>> u.s. stocks closing higher, oil falling below $30 for the first time in 12 years. joe: the question is "what'd you miss?" the emerging market slowdown may be hitting developing markets. joe: we look at how savings have increased and the desire to spend has not gone up. >> the world's biggest oil under $1bought for million in 1933, we will dig into the oil giant. >> we begin with the markets. giving u.s. stock indexes the first back-to-back advances in three weeks. eight sectors hire, two sectors

down, the defensive names coming down. yet another new low for oil prices. >> i did get a report from citibank saying it looked like we were approaching a two handle . it shows the confusion. oil is that orange line. you conceive the continued low in oil prices dragging stocks with it, that yellow line. oil and stocks bottomed around the same time, 2:00, and both trended higher. the fact we did not close below that would be considered constructive. joe: extraordinary that we saw this big rally late in the day, the nasdaq ending and eight-day

losing streak. the fact that we saw these gains on a day when oil did get crushed, even when oil was low, the stock market held in. >> it was confused. a the market was never in hard selloff, so unimpressive day. >> if you have been long on commodities, kudos to anyone who has managed to stay through that. new 17-year low going back to march 1999. has risen 10 out of the past 12 days. joe: copper, nickel, everything getting slammed today. alix: i want to dig a little deeper when it comes to oil. intra-dayvery simple chart of the oil price.

you can see that slide down we saw around 10:00, oil flirted with $30, then you had oil dipped below 30 and climb higher. still $.78 away. i want to put this into perspective for everybody and look back at long-term oil prices back over the last 40 years. we are at lowe's we have not seen in 13 years. is this worse than 2008? like,s a lehman brothers, crisis for commodities. do we really need to see prices this low, even lower than when lehman brothers collapsed? what takes longer to rebalance, supply or demand? >> nobody really knows. it depends on how quickly they

can adjust to the downside. iran is coming on earlier, putting on pressure. the case that this is over exaggerated when you compare it to 2008. joe: i want to talk about china, the chinese yuan. hibor, yuan-denominated borrowing. up, go out prop it into the market and purchase offshore yuan, creating a shortage of them. r just overshows hibo 0%, now surged to 66%, an extraordinary level for one of these benchmarks, showing a , andage of offshore yuan

how hard they have to intervene, how much it of a distortion the intervention is causing. gasped when it jumped to 10%. >> there was actually a good thing for the market, saying the pboc saying we don't want a lower yuan. it is a better thing for global equities. to how hard of a distortion and intervention they had to do. >> they took a page out of mario draghi's book, saying they would do whatever it takes for the yuan. it makes shortselling that much more expensive. when you can see here is the result of that rising hibor rate, the gap between the onshore and offshore exchange rate. the white line is the offshore, onshore, and it

has closed considerably. this is what the pboc was doing, intervening to prop up the currency. can you pull it up again? >> they wanted to keep that gap from widening further. earnings coming out better than estimates, $.48 a share, although for-year earnings are down compared to last year. 2.78ue coming in light at billion dollars. this is no surprise. coal rolls back, that will hurt the rails. that hurting the industry. , we as we talked yesterday have seen some of those rails rollover, so what that means for the global economy -- with ourhart along

deep dives, you can see them on our twitter handle. equity strategist at ubs, oil below $30 a barrel, first time since 2003, is this justified? are we looking at $20 oil? think we are getting to the point where it is overdone. there are several things at work. the market was somewhat spooked by saudi arabia floating the concept of an ipo for the state owned oil company. then when you broke to that level of $32, the technicians , and to traden below 30, which is saw today, was inevitable, but the way we think about it is that the cure for low prices is low prices, and we do think you are getting to that point, particularly we see inything else the u.s. economy points to good

growth and continued consumer confidence. joe: you have a bullish outlook on the start market, some of your favorites, financial, health care, they have been hit hard to start the year. are you confident that this first week of the year, it will be a distant memory soon? >> it will not be a distant memory. part of 2016 is that this whole is out there, fed china is uncertain, more market volatility, but what we are encouraged by is that if you look at the broad swath of stocks in the u.s., they have corrected 15% to 20%, so the selling this week in the momentum names, that is more evocative of the end of the correction, and when we look at how the market traded today with oil below $30 and the correlation it has had to the broad market over these first seven days, it is a very encouraging sign. >> earnings reporting season is

usually positive returns. deutsche bank was telling us about that yesterday. you have noted that as well. we have seen stocks fall as much as 9%, so what kind of snapback does that set us up for? >> it may not be on the order of anto 10%, like we saw october, but the setup is good given how negative the psychology has gotten and the fact that a decline of more than 4% expected for fourth-quarter earnings is a bar that we think can be easily beat. earnings falling 4%, we are entering a profit recession, we had a negative print for the third quarter. for is the negative linkage back-to-back quarters of earnings decline and a recession? >> if you look back to the late 1990's and the late 1980's, when you had similar oil price decline, earnings recession driven again in large part by

what were seeing this time, these plunges in energy earnings, the market continues to trade ahead and earnings recovered. we are not looking for robust growth in 2016, something along the lines of 5%, and we think that will be enough to keep stocks fit. was a bearish note out saying sell everything, except high-quality bonds. they are calling for a 2008 lehman brothers crisis in the debt market. they are looking for 20% selloff in the equities. what you see that gives you hope when you can look at this? when people start talking about the apocalypse, we are happy to be on the other side of that idea. >> is that capitulation? >> yes. --ng back to the fang stocks

it you go back to the jobs report, strong. at the same time, wages did not grow enough, the fed will be forced to be overly aggressive in its hiking cycle. there is lots of cash on corporate balance sheets, and we think the mergers and acquisitions story continues to play out. >> thank you for joining us. is emerging-market contagion spreading? we look at impact on the developing economies. that is next. ♪

>> coming up on bloomberg television, full coverage of

president obama's last state of the union. don't miss it at 9:00 p.m. eastern. let's go to mark crumpton for first word news. >> turkish authorities identified the man they say was responsible for a suicide bombing in istanbul, 10 people killed and 15 wounded when a bomb went off in a popular tourist area. turkey's deputy minister says the bomber was a 28 year old from syria. eight of the victims were german nationals. british counterterrorism police are said to be deeply concerned about the increasing number of girls and women traveling to syria from the u.k.. figures, 56 recent women and girls were believed to have gone to syria in 2015, 43 the previous year. britain has reported several high-profile cases of girls traveling to syria to marry

militants or support islamic state. the house of representatives is expected to vote today to punish north korea for its latest nuclear test. legislation would bar the regime from hard currency lawmakers say it needs to build weapons. meantime, a panel of experts says that existing united nation's sanctions are not being enforced. a new federal report alleges a history of sexual hearse meant by employees of grand canyon national park. the report claims mail park employees allegedly propositioned female colleagues for sex and other inappropriate behavior. last year, more than a dozen employees filed a complaint about a pattern of sexual harassment over a 15-year time span. the report by the department interior office of the inspector general found disciplinary action was inconsistent. news 24 hours a day powered by our 2400 journalist

and more than 150 news bureaus around the world. i am mark crumpton. back to you. miss.t did you economists on the cusp of revising global growth forecasts because of turmoil from china and emerging markets. how vulnerable are the u.s. and europe to the stress from the emerging market? >> it is certainly a risk we have worried about. develop markets have been growing well above trend for a few years now, emerging markets growing below trend. riskstress has been a tail that emerging markets could pull the market's down. i think it will stay a risk for this year. the first quarter revisions we made -- fourth quarter divisions japan,u.s., year old,

those were partly technical reasons. we do think the big source of lift will be coming as we move into the first half of this year , and consumer spending could be an important part of that. joe: whether emerging markets could drag down the u.s., is this a conversation that would have seemed completely ludicrous 10 years ago, but because of the linkages, it is something we have to entertain? >> absolutely. chinese 15% of the global economy. 20 years ago, that is not something we were talking about. it is important. you want to get perspective still. financial markets are relatively closed, the connectedness through financial challenges -- channels are limited. i don't think we want to push it too far. we do worry about the spillover to the rest of the emerging markets.

the we are seeing in commodity space is an indicator of what is happening in china, and that is hurting commodity producers the most. u.s., while it is hurting enp, it is a big loan in terms of a tax that effectively to u.s. consumers. in terms of a tax cut effectively to u.s. consumers. >> the labor market continues to surprise to the upside and post strong games, but gdp forecasts have been revised lower. is this spread normal? has this cap resolved? -- gap resolved? >> this is a fundamental challenge for the u.s.. they will will need to find out how to get productivity growth

backup unit if you don't get growth up, you have problems in terms of the ability of central banks provide monetary policy support. you will hit inflation pressures earlier. in the long run, you will put pressures on things like corporate earnings and the ability of government to get revenues to meet looming entitlement costs. this is the major long-term challenge we have to deal with. what wasthinking about said yesterday about how central guys have moved towards this targeting. boj, or others. think about that, this perceived inability of central banks to do anything? >> i would take some issue. monetary policy has been generatingimportant

global gdp outcomes, while not as much as we hoped, has been on order of trend-like growth. you don't know what the counterfactual is. what you are seeing now are these divergences i talked about upfront, policy makers are having to grapple with that. the fed is in a position where domestically the u.s. economy is well ahead, labor market outcomes are good, unemployment rate has fallen dramatically, 5%, and it is certainly time to start normalizing from zero. japan other side, europe, struggling to come out of the downturn, and emerging markets in a worse place. had david levy calling for a recession here in the u.s. due to emerging markets. he said the linkages are the profits channel, and he believes corporate profits -- there is no such thing as ap or profits

recession that will become an actual reception -- recession. when you think that it will reduce investment and the rate of the slowdown spreads? >> that is certainly the concerns, the risk, but it is easy to overplay the hands and cousin of what the oil prices -- doing to the sector overplay the hands out of what the oil prices are doing to the sector. i think you want to keep in mind that oil price is a big part of the earnings disappointment. the bigger issue is the productivity slowdown. that is hurting things. margins are still fairly elevated, and that will provide some cushion, but the longer you run with weak productivity

growth, the more those risks become real. >> you will stick with this. much more coming up. scarlet, you have breaking news on ford. >> ford reporting a record pretax profit and also says it is announcing a $1 billion cash dividend, $.25 a share. americanon, north operating margin will be 9.5% or higher in 2016, operating's highers will be equal or than 2015, building on those record profits. you would think this would be giving ford shares a left, but right now it looks like we are getting a decline in four chairs at the moment. we will keep an eye on that stock for you. coming up, are americans saving more? what does it mean for consumer spending? that is next. ♪

>> i am joe weisenthal. "what'd you miss?" u.s. consumers are saving a lot 82 trillion dollar jump in household wealth since 2012. -- a $2 trillion jump in household wealth since 2012. >> it is a bit of a puzzle. traditionally, the wealthy effect has been the tool of choice at the federal reserve. >> ben bernanke explicitly cited it as one of the reasons that quantitative easing would work. part of their is story of upside risk to the u.s. economy. we have been puzzled.

last six months, it looked like the savings rate was moving down, but it has been revised up, drifting upwards. >> we have not seen much wage gains. effect has come because asset values have because wages have increased. >> you have consumer spending growing more slowly than income gains. you would have thought the wealth gains would be making people feel more comfortable and lowering that savings rate. that is part of the key reason. it of ptsd from the financial crisis where you had a sharp move down in asset prices. maybe people aren't believing it. someonee flipside, wants to buy a house and they are seeing house prices surge,

could there be a reverse to asset prices? people are on both sides of the market as you point out. at the end up with the day, there has traditionally been a positive wealth effect from housing prices. it is a no-brainer that increases in equity prices are like manna from heaven. >> they are owned by the people with the lows marginal propensity to consume. >> the distribution of wealth in the u.s. has become more unequal. i think it has always been fairly un-equal. it is hard to explain the gap that has opened up in the last year or two, so i think you need something a little bit more high frequency oriented. be looking back at this time and talking about it for a long time. coming up, estimates of saudi

aramco's value now be on one tree and dollars. ♪

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i am scarlet fu. let's get to mark crumpton for first word news. ,ome headlines crossing webcasts has begun for just markets, and outline for 2016. he is in the 2015 recap portion of the call. he says that right now we are in , andital preservation time junk bonds will continue to be under pressure. mentions the stock market

winning over the fed's desire to raise rates. a short-term technical bottom today. falling under $30 a barrel today, the lowest level since 2003. he is a bond guy, right? that will still have a trickle through to energy, right? scarlet: let's get to mark crumpton. >> thank you. two u.s. navy boats missing off the persian gulf, but the pentagon says it has received assurances from iran that the and vessels will be returned safely. they were moving between kuwait and bahrain when the u.s. lost contact with them. iraq's prime minister promising to keep up the fight against islamic state until expelled from the country.

the promise comes after an attack on a baghdad shopping mall, 17 people killed, triggering a wave of retaliatory attacks on sunni mosques. a statement warning of "worse to come." president obama delivers his final state of the union tonight, expected to lay out an optimistic vision for the future. the president will focus on what administrations successes, including reaching a nuclear deal with iran, restarting diplomatic relations with cuba, and the guys hitting a budget deal with congress. you can watch the speech live tonight at 9:00 p.m. new york time on bloomberg television. the world's largest lottery prize is giving -- getting even larger. the jackpot has reached $1.5 billion thanks to searching ticket sales. the money will be paid in annual installments over 29 years, or

that winter could opt for a lump sum payment of $930 million. your odds of winning, 292 million to one.\ inbal news 24 hours a day more than 150 news bureaus around the world. back to you. scarlet: i want to pick up on where mark left off and take a deep in the bloomberg terminal. i am looking at the deficit as a percentage of gdp. ahead of the state of the union, this is really instructive to tell you where we are in the economy. at the turn of the millennium, the government had a budget surplus of 2% of the economy. you will recall that vice president dick cheney said deficits don't matter. the line in march 2002 when the iraq war begin, and at the end of 2008, 4 .7% of gdp, the deficit.

it exploded to 10.1% by the end of 2009 as the economy shrank, so the denominator was getting smaller. since then, the deficit has been steadily nehring, now at 2.4% of gdp. joe: dick cheney was totally right great we had all the deficits and they did not cause interest rates to go up at all. on that question, dick cheney has been vindicated. i want to dive into my terminal and talk about subbing we talked about earlier in the show, the cap between the labor day to -- the white line is the bloomberg labor surprise index. attempts to quantify the extent to which that data is coming in better or worse than expected. we have seen this big uptick in labor surprise. generalow line is the

economic surprise index. something has to give here. it is hard to imagine the divergence lasting that long. alix: you saw them both go up or down. they are totally diverging at this point. joe: this is a divergence to watch. credit default swaps for five years for saudi arabia, how much does it cause to protect against some kind of the fall. take a look at what happened in the last few days. it cost more to protect against against the kingdom of saudi arabia than portugal. is -- just speaks to the

market fear that percolated all through out and what the fx are of oil prices. -- the effects of loyal oil prices are -- lower oil prices are. i guess it's like they have some payments and you can theoretically protect against that. stateyou look at some controlled companies, and there is the same kind of stress, so it is kind of legit. saudi aramco could be one of the biggest publicly traded companies in the world, but investors may not like it. joining us now from houston, welcome, thank you for joining

has. if saudi aramco takes upstream might notlic, why it investors be that jazzed? upstream is where the money and that'serves are, where the lion's share of our aramco is. a lot of capital assets that ondi has built that sits use, and basically that is for strategic regions -- reasons. spare oils use that production capacity when there is an outage, so the saudi's get a lot of strategic power, maintain the friendship with the u.s. based on them being able to bring on an oil production during a crisis. how well run is saudi

aramco? part of the companies associated with state companies tend to privateer valuations, companies without state tend to be better run. where does saudi aramco fit in? top of all ofe the state-run oil companies. ranked shareholder owned noc's, and saudi aramco is consistently at the top, very revenue efficient. the government allows it to run itself and a similar way to a profit-maximizing company, protected from a lot of the patronage demands other entities and companies have to face in the kingdom. scarlet: it is in a league of

its own. reserves,n barrels of 10 million in daily production, it could be worth $2.5 trillion, yet the details are closely guarded secrets. how much of a stab in the dark are these numbers? do we have any sense of what the true size and scale of this company is? >> they have been reporting similar numbers for years. aramco who people at say that the reserve numbers are accurate. as far as revenues, how much of that revenue flows two different entities within the state, where it goes, there are always questions about the royal family and the share that flows there, so it is a black box in a lot of ways. alix: what is the motivation behind this?

the oil community says they need to do to raise cash to help them find their budget due to low oil prices. the other is that this is a bigger shift as to what the kingdom wants to become. what is your call? >> i would say both. they ipo is unlikely to happen in the short term. with the new king and the deputy ,rown prince coming into power everything is on the table in the kingdom, especially the deputy crown prince. he is casting his i are round the landscape and looking for creative ways that he can make his name and develop some legitimacy come get saudi arabia on with a more competitive, more-diversified track, so that raising cash when times are tight is also part of it. scarlet: thank you for the

primer on saudi aramco. shift in the global energy market. we find out why, next. ♪

scarlet: i am scarlet fu. it is time for the bloomberg business flash. uber wants to expand its services, the trip experiences could include music, restaurant reviews, and personal reminders. it is the latest move to distinguish itself from competition. ford says it is expecting a later pre-tax profit this month.

says 2016 should be as good or better, also paying a special dividend of $.25 a share, in quarterlyo a $.15 dividend. scarlet: the largest u.s. life insurance is working to shrink the company to limit several oversights. is hinting at a possible sale of public offering could that is your bloomberg business flash. scarlet: "what'd you miss?" the first shipment of u.s. natural gas is getting ready for export, a huge shift in the global energy market. this tanker just arrived off the coast of louisiana. eventually, it will be loaded up with the first batch of liquefied natural gas.

our bloomberg intelligence reporter, and ask him where this u.s. lng were go. >> it is the first of its kind large-scale project without a destination. no one knows where it will go. on where it gets the highest price for the gas. bg group, which accounts for the past sold moste of its gas to asia, so it expect most of the gas to end up in asia, but with time we will see of ims going to europe and south america. alix: you mentioned pricing. over all the lng global market has been linked to the oil price , as the oil prices have fallen, so have these lng prices.

how competitive are u.s. lng prices? 2014, u.s. lng prices were competitive. however, because the global prices have moved since then, it viable to send lng to europe or asia. if you look at the cost of building terminals and holding. it is still profitable to send lng to asia, but not commercially viable to europe at this stage. buy: does that mean i can lng exports from the u.s. now, but if i wanted to build another export terminal, it would not be economical for me to do that? >> it all depends on your view

of what the prices will be at the time of commissioning of the lng facilities. it is important to state that these are long-term projects, 20-25 years, so you have to take a view of where the prices will be. what we are thinking will happen is that all the projects that have been given the go-ahead by the investors will go ahead. anything new is very unlikely to be built in the near term in terms of of making decisions to build them. it is now $2.59, can you build on that in terms of all-and costs? costs?in >> it depends on the destination. what we estimate is that the holding costs are around eight dollars per million btu for the u.s. gas.

exclude some costs, the marginal price of u.s. lng is , higher than the , soent prices in asia, $6.6 it does make sense to send it to asia at the moment. in europe, prices are around $4.7, so it does not make sense to ship to europe. alix: how does this end up changing the world, global lng? is it going to change how investments go? projects wind up being a long-term project. how does it u.s. lng helped change that whole dynamic? seeing thelowly buyers adjusting and readjusting their portfolios to have the largest share of short-term and

, soerm flexible contracts that is where u.s. lng has changed the market. however, because oil price is falling at the moment, buyers are reluctant to revise their long-term oil-linked contracts. alix: which makes sense. term, is it fair to say the global lng market has become a buyers market? >> absolutely, yes. we will seek a lot in the market in the market for the next 5-10 years, therefore it will take time for the demand to because were seeing a lot of lng coming online in the next 3-5 years, especially from the u.s. and australia, so it will take a while for the market to absorb that extra supply. was our analyst at bloomberg intelligence. scarlet: you think the oil

market is fragile? wait until you see the nano market. yes, we have no bananas. alix: she looked that up. ♪

scarlet: i am scarlet fu. "what'd you miss?" the fragile market for bananas is in danger. the supply is threatened by disease. our executive editor joins us now to explain. >> we decided to take a break from certain other commodities dominating the headlines and look at another one, specifically bananas. moment,teresting at the because it is under threat from

this disease. what is more interesting is that it was once under threat from the same disease. is that we with them have a single breach that dominates 95% of the world crops. joe: what i found fascinating is why we have dozens and dozens of different apples, but only one banana. it is a very boring, plain banana. >> we could all be eating far more interesting bananas, but where eating the cavendish. it happened between -- because of the way the industry grew up, the big banana industries develop this infrastructure that works to deliver a really cheap banana, but at a cost. the cost is that it relies on one single breeze that is easy to ship and transport. different labels,

different bananas, different companies, but all the same. >> 95% certainty that it is the cavendish banana? alix: is there a cure? >> people are talking about genetic modification, but it is a really big deal because 95% of crops are this one type of banana, and a lot of people rely on bananas for not just a livelihood, but food resources. disease is really bad at spreading. it gets attached to people's shoes, a single piece of soil can ruin a whole countries banana crop. alix: what does it do? rot. is like a root joe: another famous technical question from alix. you talked about this

infrastructure design for this one banana. it is intuitive. >> you are getting a tropical fruit that is coming from far one innd the cheapest the market, cheaper than apples grown in washington state. there is a reason for that. there is a big infrastructure built around a single banana, is the price of that banana the danger of this disease. scarlet: thank you so much. i'm not going to be able to eat my banana for breakfast without thinking about this conversation. what you need to know to gear up for tomorrow's trading day. that is next. ♪

scarlet: i am scarlet fu. "what'd you miss?" a podcast just wearing on the markets and the fred. >> the markets are at odds with the fed. it seems the market is winning out versus the fed's hopes for raising interest rates. joe: he is clearly getting at one of the big questions that everyone is asking, to what extent does the fed to care about the market. he obviously thinks it is significant. i'm sure the fed would like to say differently. i think people agree with him that if the market continues to be volatile, regardless of the economic data, that reduces the odds of a second hike. alix: we had the volatility in china there.

that is why they held in september. scarlet: is the fed watching the currency market, the bond market? alix: that is all for "what'd you miss?" .

mark:. -- i am mark halperin. john: i am john heilemann. with all due respect to joe biden, it is nice to have you back. greetings from pasadena, california. on the show tonight, the president's last hurrah, and gop escalation. first, corey seeger on the rise -- bernie sanders on the rise. he is leading in new hampshire and in iowa. he is up