom? >> like any asset class, there

are two sides, the valuation side,nd the trend-falling and we believe both work historically. commodities are tougher to value, of course, but one of the best ways is to look at trailing real returns, how much of the gone down or up over the past five years, and historically investing in commodities when they have done poorly or investing in the worst-performing commodities has been a good guy you strategy, and on the flipside, the trend , you would great job either be out or short almost every commodity market. that, it'sout starting look pretty attractive. a lot of them have been getting decimated. joe: you think there are opportunities based on what you are looking at? called whatstudy you should be asking for in your stock this year.

why you should be asking for coal. data from the 1920's, what does it look like when you have equities down x years in a row. what happens after two years, three years, four years, five years? 40 five industries, and we found that after a sector has gone down multiple years in a row, the next year had a good performance. it is stair steps. when it goes down three years in a row, 3% of the time, you get great returns. when it goes down for years in a row in which is only 1% of the 20%, 30 percent, 40% a year annualized returns investing in these markets. the markets it better than down five years in a row, barring a massive rally at the end of gold-mining,l, precious metals, everything

related to commodities, we think for long-term value trade is probably a big opportunity right now. alix: we do have some breaking news. smith & wesson earnings are crossing the terminal, a blowout , $.25 a share,d above estimates, sales at $143 million, above estimates, both of them represent double-digit orenue growth, sales growth up over 30%. more importantly, boosting its overall forecast for the third , $.27 to $.29 a share, and full-year adjusted to $1.31 per share, and on the sales and $635 million a share. it had been doing very well after the mass shootings, gun

stocks tend to do that, and people tend to anticipate more gun regulation, and that also leads investors into these the gun at stocks, and the quarter was no disappointment there. has beenstock rallying, but up over 1% in the aftermarket already. coal thatea besides has gotten it reiterated is the gold miners. there's oh kinds of reasons that gold has had a terrible multi-your run, the miners destroyed. do you see opportunities there? >> when looking at these ideas,rs -- sectors and had you asked me one year ago, i would set have said the same miners, down gold 80%, 90% at this point. there are two ways to trade. one, i'm buying value for one

year, three years, four years as a time horizon and buying it at the point of maximum pessimism and buying a basket, or you're saying i'm going to wait until they crossed the long-term trend and buy into these markets to avoid a falling knife. we think both types of trades are reasonable. interestingly enough, there has been only one industry in the united states back to the 1920's that has ever printed six years down in a row, and it was coal stocks in the great depression. alix: what is your timeframe for that type of thing. if you bought gold miners one year ago, you would be crying now. you have an out signal? >> any evaluation strategy, if you're using value, but if you're using trends, much shorter, but using evaluation, you should can do that consider looking towards the end of the year. more realistically two years and up to five years. if you're looking at gold

stocks, you should approach it as a position that if they go down another 50%, i will put on another position side to the end of the year. major part ofbe a your portfolio, but looking therefore certain opportunities is reasonable. alix: do you end up looking at the factors that move commodities? there's some proprietary modeling that shows the dollar macro trends are more important in driving oil price than perhaps supply and demand fundamentals does that matter to you -- fundamentals. does that matter you? >> our favorite indicator is trend. it has done a wonderful job over times. there are macro indicators that look great, looking for ideas for value, and depending on the asset class, they can be a little different, but commodities in particular have that long-term mean reversion which you can kind of put under the value sort of banner.

it is a little tougher, but we think it works just great as well. joe: real quickly, when you think about u.s. equities right here? you see the s&p running up to 2100. i know you been skeptical and recent appearances. >> u.s. stocks are expensive. we don't think they are a bubble, but they're going up. that's a not -- not a terrible time to be investing. a month ago, you had a witness saw in u.s. markets him a but they're one of the most extensive markets. if you want equity exposure, foreign is a much that a place to be going forward. i said don't fight the trends as long as the u.s. is going up, so it seems to be the place where the momentum is. joe: thank you so much. thank you for joining us.

alix: oil has been the story this week. we will tell you how forecasting the price of oil is a lost art. ♪

alix: i am alix steel. "what'd you miss?" let's get to first word news. >> the latest on the controversies surrounding republican presidential candidate donald trump. added to the group, condemning trumps call to ban moslems in the united states. >> i'm not concerned about

lasting damage to the party. i'm concerned about standing up for our country's first principles, and i'll party is dedicated to these principles that's why it's incumbent on leaders to defend what conservatism is and what the republican party stands for. >> the proposal has strong -- drawn strong criticism. runner isican front not backing down, saying his proposal would be a temporary measure. the house is preparing to tighten controls on visa-free travel to the u.s.. legislation would bar anyone who has been in iraq or syria in the previous five years from coming to the u.s. under that these a waiver program. the legislation has overwhelming bipartisan support, and is also backed by the white house. it may end up attached to a sweeping year-into spending bill. prosper marketplace arranged shooter in san

bernardino california. that's according to a person with knowledge of the matter. prosper matches borrows with investors who want to fund them. fox news says authorities are examining a $28,500 deposit into his bank account in mid-november , and whether that money was used to buy guns. after four days of testimony, the prosecution has rested its case and the case of one officer who charged in the shooting of freddie gray. they say he failed to call for a medic despite freddie gray's plea for help. he says freddie gray's condition was weakened by a previous injury. the death of freddie gray ignited riots and looting in baltimore. he is the first of six officers to stand trial. more on these and other breaking stories 24 hours a day at bloomberg.com. i am mark crumpton. alix: thank you.

oilowing monday's 6% drop, touched its lowest level in all seven years at one point today. forecasting the trajectory of oil has been difficult across the board, and joining us now to discuss the issue in oil is energy columnist for bloomberg gadfly. if you take a look at the analyst downgrades of oil in the last quarter, the average is $53 for 2016. have they call the bottom? >> i think they will have to cut a bit more. if you look at what has happened over the past year, they started up around 80, some seeing triple digits, and i think we have seen in the last quarter some capitulation on their part. the averages have come way down. the range is come way down. if you look at where they are now relative to the futures market, they have a wide and back out in terms of the premium.

they are back to being at about a 20% premium on average to where futures are trading. especially given what we have seen in the past week with opec and the price action this week, there could be another cut on the way. joe: who tends to be right, forecasters, future markets, or neither? >> typically neither. i remember looking at it a few years ago, and it is usually no one. the best guess is usually the price on the day. look aten you take a today, forecasts might need to come down, market confuse, analysts confused. what areas of stocks will get hit the hardest? everyone basically repricing out their future cash flows, so i think exploration and production companies are in the crosshairs. barclays downgraded another bunch of emp companies.

there is valuation model boils down to how much you produce, what price, and that's a cause. if you bring down that price, then they get hit. it affects everyone because even if you're not directly exposed o dayw oday moves to day moves. joe: what would be the classic times that you would like to see oil at some sort of bottom? >> it was what i saw on monday. those really big dislocating moves down come because that suggests that the last holdouts are starting to throw up their hands and say, no. i don't think were quite there yet. partly because looking over the quarters, wehree

still got a lot of oil being produced relative to demand, vertically with countries like iran about two bring production up. so it is hard to say that we have seen the worst of it until we start to see big dislocations and price moves down, and also the build up in oil inventories come off. that is still always out. alix: thank you so much. for more fast commentary from , searchg gadfly bloomberg fi on the web. how it marks has the world's biggest distressed debt investing firm, why he is comparing now to win lehman brothers collapsed. ♪

alix: that was a beautiful sight. i am alix steel. "what'd you miss?" powered marks, one of the world's largest distressed debt investors mentioned oil producers, saying hedges have worn off, companies lose credit lines, some price to kleins, and the week -- some price declines, and weakness makes the buyer happy. -- how would -- how word do you agree there is anix:

opportunity here? >> we believe 2016 will emerge as an opportunity of across the energy complex. earnings have collapsed. and there rolling off debt is staying in place, so a lot of companies are staring into a healthy debt load with earnings collapsing and not much relief in sight. they have some pretty good intrinsic value. a few distressed players tried theake a first stab at asset class earlier this year, but it did inot workout. prices continued to decline. first and foremost, you need to see a bottoming out in the commodity complex, in particular energy prices. once that occurs, then you can valuation to-term

assets, and then start to decide where are the true distressed opportunities and the write-offs. joe: when you see action like this week, some intense selloffs in energy, in materials, in mining, still too early when were sing selloffs like that? >> i think they are a good indication of capitulation. you want to see the weak hands sell. we've had a few iterations of that already. you think it's all over. you think you've had the big selloff, and then a few months later you have another one. going into year and, you have meaningful adjustments in positions typically. it feels like having a meaningful capitulation right now. up onhould set the market better footing early next year and a better technical balance, those week hands will have reduced their positions, and some of the newer money that has come in is at a better price point. alix: you took a look at credit

cycles over 20 years and showed what it looked like when the credit cycle peaked, and you wound up having a huge run up in terms of the spread. you have the auto market that 2006,he market down in 2000 was technology, 2008 was metals, usually peaking at 200 to 500 basis points. that's a very busy chart. it goes to show that certain sectors always have to leave a change in the corporate credit cycle, and tend to have widespread. we are not there yet. >> we are not there. that chart is for investment-great credit spreads. typically, those spreads at the peak of from 200 to 500 basic points whiters than the market. we have been creaking in that points whiterasis

than the market. creeping in that direction. maybe this is the time to get involved. that would tell you that there is still room to grow. you have not reached a true capitulation yet. joe: we know that energy is in trouble, but also some signs of tightening and credit weakness outside of energy. a, do you think it will get worse? hike? --tand the rate can it stand the rate hike? a strongere that by dollar, higher interest rates, and now the cost of borrowing for higher risk accompanies is going up. at the same time, some sectors, some companies, and places like theyy, materials, coal,

can't get any debt financing. credit conditions are tightening up. now we have the macro effect of the central bank who is also planning to ratchet up rates. we do expect credit conditions to marginally continue to tighten as we go into next year. that is a another warning signal that it is not quite over yet. the signaling out of the bond market in particular is that you do still need to be cautious, and credit cycles are long, drawn out affairs. a half,bout a year and maybe two years, into that tighter cycle. if you look back in time, in the late 1990's, from the trough to the peak, a five year time span. i think there are a lot of parallels relative to today. with us. are sticking a lot more to discuss. the return of meredith whitney, one of the famous banking

analysts in the u.s. at one time. she is next. ♪

alix: i am alix steel. "what'd you miss?" let's get to mark crumpton. >> the white house says any republican presidential candidate too scared of the gop political base to condemn donald trump should not be president. josh earnest described trumps campaign has a carnival barker routine. >> the first thing a president does when he or she takes the oath of office is to swear an protect, andrve, defend the constitution of the united states. the fact is that what donald trump said yesterday

disqualifies him from serving as president. and for republican candidates for president to stand by their pledge to support mr. trump, that in and of itself is disqualifying. >> trumps proposal has been condemned by many candidates, but cheered by supporters. ted cruz announced a bill that would give any state the right to reject a refugee for security concerns. the bill would require the federal government to get 21 days notice to any state receiving a refugee. it would also allow the governor to reject a refugee without what is called adequate assurance that the refugee does not present a security risk. settledan refugees have into a home in dallas after texas officials said they wanted to ban new syrian refugees in the wake of the paris attacks, but federal officials say states are not authorized to deny safe haven for families displaced by

war. you can get more at the new bloomberg.com. i am mark crumpton. back to you. alix: thank you. meredith whitney has a new gig on wall street, overseeing an equity portfolio of $800 bermuda-based insurer. she joins us now. comparison, this is a lot more money to oversee. she will be choosing managers that oversee all this money, including eight managers, j.p. morgan, blackrock, and others. joe: they will be equity focused managers? >> they will. said it's much broader than the s&p, things that are focused on asian growth equities, so it ranges the gamut. joe: do we know the back story

here? >> she has been living in bermuda. it is a pretty small island. everyone there knows each other. she knew the ceo. alix: how does this compare to her whole career? she had great calls during the crisis. talk us through where she went and where she is now. >> it's different in that she is working for an insurance company. a's only $800 million out of $15 billion portfolio, focused solely on equities, which is what she did. now she will be focused on equities around the world. joe: do we know anything about her thesis these days. that she have any big ideas? >> she joined on december 1, so a very recent job, and we will

be seeing who she chooses to work with. she will be choosing a lot of money managers. alix: thank you so much. we do have breaking news concerning candor morgan. kinder morgan. it cut its full-year dividend by 74%. this is huge. mlp, they live and die by their dividends. this is why you would own these guys pit it speaks to the fact that they need to trim their dividend to pay back their credit. they've been getting clobbered for a wild. alix: what is the index tomorrow, because this could have ramifications. we do have some news regarding yahoo!, and this concerns the alibaba spinoff. >> the board met to figure out

what to do. companyanded the changed their approach, spinning off the alibaba asset. they haven't found a way to do it on a tax-free basis. for is been a long problem this company going back to the last ceo and the one before that. notrently, yahoo! will spinoff alibaba. saying thatuidance we will not give you any guidance. they've been making hence that future -- hints that future spinouts would be fully taxed. it is a spinoff of the rest of the business, sell the web , a video yahoo! japan ad serving platform, and keep alibaba. instead of cutting the head off the body, they will cut the body off the head.

we do expect yahoo! to give us a statement on this shortly. joe: what about this idea of spinning off the non-alibaba business? there's no clear offers are bids or anythinrm. how would that be received in the market? >> it is a tech stock with a lot tumbler, a lot of users, tens of millions, some successful products like yahoo! mail, homepage, sports, yahoo! finance, but it is a shrinking busiss. it is a business seeing revenue declines year after year. on the other side, you have even

--right now it is basically valued at nothing on the books. k at the's it loo risks of the alibaba spin. if they were to do that and they were not granted a tax-free -- how costlych would that be if they did this been? >> it's unclear from the acquisition costs and how much the tax bill would be, and that's part of the problem. investors who own the shares wouldn't really know what the tax treatment is going to be, and that's a big overhang. whattors just don't know their bill is going to be, and they don't know if the value of the alibaba stake has less value because the capital gains that might be applied to it. alix: very busy afternoon. thank you so much.

up, is the u.s. economy ready for a rate hike? what does it mean for growth. ♪

alix: i am alix steel. "what'd you miss?" let's get to our bloomberg business flash. morgan stanley planning a severance charge of $150 million in the fourth quarter.

the charge will cover the cost of cutting 1200 workers around the world. chipotle, 80for boston college students sickened after eating at one of its restaurants. for aare plummeting multi-stake outbreak of e. coli. it thinks the boston outbreak is due to a virus, not e. coli. they have suended the operating permit of the boston area restaurants. spotify changing its tune after being spurned by multiple artists. the streaming service will let artists offer new releases on its paid service for a time. it is a major departure from the current practice of requiring all music be available on its free and paid service.

that's your bloomberg business flash. bank of america merrill lynch out with its 2016 forecast. it sees the u.s. economy growing 2.5%, monetary policy taking center stage. joining us now is head of u.s. economics at banc of america merrill lynch. joe: thank you for joining us. what is your take? we've seen a few strong job reports in a row, can we continue that? >> in terms of job growth, it might be hard to see a pace of 200,000 continued, because we are running against labor constraints. the pretense of remains at lower levels. the participation rates remains at a low level. were looking at about 150,000-160,000 on average. growth, a mid-2%

economy. joe: one of the most crucial questions is the pace of wage growth. that -- the blue line is the small business survey, a percentage of companies planning to raise wages, surging to the highest level since the financial crisis. the green line is the employment index, pulled back a little bit, one survey nicely leads the eci. higher wages, do you buy it? >> i do buy the argument that conditions are being met for wages to pick up if you look at the low level of unemployment, nfib job openings, even the university of michigan consented

-- consumer sentiment survey perceives that people think there income will be higher in the years time. i think it is a slow move higher. some of these charts can be misleading in that they show what may be a jump in wage growth and the current 2% or something up to 3% in a years time, and i don't think that's reasonable. it is a slow-moving process. alix: when you take a look at consumer import prices, core pce , overall it is pretty weak, and and we have another commodity rally. how to the last couple of weeks factor in? >> you have to account for these external factors. that is the drop in commodity prices. tocommodity prices continue

fall, gasoline coming down, it will matter in terms of inflation expectations deteriorating and could pass through somewhat to the good side of consumer prices. the dollar is another key factor. there are three things to think what is the path of the dollar, what internal pressure can move towards a higher environment. it an area to go to that you are critically focused on, housing. continuing on this inflation housing, we've seen holding inflation up, also homebuilders are having a hard time finding workers, so that leads to wage inflation. what is your outlook for housing for 2016? >> i'm a buyer in the housing recovery. i don't think it has topped out. it has clearly been a slow and painful recovery.

it is quite different than what we have seen in prior cycles. the foundation is such for continued improvement. we don't have enough supply right now. that's why going back to the inflation story, we are seeing shelter costs rise. rinse arising in excess of income. that's happening in an environment where housing supplies tight. we will have you back here in one year to assess your 2016 forecast. thank you very much. alix: coming up, how will demographics alter the global economy? we discussed the trend next. ♪ -- we discuss the trend next. ♪

alix: i am alix steel. "what'd you miss?" one of the biggest risks to the global economy is the slowdown in productivity. central bankers are grappling with it as the fed considers a rate hike. our guest says one possible expectation -- expedition is demographics. you have a great chart that shows the lifecycle of productivity. as we get older, we get more ,roductive, and we retire productivity collapses, we dive. it is pretty grim. what is the big lesson from this chart. >> it is one of the possible

explanations. if we look at demographics for most countries in certain parts of the agent and the developed world, we have a shrinking in the age of the working population. rising numbers of people who are retirement age. this creates problems for governments. you have more people you have to pay pensions to. everyd of just saying single person of working age is identical. that those people who have been working for 20 years, these people are more productive, more skill sets, and more useful to an economy than those people who have just joined with much lower skill sets. this is where you get a diversions and the aging around the world. if you take germany or other parts of western europe, where the average person's age 40, that has helped growth. a lot of those people are

retiring, not just in the traditional sense in terms of pensions, but you've also got the people replacing them. the average productivity is not that high. in india, most people are just joining the workforce. alix: we have a map from your where thet shows older populations are in the world versus the younger populations, so walk us through the countries that have the younger areas and the older. >> we really like from a demographic perspective, india stands out with young people there. we have 500 million people in , asa under the age of 20 many people in total as the eu. philippines, but really africa is the great story in terms of demographics. you have young people, fast-growing populations, and that should be a boost to potential growth over the next few decades.

, at going back to africa this point, many workers with productivity have not hit the peak of life. when will we see that productivity acceleration? >> that starts to come over the next 10-15 years. if you're aged about 20 today and you're hitting that the protective he and 20 years time. here on out, your average person in population is getting more productive. it's not that demographics are the be all end all for potential , but it is one of those push and pull factors. ,ou have strong demographics you're likely to grow more quickly and boost your growth right. -- growth great. rate. alix: you outlining your report the potential solutions, and one

of them has to do with trade tariffs. we have a map that shows the highest tariffs, emerging market countries. what would a good trade policy look like and how would that shift the demographic picture and global growth? >> if you have a lot of young ,eople in the emerging world there are two solutions. you bring the people to the money, or the money to the people. if you knock and a look at migration, you have to think about opening up trade. we are seeing steps in the right direction in terms of trade liberalization, but we need to open borders and greater flows of capital. on the migration question, one of the biggest stories of the year, and a lot of talk that developed countries need migrants, otherwise they get old and unproductive. what about the countries losing

people? what do their futures look like if they have their youngest and brightest people trying to get out? >> there is this huge issue of brain drain, which we tried to discuss in the report, but you , workersttances leaving emerging markets and sending money back. that is a large share of gdp for a lot of countries. that is one offset. in terms of the population numbers and thinking about countries like india or the philippines, a very small number of those people leaving and joining a much smaller population country in europe would have a massive implication for the demographics in smaller, western countries. it.e's a lot to be said for it is a drag to the emerging world if your best purple -- people leave. joe: thank you very much. alix: we will look at how the

drop in gas prices is weighing on sales. ♪

alix: posco said to release earnings later this evening, and it is the focus of the numbers don't lie this week. the strong dollar and falling gasoline prices, that has hurt costco sales. they are basically in negative territory. you strip out fuel, ande are of over 5%. the other issue you need to look at is where can this company grow. it is a brick and mortar business through and through. blue, and it dominates

the west coast, but has room to make up ground in the northeast and the midwest. the issue is that in order to do that, costco needs to spend money. that open new stores. that is its life's blood going forward. that will increase its capital expenditures. its estimated it will double in 2015 compared to 2010, 2 $.4 billion by the in of the year. what can cosco do in terms of the products it sells? is on thee label rise, representing 20% of total items sold, 25% of global sales, helps margins and other areas. at the end of the day, it is about gaining members. you have to deal with the members who pay a fee. that is how costco makes its money. joe: looking forward to it.

firstow, the historic opening of the myanmar stock exchange. a huge day for them. alix: thank you for

donald trump: donald j trump is calling for a total and complete shutdown of muslims entering the united states until our country's representatives can figure out what the hell is going on. [applause] ban.d outright >> another stunner. >> still the only candidate everyone is talking about today. >> but really, everyone, what the hell is going on? >> happy