♪ >> u.s. stocks closing lower. the s&p lower by 1.5% for the month. joe: the question is "what'd you miss?" the.s. markets falling, dollar strengthening after the first great increase since 2006. joe: janet yellen discuss of the carnage in her press conference. ceo, ousted from cheniere energy. we will get his take on the energy market. talk about the u.s. stark market giving back yesterday's rally. jerkeemed like a knee reaction from what we saw.

the commodities selloff and the prospects for global growth taking center stage. the strong dollar putting pressure on commodities. i don't think anyone really knows why markets fell today, and i think this speaks to some good advice come no reason to aggressively interpret the fed great decision right away. we will be debating this narrative for a while. like gold, oil, copper across the board down. index takingrgy 16%, the etf that tracks the stocks. the commodity route is adding pressure to the market. -- commodity route is adding

pressure to the market. part of the reason why commodities got it was because of the dollar trade. look at the strength in the dollar, a 11 year high versus the canadian dollar, almost 2% off the south african currency. joe, you can speak to that in terms of a fed great hike. the market said, ok, we can move on. signal -- the dollar buy the dollar signal. ,oe: there was so much buildup and now we can move to new themes. the dollar will rally now in is what were seeing with the positioning. joe: this morning, fresh claims data, strong, but i want to look

at initial claims versus high-yield spreads. versus jobless claims high-yield spreads, they track each other closely when the economy deteriorates, initial claims rise in spreads widen, but we have not seen that lately if you look in the area that i have the oval over. drop,l claims continue to which may mean this is not a ,unction of economic activity something unique to this sector that is highly distressed, energy, materials, not necessarily reflecting the water of economy. broader economy. at hownt to take a look

some call has been restored after fed lift off. volatility expectations for euro people are positioning for the lead up to fed lift off and monetary divergence with europe. that started to come down a little bit, but they have both taken a leg lower. you can see these charts and more on twitter. u.s. economist at rbc capital markets it joins us for more on the fed. welcome. hi. a collision in the near term over the path of future increases, here's what andrew levin said. >> the markets are misreading 17 fmc canadian

members expect the funds right to be up by one and a half percent. that's the committee, not the market. >> you agree that the markets are misreading the fed. >> yes, this is something we have been talking about. the market currently pricing a little more than two hikes, the fed -- we tend to agree with the fed on this. forgive me if you have heard me say this for the 50th time, you will have as scenario over the course of 2016 where inflation continues to rise and the unemployment rates continues to fall, and over the course of the year as the things play out, the market will come to realize that -- they might be wrong, but the fed might be wrong. there might be even more than four hikes.

we think you will see a classic hiking cycle, but a lot can happen between now and then. 4% by next year on in the employment rates, and two and a half percent at a core and half for inflation.el mark the dot in the research that show the actual voting members are much more dovish than the overall board, showing about 1.125% rate next year, one less than official projections. good the fed be more dovish than we think? eager question of the market or the fed right, well the market is still off base, even if you want to use that analysis and it is fair,

done theaving analysis, i will reserve judgment, but that would still be three hikes versus the market 's two. even if you have dovish members of the fed highlighting three, the reality is -- i can appreciate that from their perspective, they took down their inflation estimates, went into that meeting expecting 1.7% inflation for next year after the meeting they took it down to 1.6%. i would not be surprised if that did materialize, more dovish of folks saying a less aggressive fed, but all that does is it our view is right that you will see a greater advance in inflation, then all that does is make a hurdle lower to achieving four hikes next year. joe: the big take away is not what the market things, it's the

simple fact that there could be a real chance of inflation surprising on the upside in 2016 , employment surprising on the downside, and then the pace of hikes will be faster than what people think if that is the case. those are thenk reasonable scenarios that need to be considered. i don't want to get into too much detail, but i'll draw a couple of points. one, on the inflation right, mind that if you assume you get the $45 by the end of next year on crude, which is seems conservative, that alone get your north of 2% from an inflation perspective. if you throw in health care increases, shelter increases, by , anday which will happen the medical care prices, that was part of the budget, legislative action at this point, so these things are going

to happen, and that pushes e ination higher and th employment rates needs only 75,000 jobs to each study. if you print 175,000 jobs-200,000 jobs, which is what the consensus, then you will see significant downward pressure on the great. janet yellen also acknowledged we have seen a 2.5% inn wages, october, but then we came back off that level and it has been choppy. what would get in the way of the trajectory higher? if there isnow anything that can get in the way. i'm a properly trained economist. i can see the economic model that shows you higher wages. here's what the qualitative information is telling us. if you look at the fed beige book, all you hear is that there

is a dearth of qualified workers and these companies are in the midst of raising worker pay. if you look at the small is a survey, there is a dearth of workers and they are raising pay. if you look at the i.s. him reports, they show you commodities in short supply. guess what what commodities are in short supply? labor. and so you're seeing an increase in wages. i think the story is compelling for an increase in wages. ,et me make this final point people love to talk about this idea in black-and-white terms when they talk about wage pressures. all i am saying is that you'll probably see a higher runway from the wage perspective. >> got it. a lot to unpack.

coming up, my exclusive interview with the ceo of cheniere energy. he remains on the company board. that conversation is coming up. ♪

>> i'm alix steel. "what'd you miss?" president obama spoke from the national counterterrorism center. >> are professionals do not have any specific and credible

information about an attack on the homeland. x the president is trying to reassure americans that it is doing all it can't protect them. >> new hampshire has scheduled the primary for february 9, a move widely expected given the lack of pressure from other states. they must hold their primary seven days ahead of any other contest. a trip toson canceled israel and africa, citing security concerns. carson has been trying to beef off his foreign-policy credentials. you can get more of these and other breaking stories 24 hours a day at bloomberg.com. was --energies ceo -- the ceo ofergy

cheniere energy was pushed out. first company to export gas in the united states. he wanted to expand, pro-business, so i asked how he feels about note longer being ceo. on an emotional basis, it is disappointing. you must separate your emotions from the facts. at the company has chosen to go in a different direction in terms of strategy, then i understand the conclusion. the first one to admit that i am not very well equipped to be the ceo of a because i utility, and if that's the direction they want to go in , they've made the right decision. what your plan was for the company, and where the board and you diverged. as you mentioned, we had several incarnations in this

industry, which changes so quickly and so rapidly, and the last time around we got caught with little liquidity at a time when there was a change in the energy business in general, mostly in the united states and shale shale production, which destroyed our plans to become an import terminal. i think we have learned from this experience in 2008 and 2009, a very important component in the energy business is always to have a strong balance sheet. we found ourselves with $1.5 billion in cash and very close to starting some significant cash flows coming into the ofpany from the beginning the first exports. so we have a strong balance sheet and can act how we want.

and so it goesty through and up cycle and down cycle. we have the financial flexibility to continue to grow the company and to the positioned for when the cycles turn and oil prices are going up again to be in a very good position to continue with our plans. the board wasl against expansion altogether for the next two years or just for the short term as commodity prices stabilize? >> i don't really know because nobody has communicated a change of strategy. i report to the board on a quarterly basis on where we are going and how we are positioning ourselves. had beenlans we had approved until september 2015, so this change of direction is a little bit of bread, but also if you will note that our stock -- started behaving

behaving unpleasantly in august. if you let that affect the way is think, then clearly there a re-visitation of the board level of what the strategy should be going forward. that what seem happened in august and september was that there was a total re-rating and the commodities market. why does that not affect your business as much as a shareholder and investor thinks it does. thef you look at fundamentals of the business, you can still produce gas in the united states at less than two dollars. in europe it is sold at $5.50. in asia, it is sold at $7.50. oil prices have come down, but gas prices have come down even further. the fundamental premise of the business is still externally valid. don't see some kind of

lng over supply glut globally? >> ice and over supply for a short time, but i don't think lng matters, because energy is only transportation could you have to look at that natural gas business as a whole. 2% year to year. especially with a new focus on ly cleaner feels that natural gas is the deal of choice. so i don't see any lack of growth on a long-term basis. the other side of the equation we havein the u.s., plenty of gas that will continue to be very cheap on a comparable basis compared to the rest of the world everywhere. producer oflow cost natural gas on a global basis.

energy being a method of transportation that is more economic if you have to travel more than a thousand miles, and with the fact that the u.s. will be the low cost producer for a long time to come, the fundamentals of the business are extremely valid and continue to be as good today as they were a year ago. will get his perspective on mergers and acquisition in the -- sector later on the hour. what is keeping a lid on inflation? the answer may surprise you. ♪

scarlet: will.i.am scarlet fu. "what'd you miss?" -- i am scarlet fu. "what'd you miss?" -- you say one of the reasons that inflation is low because of the fed's 2% target. >> the fed says it has a 2% target, but if you look at the track record of its key target , itation, core pc inflation is between 1% and 2% for the past seven years. bias, a pattern. if you look at the forecast after the fmo see meetings, they consistently show two years out the fed projecting at most 2% inflation.

members believe they have some influence on inflation two years out. thatthemselves are saying we want no more than 2% inflation. joe: i get the argument that the fed has a 2% inflation ceiling, and not a target, but what about the fact that the fed does not have control over it in the fed can't turn on inflation dial on and off. that is a reasonable view in the short run. janet yellen invoked that yesterday when she talked about commodity prices driving gun term, butin the near we've have this persistent pattern for seven years. eventually, the fed's actions it to play through. historically, most of the world in the 1970's had high inflation . it took concerted efforts by

central banks to bring it down. more recently, what we see is a bias, yes, inflation can bounce between 1% and 2%, cornflakes in, but over the long run, it is -- core choice the long, but over run, it is a policy choice. basically making money to tight ahead of the crisis, you thought the argument sounded sound and was consistent with what you have been writing. can you explain this? >> it does seem on the surface ridiculous. percentage only two points to god. to cut. -- two cut. it wasn't just the absence of a

, so imagine we are in this time when the economy is floating and the fed says it has significant concerns about inflation. we are just as willing to tighten as ease policy going forward. that freaked the market out. if you look at break evens on forwardn, from 2008 they fall dramatically. if you look at the recession, housing started to collapse in early 2006. it's not until mid-2008 when you see the contraction take place. it fellnd half of 2008, asleep at the wheel. feed into yourt skepticism of the fed's current policy? >> i think the fed is grounded by the believe that the

adherence to low inflation are back in 2008 it was worried that it was getting above that. presently, it's working and a framework that -- one of the big implications is that why has the fed policy been so seemingly impotent and the last seven the fednd i think it is not wanting to do anything that will allow inflation to take off. come all the assets will be returned ultimately. janet yellen said the balance sheet will shrink, which means , implying temporary no inflation. the forward-looking markets realize this. 2007-2008, the fed did not sterilize lending to banks. >> we have to leave it there. thank you very much. shudderenue sent a

through the market. ♪

>> i am scarlet fu. "what'd you miss?" first word news. fromd trump getting praise russian president vladimir putin . he had this to say. person, a very talented but it is not up to us. inis of course the leader the u.s. elections. we welcome the fact that he wants to be more friendly to russia. we value it very highly. as for his other actions. it is not up to us to assess his performance. >> he said that russia is ready

to improve ties in the united states and work with whomever is elected president. secretary of state john kerry says in a letter to senate foreign relations committee that iran is for filling it obligations and has not engaged in covert activities to advance its nuclear weapons program. is close to adopting emother entering the country. the law will pass in january. >> charges are expected for the man who brought the assault -- bought the assault rifles in the san bernardino massacre. charges against enrique marquez could come soon. a quick recap on u.s. markets after the fed made the move to start raising interest rates. u.s. stocks erased yesterday's rally.

the dow industrials losing 253 points. everyone focused on the strong dollar and falling commodities. a really uglypar of that was o. goldman sachs making get another piece of evidence that a $20 oil prices not crazy. take a look inside the bloomberg terminal. this is one chart that scares goldman sachs. , products, and you can see the huge run-up right around some record highs. they say this could be the canary in the coal mine. capacitys storage because it is warm in europe, ,hen refiners will use less oil and oil prices will need to head to cash cost to shut in supply. that is increasingly a concern,

and that chart shows that. >> refiners were part of the --ght story as refiners joe: i talked about jobless claims earlier, and i want to look back at them again. initial claims versus the52 week moving average of initial jobless claims so basically averaging the entire year. levelre at their lowest since the crisis, lowest level in 10 years. look at the extraordinary consistency in that decline. there is no sign of any upward trend whatsoever. it's hard to get too worried when you see that kind of consistency. >> absolutely. argentina's pay so, yesterday the president announced a -- idion -- aditya valuation. here is what he had to say. in order to handle the demand

that will likely occur when outflows occur and they seem to be shoring up. they seem to have enough reserves at this point to help. >> they seem to have enough for now. take a look inside the bloomberg terminal. this is the dollar versus the peso. which are seeing is the dollar appreciating 42% versus the peso, closing up 36%. to fivetretch it out years, this is where you see it in context. was january 14 when argentina devalue at the pace of by the most in 12 years. it had been selling dollars to support the currency. if you max it out -- there we go -- right here is when argentina the 1:1 peg. joe: everyone knew it will be painful, so he got it out of the

way. high yield markets have been front and center the past week since 3rd avenue management blocked clients from pulling money from its $788 million junk bond fund. officially approved the decision to suspend withdraws temporarily, and chair janet yellen addressing the headlines. focused credit fund was an unusual open and mutual fund that had concentrated positions in the risky and liquid bonds, and it had been facing very significant redemption pressures. theoining us now to discuss state of credit markets is mark patterson. and john mckay, senior strategist for morgan stanley wealth management. have we seen the bottom? >> i think we have seen the

bottom. , but-6% what you're ceiling is close to a recession in the old economy, energy front and center, manufacturing, industrial slowdown. jobless claims trending down. the consumer is in a strong position. the equityare it to market, equities are up 2%, but the activity -- equity market is skewed to the new economy. i think most of the bad news is behind us. joe: what did you make of janet yellen's comment? do you think that mutual fund was unique? should all these deeply-distress credits, should those the -- does it make sense to have a mutual fund wrapper for them

whff do these kinds of assets belong in a mutual fund? full disclosure. let's go back to the beginning of your question, is this a unique case? in this kind of climate, my own thoughts are that we are nowhere close to an economic recession. there is no credit crisis happening. in most indices, there are about 21 subsets, one falling badly is metals and mining, and an oil and gas. so that's all the action of the bad news. a little bit of retail and other stuff, but not the catastrophe that everybody makes out, i don't think.

there is a panic run on some of these funds, but no one knows what ever shut the door unless it was a last ditch effort. they hit the wall from a liquidity point of view and could not raise enough money. one of the reasons for that is withthe street regulatory pressures has been de-capitalized out of trading securities, particular the bond market. there was $200 billion in wall nowet five years ago, and well below $50 billion and market size has doubled and tripled. we have almost no capital here and you can get these exaggerated squeeze play's popping up in an exaggerated form. >> the regulatory framework does not help. what are the hallmark of high-yield investments that are undersold but attractive? >> we put out a note on the

consumer sector. the consumer is doing fairly well, household finances, formation, lower gasoline prices , more spending capacity for consumers. those names are trading in the 5%-7% yield area. we would concentrate on the sectors doing well, probably too early for most investors to play in the beacon up sectors -- ten up sectors. in that placeally compared to the financial crisis , 1990's, can you give perspective to that? that is skewed by load benchmark rates, 10 year yields being low overall. down,the market is

spreads are blown out, the market down five dollar points, really big move, happened in september, three times in 2011, everything will year for the last five years, but it does occur quite a lot as you move through an economic cycle and generally a market rally. this is a bad one, but i think we will get a bounce from here. i don't know how long it will last. will continue the conversation right after this breaker stay with us. we will be right back. ♪

scarlet: i am scarlet fu. "what'd you miss?" has hired a compensation expert to handle

financial claims from those cars involved in the scandal. both wagon has admitted to installing software on 500,000 you as vehicles that turned on pollution controls, and then shut them off. forn order to stand trial alleged misuse of government funds being appealed. i am avenue's board is expressing confidence and the guard. she denies wrongdoing in the matter and says she has "always acted in the interest of the state and the respect of the law." that is your bloomberg business flash. .e are back have been known for distressed investment. what is the distinction between

distressed and junk? >> the simple line would be the g.bt ratin >> that is if you trust the rating company. bb+ at the high end, so ddd is marching towards distress. if you're trying to get control to $.30 ofany, $.10 a bond prices the sweet spot. if you're creating noncontrolled to $.80.d, $.40 during theeek

intense part of the selloff, there was a lot of focus on the role of etf's and whether they accurately match the underlying value. where do you stand? >> i think eds did well last week. etf's did well last week. look at that chart, you see the volume numbers go up significantly. they acted well. transacted getting in kind in some cases, but they played their role as a vehicle that institutions can use to add their risks. i don't think they're causing or exacerbating problems in the market. enough debt, and less you have a financial crisis

ite 2008-2009, and i think is lumpy, inefficient for a good portion of it. if you look at the big names come at looks like a government bond it is so big. $200you get down into the million and $400 million issues, it's harder to get data. what you think? give people an easy way to access the market. i'm not sure people should be doing that with a distressed. that is more of leave it to the aperts, and it should be small piece of your portfolio that you buy when opportunities rise and you don't look at it for a while. >> returns for high-yield next year? 4% to 6%,t case is but most of that is frontloaded

in the beginning of the year because we get a bounce off the lows as we head into the new year and a consolidation midyear and we turned sideways. >> as we embark on monetary diversions, where are the most distressed opportunities? one is the coal business. coal is toast. it is a structural decline to zero over the time. oil and gas is cyclical and in an advanced stage of decline. is it bouncing back? no. that are the two sectors look the most attractive. >> thank you so much. thank you for coming in. exclusive more of my

conversation with the ceo of cheniere energy. ♪

alix: i am alix steel. "what'd you miss?" the ceo of cheniere energy and his decision to stay on the board. >> i'm still waiting to see what is the strategy that the company would like to embark on now. i will stay on the board for a little while longer because i want to understand where they want to take the company. at the moment, until june, i am on the board and can only leave if i choose to leave. for the time being, since a significant part of my net worth

is tied with the company, i would like to understand what they are going to do with the company. alix: what would make you leave the board? i don't want to explain. i am a member of the board and they do have to include me in the conversations. i don't hold any of this against them. i understand the decision from a dispassionate aces. from aot the -- dispassionate place. this i accept. i just want to see where they want to take the company and reestablish dialogue with them and continue at least for a while during the transition and take it from there. alix: it seems like the rhetoric from some of the analysts is that the board cares about increasing shareholder value, so if you're not going to do that are growing, do you see the board now putting the company up

as a buyout target? >> the fundamental equation is this, if you want to build the company, you deferred distribution to the shareholders. you cannot grow a company and distribute cash flow. lps have other m demonstrated this. you canon that distribute cash flow and use it for reinvesting is a little bit strange. if you want to distribute cast to the shareholders, that's one strategy. if you want to grow the company and use that cash to reinvest in the company, that is a different strategy. they and fly different management styles and management imply, and depending -- different management styles and thegement people, and pending on what the goals are. alix: if you look at a chart of your stock price, below was $.47

in 2002, and yet you were able to come back and investors bought in. i'm just so struck as to why this time is different. you've had a big shareprice decline in the last few months, but you're still trading at $38.34, i don't get it. >> if it makes you feel any better, i don't either. alix: you do still own about 3 million shares, but you have been selling shares, will you hold onto these? four and a total of half, some of them will be vested immediately, some in two and a half years, so by definition until the fourth is built and completed, i am a significant investor in the company. it would not be prudent for me

to have 70% of my net worth tied into a company that i no longer manage or control. i will be a very significant shareholder in the company for at least 2-3 years. alix: after that, you have to see what the strategy actually is? >> correct. alix: what will you do next? the first thing in going to skiing,joy might winter because this is a dream i have and findss out what the strategy of the company is, and in the march-april timeframe i will think about other things i want to do. alix: that was my exclusive interview. up, what you need to know to gear up for tomorrow's trading day next. ♪

scarlet: i am scarlet fu. "what'd you miss?" lenore reports tomorrow before the bell. i found an angle you will like. the tight construction labor comments theyver make will give us an indication of the broader economy. joe: tomorrow, more manufacturing data, market u.s. services pmi it, then the kansas city fed manufacturing index. philly fed index came out today, not looking good. it doesn't look like we have seen the manufacturing bottom yet in the u.s.. outperformed it. manufacturing is small. more data tomorrow on this

question of whether there is a turnaround. >> i won't be here. i will be watching star wars in new jersey. don't miss it, by the way. >> what is the name of the movie again? >> the force awakens. >> silence. crickets. >> thank you for watching. >> will see you back here tomorrow. joe: have a great evening. ♪

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john: happy national maple syrup day sports fans. first, a possible endangered species, establishment arians.