from bloomberg world headquarters in new york, good afternoon. i am alix steel. here is what we are watching this hour. oil prices heating up today, propped up by an unexpected drop in u.s. stockpiles. opec says prices will rebound to $95 a barrel but it will take 25 years. 2015, a big deal year for m&a, billion-plus 8 $50 transactions. we will talk about why he was such a banner year. norfolk southern has no interest to selling to canadian pacific. rejecting the sweetened offer of $31 billion. as a proxy fight next? let's head to our markets desk, cio has theinocen latest on the rally underway. ramy: still greg greene after the slew of data this morning.

the sessionk at highs. s&p 500 of by nearly 1%. dow up by .8%. nasdaq by .7%. we are digesting the news on better-than-expected u.s. consumer sentiment. as well as the expected surprise drawdown in the u.s. oil inventories on the order of about 5.9 million barrels last week. with all of this, let's look at the s&p year to date. take a look at this. s&puld like to have the year to date, if you can possibly get that up. up 1% on the intraday. i want to bring the year to date because we are .1% away from flipping into the green. it will be four years in a row of gains. 1% away from the positive december. if we do see that maybe we will see this rally. dox: so much of that had to

with the surprise drawdown in u.s. oil inventories. we have seen oil and stocks someone moved together, energy stocks taking off. ramy: definitely in tandem. let's look at the nymex crude. the biggest jump in the past two days. 30 day of gains in a row. up by 3.7%. we saw the highest spike earlier when the number came up for u.s. oil inventories. u.s. crude inventories comes all the drawdown of nearly 5.9 million barrels. most since june. we expected the 1.2 million-barrel lies. on my bloomberg terminal it is not just nymex crude seeing a job. it is basically energy oddities across the board. you can see the nymex crude, brent crude up by 2.9%. that forecast of five 1.3%. natural gas up by one point 3%. alix: one to check in on the

"first word" news this afternoon. mark crumpton has more from the news desk. since the troops are getting the overhead against the islamic state in the key city, but bombings blamed on the militants killed at least 15 people across the country today. the government says its forces are fighting the islamic state in ramadi's central district. it is the egg is advanced by iraqi troops in the regional capital since the -- biggest advance by iraqi troops in the original capital since the militants seized it. a worker found in the rubble of the huge chinese landslide more than 60 hours after the disaster. the landslide sunday. nearly 3000 buildings, trapping people inside. at least 70 people are still missing. a woman from oregon faces a judge on felony murder, hit and run, and child abuse charges. the 24-year-old is accused of intentionally plowing her car through crowds of pedestrians on a las vegas trip sidewalk. whenever public defender's says

she plans to plead not guilty. one person was killed and more than 30 others injured in a crash. robert durst will face a murder charge in los angeles. the real estate heir agreed to extradition by mid-august. he has been in and new orleans jail since mid-march on a weapons charge. prosecutors say he killed a friend who is helping police investigate the disappearance of durst's wife. a streak of light seen in the western u.s. a sign was debris from a russian rocket that produced a fireball that burned up while reentering the atmosphere. arizona,skywatchers in nevada, -- it amazed skywatchers in arizona, nevada, and telefonica global news 24 hours a day. i am mark crumpton. alix, back to you. alix: coming up on "bloomberg markets," new-home sales disappointing in november. the u.s. housing market still on solid ground. 2015 a record year for m&a, but

can it possibly get any better than this? ons, we will give you a read the rails in 2016. those stories and more ahead on "bloomberg markets." ♪

carol: we welcome everybody on bloomberg tv. advantage."omberg we want to talk about the markets this hour, and also, a slew of economic reports. in-house with me is mike regan, bloomberg gadfly, a columnist, riccadonna, our in-house group of expert analysts. let me start with you, carl.

there is a ton of economic reports that came out today. busy, busy day here. early data that came out and housing data. what stood out to you? >> consumers seem to be ending the year on a solid note. data we gotember today and a little bit last night, the bba released the nominal consumption figures a bit early. the spending numbers looked good but what we have to do is take the inflation adjustment into account here because we have very low import prices, we have very low gasoline prices. those are distorting the numbers. when we look at the information -- inflation-adjusted consumption numbers, solid results, and consumption of super bowl -- consumption of durable goods up. these are solid figures good this tells us that the shift we saw in the november retail sales data, which seemed to, once we delved into the details, showed

consumers wrapping up discretionary purchases, the sign they are taking advantage of low gas prices and maybe having a little extra cash in their pocket, that proof depression -- that proved prescient. carol: and mirrors what we heard from sarah quinlan from mastercard advisors earlier. they can track the data in terms spending ande are she says the consumer is strong. you are seeing a lot of spending. >> right, so a solid finish to the year. we haven't even gotten december figures. that should further help the overall quarterly profile. but this puts us on a firm footing heading into 2016, and that is all bets on the consumer for carrying the growth mental into the first part of next year. fed policy, economic growth, etc., all depends on consumers and more specifically that depends on personal income growth. carol: personal spending

important to the economy. mike regan, on the equity side of things come if i look at the major industry groups in the s&p 500, consumer discretionary has done really well, number one performer. mike: they have. next year, towards the top of the groups expected to post the strongest running growth, it follows along with what karl was talking about. consumer, health care, those two industries. if you look at the monthly jobs report, a lot of the growth in employment has come from health the graying population, baby boomers getting older, demanding more services and drugs and that sort of thing. the restaurant, a lot of employment in restaurant, bars. it is showing up any profit forecast for next year, too. as a whole, the earnings forecast for the entire market looks pretty iffy. mid-single digits growth. double-digit growth expected in health care and consumer names. that is basically the two pillars of the bull market we have seen so far. correctly,tand carl

that is the trend until further notice in the economy and the market, at least as far as what people expect. carl: absolutely. you focus on the wage and salary gains, the lifeblood of the economy. that means we have to focus on the employment data coming out. carol: it really is just that. carl: three indicators to watch in 2016 -- jobs, jobs, and jobs. [laughter] carol: i mentioned how important consumer spending his to the economy. we are a service-led economy and that is the big book of economic activity we are seeing. the consumer alone does a lot providing economic momentum. carl: right, they do the heavy lifting, and that is an important factor that makes the u.s. economy unique as he looked to the overall global outlook for 2016. the u.s. economy, as much as it has opened up and it depends on trade, it is much more closed than most of the other major economies. that means that as we focus on service sector activity, that in

particular is insulated from international development. today in the durable goods report we saw some weakness for orders and a big part of that is the sluggish global economy. if the service sector is the primary jobs engine for the economy, that means that we are especially insulated from international events. that does not mean immune. if there is a major shock to the global economy in 2016, we will feel it in the u.s. however, the way things are shaping up right now, it looks like the u.s. will certainly be a bright spot on the global economic landscape. carol: mike, how does that translate into what we might see in terms of equity trends? nope he has a crystal ball that tells us what is going to happen in 2016. it has been hard to call the last couple of markets, last couple of years. i know strategists have some high numbers in terms of their expectations for the s&p. mike: everyone has a crystal ball. it might be showing cartoons or

soap operas rather than real predictions. to me what is fascinating this year is -- we're seeing it right now, this strong rally in the market. we are gravitating right back to this level on the s&p 500 of about 2058, 2059. that is exactly where we closed 2014. people are sick of hearing me say this, but if you look at the average level -- we have had dips up and down, a tight range for a while. the average level of the close of the s&p 500 is your have been 2060. the market keeps gravitating back to this unchanged level for the year. what does that tell you? it probably tells you that forle really are waiting more signs of the pickup of growth, the pickup of earnings. earnings from the next level are pretty flat again this year. carol: and it is not just energy holding things back. mike: not just energy. there is been a peak of earnings and a lot of sectors.

the outlook for next year is about mid-single-digit earnings growth. the problem is the margin of error for expected earnings is even greater than the margin of error for what is expected in the market. one thing that is really fascinating is that when you have a flat year like this -- i did a column about this a few weeks ago -- first of all, flat years are very rare in the market. it is usually a decent game or a loss. it is only a handful of times when the markets move less than 2% for the year. , goingst all of them back to the 1940's, just about everyone of them see the double-digit gain in the market. it sort of suggests that when you have a flat year, unless you are looking in the face of a recession or a bear market -- carol: means what? what happens? 12, 13% average gain following the flat year. and i think this is

relevant, just as we are running out of time here -- a big game changer for 2016. it has been a sluggish recovery all along. what is the game changer next year? i'm going to invoke "star wars" here, the force awakens. and that is the force of inflation. 4% unemployment rate and that is going to mean higher wages and that changes everything for 2060. -- 2016. carol: the force awakens with janet yellen. carl riccadonna, mike regan, thank you so much. ♪

alix: it is time for the bloomberg business flash, the biggest business stories in the news right now. audio cd investing it is have identified a fatality linked to a faulty airbag. officials say the crash occurred in july in the pittsburgh region. a minor driving a honda accord under recall was killed. agree to whatkata

may be the largest highway safety penalty in history last month. and a new bid from canadian pacific railway possibly moves a takeover closer to a proxy site. norfolk southern says the board decision was unanimous. the canadian pacific ceo's has said that the companies willing to go directly to norfolk southern investors if the board won't discuss a takeover. starbucks is exciting gift card sales to hit a record on christmas eve as customers look for stocking stuffers in time for christmas last year the coffee giant sold 2.5 million cards in the u.s. and canada. one in seven american adults receive one last holiday season. your update. i didn't get one! where is mine? ramy has a check on the company members following analyst calls. ramy: first up i want to go to retail stocks, with finish line first. really not finished with the

rally. up for the second time in 2 days. up by 3.25%. the news after being raised to a buy, price target of $23. yesterday after the bell, nike did come out with good results with strong futures orders from china as well as emerging markets. it is giving sporting shoe retailers a boost. in energy, one of shares have gained more than 6%. we are hitting session highs. oppenheimer has raised the rating on the gas producer to outperform from perform. putting a $27 price on this stock. this year is the third day in a row of gains. it is on its highs since december 4. delphi shares are rising as well. up by more than 3%, 3.33% there, because of the lifting of rating from buy to neutral. 87.50 right now.

sterne says there's going to be more demand from china as well as more complicated electronics that might lead to double-digit gains. auto sales, the estimates for china, 23 million units in 2015. in the u.s., only 17 million. hardly a saturation. alix: great stuff. thank you so much, ramy. more than 100 million americans are expected to travel this holiday season. up 1.4% from last year. how are airlines preparing for the rush? onrit airlines ceo was bloomberg this money -- this morning to talk about this and how the industries benefiting from the lowest fuel costs in years. >> we are 30% bigger than last year. we are carrying a lot more customers this year and our planes are full. a lot of people are traveling this holiday and with christmas on a friday, it spreads the travel over different times. some have already left. some aren't leaving until the

weekend. stephanie: 30% is a good number, sounds like a good number, but the last time we spoke you said you had your site set on the model of ryan air. kills it. where are you in terms of reaching the goal of that kind of plateau? blind-sided their business model -- ryan started their business model used before we did. we will end the year with 80 airplanes. we are early in our growth cycle . we are on pace to grow 15-20% year. it will be a while before we hit ryan's size. >> tells about costs. you getting a big benefit from the reduced fuel costs? fuel costs are a mixed bag. it lowers our largest costs, which is great and it allows all airlines to be profitable. on the other hand, it is inviting more and more capacity into the industry. all carriers, even those with

less efficient cost structures, are growing and that puts more seats in the market, which poses a little bit of dampening in the event that energy prices increase over time. but overall it is a good story and it is obviously great for consumers because it means lower prices. >> is it fair to say that this is the best of times for the airline industry? in my lifetime i cannot imagine a better scenario for airlines than there are now. fewer competitors, low fuel costs, high-capacity, planes full. can it get any better than this? , it is amongu note the best in times but there is uncertainty in terms of the overall capacity situation. it probably could be a little bit better but i think you nailed it right there. ben, you talked about capacity. what you worry about from a competitive perspective? reality is our biggest

competitor is amazon.com or somebody like that because the reality is, we carry a truly discretionary traveler. the customer with a little extra money in your pocket, they are deciding how to use that money, and we want them to use it to take a trip, to go see some friends or relatives or such. we really don't think of the rest of the airline business as much as a competitor. we tend to have a large cost advantage against everyone we fly against. in our case it is more stimulating. that was the spirit ceo earlier today. .lobal dealmaking hits a record over 37,000 deals were made this year at 4.2 chilean dollars worth of transactions pending or completed. managing editor for global m&a here at bloomberg, has been crunching the numbers for us. what were the contributing factors for making 2015 a banner year for m&a? jeff: you could say a lot if it was the cheap debt. he also had a situation where

one big deal begat another big deal. years ago when heinz were taken private, they had a situation kraft.fected in the cable space, when the comcast deal fell through for time warner cable, everybody knew someone would buy time warner cable and it turned out to be charter. we are in a situation in the u.s. where there is growth, 2% growth. the companies are really good at cutting costs. a lot of ceos said i will take their ebitda and plop it into mine and get rid of people in hr, check them whenever -- hr, tech, whatever. jobs not sound good with being cut but there are a lot of synergies in these colonies. alix: let's talk about the deals being made. they have been on the rise. jeff: what it tells you -- we wrote a story that ran yesterday that says are we at the peak of the peak?

alix: 30% average deal premium? peak -- the premiums were off the lower numbers. the stock had not run as high for a lot of these countries. our suspicion is next year we will not see as many big deals. we will not see as many $50 billion-$100 billion deals. typically you just have more deals, $1 billion-$5 billion, $10 billion range. we had 2 deals of $100 billion-plus, which you never see. not just one, but two. we are going to see a lot of deals next year and there are some areas that need to consolidate, like in the energy space, but we will not see those kinds of deals. alix: and where will the deals be? $2.8 trillion here in the u.s., only 1.2 trillion dollars in asia, only 1.3 trillion in

europe. seems like asia and europe are lagging behind where the u.s. has gone gangbusters. jeff: a lot of committees that are asian want to find faster growth. if you are in germany, britain, somewhere in china or japan, you are seeing either stagnant growth or very low growth. the best place to go, and it is consistent, is to go to the ,nited states will top 2.5%, 3% we complained about that in the united states, but given how big the population is, the gdp here, and the fact that is pretty consistent, other countries with dr. have that. -- would love to have that. alix: and they still have qe. lots more coming up on "bloomberg markets." how to find success.

bloomberg world headquarters in midtown manhattan, you are watching bloomberg television. i am alix steel. let's start with the "first

word" news this afternoon. mark crumpton has more from the desk. mark: a human rights group is accusing rush of killing hundreds of civilians in syria. russia has been conducting airstrikes in syria but amnesty international says that russia is using cluster munitions and unguided bombs. some parts of cluster bombs remain unexploded long after fighting ends, killing and maiming civilians later. activists are planning a black lives mattered insertion at the mall of america. protests has led thir across minneapolis, minnesota, demanding the release of the video of last month's police shooting of an unarmed black man. a judge barred three organizers from attending the demonstration, but said she didn't have the power to prevent others from showing up. an unmanned russian cargo ship has docked with the international space station. the spacecraft was carrying 2.5

metric tons of fuel, water, food, and other supplies. it was the maiden launch of a modified version of the rocket, which has been in service for more than four decades. the next republican presidential debate could include as few as six candidates. foxbusiness is using new paul criteria to take the qualifiers for the primetime debate on january 14. the rest of the 13 gop hopefuls will be in a preliminary event. a cnn poll of republicans back donaldhows 39% trump, more than his next three challengers combined. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am a mark crumpton. alix? alix: thank you so much, mark. it may have been a tough year for hedge funds but multimillion dollar firms still managed to and double-digit returns,

that includes funds managed by blackstone, citadel, millennium partners, and de shaw. how did they do it? joining us with insight is bloomberg reporter peggy collins. what stood out to me is we have heard about macro hedge funds closing because they couldn't keep up with the environment. how did these guys do so well? peggy: it appears that some of the biggest winners this year basically allocated money across multiple teams and broad market. they were in equities and fixed income and commodities, and had success in some of those. essentially we saw millenial millennium partners, on track to have the third consecutive year of double-digit returns. dosaw ken griffin's citadel well again. it returns at least 11% since the financial crisis and doing well again this year. alix: does that mean to imply that the ones that closed were much more smaller-focused? peggy: yeah, exactly.

we saw fortress close down the macro hedge fund, and one of the best of their he struggled with his currency trades, in terms of the swiss franc. surprised a lot of investors in january. we saw others have issues they were consolidating in energy companies, or a stock like valiant. yearw people struggle this , some big names, like bill einhorns well as david at greenlight capital. what is tending to happen among the ones who have struggled this year is they have concentrated positions that have not worked out well. alix: one to the ones that have performed well say about 2016 in terms of what kind of year that may be? peggy: i think hedge funds across the board are saying it is a tough market for them the past several years because of liquidity and a volatile markets. again, they are saying they expect markets to be more .olatile in 2016 again, we've got the fed moving, potential interest rates moving

more next year. that can be an opportunity where hedge funds can make big gains and provide value to investors. alix: all right, peggy, thank you so much. bloomberg reporter peggy collins. coming up next, what are the best mid-cap investments in the new year? ♪

carol: you are listening to "bloomberg advantage" bloomberg radio. we welcome everybody on bloomberg tv. also with me is matt miller of bloomberg television. manager has been beating all of his the past five years, neil hennessy, chief investment officer and portfolio manager at hennessy funds, $6.5 billion in assets under management, and he joins us on the phone from nevada.

great to have you back on bloomberg. talk to us about this year. you have a great long-term track record. this year, though committed centrica, hasn't it? year has been extremely volatile, to say the least, carol. we have to proximally 30,000 dow jones points on the close and -- carol: crazy. neil: absolutely. half of it has been positive, the other half negative. we have not gone anyplace. what is really happening in the committeese is are continuing to make money and the cash flow is at an all-time high. they continue to make more and more money. i think you will see that continued into 2016 and beyond. my believe has been -- go ahead, matt. matt: are they doing it by growing sales are cutting costs? previously it was not topline revenue that was off. carol: for doing buybacks. neil: we went for years ago --

what are corporations going to do with all the cash they have on the books? we said they would initiate dividends, raise dividends, make acquisitions. and they did all those. -- if you look at it logically you cannot continually razor dividends 25% every year. that is going to slow down, in my opinion. you will not buy all of your stocks back in the open markets. that is ridiculous. acquisitions are so much more expensive and not as accretive as they have been in the past without the risk. i think what countries are going to do -- the s&p is sitting on 3.5 chile dollars in cash and short-term investments. i think what they are going to do is start capital expenditure programs and you are starting to see that happen, which means they are going to have to hire full-time people with benefits, which means their competitors are going to have to do the same thing, which means more money is going to go into the system, more products going to be made, and at the same time, you couple it with other economic events

going on in the u.s., and i think we are in for a very, very strong market going forward. carol: that is interesting. neil, we are showing our viewers o bloomberg tv, the s&p 500. the market has basically gone nowhere this year. doing need a bit of a breather, do you think, in terms of the equity trade? neil: no, i don't think so. what we have been in is a sideways correction. you are right, carol, if you look at the market, it is sort of like a roller coaster. exciting, thrilling, but at the end of the day, you end up where you started. once people back office and once interest rates continue to ratchet up, and i'm not saying every quarter, don't get me wrong, but you are going to see $3.5 trillion sitting in u.s. fixed income mutual funds start to slide over to activities. -- equities. for is theforecast most exciting thing. wouldn't it be great if these

companies sitting on so much cash start spending it? that is the key is missing from the economic puzzle. it is not going to be energy companies. they are down 22% and we know the problems they are having. materials companies are down 10% this year. i doubt utilities are going to be spending it. industrials? capex toyou expect come from? neil: it can be as simple as a market manager myself saying where i put money into marketing. we look at big companies because that is what we deal with on a daily basis, you and i come in the marketplace. but the reality is it could be a little company in a small little town that is going to expand, and it just starts to do is footprint all over. you don't need a huge number to say these companies are doing capex programs. i think it is going to go through the whole economy. at the same time, that said,

when you are sitting on $3.5 trillion, companies in the u.s. are no different than individuals in the u.s. they are spenders. at some point in time they are going to spend. they are not like japan, where they save. we don't save, we spend. we will figure out how we get a better return on our investment than what we have been doing, because shareholders after a while will get upset and want a better return on investment carol. l, you have nei gotten great returns on your investments. you have jet blue come i think that is your number one holding over the latest findings, up 47% so far this year. s you guys are in big time could i look at foot locker, name you like a lot, up 20%. these are some great runs. that is a great question, but one of the things we look at when we look for value is we price the sales incentive pricing earnings, because earnings can be manipulated.

sales are sales unless you are going to cook the books. we are not going to pay more than 1.5 on the price to sales ratio, more than one dollar $.50 for a dollar of revenue. that is where i like the overall market because if you look at the overall market, the price of sales is 1.7. it is not so much more about where we had our cut off as we looking for deep value. carol: matt is wrinkling his brow. he has a question. matt: i'm just wondering how you need to take these stocks. ue, united is down for the year. jetblue, a huge winner, up 50%. united is down for the year. how did you know to take jetblue even with the drop in fuel prices? neil: this is a quantitative model. there is no qualitative overlay. we look for companies that have the market cap between $1 billion and $10 billion. the price to sales ratio is 1.5

or less. it has higher earnings than the previous year. and then we put them into the momentum screen and we look for companies that have positive price momentum on the three- to have 30h basis and we copies in equal dollar amounts that have the best rice appreciation or momentum over the 12-month period. then we hold those stocks for a year and rebalance the portfolio. essentially, i'm am not the smart one, to be honest with you, matt. carol: wow, someone beg to differ -- some would beg to differ. have good money managers find these stocks over time. that is where you see the price momentum. we catch the company in the second or third inning where someone might have caught it in the first inning, but who cares, it is a nine-inning game. that is where successes come because we have no emotion

involved in the decision-making -- i knowd if emotion better than most because i am irish -- it is going to get ugly. carol: [laughter] good to know. great to get some time with you, we appreciate it. tennessee, portfolio manager at hennessy funds. of thanks to matt miller bloomberg news breaking it down for us. you are listening to "bloomberg advantage" on bloomberg rate appeared back in a moment.

alix: you are watching bloomberg. i am alix steel. this is your global business report. economists are saying the biggest risk to the u.s. economy is the possible exit from the european union. how much could the greg's it -- grexit slowdown growth? and it was a record year for dealmaking. we are going to break down those numbers. let's start in the u k. according to a bloomberg poll of economists, 43% of those are great believe the biggest risk facing the nation's economy next year is a british departure from the european union. strategist at barclays uses outlook. >> we estimate the effect of the need to be low-single digit percentage of gdp.

it is significant, and it will hurt the u.k. economy, in our opinion. alix: opec says demand for its crude will keep sliding in 2020 as rivals of life continue to grow -- rival supplies continue to grow. the oil outlook and says it will need to pump 30.7 million barrels a day by the end of the decade, about 300,000 barrels less than what was required this year. and new zealand court ruled the internet to ignore kim do -- internet entrepreneur kim dotcom is eligible for extradition to the u.s. to face charges of money laundering and racketeering. speaking to bloomberg earlier this year from new zealand, he had an optimistic outlook about his case. kim: i am not scared of anything, really. ierything that happens to me, try and make the best out of it. i would say -- i know this sounds crazy, but i don't know fear. i don't understand fear. alix: it has been a record year

for mergers and acquisitions ofh a whopping $4.2 trillion transactions pending or completed over 2015. that is a going to data compiled by bloomberg. there have been more than 37,000 deals completed this year. and time now for our bloomberg quick cake, where we provide context and background on issues of interest. today's topic, what is wrong with u.s. credit card security? during the holiday season people will be on a spending spree, but after high-profile credit card breaches, consumers are left wondering if their information will be safe this year. here is the situation. there was a massive shift in critical practices in october. any bank issuing a new card after that date without a chip or any regional tell it that had not switched its machines over will bear the cost of fraud. this is a big step. the first step to get chip-based cards into the system. but that conversion has a very

long way to go. it was estimated that by the end of 2015, only 36% of american credit cards, only 13% of debit cards, would have that ship. compare that to europe, where the numbers stands around 82%. retailers are holding off until after the holiday season to turn on that technology. cards take ahip few seconds longer per transaction, especially if combined with a pin. even though the technology is just reaching the u.s., the three big card networks established emv standards back in 1999. it communicates with the retail terminal to verify the card's authenticity when it is used from adding another layer of security. it generates the unique security code for each transaction. even if thieves get your card, they would not be able to clone the data to sell it, removing much of the incentive for theft or hacking. has caught on in europe thanks to a big push by regulars and there was a drop in front.

now president barack obama has push for the federal government pin cardsto chip and and a new framework for credit card companies to notify consumers of fraud. it may take a few more years for the hope is that the era of swiping is winding down. that has been your global business report. for more stories, visit bloomberg.com or bloomberg.com/ quicktake. we want to get over to abigail doolittle, who is live from the nasdaq, where she is looking at apple. apple shares are up nicely today, on pace for the best week in a month. it was difficult december so far. ironically, today's strength cuts as to more analysts estimates, joining the bearish bandwagon of negative commentary around supply-chain concerns. one did this last summer. he literally downgraded apple nearly its record highs, when he was 20% higher. yesterday he was out saying that the street may now actually be

overly bearish on the quarter, that it could be somewhat of a washout, and if the june quarter guide is not awful, it may make sense to get constructive on apple again. ron, these chairs are lower after the company missed its first-quarter earnings estimates and guided fiscal revenue below expectations. there are a few downgrades out there but there are analysts defending the stock, including credit suisse. while the second quarter guidance below expectations, it should mark a bottom and it may make sense to wonder whether or not there will be upside to numbers in the back half of 2016. alix: thank you so much, abigail doolittle. norfolk southern is taking another step today to derail a buyout offer from canadian pacific railway might yet again. the company is rejecting a sweetened bid from the company, calling the proposal "grossly inadequate." what does this mean? are we looking at a proxy battle? let's get the analyst from lee

klaskow, joining us from princeton. why is it so important for canadian pacific to get norfolk southern? why not just call it a day and go somewhere else? wants todian pacific grow, and growing organically in this current environment is very difficult. canadian pacific is also heavily levered relative to its peers in the commodity market so it has less exposure to double stack containers that you see on trains. norfolk southern is kind of in play right now. weak,s it as a little bit the fact that norfolk southern is dealing with a lot of headwinds, including the coal franchise, which is seen as a sector in decline, as well as poor coverage of the fuel surcharges, which is really hampering its eps growth. alix: do you think if the deal gets done we are looking at a proxy fight? definitelyk it is going to come down to a proxy fight. the management of norfolk southern does not seem

interested in merging with cp. it might even push norfolk southern into the arms of another acquirer. there are other networks out there and they don't want to be the last to consolidation of the real market. they want to be first or second pit it might motivate someone like burlington northern or union pacific or canadian national to merge with norfolk southern. they might find a connected network a more attractive vs.ork over the long-term, canadian pacific and norfolk southern network. what is striking to me is the whole sector has been slammed all year and norfolk southern stock is down 17% despite the fact that it went through merger battles the last few weeks. what you make of that? is there that much more downside to go when it comes to these stocks? lee: this year has been a horrible year for real stocks. they have underperformed the market significantly. it is being driven by rail traffic traffic down about 8% in the fourth quarter.

in 2015, it might be the first time since 2009. that has been the thing that is driving the weakness in the stock. not only are we seeing weakness and commodities, but intermodal used to mitigate the weakness. the demand of containerized freight, that is seeing some softness in the fourth quarter. that is being driven by increased capacity of trucking spot market, coupled with the fact that low fuel makes trucking much more competitive with rail. alix: glad you brought up fuel because we take a look inside the bloomberg terminal, charting railroad stocks versus the oil price. they don't always move in tandem, but you can see right here for the whole of december, they have pretty much moved lock in step together. if oil prices stabilize or even rise, do railroads get a chance? lee: railroads really needs -- if we want to talk about oil, they haul oil, and if oil is below $50, they are going to haul a lot less crude, a lot

less sand, and those our markets a lot of people are expecting to be growth markets in 2015, which did not end up happening. with low fuel prices, like i said, trucking becomes a lot more competitive with rail. alix: so, yes. any oil price above this level will be really painful. much could only klaskow, senior analyst for logistics at bloomberg intelligence. coming up on "bloomberg markets" megaupload founder kim dotcom has likened his site to drop off but officials are not seeing it that way. a new zealand court ruled he is eligible for extradition to the united states, where he faces charges of copyright infantry. what will happen next? ♪

alix: welcome to "bloomberg markets." ♪ ♪

from bloomberg world headquarters in new york, good afternoon. i am alix steel. here's what we are watching. oil on the rebound after inventory dropped. what does the future hold? internet onto the newer kim dotcom facing -- entrepreneur kim dotcom face next edition from new zealand to face piracy charges. what are the chances he will end up in a courtroom here? workout clothes for men -- sales have more than tripled. let's go to the markets desk, with the latest. we are able to hold onto this rally today? >> able to hold onto the rally. we are on session highs right now, especially after data this morning on better u.s. consumer sentiment and the drawdown in u.s. oil inventories from last week. the s&p 500, up 1.5%.

the nasdaq up 0.7%. let's take a look at the s&p 500 for the year today. you can see that all the volatility that has happened, ever since we started the year -- i bring this up because there has been a flip-flop between positive and negative territory, happening a record 24 times according to the spoke ke investment bespo group. if it closes above 2058.9, we are above that, but if we close at that, we would be close to holding on -- the flip-flopping could bode well for next year, yearse since 1928, the 12 with the most number of crosses back and forth were followed by years where the average was up an average of 9.6% according to bespoke, those interesting technicals we will look towards.

with that, let's dive into my bloomberg terminal and check out the imf function, the sector health of the s&p. you can see that energy has been the biggest leader all day, 3.6% up, followed by materials and utilities. energy isrprise that rising higher after the drawdown on inventory. a quick check on nymex crude, also trading higher, up 3.9%. just off session highs. we did see the spike happen here. s biggest rises it since october. alix: we just got the rig count number, down about nine rigs. last week, we saw in addition of 17, so a paring back of rakes could be a more -- rigs could be a more bullish sign for oil. is the safety trade done for today? ramy: basically everything that could be a safe haven, gold and treasuries, are losing their

luster. gold right now is off by 0.5%, falling for the second day in a row. it is now at its lowest in the past five days. that's because better-than-expected u.s. consumer sentiment for january is likely driving away interest. treasuries also losing their luster, for a second day in a row. the 10-year yield is rising up, three basis points right now for a yield of 2.26%. alix, this is the highest in a week. alix: we want to check in on the bloomberg first word news. mark crumpton has more from the news desk. mark: president obama will host a summit early next year in california with southeast asian leaders. during a visit to malaysia, the president invited the leaders of the association of southeast nations to meet with them in the u.s. but the summit could annoy beijing, which also seeks to develop and improve

relationships with leaders in the region. australia -- austria says two see teenage syrian brothers were arrested on suspicion of terroristt with organizations. the tip came from germany, whose authorities accused a third elder brother of belonging to the terror group. a u.s. military spokesman says the defeat of islamic state in ramadi by iraqi troops is "inevitable," but he adds it will take time and will not be easy. iraqi forces are in a fierce battle today against militants in the center of the city. the gains are the most significant by government troops since the western regional capital was seized by islamic state last may. rescuers recovered 16 more bodies from the weekend sinking of a passenger boat in indonesian seas. is joiningian navy the search for 54 people still missing. the ship sank on saturday. the fiberglass ferry was

reportedly overwhelmed by waves more than 10 feet high during stormy weather. global news 24 hours a day. a i am mark crumpton. alix, back to you. alix: much more coming up. the dow is up 128 points. we will be right back. ♪

♪ carol: you are listening to "the bloomberg advantage," here on bloomberg radio. we welcome everyone listening on

bloomberg tv. an update on a story in the tech area. center disco our bureau, where we find emily chang. we talked about kim dotcom yesterday. give us an update, because there was a ruling. amalie: there was a ruling in district court in new zealand that kim dotcom is eligible for extradition to the united states. he is the target of the biggest copyright in frenchman case in history -- copyright infringement case in history. the u.s. has been trying to get him back for years, and the judge ruled there is overwhelming evidence to support a case against him in the united states, and that his own evidence fell short of undermining the case. i talked to cam and his attorney -- kim and his attorney, and they said they will try to appeal. there are several appeals, and this will play out over years. i talked to kim dotcom in new zealand at the mansion he was

living in at the time. i asked him, are you scared? he has never been to the united states, but he faces potentially 88 years in prison here. he said, i'm not scared. in fact, take a listen to how he describes his own approach to fear. kim dotcom: i'm not scared of anything, really. you know, everything that happens to me, i try and make the best out of it. i would say, i know this sounds crazy, but i don't know fear, i don't understand fear. emily: kim dotcom, the founder of megauoload. u.s. authorities say this was home to a lot of pirated content, pirated music and movies, that he robbed the entertainment industry of $500 million. he's argument -- his argument was this was like any other file sharing service, like dropbox. they made plenty of efforts to take pirated content down, but

they could not control everything their users had. this could go all the way to the new zealand supreme court. listen to what he told me about how long he plans to fight. kim dotcom: i think this case will go on for a very long time. i have prepared myself for that, mentally. this will be a fight, you know, for a very long time. emily: so the ruling yesterday was in the new zealand district court, then it goes to the high court, then to the court of appeal, and ultimately probably the new zealand supreme court. this could play out for another which meansyears, we might not get a resolution until 2020. we may not know for sure if kim dotcom will be extradited to the u.s. and try here for four more years. carol: it is not over, as you mentioned. it could go on for several more years. what's the significance for our listeners and viewers, in terms of this case specifically, what it means for patent infringement? either bigger applications,

implications i should say, that everyone should be aware of? emily: there are potential larger implications. site say the kim's u.s. government is trying to make an example of him. if you look at other filesharing services, it so happens that firstload was the filesharing service to gain a lot of scale and notoriety. so there are much wider-ranging implications. people on his side saying, look, if he is extradited to the united states, the united states will have to pursue cases against a bunch of other parties. on the other hand, the united states has been building what seems to be a strong case against him. over the last several years now. it is a pretty devastating loss -- there are a number of appeals that will follow this, but it doesn't look good for kim right now. carol: if corey was here, he and regulatoryt it the

-- if the regular tour framework has kept up with the changing environment. is the regular tour framework not up to snuff, the legal backdrop not as sophisticated as technology evolved? emily: i spoke with kim's lawyer. he said that for exhibition to apply, he has to have broken the law both in the united states and new zealand. in the u.s., there's no congressional statute for criminal liability for copyright infringement. there are civil penalties, but there is no, they say, no congressional statute or criminal liability. in new zealand, there's actually a law that protects internet service providers from actions based on the conduct of their users. so under that scenario, they say megaupload should be free and clear. they were just a middleman in this practice, which has become widespread around the world, not just with megaupload, but with

other services. so much broader implications here. i'm going to be speaking with kim dotcom's lawyer, who happens to be based here in the bay area. he has logged a lot of miles between san francisco and auckland, new zealand, but we will get him here to talk about all the stuff and layout their argument. they do have a couple of legal experts who have come out in their favor. larry lessig, who you know, a very famous law professor. he has said the case has no merit. so they certainly do have experts supporting their case on that side. carol: you mentioned ira rothken coming up on "bloomberg west." you follow the case, you spend time with kim in new zealand. what do you want to know from his lawyer at this point? emily: first of all, his reaction. if their argument did not hold up in court this time around, how will they be for the argument next time around, if we are potentially looking at three or four more rounds of appeals? how can they advance the case to

make essentially a different argument? the other thing is, you know, the u.s. government has built up, they have been at this for four years now, and if they have not come up with a valid argument in their favor, that's a fairly long time. is time really going to change anything in terms of getting it? carol: we might have talked about this yesterday. how worried is kim, how nervous is he about this? emily: kim is a very confident guy. you know, in telling me he will fight this case to the end, he has no doubt in his mind that he is right. in fact, he and his cohorts also named in the case have said they have done nothing wrong, that they have broken zero loss. his opinion is that he believes in copyright law, but he doesn't believe in what he calls copyright extremism. he thinks that hollywood has

created its own set of problems by releasing movies only in the united states first, not making them available for worldwide release, that that leads to this content being in demand in other places, and he says he really likes the netflix model, for example. release it all at the same time, everywhere. carol: should be a fascinating conversation. emily, thank you so much. emily chang, our anchor with "bloomberg west," 6:00 wall street time, 3:00 in the bay area. you're listening to and watching the number. ♪

♪ ♪ welcome back to "timber markets. -- bloomberg markets." time for the business flash, the biggest stories in the news right now. auto safety investing it is linked eight fatalities to a faulty takata airbag. the latest crash occurred in july in the pittsburgh region. a minor driving a honda accord under recall was killed.

takata agreed to what might be the largest highway safety penalty in history last month. sales rose 4.3% in november to a annually adjusted rate of 493,000. the increase was possible because the sales rate for october was revised downward. year today, new home sales advanced 14.5%, helped by job growth and relatively low mortgage rates. confidence ended the year on a brighter note, as low prices put u.s. consumers in the holiday spirit. the university of michigan's final sentiment index for the month climbed to 92.6, the highest region -- rating since july. in november, it was 91.3. that is your bloomberg business flash. now to the markets desk, where ramy inocencio has a look at movers today. ramy: i will look at some of the laggards this afternoon. first in the tech sphere, micron shares are feeling the impact after disappointing earnings

they reported last night. the intraday is down about 4.6%. micron reported profits fell 77% from last year, and revenue was also down by about a quarter on prices for its memory chips that are falling. in the home retail space, bed bath & beyond falling the most in newly a year today, 4.6% as well. it has come back from session lows, but it is still down. the company cut the earnings outlook by 9% at the top end, saying they expect fewer transactions in the preholiday quarter that ended last month. there's concern they are losing market share to the web and online competitors that can give a better deal. despite star wars being so amazing, disney shares have actually lost a bit of their momentum over the past several days. today they are down 1%. but look at the chart over the past week. down down by nearly 7.5%,

4% in the last five days, since the day before "the force awakens." alix, you and i will have to keep watching star wars a couple more times. alix: not a problem. [laughter] eisure clothing is really taking off. business growsaw 340% since founding two years ago. we saw this play out for nike in earningsquarterly --ulted we talk a lot about less quickly earnings could we talk a lot about people buying phones. we also buy a lot of socks and workout gear. nike has outperformed apple in the last quarter. nike said orders for the next four months were up 20%, up over 30% in china.

so despite any kind of worries about a slowdown in china, nike has been killing it, bucking the trend for what we had been worried about, that perhaps we are buying more stuff like phones, and not as much clothing. roan apparel,out what is their success? carol: i want to talk a little more about the leisure space, -- theye coming out know a lot about this. the cofounder and chief executive is with us. they play in this leisure athletic wear and apparel great to have you back with us. talk to us about the growth at your company. our radio listeners know about you. tell us who you are. >> rhone is about two years old.

we play in the premium men's activewear space. we are an elevated brand that sells directly to men. the target demo is 25-50. it comes at a premium price point. we use better fabrics, things like that of technology. carol: there's something particular in terms of the composition that helps in terms of fighting bacteria, and so forth? >> that's one of the things. the other thing is the feel, b eing luxuriously soft and avoiding pilling. touse flat lock stitching avoid chafing. when we talk about better fabrics, the average mass brand spends between two dollars and four dollars a yard on fabric. some of our fabrics cost into the $15 range, which has nothing to do with scale, much more to do with the fact we are using better fabrics, better technology. carol: it's interesting that you

say that. there's a lot of players out there. you find you have to do something unique to distinguish yourself, kind of bring in the customer. >> absolutely. that is both in terms of the look, we use a sophisticated aesthetic and how we structure our product. you won't see big, massive logos and bright neon colors everywhere. carol: your stuff is subdued. burgundy, kind of mellow. >> it is inspired by nature, all the color pallets. we will take more risk on colors in the spring. it's also in technology and distribution. one interesting thing about nike earnings is how big the online sales grew over the last quarter, and we were born online, so our online distribution, e-commerce is the latest and greatest in delivering right to your door. carol: how much of your business is online? >> 65%. carol: and that's where the

growth is? >> we started online. for us this year, our growth was really in the wholesale market. we grew to over 100 doors in a single year, and that is very premium wholesale outlets. bloomingdale's, equinox, high and specialty stores -- high-end specialty stores could growth was in the hole so market, but online business is growing as well. carol: can you quantify growth? >> we grew more than five times this year. carol: you can keep up with production? >> thankfully, we predicted we were going to grow, and we hit our numbers and kind of came in a little ahead. good, forecasting was which is the tricky part of this business. now we have to continue to do that and be good at forecasting. carol: you're coming out with new stuff. you brought some water bottles for us. i have a ton of water bottles. you talk about being unique, doing things differently. what is different about this? >> this is what we call the

rhone flask. it will keep your drinks called for 24 hours, hot for 12 hours. when we first got this, we thought, that's the most outlandish claim, no way it will keep it cold for 24 hours. so we did testing, we worked with the factory. it absolutely does. it is bpa-free. dpesm -- doesn't sweat. carol: what is next? will you do womenswear? >> as soon as we do, we will bring it to you. carol: is it an area you will do? >> it is one we will look at the right time. we are not there yet. carol: what's the trickiest part for you? higher labor costs, materials costs? >> it's about getting people to be aware of us. we are a small brand. creating awareness is the challenge. once people try the product, the repurchase rate is great because people fall in love with the product. but as a small brand with a fraction of the marketing budget of the big players, getting people to know we exist is a big

challenge. carol: would you ever hook up with a nike or adidas? >> we will stay the course. we are excited about growth we are seeing. carol: happy holidays. the cofounder and chief executive officer of rhone apparel, joining us here on bloomberg radio. alix, i will toss it back to you. ♪

when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. so your business can get back to business.

sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. to discover the best shows friends together and movies with xfinity's winter watchlist. later on, we'll conspire ♪ ♪ as we dream by the fire ♪ a beautiful sight, we're happy tonight ♪ ♪ watching in a winter watchlist land, ♪ ♪ watching in a winter watchlist land! ♪ xfinity's winter watchlist. watch now with xfinity on demand- your home for the best entertainment this holiday season. ♪ live from bloomberg world headquarters in midtown manhattan, you are watching bloomberg television. i am alix steel.

let's start with the bloomberg first word news this afternoon. mark crumpton has more. mark: a woman accused of plowing a car through crowds of striprians on a las vegas sidewalk has been arraigned. she did not enter a plea during her brief court appearance. she's charged with murder, hit and run, and child abuse. the judge sent a january 20 date for a culinary hearing. officials in -- for a preliminary hearing. officials in iraq are blaming islamic state for bombings across the country today that killed at least 15 people. but government forces say they are gaining the upper hand over the militants in ramadi. iraqi troops reached the center of the provincial capital, the strongest advance against the militants since they seized the city last may. a worker was found alive today in the rubble of the huge china landslide, more than 60 hours after the disaster. the landslide sunday in shenzhen buried three dozen buildings,

trapping people inside. at least 70 are still missing. day,l news 24 hours a powered by our 2400 journalists in more than 150 news bureaus around the world. i'm mark crumpton. alix: thank you so much, mark. oil is spiking on inventory data showing a fall of almost 6 million barrels. now, will we preach storage capacity before supplies are -- breach storage capacity before supplies are cut enough, and will that force oil down to $20 a barrel? vince joins us for insight. vince, that's what i'm reading and research reports. what is your call? vince: when you think of 2016, we will have a persistent and elevated inventory coming into 2016, from the crude oil side through the petroleum chain, refined products. that will continue.

as we head into the first half of 2016, when we get into the refining maintenance season in the spring when demand will receive, those inventories will likely be higher as well. so demand is heading south, and still that supply is very resilient, because we are still dealing with 35% above the five-year average in terms of crude inventories and storage. alicx: is demand really heading south? wti trading higher is a healthy sign. the market is starting to rebalance. do you agree? vince: you have a tremendous amount of inventory to get through. when you get into the seasonal inventory cycle, you will see seasonal demand curtail. we still have this enormous amount of crude inventory which you have to get through, as you get into 2016. alix: meaning demand could be fine, but it needs to be that

much stronger because supply has not adjusted enough, and that kind of demand we are not seeing. vince: the persistent elevated inventory situation heading into the first half of 2016. alix: what about gas? it is a very similar story, inrsupply, much more levered some ways due to the warm weather. vince: similar dynamics in natural gas, much more levere to the winterd withdrawal season, typically beginning in early november through march. so the first two months of the year have been extremely warm. we have seen a build in natural gas storage inventories. approaching 4tcf. very significant inventory storage, but we still have resilient output coming from the appalachian basin marsalis and -- marcellus and utica. alix: we are so pessimistic on it, a short squeeze could be in

the cards. thence: you still have to get through the reality of the secular rise in output colliding with a cyclical weather issue. the winter weather season is the most important time of the year, where you see the storage get depleted. alix: we still need that demand, that stronger demand. thank you so much. vince: happy holidays. alix: you, too. coming up, what are the hot tech trends next year? we will find out.

carol: you are listening to "the bloomberg advantage," on bloomberg radio and television. we welcome our viewers on bloomberg radio and tv. let's talk about what is to come in 2016. the internet of things is some thing we talked about. also wearables. let's get a take from the chief research officer at idc, international data corp, joining us from framingham, massachusetts.

we have talked a lot about the technology space, what has been going on. what you think are going to be the trends that take hold in 2016? del: great to talk to you. what we see as the big trends, this move to digital transformation. what that simply means is that for decades we have been using technology to automate processes in organizations and our personal lives, and now it is being used to automate the way to create new revenue streams in business. how they touch customers, how consumers live their lives. that's creating a dislocation. the tech companies participating in this emergence of what we call the third platform, they are participating in a market growing almost 13% compound annual growth. the tech companies participating in the old era, the core infrastructure, they are seeing

a market declining at 5%. so the story of two totally different markets, consumers and businesses start creating new offerings, using new offerings with technology. carol: crawford, we like to get specific with you. we spent a lot of time talking about how ibm is transforming itself, juicing up exposure to the cloud. there's a lot of tech companies going to transformations. then you have companies like google, which seem to not be able to do anything wrong at this time. who is really well-positioned, do you think, and who isn't? crawford: what you see, you see this set of a couple different parties going on. google, very well positioned to take advantage, not only of this core third platform, mobile, cloud, social, analytics, but also these emerging innovation accelerators. next generation security, internet of things, cognitive systems. google will be a platform owner in cognitive.

the owners in cognitive will be google, microsoft, companies like amazon, the companies that are really focused on these new emerging technologies. facebook is making a big bet on augmented and virtual reality, another one of our innovation accelerators. carol: take a step back for our listeners and viewers. you talk about cognitive systems, cognitive analytics, virtual reality. you are talking about specifically what, what kind of impact they can have? crawford: it is significant. when you think about a cognitive system here, we are really thinking about a system with intelligence built into it, so a simple question and answer system that can increase productivity and really change helpful -- how people work. by 2020 cognitive applications will your productivity in excess of $60 billion for enterprises. what that means, you will see physicians use cognitive

solutions to it and if i more effective cancer treatments. we think that identifying effective treatment for cancer can be 50% more effective for the complex cancer patients. we think that you will see governments use cognitive systems to more intelligently reroute traffic in real-time during sporting events or commuter events. so-called and it will pervade different use cases across many different industries. you know, when you think about augmented or virtual reality, specifically you are looking at, you think about augmented reality, thinking about glasses that you wear that augment your world, like google glass. we think that new kinds of services will be created around augmented reality. use servicesow you today. you go to ikea, for example. this is made up. you go to ikea, you buy a piece of furniture, you go home, you want to put it together. imagine using augmented reality

glasses to pay another $20 to have the person at ikea see what you are seeing, to help you in real time to put that piece of furniture together in your house. carol: i would so pay a ton of -- anyone who has put together ikea furniture knows, you will take any assistance you can get. crawford: that's a new revenue stream. this is where we are headed. carol: what do we get from apple? i'm looking at researching sent over to us today, talking about apple getting into the smart eyewear game. what exciting stuff do we get from apple in 2016? crawford: we think that probably comes a little later. we think that by 2018, you will see apple enter the smart wearables, sorry, the smart eye wear game, creating a new category that does not exist today. we think there will be a wild west in 2016, where maybe it's

not apple, but at least one leading watch brand, existing old-school watch brand, is acquired by a technology company as they try to get into the market. what's probably also interesting over the next couple of years will be the emergence of a new capital -- category, smart clothing. you will see clothing that you can wear, today it is used by sports teams to measure lactic acid when you are working out, a how fatigued or how hit player got, those will become more mainstream. by 2020, you will see another $2 billion market with 25 million garments shipped with batteries, sensors, and can be connected to your phone or the internet. carol: i have to ask you about robotics, what you see. you know, you had that drone that nearly hit a skier, and austrian skier during a solemn in italy. the international ski federation says they are banning camera drones at world cup races. what do we see in the area of

drones and robotics? crawford: drones and robotics are a super interesting category. we think that next year, probably 80% of the market potential will be untapped, do exactly -- due exactly to what you are talking about, safety and privacy concerns, having drones in places where they should not be. over the next two years, 80% of first responders will have new, being developed today, drone defeat technology. if you are fighting a forest fire, you will have the technology to stop people from flying unauthorized rounds over that -- drones over that, because you will interfere with planes dropping things. drones over time are not as much of a consumer technology as they are something that enterprises will use. we think 70% of drone the planet by 2020 -- deployment by 2020 will be driven by industry automation. surveying, those kinds of areas.

so we have a long way to go in drones, and a long way to go before amazon is delivering to your house. carol: biggest technology surprise in 2016? crawford: so, i think the biggest technology surprises are probably going to come around advances in wearables and seeing new wearables changing consumers' lives. carol: d crawfordel prete, chief -- crawford del prete, joining us from framingham, massachusetts. ♪

♪

♪ welcome back to "bloomberg markets." i am alix steel. time for a look at the biggest business stories in the news. billionaire investor carl icahn has sweetened his offer to acquire pep boys, with a promise to automatically top any bid from bridgestone by $.10 a share. he offers up to a maximum of $18.10 a share. bridgestone has until 5:00 p.m. eastern time to respond to the new proposal. norfolk southern has spurned a possibly moving it to a proxy fight. the board decision was unanimous. the ceo said the company is willing to go directly to norfolk southern investors if the board will not discuss a takeover. the u.s. movie industry is on track to crack $11 billion in

annual ticket sales for the first time ever. likean thank blockbusters "star wars" and "jurassic world." the north american box office, including u.s. and canadian theaters, is forecast to rise 6.3% this year to just over $11 billion, surpassing the current record of $10.9 billion set in 2013. speaking of star wars, the latest global take, $682.2 million. that is your business flash update. let's go to our markets desk, where ramy inocencio has a look at company movers. ramy: we will give you a macro look at what's happening now. a quick check on the pulse of the market. let's go to the big board, looking at markets at session highs. we are doing three days of gains in row. the s&p 500 is up nearly 1%. the dow is up 0.8%. the nasdaq is just behind, up

0.6%. interesting that the dow, 28 of the members are up, but only 2 are down right now, so a really wide positive across the markets now. let's look at nymex crude. that is why we are seeing a lot of pop in the market. nymex crude is riding higher after u.s. inventory data we got at 7:30 a.m. 3.25% rightt -- up now. also the biggest intraday jump in the last two months for equities. looking at treasuries, the rise in crude oil and better economic data has been leading to selling in the bond markets today. the yield right now is coming off of highs, up about two basis points, 2.26%, the highest in a week. a look at some of the biggest leaders and laggards of the dow right now. chevron is leading the charge has oil gains. that makes sense right now.

chevron is up 3% here. interestingly, nike is the biggest laggard, coming despite better-than-expected quarterly earnings after the bell, and futures orders for china and emerging markets. 2.76%, down 2.27 -- potentially some profit taking there. alix: as we mentioned, crude is on the rebound today, but prices are at 11-year lows. what a global indications it prices keep falling? with me now is quincy crosby, market strategist at prudential financial and a former u.s. diplomat specializing in energy and u.s. resented it to the imf. thank you for joining us. good to see you. what are the global indications for oil settling at this level? specifically at the fiscal breakeven for countries like libya.rabia, venezuela, they are not making money right now at this oil price. what is the knock-on effect?

quincy: the knock on effect is that you will see more dislocation, spreading beyond energy. you wind up having a situation in which they have to then worry about their currencies. so you have the federal reserve probably at least a couple times this year. they have to worry about keeping their currencies from collapsing even more. you just need to go to our neighbor in the north. canada has been seen as a commodity play. their currency has been weakening against the u.s. dollar. basedtch the looney move on where oil prices are heading. any stimulus out of china actually helps commodities move higher. so you are looking at russia, russia has a problem. recession and inflation. if they can beat inflation, they might be able to begin to lower

their rate. it is a difficult situation, and it is global and spreading unless oil prices begin to move higher. alix: you make a great point. we have seen 10 countries overall weakening the currency pegging the dollar orde- altogether, because they can't keep propping up the currency with fx reserves. the oil story is not over. what happens with saudi arabia, if they can no longer support the currency peg? quincy: saudi arabia went into --s with the a's right open with their eyes wide open. they are the de facto leader of opec. they have done this in the past to punish opec members who cheated on their quotas. it doesn't look like at this stage that saudi arabia wants to give and yet. go in a little deeper, push the price down and maybe more

producers will fall off. however, when we look at the investing side, you are going to see more consolidation. you might see, and this is the big scare in the market as the spreads widen and high yields .ove deeper, not just in energy that is, what happens if one of the big companies that we all think is very safe winds up cutting the dividend, getting rid of the dividend, in essence having the citibank moment we all had in the financial crisis happening in the energy sector? that is the worry lurking out there. but on the other side, a lot of consolidation. you are going to see more consolidation, and the more consolidation you see, the more healing you have for the investor that goes in. alix: you pointed out energy. but looking at other sectors, we have seen the spread widened across the board.

you see the weakness in industrials, and materials, also in communications, health care spreads also widening. --s relatively presages pervasive. quincy: that's something you don't want to see. you want to see yields coming in, you want a healthier high-yield market, and also looking at credit default swaps of some of the energy companies, the big energy companies. you go across. take a look at glencore. that has become the emblem of the problem in commodities, the problem in energy. glencore represents that. a lot of investors are paying attention to their credit default swaps, and how they are managing. alix: to see what the risk actually is. quincy: to see what the risk is. also the banks. the banks that work in the energy sector, you have to pay attention to what they are saying, their credit default swaps. because the weakening of the banks, because it is your line

in the sand of the trouble that we may have if oil prices do not begin to stabilize. we just need to see it stabilize. that in and of itself will help. we can't forget about china. the more the chinese can do in terms of stimulus. we took a look at the package they have talked about in terms of monetary and fiscal policy. perhaps that might be the biggest contrarian play you have going into 2016, if it actually works. alix: that would be pretty contrarian. pulling up credit default swaps for glencore to look at the five-year, if you can check inside my bluebird terminal -- bloomberg terminal. they are off the highs, but still extremely elevated. so you are looking at this for the health of the economy. quincy: you are looking at it, because what you don't want to see our chances of mega-bankruptcies, of defaults. and then what? you know what happens.

hedge funds are betting one way or another. they wind up being forced to sell what they can sell. there's an old expression from the trading floors, selling begets selling and buying begets buying. that's what you don't want to see. alix: when you have to sell when you have to, not when you want to, where the risk is. quincy: exactly. you see that in high-yield. you can see where i started off, when there's one cockroach, there are a million. alix: great pleasure to have you. thank you for coming to quincy krosby, market strategist at prudential financial. tune in to "bloomberg west" tonight, where we will talk to the iconic venture capitalist cof. patric ♪

>> good afternoon. i'm matt miller. for the third straight day, still trading below $40 a barrel. says demand will slide until the end of the decade. where our prices headed from here? travelbreaking holiday expected this week, the ceo of spirit airlines told us how the low-cost carrier is handling the load. christmas comes early for beatles fans. the fab four of music will be available on streaming services including apple music and spotify starting tomorrow morning, the what will it mean for the music industry? we are a half hour into the trading day. let's head over to the markets desk. >>