probably lead to budget cuts. time is running out for puerto rico. will the island miss friday's debt payment deadline? welcome to "bloomberg ." i'm david westin. brendan: and i am brendan greeley. it is a delight to be here. shannon pettypiece is also here. bunch ofalk about a things, among them the light sabers delivered to our house that were used all weekend. it is a lot of hurt but it is amazing. at one point, no light sabers in the kitchen, vonnie quinn. vonnie: i want to know what your kids got. brendan: first word news with vonnie quinn. vonnie: in iraq, a setback for

islamic state. soldiers have captured a in ramadi complex that has been held by islamic state since may. minister, since 08, has made a landmark apology for korean women, for forcing them to be sex slaves during world war ii. japan also agreed to establish an $8 million fund to compensate victims. a series of tornadoes near dallas has killed 11 people, one miles perup to 200 hour. flooding in the midwest is blamed for at least 13 deaths. missouri's government -- missouri's governor has declared a state of emergency. day, powered by 2400 journalists. a look at what is

going on with s&p futures this morning, as well as the other major averages. we are seeing a decline. we have seen this correlation recently between stocks in the united states and oil prices. oil prices have been trading lower. decline.eing a 2.5% as we begin to get headlines from saudi arabia regarding the 2016 budget, the country is coming out and saying its revenue this year just became the headline. 608 billion real versus the $715 billion forecast. as expected because of the loyal -- because of the oil price being lower, it is taking in less revenue. we are seeing this feedback to what is going on with stocks. also this morning, iran is talking about its high priority, increasing oil exports. that increased supply is also

having a negative effect. i want to look at gasoline prices as well. we have seen retail gasoline fall below two dollars a gallon for only the second time this year. right now it looks like it is above two dollars once again. if you were out driving this weekend, you probably noticed we are seeing low retail prices at the pump. i want to bring it back to stocks and talk about globally what we are seeing in the stock market because not only do you have oil prices falling, the shanghai composite is declining quite sharply, with industrial production falling in china. that is having an effect also. ipo's also having an effect there. we are seeing a feedback loop to down.an stocks between oil and china, it looks like a little bit of a negative tone to start the day. david: thanks very much.

fedex is facing tough criticism on social media after failing to deliver packages by christmas due to severe weather across parts of the country, or so they say. #fedexfail is trending today. ed, explain to us how big a problem this is for fedex potentially. are goingle of things on. we saw in 2013 that there was sort of this short-term reputational hit that ups took when it was unable to deliver parcels, and that ended up spilling into some preparation into 2014, and it ended up being too much preparation. there were people in the facilities sitting idle. so you get that short-term response to make sure that it never happens again. the second thing that can happen is what happened with ups in 2013. they spent a lot more money than

people working over the holidays. we do not have the dimensions -- those much extra other kinds of things that fedex is going to be looking at, to wrap their hands around this to make sure it does not happen again during such a critical shopping season. david: do we have a sense over whether this is related to the dramatic increase in purchasing online, particularly with amazon? ed: a couple of things happened. you have companies promising free shipping, and they have to make up that consumer demand that is flowing through the retail channel with how much capacity the shipping company is going to have. you have to worry about how much of that influence is going to show up, how much the shipping company will be able to deliver. the second piece is, december is typically not a great month for air travel. things are a little warmer this year than usual. typically at this time of year,

you are going to start running into delays. put those two things together, the short-term surge into what could be bad weather, and that is a delicate balance that becomes very noticeable because everything you are geared towards -- getting packages delivered by december 25 -- would not be as noticeable at any other time of year. even if fedex does have these logistical problems, fedex seems to be there only game in town when it comes to air, that next day delivery. if retailers are unhappy about this, can they go somewhere else? ed: ups has a large air network. ups is the largest package delivery company, if you look at everything from their air plus the ground operations. is differentiated as a

larger air operation. that is the place where you would see a larger trade office. brendan: i have a will of thumb trust anyone's promises after december 21. shannon: you were looking back when year. i want to take it back four years because you go back and include that problem. the problems that ups had a couple of years ago. ups is green, fedex is white. obviously fedex has outperformed. this is adjusted for percentage changes, so it accounts for the percentage change we have seen in each stock over the last four years. fedex is the outperform her. an more or less has been on upward trajectory since it had those issues. .ou just heard the discussion it did not see any sort of

long-term effect necessarily from the issues at the holidays a couple of years ago. that said, it is still underperforming fedex in terms of stock performance. brendan: do companies in general have a change -- have a handle on changing consumer needs? ed: what it looks like in the last couple of years, in terms of the amount slowing to the channel -- last year ups did seem to get a handle on it different a couple of things. they had extra people in different locations. they also set up mobile villages , sort of pop up sorting centers, using some of the inipment and personnel trailers. they ended up having too much capacity less year and they did not seem to be able to match that short-term demand from the

consumers given what their facilities were. enoughdid not quite had -- people did not quite have enough to do. so this year they kept the same number of temporary employees as last year at ups. as far as we know right now, it looks like there seem that it looked like the system seemed to work ok. shannon: there was a story in "the wall street journal" last week about building up its own network and not wanting to be dependent on the third-party shippers. areou think fedex, ups -- they worried about losing amazon? about amazon saying i cannot depend on you? let's play a little bit that we have from an amazon official talking about exactly what shannon just described. >> we are doing it in two ways. we are doing it through our own delivery program, our amazon

plus program, which allows people to be their own boss, work the hours that they want. and we are doing and automation program. as soon as legislation supports it, we will be able to integrate it. that was dave clark, senior vice president for amazon. ed, back to you. ed: one of the things we have seen over the last several years have gones and fedex from the kind of service for consumers that might be used every now and again -- say just at this time of year when you have to deliver a certain type of shipping product -- to something people use year-round in their ordering of paper tells on amazon prime or something like that. they have to realize it has been a big boost to their business. also that growing dependence

goes to what those large customers might be trying to take on in terms of taking that business in-house. david: we are waiting for these numbers from mastercard advisors. we are at a bit of a disadvantage. we do not have stephanie ruhle with us, the most enthusiastic follower. she is getting a well-deserved break. shannon: if stephanie is watching today, she will be disappointed because i will use a little bit of the weather excuse. it finally got cold in the midwest, so somebody wants to finally buy a sweater or a coat. my family in michigan was certainly wearing sweaters on christmas. so is there -- so there is a little bit of a boost. that is great for the apparel companies because they have been struggling the past six months because the weather has been warmer.

men's apparel is expected to have done poorly. brendan: why the disparity? shannon: no real innovation in men's apparel. this is traditionally the difficulty with men's clothing, that there is always the problem that you cannot convince men that they need to buy something new every year. shannon: every now and then you get those innovations in men's apparel, a slightly different cut of genes, cut of tide. shift away from -- a shift toward wanting to spend more on experiences. was way upbusiness on christmas day, people eating out on christmas. travel in november, it is one of the best years for travel. experience rather than stuff. luxury watches did really bad, another thing you can maybe

blame on men. high-end jewelry. tier retail isid expected to do really well. we are going to get some hard data on the numbers coming up sometime this morning on what sales actually were over the holiday season. neromberg's ed duffin walking us through fedex. thank you. not that much movement, but we will take a look at it next on "bloomberg ." ♪

vonnie: welcome back to "bloomberg ." iran is putting pressure on the price of oil. boosting exports after sanctions on the country are lifted. brent crude is poised to end 2015 with the lowest annual average price in 11 years. , 850 $7 million has been pulled out from the u.s. exchange rate backed by everything from metals to green. the value of those funds is down 26%. raw materials have drops to a 16-year low. another milestone for the new "star wars" movie. it grossed more than $1 billion worldwide in 12 days. that is topping every movie. it even surprised disney executives, who bought the franchise from george lucas in 2012. brendan: now we going to head to global go, where we look at

international stories. saudi arabia is unveiling details of its 2015 budget. correspondent is looking at numbers this morning. what is the actual number? , ahad projected a deficit hard number to swallow what does the actual number look like that was real this morning? actualave not gotten the percentage deficit number yet. what we do have is the total percent, roughly $100 million. some economists estimated it would be a bit higher than that, $100 million is a huge deficit for saudi arabia, which surpluses,nning surpluses that have allowed in amassing of large reserves. spendn: how long can they

down the reserves? you cannot sit on your reserves forever. riad: absolutely. if you spend at that sort of rate, the imf estimated that the less -- unless saudi arabia takes steps, able be five years before they have eaten up their reserves. issuing -- they have room to do that. the debt to gdp was the lowest in the world in 2014. it is suspected to go up about 16% of gdp this year, and it will rise rapidly unless they do something. that is what people are expecting to hear from this budget. what are they going to do? are they going to cut spending? there have been hints that they might take some measures to do that, but they have to balance that against their own needs in terms of growth. they had to keep growth going. a problem with youth unemployment already, and they

cannot afford to cut back spending to the point where the growth is too low or even shrinks. are the options as a practical matter as we wait to learn the details? spending,astructure social programs? what levers can they pull or push? of the key things people are watching out for is subsidies on fuel. subsidies have already been cut on fuel, and saudi arabia, some people are expecting it to do the same, or at least to maybe not remove them completely, but these are huge burden on the saudi budget, which has saudi arabia, a sizable population. now that oil prices are low, it seems like an opportune moment to take this measure that the imf has recommended. other measures could be, on the infrastructure side, they could

delay some infrastructure projects. the expectation is they will stick to the big ones, like the riyadh metro system. other measures would be privatization. there is some discussion whether they should privatize some ports . there is a variety of things they can do, and the question is how far they go this year. they could probably do it gradually in order not to -- thank you very much for joining us from riyadh today. up next, the outlook from cease with on top travel companies on "bloomberg ." ♪

david: welcome back. you are watching "bloomberg ." in the best of go interview,

stephanie and i spoke with ceos of travel companies including delta, southwest, and priceline.com. i think the u.s. economy is really strong and continues to be strong. mexico is doing well. the caribbean, central america is doing well for us. parts of south america are ok, but brazil, venezuela are not doing so well. eastern europe is not doing so well. russia, because of the sanctions, the middle east, because of political and social unrest. japan is in its 20th year of economic status, if you will. its currency is weak, and its economy is not doing well. china is holding its own. it is really a different picture in every country. i think the important point you just made his currency. the currency issue is an important issue for every consumer company in the u.s. that sells overseas. the strong dollar does create

real currency headwinds, and in fact, if you look at our unit revenue performance in the third quarter, much of our unit result decrement was as fuel rolloff charges and the effect on currency. most multinational colorations -- most multinational corporations will have currency headwinds in the u.s. for a pretty long time. it looks like the dollar will be the reserve currency in the world for a long while. >> we have a lot of foreigners traveling in the united states, not nearly to the degree they have in the past, primarily because of the strong dollar. this will pass, but that is today's reality. a lot of americans overseas are taking advantage of the dollar, going to europe, heading to south america, even heading into asia. that is a clear trend of the business. of our capacity

today is in international markets. at this point it is all directionally south, the caribbean, mexico, central america. in terms of our future route expansion, that will be our biggest opportunity. ofwill still have plenty opportunities to add new routes within the 48 states, but it is pretty much connecting states that we already serve and adding additional frequencies. it is important but will not take away from our domestic focus. david: shannon pettypiece, coming back to the united states -- you said more -- you said people are spending more on restaurants. are they spending more on air? shannon: december was the biggest month for travel spending on record in it goes back to experience, people wanted to spend money on memories rather than stuff. consumers are spending big on travel. it is becoming an increasing budget item for them, and one thing we did not hear most of

them talk about is oil. and the profits they are making off of this. as airfares come down, consumers will see more opportunity there. maybe it is a good opportunity to take that trip. david: is good for the bottom line because they do not have to pay as much for fuel. there is the question of whether or not the business cycle is tied into airline profits as well. we are never completely certain whether that bond is broken. . am coming back to this in the meantime, shannon is going to stick around. we are going to move south to puerto rico new year's eve. it may not be a day of celebration in that territory. the country faces billions in bond payments on january 1. ♪

♪ welcome back to "bloomberg ." you are looking at london where markets are closing for observation of boxing day which is actually on saturday. brendan: looks pretty nice.

we are here with shannon pettypiece. looking at boxing day and all the other things bought. first, news with vonnie quinn. areie: in iraq, forces claiming a major victory. to cap recaptured the main government complex over the city of ramadi. defense secretary ash carter criticized the iraqi forces, saying they had no will to fight. 2020ank of japan says the tokyo olympics will boost the japanese economy by almost $250 billion. they say construction spending will expand gdp by up to three tens of a percentage point over a secure period. and in chicago, another police shooting has raised russians about the city's use of lethal force.

authorities -- video showed an officer shooting a black student 16 times. shannon: wanted to look at some of the individual stocks we are watching today. over the past year, they are up almost 80%. shares of this company, pep boys -- agreed to a 974 billion remember, carl icahn had made a bid for the company. it is possible that a new bid may come. icon's last bid. we will see if he does come up with a higher bid. shares not trading at the premarket, but you will be watching it. another stock to watch is

valeant that has been under such scrutiny. its ceo, michael pearson, has been hospitalized for severe pneumonia. hospital in new jersey said he has been discharged, but was still hospitalized elsewhere. pearson is 56 years old and analysts say that any uncertainty surrounding leadership ishis so critical that can make investors nervous. we have been talking about oil declining. we are watching oil stocks as well. the direction of oil and stocks have been tied together and we are seeing the big cap oil stocks under early pressure. exxon mobil and chevron already declining along with prices. have been talking a lot about what happens with the currency and with the strong dollar and what it might mean for exporters. i learned today, there was a that wasun across

written by paul hannon entitled currencies have a stronghold on exports." a shift in the dynamics is impacting a wiki has local currency. eak local currency. this piece says, in terms of exports, people are incorporating many more goods from overseas to begin with in their goods. ,t actually blocks the fourth so a stronger dollar does not hurt u.s. exporters as much. the exporters in europe and latin america. brendan: this was an interesting pick. new, new trait theory. we are fighting so many things are a consequence of the supply chains. more and more intricate when there was a flood in thailand.

there were second and third order affects all over the world. -- they and you hear have called out companies blaming currency for all the problems. we just heard from pharmaceuticals, retailers, anyone you can think of, it is always currency, currency, currency, just like the weather excuse. hold on a second here, let's look at the economy. there was a paper presented at jackson hole that looked at the effects of currency on prices. most trade action priced in dollars. it is difficult to export deflation to the u.s. it is easier for us to import inflation. the things we learned in macro,l one and two -- still govern policy. david: we'll talk about globalization.

have not anticipated. it may reduce some of the volatility. brendan: and when did you -- one andne into two? he writes that -- you have to take a step back and listen my they hate obama so much. the focus group was illuminating. some still believe the president is not christian. many people feel like he does not love america. within this growing faction, mr. turnbull can say just about anything. i thought that this was both fascinating and terrifying. in the careers we have built-in broadcasting and reporting, to look at something and figure out

whether it is true are not an report it the best of our ability. it is true that the president is a christian. a well-established fact. when you look at the poll groups, his focus groups, he was stunned, i will stand, these are people that we can't reach. there are people you cannot reach for things you have verified to be true. shannon: and currency, we are operating in a different world. operatingics, we are in a different world. old assumptions don't apply. the way people see ins are different than when we took politics, political science, 101. there are people who are not catching up and people who are. it's: i speculated that not so much they don't believe the facts. this is the more underlying anxiety that gives rise to anger. .hey have lost their jobs a whole category of jobs has gone away. the world has become a different place. they are very anxious about it. this is something that

john kasich is very well. in the first debate, he was only -- he was the only republican addressing what is going on. i understand there is deep resentment and anger. he has given voice to that. shannon: and a lack of trust. i was doing a report on gun sales and a lack of trust. brendan: not just a bunch of elections, but deadlines for puerto rico. nearly $1 billion in bond payments due. keller for bloomberg news, laura, thank you for joining us this morning. walk us through the deadlines. what is coming up for puerto rico? laura: gateway first is the big deadline. -- january 1 is the big deadline. brendan: how much is due? billion.

onwill have a big crescendo january 1. at that point, it is a bunch of different agencies that are supposed to be paid. the governor said, look, we don't have this money. we might run out of cash in december. some of this is posturing, they don't want to pay the bond holders. there are extraordinary measures they keep taking. they may be able to pay most of it, maybe not all of it. david: what is the difference between the $357 million in the general obligation fund, and what is due from the utilities? what options do they have? bond issuingferent agencies. each of those has its own stream of cash, its own revenues and is able to use for the different payments. you start to get into this monopoly of let me have this, let you have that, because all of the agencies are intertwined.

you can't always take money from one place and put it to another bond payment. david: they made different types of promises. one of these bonds, they said, we will pay for it out of the sales taxes. floor: it is a dedicated revenue stream meant for that. there is a lot of legal challenges because you have a tier of different bonds. there is a second-tier, third tier, depending on how you think about it. it gets complicated, that is why so many people and puerto rico say we need a bankruptcy court, or control board to say, this is the pond that is most important and you must pay this. inid: so the procedures puerto rico -- is it too late for congress to allow the utilities to declare bankruptcy? laura: it is not too late. it is the theater of drama happening right now. we have known for years this was

going to happen. there are certain things that would have been helpful that happened two years ago, but there are things congress will be asked to do in the next couple of months and next year. brendan: the supreme court said they were gone a step in. but they are in -- the congress is in recess. the court will not be able to hear the argument until march. laura: that is true. i was in cairo for the last two weeks. one of the things i was reading when i was over there was the democratic senators said, we would like to put a moratorium on any lawsuit said bondholders can file for the next couple of months. ofjust buys you a little bit time, does it mean that the bondholders cannot sue if they don't get paid later on. it is all coming to a head here. brendan: they goes to david's point. the process rubicon where we are not settling -- where we are settling it in courts. need somet is why you

entity whether that be the courts or control board that say this is how we are going to do it. the fact that the matter is that puerto rico cannot afford to pay all the debt and provide essential services for its citizens. david: laura keller from bloomberg. thank you for being here. we will see how it plays out. next, it is the best of "bloomberg ." we'll hear from some of the biggest names in retail, ahead. ♪

♪ shannon: welcome back to "bloomberg ." vonnie: i'm vonnie quinn.

four cars are being added over the toccata airbags. legacy and outback's -- they said that could affect more than 450,000 vehicles. at least nine debts are blamed on explosions caused by the airbags. ark zuckerberg is making personal appeal toward india to allow a free internet service. the plan allows customers to access facebook and other services such as jobs from their phones without a data plan. and it has been a record-setting holiday for amazon, the world largest online retailer, has more than 3 million people set up for amazon prime. amazon says a record number of allows unlimited free shipping. david: if you very much, vonnie. turning to all-consuming.

we killed was a hot topic as sales slumped heading into the holiday season. he spoke with some of the biggest names in the industry and how they view the strength of the consumer. >> you really focused on the united states, north america and china in particular. there is going to be a lot of growth. the investment we are making help us to serve customers that we can take advantage of the growth. the u.s. market will be at least as good at as it has been this year. to develop $1.5 billion as our enjoy $10 at them minimum starting rate. that adds up to 75% of pressure. the rest of it is in e-commerce. we had to put all the capabilities in place and build additional platforms and create fulfillment centers and earned that. we are getting to that point. -- we have the third

most visited platform and mobile history. >> we have really made sure to focus on understanding today's consumer, how they are shopping differently, and being choice full about the priorities we've set. you're in the early stages of bringing the brand back to life, but the last three quarters have consumer isoday's still connecting with the target brand. >> we think we have growth opportunities for a number of years. we have certainly learned lessons from canada. as we go forward with some of our initiatives in the u.s., we are being very thoughtful about how we face those. we're going to test, learn, validate, before we rapidly expand. our big advantage is the fact we have stores. we had 1805 stores across the country. as i said, consumers in the united states still like to experience physical stores. ago, i: 11 years

launched with e-commerce and people thought i was saying. they said no one would ever buy online. it is now 20% of our business. i think there is always going to be room for bricks and mortar and i think it is going to be, how do we make the experience seamless? how do we personalize it? >> for me being private is a luxury. we don't have to make decisions is on quarterly earnings. that is the bottom line. you want to grow our company in an organic way and in the right way for the future. >> i think there is a challenge that when you look at the pricing, the pricing appeals of people who need to merchandise. i think the real challenge in life is how do you appeal to people who want merchandise? i think that is a very big difference. people who need merchandise, to put it on the table, the people who wanted, what is that experience? david: ok, so shannon pettypiece, we're starting to get some actual numbers of

mastercard. it sounds encouraging? shannon: second really strong holiday. doesn't mean every retailer has a really -- has had a really good holiday. spinning up 7.9% you exclude autos -- when you exclude autos. that is higher than estimated. a lot of people were talking about 4%. these mastercard numbers are better than most analysts expected. you heard all the ceos talking about e-commerce. it shouldn't be a big surprise of all those shopping, up 20% this year in e-commerce. aboutedex is complaining getting their shipments out, it gets expensive and shows you the typo volume that companies are dealing with. another couple of interesting numbers, electronics did poorly, which we heard in the third quarter. there is no new iphone. it was an apple watch, but how many people are getting an apple watch?

is no real need to upgrade on tvs. the prices on those have fallen. surprisingly was furniture, but that speaks to a lot of consumer sentiment. mastercard is said furniture is an item that shows the consumer is selling strong. you will be able to pay for that sofa six months from now. furniture is a bit item and shows confidence in their home. it is a way of investing in your home, increasing the value. david: that is the one number that economists are going to be pulling out of it. the rest of it it is interesting. that actual focus on durable goods is good news for us. shannon: i don't think that every retailer is going to have an awesome fourth quarter. there will be winners and losers. brendan: all right, shannon pettypiece will stick with us. consumer discretionary

stocks have been the best of the year. is in theiscretionary top spot, up 9% year to date. i want to look at retail as a part of that. retail has been the best performing group within that, but it is because of online, mostly, not all. netflix is the best performing stock in the s&p. amazon's number two. expedia, which is surprisingly in the -- surprisingly in the index. you have specialty categories, home depot, speaking to the idea of sprucing up your home. ell brands is in there too -- l brand is in there too. it is very clear the diversion between old and new retail and what is driving the gains here. brendan: when you have been back then beyond -- bed bath &

beyond. autozone right there that speak to doing work on your car rather than buying a new one. david: i think matt miller personally accounts for a lot of that. like consumersks are spending their gas savings. he found two dollars saved on gas was spent this holiday season. they are driving more miles, their tires are wearing down -- david: they are driving more miles to restaurants. next, alibaba can of its stake in chinese department store. it is on a list of companies to watch in 2016. julie hyman has put that list together. stick around. ♪

, bloombergback

intelligence put out its 50 companies to watch in 2016. we are focusing on a few retailers. julie hyman is here with us. we looking at? watch atmpanies to various catalysts. doesn't mean it will be out performers, but could be in the news. alibaba is one of them. the company has a stake in a chinese retail store called "in time retail or co- it has an option to increase that stake and could come in 2016. that is something that could its exposure. it is interesting because alibaba, the proposition was, it was going to get exposure in the united states. this is its big entree. the biggest catalysts in 2016 should not be increasing its exposure in the u.s., but in china itself. brendan: this is a bricks and mortar? matt: yes it is.

we have at other retailers do that as well. a little bit of bricks and mortar front. brendan: that exposes alibaba even more that they are basically a play on the chinese consumer. the biggest story in economics in 2016 as well be chinese consumer confidence? it is just as important for alibaba. julie: yes, if not more so. macy's has been under pressure to monetize its real estate. it has all of these department stores. could capitalize on them as sales have been fighting to some extent? not all of it is real estate, it's most choice real estate has not worked so well. the stock itself has got nothing but down essentially. you have this issue with these dime retailers, sears is one,

macy's doesn't appear to be one at this point in time. great tois, it is monetize the real estate, but what is the underlying -- brendan: don't they need those warehouses in order to make good on promises of next day delivery? julie: we're talking about the department stores themselves. would do a sales leaseback. he put it off and lease the operating companies. that is the structure that has been employed. shannon: speaking of dime listenrs -- well, i mean -- brendan: i think you summed it up. thank you very much shannon, for being here with us. next, "star wars" was over million dollars -- a billion dollars.

♪ a billion dollars at the box office. no other movie has hit that mark faster than "star wars." even disney is surprised.

regulators are struggling to catch up. a fortune on four legs, buyer to spendle to kentucky money on resources not get sent to the track yet. ♪ david: welcome to the second hour of "bloomberg ." i'm brendan greeley. we are happy here, but we miss stephanie ruhle. we are happy that you are here, carry. and we're always happy to have vonnie quinn. vonnie: it is a major victory for iraqi troops. the iraqi has recaptured the city of ramadi. according to the associated press, parts of ramadi or so under government control.

japan and korea has reached a landmark agreement. japan's foreign minister delivered an apology. japan agree to the established an agreement to compensate victims. a series of tornadoes killed 11 people, one of the twisters had of up to 100 miles per hour. 1500 homes were damaged or destroyed. flooding in the midwest is blamed for at least 13 deaths. missouri's governor has declared a state of emergency. i'm vonnie quinn. not to julie hyman on the markets. julie: i want to start with valeant. that michaelrlier pearson had been hospitalized

with a case of severe pneumonia. on company is now commenting it saying he is not on medical leave of absence effective immediately. it the board of directors has created a new ceo that will callan, andrt, dr. an executive vice president. those three individuals will be serving in an interim capacity. michael pearson has been hospitalized with a severe case of pneumonia. there is this office of the ceo that has been created in the interim to take over for him. the board of directors of valeant created a committee to oversee and support the office of the ceo for berries members of the board. -- for the ceo of various members of the board. the company has come under a lot of scrutiny because of its pricing practices.

stocks that individual just to get a check on the broader -- we are seeing a decline in u.s. futures. we got the saudi arabia and budget numbers. ionic increasing exports -- ran increasing exports. take a look at the bloomberg terminal. at the correlation between the s&p 500 and oil. you see the correlation near a two-year high. moving more and more and lock steps. as we gotten to this last quarter of the year, oil prices has had a negative effect on stocks. we are looking at the dollar this morning versus the euro. here,ro gaining a little

the overall trend has been more euro, higher dollar. david: let's turn now to oil. we have been talking about it quite a bit. we are here with andrew cost grow.h -- cos what is happening in the oil markets as far as you can tell? the continuation that they are going to come to the market next year, whether it be 500,000, 750,000 or $1 million, persisting they will be here next year offsetting the supply declined to have elsewhere. could be a one-for-one offset where we enter the year at the same tune as we exited the year oversupply. that is premature what it is looking like, a continuation of iran making sure they're going to come to the market next year. brendan: it is pretty ironic that the united states is trying

to have a major oil producer in the next couple of years. the whole market went south on them. now they're shutting back down the wells. -- it is note sustainable for the long run. what that does only sets up for a quicker rebalance on the backside of this. the lower we stay longer, the quicker we rebalance. if we get into that $40 or $50 price range, if you draw comparison to the base metals theet, it took years for primary metals to fall. wti falling in a matter of a year and a half. it gives you the idea that the u.s. producers has cut the cost relatively quickly. the metals and mining side of the equation has had time to readjust to a slowly deteriorating price environment. you don't really have that many to push back on the energy side.

absoluteeaching their nadir at this point. there really not much more to get. brendan: julie, what does bloomberg show on this? julie: i looked at this index of base metals that enters suggested -- versus crude oil. yet the longer term white line. then you have oil and yellow. this is a 50% drop over the past five years in the space metals. it has taken that five-year periods to come down. however, it has taken one year for oil to drop that same amount. just a visual illustration of what andrew was just saying ity ofthe repetitiv what is happening base metals. where are we going to see really low pass-through cost to consumer? what is the consumer angle

coming especially through the holidays to lower prices for everybody? andrew: on the retail side, you have more money in your pocket to spend, but if you look across the sector that has been touched by oil, airline companies have predominantly had a 50-50 hedge book heading into the next following quarter. by now, they are pretty much open, no hedges whatsoever. side, it is art tailwind as you see more auto suppliers start to increase that mix toward trucks. it is a higher-margin product versus cars. -- ourlysts said it analysts say they're going to that next movement. by transport side for railroads, it is kind of a wash relative to

lower surcharges that they are receiving versus being offset by they bemmodity, whether on the crude side of the cold side, for example. david: think you very much for joining us. the question is, have you seen it yet? you should know what that is. the question is, who hasn't seen it? "star wars: the force awakens was the first picture to hit the $1 billion mark so quickly. paul, thanks for joining us. this is quite a story. paul: this is one that keeps on giving especially for disney. equally strong second weekend. it is playing very well across the globe. what investors are looking for is china, that is where the last major market is where it will open. it doesn't open until january. brendan: january 9.

paul: i will be the market that will determine how big it will be. could it be the all-time leader and knockoff "avatar." brendan: it is the second largest market in the world, china, and it will surpass the united states. paul: it is a low single growth business in the u.s., it is a solid, 20% grower in terms of the box office and has been for the last five to seven years. that is where hollywood really recognizes is a huge growth market for them. they are green lighting these big films that cost $200 million, they really want to make that it plays well in china. david: let's take a look at what bob said last week. in: when we acquired lucas 2012, while he knew that the most important thing we had to do was make good films, starting was this one, that it

always going to represent for the company more than just a movie and more than just a movie business. as we look ahead, there is a lot wars"ivity that is "star related, like large the park lands. talked a little bit about the thing parks and how this strategy relies on just that selling movies, but only a lot of things. i am interested in their slate of "star wars" related movies. what does this success due to those plans? they really had a lot riding on this first movie. the first movie not only had to be big, but the really big, to set up their franchise for the next five to seven years in terms of more "star wars" movies. they have some other movies coming out, some prequels, merchandise, being parks, it is all predicated upon this first movie being the global

blockbuster it has turned out to be. bob said i invested $4 billion in the company and making this thing and it had to work, and it looks like it is. david: we want to turn back to valeant. it sounds like there might be more to it. here's are falling this morning. the ceo, michael pearson, taking medical leave of absence. he was in the hospital with pneumonia. bloomberg drew armstrong joins us on the phone. drew, you know this company well. what can you report for us? know right now is that over christmas, mike pearson, ceo of valeant, he was hospitalized with what the company was saying was severe pneumonia. run of the kind of pneumonia we are talking about, serious enough that he needed to be in the hospital. he was in the hospital over the weekend and we know that he was discharged from one hospital in -- but is, but is in

still hospitalized, we don't know where, the company is not saying. they're not getting updates on his condition. he is taking a medical leave of absence, which is going to last for a bit longer and run in part by the committee of executive at the drugmaker. this couldn't come at a worse time for valeant, to be honest, given what the company is facing right now with the level of scrutiny trying to get the business back on track. drew, the obvious question when you have a ceo out n extended period of time is how instrumental is he to the strategy of the company. is he the company? is simental. pearson built it from a failing bio company in 2008 and turned it until -- and turned it into the kind of pharmaceutical company it is. he is the original executor of its strategy and entire being. we were speaking to analysts

last night and one of the things they were saying is that there is not an obvious successor. michael pearson is a valeant. -- isabel and. david: valeant became under increased scrutiny accounting irregularities at the company -- of the company. do we know where that investigation stands? drew: the board is in the midst of this ad hoc committee to investigate what happened. the real issue is that in the wake of some of these questions where valeant had to cut ties a may distribute is in really rearrange some of its is his practices, michael pearson was the guy leading up all those changes. the company indicated that there would be going through some tough quarters and report down

sales. it had recently announced a deal with walgreens to help sort some of that out. now michael pearson is in the hospital and i believe everyone is wishing him well. but he is the guy helped leading the change at the company right now in an exceptionally critical time. keep in mind, they lost half of the value of their stock back in august. the turnaround -- despite all the criticism, most of the top shareholders are saying, he is the guy, he's got to stay, we need him. david: so we are looking at it right now. shares are down 2.2%. what do we know about the three people appointed to act in his place? drew: i think at this point, we are still going to be learning about them. investors will be familiar with them. these are voices that have been hurt on the conference call. michael pearson has been the face of this company and the one that investors have really counted on to drive its strategy and growth over the last several

years. brendan: true armstrong, thank you, we have been ripped -- we have been following the reporting on this for months. companies are going to get hooked up? stay right here. ♪

♪ shannon: welcome back to "bloomberg ." i'm vonnie quinn. the ceo of valeant pharmaceuticals is taking medical leave. michael pearson was hospitalized or a severe case of pneumonia. the team of executives will take over for pearson monti is out. saudi arabia -- the new budget plans to be caught by 14%. news media says the

government will unveil economic reforms next year. meanwhile, iran is putting pressure on the price of oil. afterre boosting exports sanctions on the country are lifted. crude is poised to end 2015 with the lowest annual price in years. brendan? brendan: there was a steady stream of acquisitions this year. no one expect for that to stop in 2016. one industry will keep bankers busy -- media. alex sherman is always there and tends to break the stories when the consolidation happens. here's what i want to know out of the gate, no industry is more subject to regulatory scrutiny, few are then -- media particularly, has that environment change? it's changed say some degree in the sense that there may be no more deals to be done. ,f you look at the cable sector

there were very few deals left because -- brendan: we're going to get your new microphone because we want people to hear what you have to say. when you look for that the environment for mergers in the coming year, what is it that you are looking for. >> the big thing i look at is what is going to happen on the antitrust fun? i am sure alex can tell us more of this soon. it derailed and basically delayed a lot of big deals that we saw this year. a much moreee aggressive antitrust dance coming from the department of justice. these deals, even if the terms are good, we are going to be sitting there for a while being heavily scrutinized. brendan: comcast went away because of antitrust. kerry: completely went away. at the end of the day, we will continue to see that type of

pressure on those deals. looking at a different sec from two years ago? >> the sec might change one's obama leaves. you may see some of these deals in 2017. it is not quite media, but honestly, whole world of telecommunications is emerging. it is possible sprint and t-mobile may try to do something in 2017. no way they do it in 2016. david: is there any real danger with charter time warner cable? alex: there is a higher likelihood that charter-time warner cable goes through. because it did not go through, doesn't mean no cable deals can go through. it was a sign for him to say, look guys, we tried this one and we are not going to stand in the way too strongly.

kerry: our consumers getting much in a way out of these deals? you said, with broadband and with mobile technologies -- alex: that depends on which side, that is a heart positive to answer. on the one hand, media is so big , it depends on what you are talking about. the cable companies would argue that by coming together, the are able to push back on it his knee, cbs, time warner's of the world and actually lower prices. if they gain more leverage, they are not good to take the price increases and turn them around to the customers. we're going to push back on you because we are big, and prices will be lower. that said, i don't really think people think that will be the case. cable bills just keep going up, and up, and up. brendan: the perverse argument has been sent it is already a duopoly locally anyway, mergers

are not going to change the crummy structure of your local cable access. [laughter] something that is an alternative to cable altogether. alex: the cable companies are ok. this is a big game people don't understand. cable companies may be ok with raising your bills and having to cancel cable because if you cancel cable more, you send a message to disney that says, people aren't buying espn anymore. we are ok with them drop in tb altogether because we are going to make a higher profit margin on broadband and phone. rwe bloomberg coming up next. ♪

♪ julie: time for futures in focus. crude oil has been in a bear market. it began showing signs of a

recovery. is 2016 the year oil mix of comeback? joining me is todd from encino brothers. todd, we are continuing to see oil work its way lower here. we got a couple of elements pushing it down. numbers.duction iran saying it is going to increase exports. are there any signs of a bottom here? don't think the bottom is in yet. this week is going to be about what holds. will it rumors, or the volumes? weak.s will be -- the realtion is question is, how the exporting ban is going to affect countries that have a high percentage of gdp in that revenue. right now, well prices are very susceptible to declines.

.ou can throw out a number option models are pricing or $24.e between $22 that is a good place to start. i don't think we are going to get there tomorrow or the next week. this is going to be priced and repriced. there will be a downside pressure for oil, especially with the u.s. entering the oil trade globally. julie: just to be clear. is the price for 2016? >> yes. julie: gotcha. we will be right back with more "bloomberg ." ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20.

it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. 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. ♪ david: welcome back. beautiful, warm holiday morning. isn't that gorgeous with clouds in the sky? i love it.

we are here with keri geiger. we want to start with bonnie. vonnie: at least 60 people killed in nigeria. suicide bombings. hurt and staffers say they are overwhelmed. david cameron visited the community's northern part of written hit hard by flooding. weeks of heavy rain. and they took time out at the world's bassist airport for a celebration. the 100 millionth passenger of the year was honored. missed his connecting flight.

journalists.00 now with julie. julie: futures continue to move lower. fitbit movedorts up 20 spots on the free app list on itunes to the top spot. overany people got fitbit the holidays this year, 5%. down 76 percent after one of the drugs it was testing, and antiviral drug failed to meet goals. stock taking a tumble also after shale decided to end its contract with the country for a harsh environment. those shares down by 1%.

let's get to the morning meeting where we hear what he banks are looking at today. north america economist emmanuel joins us now on the bank inflation outlook. i guess this is also a question rent in greeley wants to talk about because he talked to janet yellen about it last week. has in quite strange. when they are trying to increase inflation, do they have ability with health care in particular? directly. the issue is it has been moved by a lot of sector specific factors are the affordable care act, changes in insurance premiums and policies. it is not something the central bank can directly affect. if the fed continues to be relatively stimulated, and

allows things to gradually build in the sector, which can overtime put them up in inflation. indirectly, there are ways they can put a little bit of upper pressure on it. >> you have said this could have an upward effect on inflation, the main measure the fed looked at. but it seems like there are a lot of downside risks to the forecast, that yes, it could happen, but you also see a decline as well. >> absolutely. health care is an area that is extremely difficult to forecast. a lot of analysts are looking very closely at it. thatof the huge cuts affected health care, more of a base year affect. it is not the case that we think prices are suddenly tapering off.

prices still coming from a legislative act 70. as i mentioned, you have upper pressures in wages, upper pressure on inflation from those effects fading. it is complicated and very dip will to forecast it with decision. we are due for modest upsize. >> why are the effects of the aca so difficult to suss out here? we not know exactly what effects. what don't we know? what would we like to know that we do not know? >> there are direct cuts the aca had on specific kinds of payment for payers. area ofe is a whole research trying to understand impactlic sector cuts

private sector reimbursement rates here at perhaps medicare and medicaid payments dropped and that has certainly had a negative effect on inflation. but how did private insurers react? did they also drop reimbursement rates or is there an offsetting an opposite effect? those impacts are difficult to understand. sense of the general direction prices are going, and there is a huge it of uncertainty around that. >> anecdotally, you see a lot of reports about the shifting of the health care cost burden to consumers to some extent. what are you empirically seeing in terms of your research and where those costs are being borne out? we're definitely seeing that empirically. 10 years now. more and more, the costs ,ssociated with health care shifted on to consumers in terms of having higher deductible plans. what it means is they will be

more discriminating and sit it out and try to self medic eight as opposed to going to the doctor or the brand name drug. more and more price discrimination and that is having impact on pushing down prices through lower demand. something difficult to quantify but it is a broad trend we are seeing and we think it is only going to continue further. we think it is a factor adding downward pressure on overall prices. there are a lot of moving prices here. we think it is a broad trend exceeds some of the recent measures and will likely go on going forward. >> thank you so much, talking to us about the difficulty predicting health care inflation for her and the federal reserve. brendan? we kept hearing rich people would dominate the presidential election.

watching the campaigns, and following the money in particular. she is writing now about the impact of big money. what i'm getting is basically sheldon adelson, we hardly knew ye. super pac's are irrelevant. .> not quite this could all change, but it is different than what we heard at the beginning of the year, which is basic he through the third quarter, the super pac's are spending money, but not getting the effect in the polls. the more they spend, the worse the candidates they support are doing in the polls. no one illustrates is better than jeb bush. in this election, things matter more than just having a big pot of money. matters andsider jeb bush is an insider. the money could be spent in a more effective way. we will have to see next year.

right now, i'd is not getting anyone in -- much traction at all. >> let's talk about the way you eloquently put this, dark money forces. for were a huge concern both sides and both parties during the 2012 election. you're now seeing dark money, though it can come from other places rather than super pac's, it is not driving, death campaign financing. moving forward, is it a genuine shift on how elections are embracing dark money, or do you think this is just cyclical? thisit could just be election, but saying i don't want any money or billionaires behind my campaign, people like bernie sanders are saying that. gets away withmp saying, i don't have any outside

money and i will not be in by anybody, that seems to be what voters are looking for. it signifies i'm totally independent and cannot be bought. david: donald trump is a good example. spending any money. the interesting one was ted cruz, who turns out had a fair amount of money and he is just not spending it. >> correct. he has raised a lot of super pac money. they are supposed to run independently of him. super pac. he has also raised a lot of money through his campaign but he has not -- that super pac has not spent much money on advertising and yet he is moving ahead in the polls. even if you raise it and do not spend it, you are doing well. if you try to raise it and do not to the good job raising super pac money, for example, hillary clinton, she has outraised her super pac and she is doing well.

the super pac's do not seem to have much of an effect at all. david: if the money is there, it will get bent? >> that is true. continues the pattern . we will see. we are only five weeks away from iowa offices. we will see what happens when we get into primary season. >> is it possible the sunlight is actually the best disinfectant? a candidate like bernie sanders justo relatively well talking about the stuff we have been reporting on. wouldn't it be nice? i think that would be the best way we could go. i think regulatory, it is almost impossible to regulate money in politics. it will find its way in through some backdoor. transparency to me is the best way to handle it.

>> all right, paula had once the misfortune of being my editor. larry summers, david rubenstein, on the u.s. economy. that is coming up. ♪

vonnie: welcome back. --estors are bailing out everything from metals to grains. rob materials have dropped to a 16 year low.

record-setting holiday for amazon. it says more than 3 million people signed up for the amazon prime service. during the third week of september. a record number of packages shipped allows free shipping. fedex is being hammered on social media for missing some deliveries. the company blames heavier than expected last minute shopping volumes. it says packages will be delivered today. is your blue -- bloomberg business flash. grew ashe u.s. economy gdp figures last tuesday showed the economy grew at a 2%. this past year, in our interviews, we heard from heavy hitters who gave their take on what to expect from the u.s. economy. bit of a slowdown

to her we can see it in some of our businesses. it was stronger at the beginning of the year. be a surpriset given the things that of happened over the last few with dramatic changes in currency. it is harder for americans to export all kinds of other issues we are facing, with china, commodities generally going down. into all truncated narrow window. the fact that these things happened over six or eight weeks , it was more than everybody could exist -- could absorb here the nature of that is that people lose a little bit of confidence and they wait to see what happens. optimistic things will go on a more positive trend.

how much of the stuff can you take all at once? of the lastut recession in june of 2009 and we tend to have her sessions every seven years in the united date since world war ii. in -- at some point in the next two or three years, you could expect a recession. i do not see an indication of it, but you do expect a slowdown after the growth of the last few years. europe will probably be about 1% and china is slowing down to probably 6%. ado not think we are going to precipice where there will be a recession. i think it is just modest growth for a while. selleralways a buyer and in our business but it has been difficult to buy things in our business because the price has been relatively high. the average cash flow multiple has been almost 10 times in the last couple of years. it is now going down a bit. it will be better to buy things in the next year or so and a

little tougher to sell things at the prices you want to get. >> i would rather be playing america's hand to her you look at what we're doing with energy resources and great universities and silicon valley, a basic resilience of the united states, we have got deep structural strengths and that is a huge thing. but it is not a huge thing that carries you through macroeconomic -- the united states had huge structural strengths in 1828 but that did not stop a painful decade from following. we have got to be focused on making sure we're doing to grow thee can economy. i talked before about public investment. there is a lot we can do to spur private investment and i think

government needs to recognize that confidence is the cheapest form of stimulus. david: this is what i am perplexed by the you talk to economists and they say slow and steady growth. nothing robust, but we have such volatility. why don't we just relax and enjoy the 2% growth? classic depends on how long a view you take care of looking at women entering the workforce, that having peaked and declining in the future. long run, it will all work out, but in the long run, we will all be dead so it does not really matter here is what i was struck by was david rubenstein's comments that expansions do not last that long and eventually they have to die. janet yellen made this point in her press conference, expansions do not die of old age. >> it also feels like we have been on the edge of a recession since the last one. it has been hard for everybody, e common -- economists,

particularly the middle-class, to except the fact we are no longer in a recession because growth has been so slow. the gains from the last session have been hard-earned at this point. benefits have been unevenly distributed. look at the stock market, a lot of people are not feeling that. i think economists are just coming to grips with slow long-term growth and politicians have not begun to fathom what politics will look like. a steady and rival growth. if you do not get the path to the wages, i do nothing people will have the confidence. planet, a $120 million that will get you from london to new york in less than five hours. ♪

david: welcome back to her two of the biggest themes and financial crime has been -- and wall street's anti-money-laundering rules. >> these were big news this year. spoofing has really exploded into the world of white-collar crime this year. it is the newest white-collar crime. individualsargeted and it is all about computer trading. the bottom line is under the 2010. frank act, it made it illegal to cancel by orders. it is largely the equities market. >> it is illegal to make in order know you will cancel it. >> yes. if you're intentionally taking market, andnto the you have intended to cancel these orders, you can actually

go to jail for that we saw a manager, this year go to a trial and he was convicted in less than an hour for doing exactly that. >> my friend is a lawyer. >> you can go to jail for canceling orders you intended to cancel. make a lot of money on this. cosco can make millions of dollars on various programs. david: why this year? is there enough that to make it possible now? >> it went from being conceptual wrongdoing to a wrongdoing that a groups of prayer -- group of prosecutors and elsewhere are zeroing in on? one of the big criticisms of the doj is they do not get

individuals prosecutors on the big cases. individuals.bout it is about traders and firms, guys working in their basement. >> there was a lag time to even understand what this was. is in thedence algorithm. that is the fascinating thing. they leave their own trail of evidence. >> there definitely was a lag time. that youite remarkable did see convictions and you saw some of the biggest cases, the arrest of a man in london for the 2010 flash crash. that was all about swooping -- spoofing. is a something that sickly, people are worried about it and juries are convicting on it. >> fascinating. >> all right. we're talking about superfast

carry-ons. business plan for fly from london to new york and 4.5 hours. the plane is set to cost 20 $500 million. the speed of sound. david, you've found the story this morning. is this your dream? >> $120 million to shave $2.5 off your flight. >> i was going to say, you are not really saving a lot of time but a lot of expense, right? >> it goes mock 1.5. thehat struck me is concorde is already there and it works for the rich. the economics are such that a plane built for the superrich is totally feasible, whereas the concorde could not actually work anymore. >> this is a new way of compensating your ceo.

forget the gulfstream. >> the timing worked out for that. there is a certain convenience to overnight on a transatlantic flight. it confuses me. >> i don't know but i think it might be a status thing. i would love to fly one of those things. it would be fun. keri: i think it is calling david. david: thank you very much for being with us and a big thank you to brendan greeley. thank you for filling in for stephanie today. still to come, a take on optimal asset allocations. ♪

>> we're just a little bit more in 30 minutes from the opening bell here in new york. ik: good morning, everybody.

thankful to be here. happy new year to be. jpmorgan's global head of consultants, megan. welcome. good to have you. you got a new job. congratulations. what is it all about? >> we're working with the consultant section of the market. lot of see and is a product innovation coming from our consultant. also, you think about the future of the market and a lot of the chief investment activity and foundations looking for investments advice. it is something we'll get to later in the show. huge role. play a it is a huge part of j.p. morgan asset management. >> for the first word, here is vonnie quinn. vonnie: thank you.

boko haram has killed at least 60 people today. the extremists attacked people with rocket grenades and suicide bombings. hurt. were the staffers say they are overwhelmed. march to cityll hall today and demand the mayor's resignation. killed by officer saturday during a domestic disturbance, police say the shooting was accidental. the family says he was mentally ill. phasesnow was the latest of that severe weather that killed at least 43 people over the weekend. the power is out in oklahoma and the mesko and western texas. no alerts are out. by 150s a day powered euros around the world. julie: futures are trading lower

this morning after a strong uptick for stocks. lastly, we saw that come down to some extent as we kick off the last week of the year. some of the reasons behind that selling have to do with oil prices. once again this morning. below chinese production estimates. iran talking once again about increasing exports seeing a high priority. oil prices down about 2.5% and gold is also coming off after showing strength last week. we see prices down half of 1%. look at global stock markets. in china we saw 2.5% decline selling as well. it is smaller in magnitude, more like what we're seeing in the futures in the u.s. for the three stories that matter in markets now and we begin with the high cost of low oil prices. and $87abia expects

billion budget deficit in 2016. that is 10% lower than the shortfall expected this year. forcing the government to draw on reserves and bonds for the first time in almost a decade and two/ -- to slash spending. saudi arabia is very important geopolitical actor. what does it mean when we see make these forced to kinds of decisions? is critical to maintaining stability in an unstable part of the world. >> that is correct. what we have seen indicates rather than cutting back, they will look to the bond markets to finance some of the shortfall. a large federal reserve tap into and keep things stable if oil recovers.

i also wonder if there is not just a larger geopolitical conflict. the region.l in iran can put pressure on them by increasing oil production. barrels ready to go. term pressure in the near to keep oil prices low. just iran butot also russia and even the state of alaska having to make tough decisions. alaska is looking to bring back an income tax for the first time in 35 years. where subsidies are paid directly to citizens, that can be a real shock to add an input -- income taxed to people who are not used to it. asset what happens to prices one the gulf states no longer have all that money to

invest? to money that allowed them buy not just fixed income but going heavily into private equity but also stocks and other assets? in order to maintain stability, it will result in even asset purchases by these commodity driven countries. when we look at foreign buying in the research, it is typically u.s. treasury levels as well as current account deficits. what we are projecting is a 30% andine in foreign interests bond markets, a significant decline. norway, their fund liquidating. do they have real estate and hotels, or is it all

fairly liquid? need forve things you liquidity. a drop-down in oil prices, you have got liquid securities. there are also more strategic investments. i would not expect to see that type of thing liquidated. if you look at russia, their reserves keep on going for another year and that a slick. russia's economy shrank for the first time in five months. declines in oil prices rippled through consumption. in december and shrank from a year ago. a renewed selloff and oil is threatening to extend the recession into a second-year in what would be russia's longest slump in two decades. a conference last

week were he tried to one people it was not getting better anytime soon. >> once again, we'll see russia have to make tough decisions fiscally. fresh a is not considered a business friendly environment to put it nicely. --we want to and sent arentivize growth, there going to be major restructuring forms. -- reforms. russia will be fine. we arearrel oil in 2016, talking about the end of reserves if they continue sending at the same pace. be in recession, and there will be tough decisions for them to make. governmenty covering spending.

i do think opening up and being more friendly to business and foreign investment is critical to getting people back into the country to invest. i think some of the comments we are getting out of russia, around, look, this is not getting any better, it is a precursor to there are not point to be changes here. they do not have saudi arabia behind them to do this and issue it for the downgrades. they are in a tougher situation. number three has to do with china. the shanghai night fell to watch at 6%. a couple of things in the mix here. the restrictions on selling by major shareholders that the chinese put in place to stem the market decline is a bout to expire. investorsome -- some concerned.

trying to put is a registration system in place for ipo's by march, and then you have the chinese telecom carrier whose chair is under investigation. that stock dropped 1%. there is talk that we will revisit the kind of panic driven selling that seems to be affecting the chinese did i say panic because we do not know what was going on in china back in that time frank and what reader you getting from china right now? -- timeframe. what read are you getting from china right now? >> sometimes it is not well foreshadowed. you get major disruptions in markets. you have got this incentive expiring.

essential reevaluation of very want against the dollar. you have also got industrial production numbers coming out very weak for china which indicate a decline in commodities demand which says the overall economy may not be as strong as required. david: some people call them scare mongers but that matters not in this conversation, they point out the saw a depreciation and a rise in money market rates subsequently followed by a plunge in time -- in chinese stocks and that is happening again. >> yes. the chinese government set out to create an investment in the stock markets. a lot of leverage investments. 1920's to the 1930's

here, it felt like that when you read these stories about incentives. retailu have got a heavy presence, you will have take shifts in sentiment that create problems like this. thing one reason about is the growth of credit in and that it may be a real problem and they need to deleverage in china. is that your opinion? >> it is the fastest growing out of the economy. we have got a chart we look at and you pull china out and it is on a trend line. we are deftly looking at high degrees of leverage. inerage can sometimes and 2008. those are the three stories that matter to markets. next up we will look at

premarket trading. stay with us. ♪

vonnie: welcome back there four caramels are being added. u.s. regulators say -- mazda-side airbag six and subaru, legacy, and outback, all the makers say that could affect more than 450,000 vehicles. nine deaths are blamed on the exploding airbags. $65 million today saying they are guilty of price-fixing. of china passes anti-monopoly crackdown.

many companies have already been hit or united airlines has a new policy on kids flying solo. a fee is being added for those 15 and younger. has the same fee, covering a similar age range. i will head right over. to focus on one stock in the premarket today, and that is valeant. the stock is down 6% this morning. it's ceo is on medical leave here the company said he had a severe case of pneumonia in the hospital where he was and new jersey city has been discharged. not clear where the company valeant is staying today. ofing to respect the privacy his family.

executives, the second of and board members also overseeing their work. temporary though it may be because michael's really tied up in what valeant is. you can see the stock types over the past year. valeant has been a company rapidly growing profits in part by making acquisitions. it has come under scrutiny some of those companies raised rapidly by a large order of magnitude some of the drugs they make. the threat of regulatory scrutiny of the company has caused the stock to tumble. a lot of talk about it. bill ackman has been a big defender. there have been many critics of the company as well. i wanted to look at the short interest in valeant as well. they have been shorting the stock or looking at other drug companies that are somewhat

similar. let's first of all add the price and the short interest ratio here. the price, which we just saw. the ratio has been declining to some extent. as the stock has been going gon, we have seen shares down because people have given up on their shorts and cashed out in some cases as the stock continued to go down. on their way to look at it is the absolute level of short interest which has continued to go up. shares sold short in the company. are about 4% of the shares sold short, not an incredibly high ratio. to give you an idea of some sentiment surrounding the stock ,fter the shares have gone down we will continue to monitor the situation and bring you updates.

the losers in 2016 may be winners. hottest jobs on wall street 2016 is coming up next. ♪

a job on wall street is not the ticket to riches. it used to be. gone,ly are those traders the machines are taking over. everything from algorithms to rowboat visors is making capital less and less necessary. will keepvoting pull shrinking, in others, it is expanding. here to tell us what experts consider to be the best jobs on welcome, h in 2016, ue. to all the --

it is terrible for all the companies along the oil and gas ecosystem. the people wes, have talked to have indicated this is the year there will be mass consolidation and oil companies will give up and try to make it on their own. they will either be sold to the stronger companies or have equity. bankers and gas and oil definitely, or they will go bankrupt. these restructuring bankers will have a great year, at least one to two years of excess earnings. >> it has been kind of interesting, some of the stories coming out this morning, even with -- even with oil restructuring act these levels, they will not hold. it is basically equity now in order to pay back the bond, which you would have thought

would be secure. will be interesting to see the activity next year. >> your cfo was just a few weeks ago talking about traders having a great year. many and the interest-rate policy, there will be a lot more to do. meg: i was looking at what it would be like. mergers and acquisitions, these ideals of over $1 million in north america. either pending or completed deals over year to date. the green line is the number of deals and the blue bar -- blue bars are the volume. theme thateresting alix steel talks a lot about is there have been talks for several years now that would be

-- the bankers and analysts and industry have been talking about it coming and yet it has not quite come to fruition yet. dealsd a decent number of but there has not been an explosion of huge deals people have been waiting for. i am curious what is the tipping point in 2016 that will make that potentially finally happened? some of the language we are hearing from analyst's and executives is just the oil of these, the prices would come back before then. they have gun to the point where they do not have any abilities to hold out. collects some of them were hedged and those are rolling off. and were able to refinance keep the journaling going. that is what they have to do, to drill or drop. that has probably given volatility and that may make

such an extension possible. meg: we will see a tipping point. i cannot access the public capital markets, help. >> what kind of opportunity does that create? particularly in fixed income markets, it turns out -- some of the best minds are on the buy side. you have high-frequency trading, people at hedge funds actually going to the sell side. opposite. it was the we're hearing from recruiters int some of that exodus

these particular incidences, we're talking about assisting huge investment banks in fixed income or making things like making the trading market more efficient. banks -- a lot about hugh: 2016 was the year where you will see the first used cases, talking about advisors and wealth management, applications. be a huge year and we hear anybody who has the ability for data management is getting hired. one of the findings that intrigued me in your research was the idea is not so bad to be lower down on the totem pole and

wall street these days. hugh: for survivability, i am not sure about confidence. as it has been explained to me, you have tons of people, for all tons of newsaying, recruits. a lot of people who were junior. a lot of people who are senior who never left. five to seven years of experience is scarcity. david: you can think of it of a different form of averaging down. thank you for being with us. megan, please stick with us. what is the optimal allocation for 2016? make is here and will tell investors where to put their money on bloomberg . ♪

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futures. it does look like a decline of this magnitude will wipe out the s&p 500 advanced for the year. big apple surface. some characters. >> when does santa claus have to kick into county echo >> i guess we have four days. there may be some tax related selling at the end of the year. some stocks have tanked. that is a subject we are going to dig into. we have taken to calling 2015 the year were nothing really works. betterton me show it to you.

for the rest of the viewers, this is not what we need right now. >> the point's total return, barely above zero. high grade corporate bonds. government on, be they merrill lynch, index slightly north of zero. going on there. almost 10%, looking at commodities. very few assets or strategies have performed. are we likely to see a repeat of that in 2016? >> i think this is a good precursor, and not necessarily those returns.

yearolatility we see this at certain spots, we are talking .bout high-frequency trading markets the high-frequency trading created a real problem for the markets, where s&p dropped 10%, 11%. those algorithms couldn't process what was going on with the data and the markets. prepare yourself for the same thing in 2016. we will have high volatility due to reduced liquidity. as we talked about, reduction and risk appetite. i was talking about rebalancing my portfolio with year-end

activity. looking at 4% to 6%. week you had north of 8% yields there. we do expect further volatility. when you start looking at like that start looking at risk reward -- start looking at risk reward -- stick with higher-quality types of things. a year where equity will do fine but not great. is to reallyng look at strategies that have been driven by momentum. the central banks around the world have all made us do crazy things. a 2% yield but that dividend stock pays 2%.

incredibly crowded trade, our research indicates it is one of the most extreme valuations on the market. as we continue to see industry rates rise, maybe we see a reversal of that trade. make sure you wreath a -- you rethink things. they may reverse and it is not going to feel very good. >> how much volatility will continue to succeed? we have become so concentrated on the fed and central banks for economic data and news. jpmorgan -- the top two things they think will drive market returns, economic growth tied with fed. we know this is a fed driven market.

it is really cheap versus the 20 year average. the 20 year average does not include center bank intervention. we have no roadmap. risk premium is very high. agree because your risk-free rates are artificially low. about where risk-free rates are. that is central-bank policy. >> i wanted to talk about what forecasters are saying about next year. the average forecast right now surveys 2207. this is the s&p 500 itself. is the have found average forecast tends to not be correct.

goldman sachs was the most accurate last year. he is looking at 2100 for next year. he is about 100 points below everybody else. it is interesting when you look at forecasters and who to believe and who not to believe >> it is a fantastic lesson in behavioral finance. that is true of professional forecasters and economists. when you are overconfident you ride it all the way down. about opticalking but allocation mix. a number of other factors, risk factors that investors increasingly need to consider. lesson in 2008is and 2009.

>> if you think traditional ways of investing, you think about stocks and wants, you think a slice of high-yield and a slice on, diversified. the truth is the high-yield slice is going to behave like an equity slice when there is a big market selloff. underlying government bonds is a factor of inflation. the way you want to decompose your risks is not by fixed incomes versus alternatives, but what factors underlying the portfolio. , if an it described

asset class is a molecule, the risk factors are the atoms. inflation is a risk factor. that also exists in real assets and in the stock market. >> it is fascinating, liquidity area did >> the thing that is important is not continue risk factors with risk premium. is isolating what the real drivers of the portfolio are. we are just coming up on a .5 minutes in the market day. do you want to bring us up to speed on where the stock market >> we are seeing this

decline off of a strong week. prices, which we are going to get to in just a minute area there have been reports in terms of the free app will -- free app lists. now they are logging on getting ready for the new year. we tend to see these health-related stocks go well. apple is moving lower. that has been the trend for apple. it looks like it is continuing its march downward. another stock having a huge movement is a biotech company. late stage clinical trials of an antiviral it was developing did not show positive results. failed to meet goals in the language.

let's get to oil. we are seeing oil prices move lower. down nearly 3%. you get another look of the affected energy. pretty broad-based selloff that we are seeing at this point across the board. let's check with abigail doolittle. lululemon. shares were down 1% in the premarket. all while in analyst says the company had a huge boxing day clearance sale with significantly more items than last year. this plays into the whole inventory theme. something anderson calls normal

for lululemon. she operates her underperform rating and street target of $40. >> thank you very much, that is abigail doolittle. next up, the value proposition. we are looking at the bond market with jpmorgan.

amazon says a record number of packages were shipped during the holidays. the company had more than 3 million prime customers in the

third week of this month. prime allows free shipping for a year. the communist party says it is suspected of discipline violation. a new star wars movie grows to more than $1 billion in just 12 days, faster than any film ever. the force awakens surprised disney executives. >> thank you. it is time for the value proposition, this is where we zero in on controversy, try to stoke some debate. bill gross call the bull market at the end of 2013. any number of investors would have protected with the end of quantitative easing, u.s. government bond returns had nowhere to go. they didn't in 2015. the question for our guest host

is can the bond bull market keep >> they look at wage inflation, core inflation taking up, the fed is going to be on the move area interest rates should go up. as we were talking about earlier, this mean reversal doesn't work with heavy-handed banks. the other thing that shifts dramatically in the bond markets, you now have regulatory pressure on many counterparties to hold high quality assets. at the same time we have treasury supply, government bond supply. half of what it was this year. technical at the picture, knowing the fed will continue to reinvest its

portfolio, the bank of japan is going to continue to ease. you have this low rate world by banks. i don't think there is a lot of that i don't think there is a lot of room to grow up. if we do get a bit of a stock rally and rise in rates, although's pension fund's are going to come in and by the long end of the treasury market and investment grade security. point,make an important which is the treasury market is a curve. we can see one thing happen on the short end. what you described is a curve flattening scenario. is that what you anticipate in 2015? of year is up at its highest level. it sounds trained -- it sounds strange with the tier being at

high levels. i think the intermediate longer-term sector is going to be driven by that supply demand imbalance. >> for someone who has never traded bonds, explain what the risks are. that is what i understand you describing. a yieldu decompose curve into parts that react to fed policy and less reactive to fed policy, one month, three month, six months. they can anticipate the fed is going to be on this hiking move. if we get strong inflation numbers and wages are skyrocketing, the fed will be forced to act more quickly. the front end will move more quickly. the dynamics are much more driven by technicals.

>> what you are saying is there one ps many people buying. >> on the front end, no. on the long end, i don't know what the fed is going to do. the intermediate to long end, you have structural demand, insurance companies come up potentially from people who need high quality assets and the supply of high quality assets is going to be lower. >> i'm sure there are technical reasons why the fed is not going to be issuing long-term bonds. i'm sorry, the treasury. >> we are looking at 300 there -- 313 billion of treasuries. it was over 625 billion this year. is that kind of demand for high-quality assets you are not going to see rates go up that is other thing interesting about the fixed income markets. part of the reason we saw this huge credit selloff, obviously

commodities play a big role. these are record supply numbers. part of the issue is we have too many bonds this year. hesitant, more spreads are more attractive, and you start to see a clearing price in that asset class. >> the bond bull market not yet coming to an end. up, we will take you to kentucky. for a look at the business.

its roots are in the united states but some of its biggest

players are in asia and the middle east. every year the world's best trainers, breeders, and buyers set on lexington kentucky for the biggest thoroughbred auction in the world. >> the world's largest yearly auction a buyers from around the globe. bill thomas and oversees key land september sales and months before it started he and the staff are traveling all over the place, encouraging buyers and sellers to come to kentucky. >> we saw a tremendous amount of forces. says to a the hottest markets are australia and china. >> you hate to call it an emerging market. >> force racing was illegal in china for decades.

the country has also faced some economic challenges. that could affect the thoroughbred industry. the number of horses at various times. >> also paying close attention to currencies. he is a bloodstock agent. >> going to be a success. very weak, very difficult. >> playing with the money. >> international demand was up three and it has become easier to buy shares of racehorses.

>> just before the financial crisis, $11.7 million. dubai audit. the highest price was 2.1 million. elliott walden runs winstar farm. are down youkets create more opportunity to buy. >> first american buyer. >> a sure sign of how big horse racing has become.

>> is it an investment? or is it really one -- really does something for ego? >> jp morgan invest in things like art, race cars, classic cars. horses, if you are knowing -- if you know it you are doing, good luck to you. i do like the idea that you can buy shares at horse races. we got my daughter an american girl horse. i'm raising her to be one of these investors long-term. i hope she is saving every penny from the tooth fairy. >> let's turn the conversation back to the bond bull market.

if it is not going to end in 2016, when? >> i think you have to get the central banks out of the business of buying bonds. it still has that huge portfolio to reinvest. happen until won't 18 months out. you have the bank of japan looking at embarking upon an even bigger quantitative easing program. europe.have that does it for bloomberg, go -- for bloomberg for .

>> 10 a.m. in new york, 3 p.m. in hong kong, welcome to bloomberg markets.

from bloomberg world headquarters, good morning. hope you had a great holiday. we are watching a lot this hour. saudi arabia getting squeezed. how will king solomon industry -- king solomon administration: off. -- andce casters forecasters predict stock for next year. and isn't the el niño affect, climate change, or both? how this winter's abnormal weather is impacting countries with commodities. we are about half an hour into the trading session. julie hyman is standing by. it has been like this pretty much for this year. where stocks are going.