this man, it's forecast usually pay off. jeff has the predictions you can't afford to miss. he is one of the biggest names in alternative investments. hear him trash talk his rivals. ♪ david: welcome to "bloomberg ." stephanie: big morning. jonathan ferro from london is with us. specialave a very guest, former treasury secretary and harvard president emeritus warren summers it with us. you have a lot to cover. a quick check of the global market. stocks in asia rebounding after exports recovered last month. colinso making -- i hate

with a recovery after crude fell below for $30 of the first time in 12 years. it was pleased to open a bit higher trading up over half a percent. is slightlynk that positive picture, but let's get real. you put out an editorial if you days ago saying take a look at financial markets. 08 crisis come we saw it to the market. their more volatile, paul ago it quipped 50 years is predicted nine of the last six recessions. is that what is happening here? are they predicting a recession? the wayot to look they're protecting a recession. you need a larger market down graft than we have seen. i think that policymakers make a mistake when they ignore markets.

driven byare often psychology and technicals. they make mistakes, but they also have a very important canary in a coal mine. because market aggregate large numbers of people's views, because their fundamental purpose is to judge the future, where as economic statistics look to the past, i think in forming a balanced view you have to give weight to what his happening in markets. when you look at the long-standing judgment in markets, that in the index bond markets almost anywhere, inflation isn't going to get up to that 2% level over the next decade, let alone the next several years. look at the low real interest rates that a markets are predicting. then look at the signs of apprehension that are surely coming out of global commodity

markets, coming out of the stock market, particularly manifest in markets in china. you have to regard the situation as one where risks are substantially tilted to the downside. that is the perspective that policymakers around the world need to have, especially in light of the reality that there is less ammunition. the result is ammunition stored up now that there was. interest rates have already been brought so low. central bank balance sheets have already been substantially expanded. i think it is a moment for apprehension, and for planning with respect to problems that could come. that: you have said regulators should hope for the past, but plan for the worst. you also talk a lot about secular stagnation. unpack what you just said. what are the specific things you

are looking at in markets of any sort. whatn be commodities, fx, are making you most warming right now? larry summers: i think my general concern is that we have a chronic excess of saving overinvestment. that is depressing real interest rates. deflationaryng to pressures. that is leading every place to wants to have a trade surplus, and a capital outflow. the one thing that cannot happen is that every place in the world gets to run a trade surplus and gets to have a more competitive currency. in particular, the world economy is riding very heavily on the united states. the united states is in a sense the importer of last resort. our economy is not without its

own fragility. there are many people to believe the fourth-quarter growth will fall below 1%. i have been encouraged, and i think it is the brightest spot there is in the u.s. economy, by the u.s. employment picture. that was again very robust last month. even that robustness wasn't enough to produce meaningful wage increases. the right posture is tong ready, aggressively, respond including with fiscal policy if things slow down in a meaningful way. and being preventive with as the to a slowdown dominant policy priority, rather than being preemptive with that,t to an overheating given the global context, seems to me to be very far away.

jonathan: one of the things you said was be ready. you also wrote about the need to come back down. to be ready when the recession comes around. the federal reserve is not ready for the next recession. how do they respond with monetary policy? i think it is a combination of identifying , notctly the greater risk looking like there is no chance that inflation could ever get above 2%. they have been very clear that they believe the 2% target is symmetric. it is equally bad to fall short, and immodestly exceeded 2%. i'm not sure their actions have been consistent with what they said. i think it is not just about

what central banks can do, probably not even dominantly what they can do, we have to be prepared to use fiscal policy and to uisse it more rapidly thn has been the case traditionally. i think fiscal policy has been japan, andn europe, frankly after the first several years of the crisis when it was used quite successfully to bring about a rapid turn, i think fiscal policy has been underused as a resource in the united states. stephanie: you're giving us what should happen. given the current administration, it doesn't feel like we were going to get fiscal policy. i am not very political. i think it is only fair that the current situation in washington -- i think it has been very clear that the congress has been

the block on how much we have been able to use fiscal policy in this economy. starting in 2010, the congress was insistent on a degree of austerity and our policies that has had an adverse impact on economic growth. it is not to say i agree with everything the administration has done. i think you can't talk about what happened in economic policy without talking about congress. stephanie: what's do you think the next 2-3 years look like? are we heading for a recession here? a true china blowup, what will it look like? you keep trying to offer a single scenario. stephanie: that's my job. larry summers: the right way to withs make forecasts is

the ranges of uncertainty. i will just say i think history suggests that if you're looking three years out it is a serious thatke to ever assume there will be no recession. that is a wrong assumption. the santa say that it couldn't happen, but it would not be the right planning basis. i think in china you are looking that therospects spread, andl increase. it is a very profound transformation that china is attempting. even if it is undertaken the most successful and smooth way, that is likely to lead to slow down. what we have seen doesn't suggest that we can count on it taking place in the smoothest

and most successful way. rather, to the contrary. you have almost a perfect storm of problems and other emerging markets. between russia's descent toward lawlessness, growing apprehensions about south africa which is led major decline in its currency. , and weakchaos economic policy combined with the burden of low commodity prices in brazil. the emerging market sector, which had been seen as a possible new salvation for the global economy, has largely turned downward. at the same time, global trade has slowed. i just see a gathering of

deflationary forces at a time when the world is probably already in danger of being demand short. a prudentyou are regulator, like a janet yellen, and anticipating a recession -- not expecting, but planning. was it a mistake to raise in december? hooku let congress off the by leading with monetary policy? summers: i think you assess the balance of risk as being towards slow down and deflation, not towards inflation. that influences the monetary policy choices you make. at a certain point, when you committed yourself to raising rates in december, you raise rates in december. whether that was a prudent

commitment to make i think is open question. i don't think you investor yourbility -- invest credibility in the idea you have substantial rate increases in the coming year. circumstances may well permit that, but i don't think one one'sto invest credibility in a substantial number of rate increases during the year. i think one does, there is also a question for central bankers generally of speaking to the need for more stimulative policy. not just in the monetary area, but with measures to promote business confidence. with respect to fiscal measures like promoting public investment. is crazy before, it

that at a moment of epically low interest rates, extremely high andtruction unemployment, low materials prices, we are investing less in infrastructure as a country after depreciation time in the last 75 years. at a time when it would be ideal both and a stabilizing sense, and in a long run sense, to rebuild and renew america. that is what we are hearing too little of from both sides. i don't know what the constituency is for decaying air and collapsing bridges. i don't understand why there isn't more willingness in our political process to advance be justified me to

on a whole set of grounds. deferredemoving the maintenance burden from our children's generation. stephanie: help us understand, you have been pounding the table for infrastructure spending -- why do you believe the president didn't adopt an infrastructure stimulus plan that he said he would? instead, extending emergency funding. why do you think this is happening? larry summers: i think there is an implacable opposition in congress to anything that smacks of the government expanding its role and doing more. when people hear about public infrastructure, they reasonably enough think about the public sector. so, that is why. and look, it is not that there aren't valid concers. there was a bridge outside my office it is not very big that

they have been fixing for almost four years. bridgecaesar built a eight times as long as that bridge in nine days. don'tnot like i understand why there isn't some lack of faith in the public sector's ability to do some of these things. but, i really believe that doing it, doing more with infrastructure, and doing it bet ter, would have a powerful impact on the economy. it is not all public sector. that my cell is phone calls are to my office in boston are more likely to drop driving into new york city and into the beijing airport. the governments job to

make a be enough cell phone towers. that is a private sector responsibility. i think that is an important aspect of what needs to be done. jonathan: let's take a globally. you talk about markets being a predictive force for what is about to happen in the future. when you look, which market -- you know which the pushback will doesn't tell you as much as it used to. the commodity market doesn't tell you what it used to. as a demand function, which market is it that you look at? i don't think you look any singular market. the pervasiveness of commodities tells me that it has to do with demand. if it was a supply side story, what was goingt

on with copper will be different from oil. thatems to me the fact there is so larger common commodity factor is telling you something is happening. jonathan specifically,bank every single news compass i go to what it is the ecb or the bank of england say this is transitory. you were saying this is an transitory at all. if demand is a pickup, commodity prices can be lower. is that what we're looking at here? larry summers that is the significant risk. it seems to me that we have been of impugninges false transients for the better part of a decade. if you look at expectations of when rapid recovery would come, and the feds of u.s. to when it would take off, they have been saying within a year for the last 6.

and they haven't been right. it seems to me that you have to have a certain point reconcile yourself to the fact that some things you thought were transient were in fact much more permanent. oft is really the importance secular stagnation. its centrals as content that a set of forces that people have dismissed -- regarded as being consequence of the financial crisis -- you can believe that the huge financial interruption which was what doing it in 2010. but in 2016, and the real interest rate is lower than it was three or four years ago, you have to ask yourself is this really all about the legacy of the financial crisis? or is it a new situation that we find ourselves in, to which we

need to adapt? that has been my argument. that doesn't mean we won't have growth, or cyclical expansion, but i think baseline scenario is a more deflationary, more sluggish, baseline scenario than we are accustomed to living with. trying toose interpret data need to see it through that kind of prism. stephanie: you mentioned a perfect storm. be 1937 allould over again. if we continue to see weakness that the world, and the dollar strengthened, with the fed have to cut this year? it is almost a tautology. if there is enough weakness, of course -- of course they will have to cut.

comments to a single scenario. i don't think that is prudent. risk that we will find ourselves in the situation within the next two years where policy is going to have to reverse? yes, i think that is a significant risk. in my thing that will happen? no. let's like both the fed thing to happen. let's say four hikes this year, if they initiate those eir ballparks th forecast. let say it is done. the economic to the globe company -- global economy do not change much from what kind of world -- larry summers: i would be surprised at the world economy can comfortably withstand four hikes. and i think, basically markets

agree with me. that is why, despite the statements being made, markets aren't expecting four hikes. but, i think it is always a mistake to discount the range of possibilities. this will bee that the year when growth accelerates. it is possible that the trend in the employment statistics will continue. if it does, and we probably will need to have four hikes. but i don't think that would be the central scenario a, and b, if good things materialize and work out well and smoothly it won't be hard to work through it. so, really what policymakers need to think about is insurance against the more

negative scenarios. i think the negative scenarios of overheating inflation seems to me a, remote intervu like we had, and b., starting from her inflation is seems to me easily managed and not that serious. that is why my play has been that policy should be more focused on insurance against a more negative scenario. stephanie: you were encouraged -- you are encouraged by the implement numbers. you thought it was great. when you dig into it, things aren't growing. companies aren't hiring in any significant way. global economy are weakening. is that employment number a bad number, or giving us a false positive? every summers stephanie: president obama was up last time.

larry summers: that would not have been the term i would abuse. i think he was right to point out how different the world looks than it did seven years ago. you were looking at it possible great depression scenario, unemployment did reach 10%. the financial system was on the brink of collapse. we are at a very different situation. think that it is happy times are here again. that is certainly not the way i heard the president talk. rightelieve that the focus for policy concern is mroe on the -- more on the slowdown scenario than it is on the overheating scenario. david: what other uncertainties

to rehab? -- we have? does china have an economic policy, and what should it be? hasy summers: china growthd more in terms of -- extreme the rapid growth -- morewell over a generation than any country in the history of the world ever has. that means it is a mistake to fail to respect their policymakers and what they have accomplished. i do think that the experience of investment driven, huge investment driven, export based at ah models in asia is certain point they burn out and you need a transformation.

the experience of japan after 1990, the experience of korea and the asian peninsula crisis countries in 1997 suggests that transformation is very difficult to pull off in a smooth way. what am concerned about happened to china. one other thing to say -- a pandemic, the only concern. larry summers: they are -- even if they succeed and become a more service-oriented economy, that will mean less demand for copper and iron ore and other commodities. even from a successful chinese information we have risks. pandemicsy quickly, --\ larry summers: i'm keynoting a reportable basically say that pandemic risk and other versions

flu is and ebola and the most important national security issue relative to how much attention it gets up any of the issues out there. stephanie: way to end on a high note. jonathan: thank you for joining us this morning. up next on "bloomberg ," and exclusive interview with bruce. away, futures positive. s&p 500 futures positive. ♪

welcome back, you're watching "bloomberg ." what a morning, we just set them with every summers.

soon we have an exclusive interview with robert kaplan. it will be 8:00 a.m. here in new york. what a day on bloomberg. let's get to vonnie quinn. has released 10 american sailors it detained overnight. the two small boats they had been operating when they lost contact with the navy. is it entered a rainy and waters because a -- iranian waters because of a broken navigation system. urged americans to turn away from cynicism and fear. he did not mention donald trump, but the president said anyone who claimed america's economy is in decline is peddling fiction. it is too close to call in the republican presidential race in iowa. donald ted cruz leads trump 25% to 22%.

his lead is within the margin of error. bloomberg news 20 for hours a day powered by more than 150 news bureaus around the world. jonathan: and much ordering miss tom keene us now. good morning. tom: a lot going on, it is a quieter day today. some smart literature, this was the wall street journal. vonnie quinn gets full credit for finding this beautiful must-read on the global slowdown. what is important is that ruchir sharma and morgan stanley hugely

influential in gaming and dynamics of emerging markets. jonathan: there's been so much discussion about the relationship between gdp and global trade in the last 10 years, and going back even further. what is interesting to me it's a conversation with larry summers we talked about the commodity market slump. he talked about the demand aspect for this post the pervasive drop off, how much of it has to do with the demand and not just apply. does that play into this thinking as well? tom: i think those dynamics are valid. roach fromom stephen real morgan stanley who is the idea of an aggregate demand slowdown. ever some pushback to that theory. you can hear that from lawrence summers, you just spoke with. all in all, it is about what can get us to the next point. last 24say, iun the hours people are focused on a global currency adjustment as

the easiest tool of choice. stephanie: what do you mean the last 24 hours, why now? tom: that is a really important question. what has changed is the first and second derivatives, the exhilaration of the decline in oil. ist people in the game like rated change, rapid abrupt change. we are seeing that in spades with an oil market. that is why you have a new urgency here within the markets. stephanie: wow. david: one of the things that struck me was the extent to which you asked manufacturing companies are dependent on international trade for their probability. is a very hight number from what we had in the 1990's. different from previous eras, which some people want to bring those models back.

larry summers at the very critical of paul krugman's for older economic models. that is precisely what you mentioned. the internationalization and a new kind of globalization that we have seen today. that affects american companies but also affect other multinationals as they invest in america. stephanie: tom, when we break down this headline, and glboal economist -- global economies, larry summers mention the perfect storm. think we are not looking at everything in aggregate? 220imf missed the last contraction while they were actually happening. are we missing the punchline? tom: i would give better credit to the imf the many critics.

at somey to throw darts of the sophisticated crystal ball. always get that they the headlines. with that said, the biz and the optimistct by for secretary summers's criticism. he carries huge academic weight even among the greatest optimists. there was a balance right now, what all of it -- the applecart is upset by this rapid decline in oil. i would note one sense of gas has nottural joined oil in the recent dissent. .avid: thank you very much now we turn to a very important asset manager. assets, itillion in is the world's second-largest alternative asset manager. himcoanchor sat down with

to discuss everything and joins us now. introduce us to your interview. eric: it is an enormous firm as you pointed out. almost nobody has heard of the thing. you could rattle off blackstone, on,isle, kkr, the list goes brookfield belongs second on that list right under blackstone. stephanie: it sounds like assisted living. anyhow, they're huge and real estate. only blackstone did more real estate deals last you. now they want a little more respect in private equity. bruce: i get why brookfield inspires fear in real estate. there is only one public company that does more in real estate and you guys. there isn't that much room between the two of you. what is your competitive advantage in private equity, when there are a half a dozen

firms that have been doing this in scale for 20, 30, 40 years? bruce: our four businesses that we have were spawned out of our private equity business. anstarted off by being investor in these businesses. eventually, we separated them off to the side and built the platform. those raise funds for specific sectors. our private equity business is now relatively small. we are putting a lot of effort into it. i think it will be as large as many of us businesses eventually. erik: you want your private equity business to be mentioned in the same breadth as blackstone and carlisle. bruce: if you don't mention it today, you should. k: their competitive.

bruce: they have a petition for being savvy and cutthroat. there also have the end excellent organizations. are owner operators we buy businesses and hold them for a long period of time. and we are just a little different. we built the other for business is big. i think we can build this one just as big. erik: that sounds like bruce flatt throwing down the gauntlet. bruce: however you want to say it. erik: what is brookfield personality? bruce: generally low-key. generally conservative, will be but the downside protection. we try to earn the best returns of yost think about risk. operators of the

business that we run. we are an investor first and asset manager second. as opposed to other organizations started as asset managers first and then became investors. anythingot to say about any others, it is just what we are. of valuebunch investors to happened to raise funds. because our balance sheet scale and size, and the discretionary stillwe have -- we are 45% of the money we have in every strategy that we operate. >> it may not sound right trash talking, but for a former accounting from winnipeg that is trash talking. low-key, conservative, worried about the downside, what this that turn into? in the 14 years since he is been

ceo, he is generated a total 800%. of more than berkshire hathaway run by warren buffett? 172%. david: he comes across as very confident. jonathan: we started this conversation but never heard them. admit, i hadn't heard of the firm. this he wants to change that? why should he want to change that? stephanie: i love this point. erik: the answer is fundraising. needs to be known in shanghai, and beijing, in dubai. they do business there, but need to raise money. ters, and they want to compete mano a mano. stephanie:

recent does unbelievable global express and say who owns this? it has to be that guy. erik: he looked at my shoelaces and noticed -- stephanie: erik is famous for his shoelaces. : he said he only wears loafers to be able to go in and out of airport security. keep flies business -- revise business-class. stephanie: baloney. the 9:00have more in a.m. hour of that interview. and all day long here on bloomberg television. scene we go to break, a at the museum of american finance gala. i have never been to that museum, what exactly is in there? areguessing no dinosaurs big whales. but to former u.s. treasury

secretaries, robert rubin and tim geithner. the need to little eye candy's of the invited new york stock exchange president tom farley we will sit down next week with. i don't think any of us were at that party. when we come back, more. ♪

david: welcome back him you're watching "bloomberg ." in 2015. were dead on his double line total outperform 94% of the bloomberg peers last your. so what are jeffries calls for

2016? let's take a look. he was see a continuation of the aftermath of the rate hike. he was a market struggle then create potentially a very good buying opportunity later in the year. david: doug ramsey, capital management cio is here. you just heard what he had to say. what is your reaction? doug: i think struggle is to kind of a word. i don't disagree with the buying opportunity later in the year. bearmy perspective, the market in the u.s. has been underway for months. all sorts of things beforehand in foreign stocks and emerging peaked in the second half of 2014. underway for quite a while. besides of declines really implies to me the large capitals

will eventually follow. another 10% or 15%. real bear market. jonathan: can you have an earnings recession without a general recession? douog: it is possible. historically, going back to the postwar. we singled out five noneconomic bear markets. the classic was 1987, down over 35%. the economy slowed down for a couple of months and grew for another three years. that can certainly happen. i think the key thing is the markets they the economy. if i'm right and the s&p is down 25%, we will likely have a recession of some sort in the u.s. the stocks that market and only anticipates future economic activity, it is also a driver.

we are down 25%, that is a big negative wealth effect and a confidence plausible cause people to pull back. manager looking to buy a new machine will think twice about it. david: this is interesting, has put the odds of recession and about one third right now. kitchen looking into junk bond spreads in town of the market puts the odds of a recession at about 44%. if you pull up this chart which is junk bond spreads in bank of america. stephanie: hold on, you have to put in respect of the percentage that are energy names. matt: i was going to get to that, but that is a very good point. about 44% posted typically, we're at 5% in expense i months and 10% in recession months.

if you take out those energies, the odds are still at about 20% which is to hire the maybe the average markets. i am higher than that. part of it is just the size of the tops of already been carved out of the market and an sense of group. stocks already got 25%. stephanie: and help me understand, and america -- bank of america could be a blowout at a 5%. investors said they got dry powder, maybe not in energy. healthy balance the two. how can you have a blowout you when you have a recession? think the investment community is slow to latch onto this idea that things are slowing down. jonathan: you said markets are good predictors of what could happen, but the investment community up and slow to pick up

on things. so which one is it? i still argue, the context of the price actually already of -- there is a lot complacency. it is popular to say that this has been the most hated bull mar ket on record, we would not believe that they some person -- participation. russelldown 20% on the monday. a is down 24% from its high year ago in march. we only have -- stephanie: then let's make some money. yesterday rbs but a report that said sell everything you want to jump at the window. what exactly should we be doing? doug: everything except the last piece. stephanie: you are saying sell everything? sell anything in our tactical funds. we can to go short, we can't go flat.

we are pleased on close to the minimum. i do think a buying opportunity to develop later in the year, possibly in commodities. it wouldn't surprise me to see oil to be the first to bottom. right now, it is certainly dry powder time. david: we will come back with doug ramsey just a minute to talk about what you're finding buying opportunities. we will find some way to make money for stephanie get today. -- here today. ♪

jonathan: european stocks rebounded for the second straight day. doug ramsey is back with us. he manages the global fund. i wanted to with you, woman talk but european equities, -- stephanie: that english accent. we are short in the euro along with whatever drug is

going to do. it is not that simple now, is it -- draghi is going to do. it is not that simple now, is it? doug: historically come what is been working works the best late and a bull market and early in the bear. as you transition, it becomes time to become a value investor. i think we're getting there. that is one reason we avoided in emerging markets. suspected they were a value trap. last maymarket peak with only 12 times i normalized earnings estimate. is the peak apart of the greatest liquidity driven bull markets of all time. something must be wrong here. you're getting well advanced to this stage. quite frankly, that will be a confirmation that the bear

market is entering a final phase. you start to see some of these persistent value traps outperform. jonathan: typically, only talk about a bull market, our viewers are thinking 2-3 years the new drop off. but the technical definition we had a bull market in the front half of last year when the dax, then a bear market later. it is going the short cycles from years the matter of months. stephanie: proving your plate that is the most hated bull market. people didn't fundamentally like it because her mario draghi says i will do whatever it takes you have to just go with it. doug: i am not in the camp that 20% is automatically a bowl or a bear -- bull or a bear. you can make the case the 2011 -- but so much was down. i believe that a shallow bear. mee with 1998, but let

answer this way. if we stop here, if monday was the low across most markets and go to new highs, i would not label this whole period a bear market. stephanie: do you think central bankers have no dry powder left? you're basically saying mario draghi and janet yellen don't have the power to do whatever it takes anymore. doug: they will figure out something of we're down 25%. stephanie: if they do, we could to the market turned dramatic look at it in europe -- like it did in europe. doug: i think that will be a transition -- if i'm the fed and we were critical, why did they stand on the sidelines? the original with

6.5% implement rate target there were a lot of reasons not to lift rates last month. look at markets, the average stock performing so poorly. look at what high-yield had done. stephanie: janet yellen made a mistake? douog: the mistake was -- doug: the mistake was baked in the cake years ago. as a matter fact, the p/e ratio across our broad stocks peaked quintanilla with that first month of tapering. those already two years of tightening in the cycle. that efficiently increase -- stephanie: we believe it their doug, thank you. when we come back him our exclusive. ♪

stephanie: robert kaplan's attempt bloomberg for an interview. oil dips below $30 a barrel

before a nice bounce back. we will be speaking with harold hamm. he runs a private equity firm no one knows about but they should. bruce platz tells us what he is buying and selling. ♪ stephanie: welcome to bloomberg go. david: we are here with jonathan ferro from london. it is touched on the markets. jonathan: let's get a check on futures. futures higher again this morning. this makes stephanie happy cut down future's up 79 points. s&p futures up by 10 points. nasdaq futures snapping that 8 day losing streak. nasdaq futures up 25 points. in europe, big rally.

ftse 100 up one fourth percentage point. that's one full percentage point. stable.uan the pound, one dollar 44. this is terrible for me. good for you guys. come over and see me. stephanie: things that are terrible for you do not hit my radar screen. i looked athings yesterday, you saw names like apple where people are very positive on really taking a lead up because it does mention we are getting back to fundamental investing. sibley saying, what do i truly like and why. jonathan: apple has been very much a concern as a proxy for china. every time that concern kind of

dissipates, apple comes back higher again. as for the fundamentals -- stephanie: how many apple products are in your house? my look like an apple store. jonathan: let's head out to dallas where michael mckee is sitting down with robert kaplan. michael: good morning to everyone watching and listening across all of bloomberg's platforms. is 60las the temperature degrees. robert kaplan was a harvard university professor until september of this year, driven out to the terrible winter in boston last year. we find him now as the new president of the dallas federal reserve and we thank you for joining us. robert: good to be here. michael: a lot of market volatility to start the year. what implications do you see from that for monetary policy? career inving spent a

investment banking for 23 years, the markets are going to go up and down. this has been a tough start the year. it says a lot about the turmoil in the markets in china which --e reflective of their and their underlying issues. it's a lot about our companies the united states while exports may be less than 20% and manufacturing is less than 20% of the u.s. economy, it is a higher percentage of the profitability of the s&p 500. when you see weakness, particularly weakness outside the u.s., it affect our companies, probability, the market, to a greater degree than it might affect the underlying economy. as a monetary policy maker, you have got to watch these market moves but you got to realize they may or may not reflect what's going on in the underlying economy in the united states or better yet they can go

down for two weeks and they can rebound as they did in august and september and the underlying fundamentals are still strong. i would say you have to watch it and understand that not over read or overreact. it takes time to figure out what the market may be saying. michael: the government reported almost 300,000 jobs were created in december. monday, the markets tanked. does it were you when investors do not react positively to good news? robert: no. investors and the market are reacting to corporate profits and expectation of corporate profit. i mindful of that. corporate profits in 2015 were down in the s&p. has not been a lot said about that but they actually declined. in the first couple of weeks in the year at the end of last year some of the estimates for corporate profits for 2016 have been revised somewhat down. it is much more reflective of prospects around the world as it

is the health of the u.s. economy. i'm not surprised that the markets are going to pay attention to other things. i think the job numbers helped. it helped bolster confidence in the u.s. economy. we will have to see over time. the markets may not react to information in a day or a week but over a period of time they normally weigh all this information and i think you will see a strong u.s. economy reflected. michael: what are the prospects for the rest of the world? particularly for china and their likely impact in 2016 on the u.s. economy? for growth forecasts outside the united states i would call sluggish. they are going to improve a little bit in 2016 but it is very uneven. for example, any country like venezuela or brazil, russia , that are exposed to commodities are actually in recession. that is probably going to continue. india is a bright spot.

china is dealing with a number of issues that are not cyclical. they will take years to deal with. overcapacity in their industries come overleveraged, aging population. this transition they are trying to make from export driven economy to a service sector consumer economy is going to take many years. i think the u.s. and the world is going to have to get used to lower rates of chinese growth and i think the world is adjusting. it has implications for commodities prices are you some applications for u.s. gdp. it hasn't locations for u.s. domicile -- it has implications for u.s. domicile of companies. michael: robert kaplan was well known at goldman sachs and harvard but as a policymaker people do not know where you are necessarily coming from. would you characterize yourself as a hawk or dove? robert: it may be too soon to say. i probably consider myself as a

business person as a centrist. open to i am quite looking at new information and changing my mind. i don't rate unemployment versus inflation. i rate the risks of those in importance of those about equally but i do not come in with a preconceived point of view as a hawk or dove. i'm probably a person who is more focused on diagnosis, what to do and how to do it. at this point out call myself a centrist. i think you will see me at times advocate positions that sound a little hawkish and you may see , on the facts and what might analysis is, advocate dovish. michael: right now when you look at the u.s. economy, do you worry more about the prospect of inflation accelerating or growth slowing? robert: i still believe gdp 2016. in

our best judgment is it will be 2.5%. not great by historical standards but enough to continue to generate jobs and probably drive down the rate of unemployment. we think we are making good progress toward reaching full employment objective in the united states. full employment is going to require rates of headlining unemployment low 5%. i think there is more slack than we are used to at this headline rate of unemployment. inflation, as you know, has been low. -- i thinkre is some there are some transitory factors that are driving it down. our own view in dallas, we look at this dallas tremaine which suggests inflation. core inflation is running about 1.6%. i will watch that very closely to see if there is evidence of inflation picking up. my suspicion is we will be able

to run and should be able to run at lower rates of unemployment without sparking as much inflation as we would have in the past. i think that is because of globalization and a number of other factors. those are things i'm looking at. michael: how low do you think unemployment can go before we see inflation accelerates? robert: my own sense is i think we can go lower than where we are now. whether that means 4.5% or lower. the world is different enough -- and i gave a talk the other day and you and i talked about it. the world is different enough that it was pre-recession because of globalization. more disruption. aging demographics in the united states and around the world as well as high levels of debt and many countries are meeting to deleverage. when you wrap that up together i think all that is putting downward pressure on inflation. this is one of the things i will

keep asking that question. i do not think i know the answer. michael: that was -- david: that was michael mckee talking with the new dallas fed president. we have not known where he is on the fomc. what struck me was his emphasis on corporate profits and the extent to which u.s. corporate profits have become so tied up with the international global community which is something stephanie has talked about. jonathan: as a businessman i would be a centrist. i love that. anyone familiar with the dallas fed will know that that had a hawk there for a long time. that is kind of what people want out of this. the point on the labor market that unemployment can go lower before you get inflation pressures, goes back to the conversation we had with larry summers. where is the point where unemployment comes down and wages start accelerate? we are still not there yet and i think that is the big debate for these guys at the fed. stephanie: think about when he notes deflation as it relates to big countries.

what does it mean for emerging markets? when doug talks about emerging markets being a value trap the more problems we have here or in europe, what does it mean for countries like brazil? tough times. many investors viewed brazil as their favorite trade a year and a half ago. david: you want to stick with bloomberg go. we will be back with more interview from robert kaplan. ♪

vonnie: welcome back. shares of general motors are rising in premarket trading. gm increased its forecast for annual earnings and boosted its stock buyback plan by $4 billion

and raised dividends. gm says its sales will keep growing in north america and china. shares of ford are falling. acord results for 2015 and supplemental dividend of $1 billion. there are concerns that ford's north american profit margins may shrink this year. volkswagen ceo will try again in a meeting with regulators. california regulators rejected the w's proposed engine fix involved in the omission scandal. -- the emissions scandal. now matt miller on the markets. see it will be a third day in a row if we rise again today although monday was not huge. the s&p mini contracts up 11.5 points. nasdaq up 27.

take a look at oil because that has been a main driver in the market, down every day this year until it finally bounced back. you see it up again today, up . still very low but maybe just maybe it has hit bottom. city stillf the think they will go down to $20 a barrel. jonathan: is $20 still a big call? matt: i do not think it is a big call but ed morris made that call last february. the guy has been on top of it. stephanie: a big call and it is a small number. jonathan: more of our interview with dallas fed president robert kaplan. ♪

jonathan: good morning. let's go back to dallas where michael mckee continues his exclusive interview with dallas fed president robert kaplan. michael: welcome back. we are live on bloomberg radio, bloomberg television, and streaming live on bloomberg.com. with robert kaplan. you are new to the fed. what is your reaction function going to be? what is going to determine for you when it is the appropriate time to move interest rate again? robert: being new to the fed, i've have now been to three fomc meetings, about to do my fourth in january. i have gotten a better feeling -- gotten to know the better bank presidents, feeling to understand how the process works. spent enormous amount of time in

this district. the main things i am looking at gdp,nemployment, passive evidence that we are moving toward meeting our 2% inflation target. those are the factors i will be watching regularly. in thinking about the path to normalization, the only thing i'm sensitive to is running zero interest rates or near zero interest rates as we have is not free. it creates distortions. creates other imbalances. i will be looking for those also. i will be looking at gdp, unemployment, inflation, and trying to understand what is going on around the world and what the future looks like. i have a bias toward thinking if we can normalize, it would be much better to normalize. we have gotten so used to these

potential distortions i do not think we recognize them anymore. i'm sensitive to the fact that we want to get on a more normal footing. michael: do you have numerical targets? seert: for gdp, i want to in 2016 for example we will be tween 2% and 2.5%. i want to see the unemployment rate dropped down. our view is it takes about to 150,000 jobs a month. i want to see evidence that after these transitory factors have passed with oil and the dollar that we are gradually moving toward reaching our 2% inflation target, not this year but over the next two or three. those are things we will be looking for. in addition, we will be looking at economic activity all over the world and how it might affect what is going on here.

michael: do you think those metrics will justify the rate increases the fed suggest will come this year? robert: too soon to say. in december you are referring to all the projections we made. if i thought we were making progress on all of those indices that i just talked about than i four is ae or reasonable base case. the economy never unfolds quite as expect. we have to adapt to it. if we saw progress along those fronts, for me, i would have a bias to want to move toward normalization. understanding there is always going to be a lot of pushback and a lot of resistance to doing that. it comes with some risks. every time we increase the fed funds rate we will need to watch and see what the impact is.

a lot has been discussed about capital flows moving away from emerging market economies. impact on exporters, strength of the dollar. we have to watch and learn as we act. i will be focused on doing that, not predetermine what we're going to do. economy speaking of the not unfolding a somebody might of predicted, you're in the middle of the oil patch. nobody thought we would see oil from $30 a barrel. what is the impact? robert: the mayor talked about the fact dallas has been very resilient. austin has been resilient. houston is more negatively effective. the net impact of all of this statewide is that job growth is still up in the state which is a testament to the resilience of the state of texas. more diversified state. lower job growth that we had in 2014. job growth here was about 3.6% in 2014 it was about 1.3% this

year. we think it will be the same in 2016. michael: we have had an impact on job growth nationwide. capex. are there other areas you worry about? robert: the immediate effect of cuts and capital spending, we are seeing that in companies, in the state. there is a positive effect of lower prices for consumers, more driving activity, better car sales most likely because of that greater ability to spend on other things. i worry about the ripple effects of what is going on in the energy sector. one of them is, energy is a material part of the high-yield sector. high-yield issuance has gone up --matically and what happens high-yield bonds are held in mutual fund today in etf form. if you have weakness in one sector it tends to cost selling

in every other high-yield sector because of yield of redemptions -- because of fear of redemptions. making it harder for companies that are leveraged to borrow and it will widen credit spreads. michael: robert kaplan. stephanie: that was michael mckee in his first interview with dallas that president and ceo robert kaplan. you can listen to more about interview on bloomberg radio. it will be on bloomberg.com in just a few. david: his bias toward norvell's normalization. he may say he is a centrist but i thought that showed his hand bit. jonathan: you hear that from the hawks. this ballpark figure of full hikes this year. it could change.

we go back to the larry summers interview, four rate hikes? he is not sure the global economy can withstand that. that will be the big debate, how many hikes can the federal reserve actually get in. if they did not hike in september because of what was happening in china and global financial markets, i would love to have seen if the federal reserve meeting for that first rate was right here right now today. david: since the fed hiked in december the markets have said we do not believe four. he had been saying two. -- they have been saying two. stephanie: if the fed was in that position today, remember we have a positive jobs report. larry summers was saying how excited he was about that number so how do you balance the two? janet yellen was spooked by it in september. she felt good about the economy in december. jonathan: you have a domestic economy in the u.k. that seemed

ok and then everything abroad it not seem great. it is a domestic economy. insulated enough to what is happening globally. i think the economists, their answer is no. stephanie: there are not that many similarities between here and the u.k.. have you had the food in new york? it is amazing. john is like, how many days do i have left? we will be joined by a giant in the u.s. energy industry. we will be speaking to harold hamm. find out what he thinks -- find out when he thinks oil prices will stabilize. ♪

jonathan: good morning. we are about 50 minutes from the opening bell.

futures higher here in the u.s. as well. there futures up 115 points. s&p futures up 15 points. , stable for a fourth straight day. wti, a drop below $30 a barrel for the first time in over 12 years. 31.39 per barrel. stephanie: turmoil continues in the oil markets. wti crude hitting below $30 per barrel but recovering just a bit today. here to give us his views on how all of this will play out, continental resources ceo harold hamm joining us now. here's alix steel. fall, did he saw wti you expect that? is.ld: it is where it

markets works by demand. the lower it goes, the shorter time it will be there. it will play out like that. we see several things that will move the market higher throughout this year. we are close to that point on price. higherany analysts see prices at the end of this year. you have to model your production on some price forecast, what is it? people don't do that much. looking -- we have our own estimates of what that will be in the future. i have said we are probably looking at toward the end of the year at $60 prices. i believe that. that is what we have looked for. what we have been fighting with his predatory pricing from the saudi's.

they are basically the only ones .hat had access to capacity they turned it all on. 1.8 million barrels access production -- excess production came onto the market at the end of 2014. that has been the oversupply. about 2% of the market. a little over 2 million barrels a day. until that plays out -- and we are seeing that toward the end of this year toward nothing. alix: you have seen that before, when saudi's refused to cut back in the 1990's. the difference is u.s. shale and the capacity for the u.s. to now export its oil. you have been an advocate for such a long time of that. what do you think is potential to export? harold: i have been a longtime advocate. we were a captive market to u.s. refineries. our price was 25% less than the rest of the world. you cannot compete in that environment.

now is the same. becames of trading wti the premium price. 11 hours of trading on the open market, once export became reality. that was the difference. it was a mechanical thing. we are on level playing field now with the saudi's and we can play with them. alix: once the export ban was lifted, brent and wti are trading around the same price and most analysts are saying exports are on economic because you need a discount of u.s. oil to justify the transportation cost from the balkans to the gulf coast or to asia and europe. harold: we have had countries all around the world that could not get our premium quality crude. it was not available to them. now it is and we are filling those markets.

shipments are going out. it is like turning on a switch for exports. we had the capacity. the demand was there, the ships were there, the ship channels, pipelines. it was all in place. it was not like lng. it was ready to go, available. we have seen it turn on. in the future, you will have market of choice, the u.s.. our legal system, banking system , is much better to deal with than it is in iraq. how do you know that you will get that oil? here you will know you that you will get the oil. different than it was in the 1970's. we have the resorts bache -- the resource base in the future. certainly we are not going to turn it all on at once. we are seeing a lot of people have a lot of discipline in this industry today in the u.s.

everybody expected it to bankrupt everybody but it has not. we dealt with predatory pricing for 40 years. in the future, we will not have to. the saudi's played their hand. it is the last hand they have got. alix: we are expect in u.s. production to roll over quickly. the rate count has dropped 70% but u.s. production has rolled over 6% or 7%. part of that has to do with efficiencies. drilling on better wells, operating costs came down. how many more levers do you have left to pull until you have to shut in production? harold: people are already shutting in production. that is the thing about it. it gets to a certain point, you do not have to sell. you shut them in.

that number differs all over the board. -- recoveryple projects, you shut it down. things i think everyone is missing, historical online has been 4% to 6% conventional resources. with horizontally drilled fields , the reason you drill horizontally is to accelerate production and the klein rates. -- and decline rates. about 20% on horizontal fields. it will drop a lot quicker. most people are not taking that into consideration and they need to. alix: the bigger question it seems going forward is when we do see a price recovery, how quickly can you get the completion crews back? how quickly can you turn back on the rigs you have shuttered?

harold: that is an excellent point. infrastructure goes away. people go away. rigs, most people shut down drilling by 75%. that is how much has fallen. how long does it take? just as long as it did going down. a good while. we have been in this 14 months. you will see that take at least that long to turn around. we are building to a low supply situation. unfortunately, in the world. alix: it seems like a buffer could be those wells that were drilled but not completed to save costs. how quickly can those be turned back on? harold: that is going to mitigate it some.

it will mitigate the low supply situation a bit but not drastically. completion crews have also gone away. people moved into different areas or you have lost people. it takes a good while to ramp backup. took my last question, you off some hedges last year. you were expecting higher prices. we get to 65, would you be considering putting on hedges for continental? harold: i am not looking at putting hedges back on at this point. we are well hedged with natural gas, about 75%. we're in pretty good shape in that area. capex.dy protected that move made us look at the whole picture and we were the first to real back. and make sure we had all of our costs in line. alix: harold hamm, ceo of

continental resources. we will continue this conversation after the break. ♪

david: welcome back. we're still here with harold hamm. it is good to have you. a fascinating interview with alix. i would like to start off with a specific question about energy producers. we hear a lot of talk about a lot of debt that a lot of people have taken on. when the oil price goes down the way it has, i have seen reports just today that there are energy producers paying 40% of their

cash flow in interest payments. harold: it is a different type of debt than it was in the 1980's. everyone at that point was indebted to the banks. the banks could call your note and when they did, you were done. we were not in that situation fortunately. very little debt at that time. a different type of debt that people in our industry have today. oil and gas companies. it is long-term debt in the form of bonds and other instruments that are not going to be due tomorrow. it is out there in the future a long way. smartsly, people are putting this in place because of the sick nature of our industry. -- the cyclical nature of our industry. predatory pricing.

trying to put you out of business, take market share. we saw the same thing happen in 1998. they did not -- we got a second dose of the lesson of the 1980's in the late 1990's. here we are again going through the same thing one more time. alix: what is different though is you have shale. you have the ability of the u.s. to pump its own oil. do you think there is a possibility of the u.s. becoming the new saudi arabia and still keeping their costs low? harold: sure i do. this last year has been a good sample that all the companies become much more efficient in operations, drilling operations, production operation, all across the board. if we are on level playing field , that is what exports did. it put us on level playing field. we are not captive to just the u.s. refiners.

we can sell our product anywhere in the world. we are getting the same price the saudi's were. last year it was not the same. we were suffering a 20 point -- a 20% deduction. today, we are on a level playing field. 11 hours of trading, those prices flipped. 11 hours of premarket trading flipped those prices. once we could export. it's going to be a new day. we will be a market of choice in the future. today, ahead of us, we have a wonderful resource to invest in over the next 20 years. jonathan: which is one of the reasons people think crude bounced back in a big way. -- crude won't bounce back in a big way. you mention the curve earlier. you do not put weight on the print curve. how wrong is that for you? what we are seeing now,

i mentioned earlier that this is the last hand the saudi's can play. from this point, that is over. everybody thought they had a lot of excess capacity. 1.8 million barrels. they put it on and use that. they played their hand. in the future, it's going to take a while to get back up running. all the stimulation crews, operations, everything in the industry, you lose a lot of people out of it. that is the unfortunate part. you lose a lot of qualified, trained people. it takes a good while to get back up and running. it's going to come back on gradually. stephanie: the energy sector killed the high-yield market last year. what do you think were going to see in terms of m&a or bankruptcies next year and what oil prices are? harold: i think you will see

m&a's.rced there has been a lot of resilience in our industry that has been displayed by oil companies. we have not seen a lot of forced m&a's like you did in the past. stephanie: could we in 2016? if we get to $20 oil, so more producers -- some smaller producers have no choice. harold: they have some long-term choices out there. very few of them have so much debt leveraged that they will have to go under with $20 oil prices. the lower it goes, the shorter time it's going to be. that is the way the market works. stephanie: you do not think we will see bankruptcies this year? harold: i predicted that we would not, we have not. a lot more resiliency in the

industry than anybody imagines. alix: there's been such a big spread between the bid and to ask just sellers did not want to sell when oil was at 40. the issue becomes the volatility we have seen in the oil prices preventing m&a. how do you fairly value in asset when a few weeks ago we were 45 and now we are getting calls for a to handle? how do you see that playing out when you are seeing a lot of reducer still under pressure? i have seen half a dozen of these downturns. the cycles like this. all the other folks in our industry have as well. most of them have. they know how to get through it. they are not going to sell out real cheap and they are not going to be merged real cheap for the most part. jonathan: to that point, they are not going to sell. you do not think shale will

be in trouble. for what reason should anyone pull back? if i am the saudi's, i'm not going to pull back on production to bailout the backers. why should i do that? ceosak for the miners, the of rio. someone says to me, i'm the lows cost producer, washington pull back to bailout some of the minnows in africa? why should anyone? harold: that is an awfully good question. the answer to that is, this has been a monumental mistake for the saudi's. jonathan: why? harold: it has not worked out like a plant. expect it to move prices back to 70 for a while and they could work in that environment really well. can they work at 30? no. they are supporting a country. all of their welfare system comes off of oil. that is all they have. they are supporting a country. i'm supporting a company.

we were lean going into this. we have not cut any employees. can they get by? they are seeing a lot of social unrest over there. they made all their neighbors mad. can they continue that? david: why doesn't it work the other way? if your nigeria, venezuela, and r stability depends on oil, you have to keep pumping. harold: venezuela, that as a whole different situation. this is unsustainable. that is what we are talking about. unsustainable practices. what happens to production? it plummets. pumps,u need to replace tubing failures, all of that in venezuela. you have seen production plummet. that is what is happening around the world. david: harold hamm will be staying with us for the entire

hour. it will be great to have a mere. we will come back -- it will be great to have him here. we will be right back. ♪

jonathan: good morning. we are back with harold hamm. great to have you with us. shale oil. we are talking about west texas, the permian basin. that is the market they are most parts of the -- they are most positive about. the producers started using horizontal drilling. a lot of those fields in west texas. it has worked out well. .hey are applying that now it has been good for the permian

basin as well. alix: macquarrie had an interesting study out, 5 billion oil -- 5 billion barrelf oil a day. what is the next play that we don't yet know about? harold: we are involved in a play called stack in northwest oklahoma. an awfully good play. oil, natural gas. a tremendous play as well. happen.ake that 5 million barrels -- 5 billion barrels -- 5 million barrels. newe has not been a lot of exploration last year. this is one that came on very well. very nice position. stephanie: i want to be

long-term but i cannot. we look at the price of oil did minute by minute. right now, what is the most valuable investment? what matters to you? where are you positive? harold: investors ought to be all over it today. the stocks are very cheap. this is a long-term business. stephanie: do you think we are at the bottom now? harold: we are awfully close to the inflection point if not there. i am not going to call bottom. the lower it goes, the shorter term it will be there. i think we are awfully close to the inflection point. a lot of people are not counting on the fact that we have a lot of declined to overcome. you are right about the 5 million barrels. where we have to go to get that. natural decline on conventional wells were about 5%.

we drill horizontally to accelerate production type rock. also, along with this higher accelerateds also decline rates. stephanie: and storage costs. it costs a lot of money. rates i wasdecline getting to, historically higher. when you look at -- auto people are not looking at that. first-year decline rate them about 70% on horizontal production. over time it levels out at 20. about three times as much as conventional production. nobody is looking at that. how do you overcome that? dropping about 100,000 barrels a month in the u.s. today. how long does it take to work off that 2 million barrels?

if you taken the fact that horizontal fields decline faster. are you buying a powerball ticket? david: $1.5 billion. harold: sure. didn't you? whoever wins powerball, where do you think they should put that money? harold: obviously, oil and gas. david: what a surprise? stephanie: thank you so much for your time today. harold hamm, continental resources ceo. ♪ we live in a pick and choose world.

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only at a sleep number store... find the lowest prices of the season, going on now. save $600 on the #1 rated i8 bed. know better sleep with sleep number. david: welcome back to bloomberg go. stephanie: it is a big morning

because jonathan ferro is still with us. it is a huge morning. we have had larry summers, harold hamm, it has been a big day. jonathan: here with us is jim mccaughan, ceo of principal global investments. great to have you with us. vice president biden says an apology was not given or needed after two navy boats drifted into iranian waters. iran released the 10 sailors today. the u.s. and iran both said one of the small boats had a mechanical problem. john kerry issues a thank you after the americans were freed. a turkish official says one person is under arrest in connection with the istanbul attack. the country positive interior minister held a conference today . most of the 10 people killed in yesterday's suicide bombing were german. the attack happened in a

historic part of his temple. police say the bomber had leaks to islamic state. with voting in the presidential nomination 19 days away, media trackers says the vermont senator spent $4.7 million in ads in the past weeks. the iowa caucuses and the new hampshire primary approach. global news 24 hours a day powered by 2400 journalists and more than 150 bureau's around the world. matt: futures up across the board today and climbing as we get closer to the open. 1% contracts about 8/10 of if we put up some gains today it will be the first time we have had three day gains since before christmas. over in europe, also positive results from the trade balance that we got out of china. more exports coming out of china

which is good news for them. maybe the u.n. deflation has worked. stocks its hundred up. all gaining. we saw gains in asian markets as well. with the exception of china. here we see actual real gains today. three and a quarter percent after yesterday coming below $30 for the first time in 12 years. let's take a look at the dollar. againstit gains as well the euro, the yen and the yuan. when you see green arrows that means we can buy more of these currencies for the dollar than we could before. if you take a look at my terminal i have an interesting chart. it shows the total market cap of all u.s. equities going back to 2011. you can see this drop we have

only in 2016 but really since august is a loss of dollars in.3 billion u.s. equities or market cap. jonathan: about 27 minutes away from the open. three stories that matter ahead of the open. china's trade surplus widens. offering support to a weakening yuan, that is royal global markets. country us trade balance widened to $60 billion in december. that is according to official figures. emphasis on official figures. official figures also said there was a big boom in exports. jim: the trade data has provided support to the yuan. that is not entirely logical given the economic story one has to deduce from trade numbers which is the chinese are not

importing as much as perhaps we expected and perhaps they want to. it suggests to me that the transition towards a more domestic and consumer-oriented economy is going slowly and that is not necessarily good news. david: could it also be tied fx? for example the dollar strengthens against the yuan. jim: the yuan has been managed against the basket that they think is their import basket recently. is weakness of the yuan maybe not as scary as some people think it is. they have been effective at managing it toward the basket of currencies. imports to china from the u.s., they are suffering price pressures. in euros, that is not happened. i do not think that is the explanation. go,d: earlier on bloomberg

larry summers weighed in on future pet policy and what it means for the global economy. here is what he had to say. >> i would be surprised if the economy can comfortably withstand four hikes. i think markets agree with me. despite the statements that are being made, markets are not expecting four hikes. david: what is your reaction to that? jim: i think that is one of the few things i agree with larry summers about. i think two is more likely in terms of hikes. larry would say it is because of his secular stagnation and slow growth. my believe is most business people, most economists, are underestimating the deflationary impact of technology on the economy.

your $50 cab ride becomes a $30 you've arrived. -- you're $30 uber ride. a lot of things like that in the economy are driving effective prices down. apparent very low gains -- jonathan: once again this is not the year where yields go higher. to those things resonate with you? jim: i think it is not the year when yields go higher. if i am right about two relevant raises and rates, the federal funds rate -- why with a tenure be any different from 210 at that point? this is not an environment because of the way i see the technological deflation, it is not an environment where i expect to see rates backing up. at that sort of valuation u.s. equities, particularly those

mystically oriented, are not bad value -- those domestically oriented, are not bad value. i am more optimistic about the u.s. equity market for this year. stephanie: general motors shares are up. a little optimism. 4.5% in premarket trading. it is because people saw matt miller at the detroit auto show. the automaker raised projections by $.25 per share. boosted the dividend. in northes growth america and china. it sort of takes us to larry think, yes gm believes they will have growth but it is slow. is that the reason you are constructive on the united states? it is positive but does not have to be racing. jim: and sustainable. i would also look at gm and say maybe this is evidence which we

have been waiting for of people spending from lower gasoline prices. i think this is one of those kinds of positive signs that some of the expected boost from lower oil prices is maybe the latest we coming. coming. belatedly on a five to 10 year view it is all about technological features. cars now park themselves. maybe they will drive themselves within the decade. that will make a big difference to the industry. the risk side on a car company right now. jonathan: the other is the credit that underlies all of those. people --d year for that record year for car sales was that big boom in credit as well. long-term deals with a very small monthly rate for not actually buying the car for $10,000.

matt miller and i were having this conversation. they are buying a car for $100 a week. jim: that is something that makes it relatively easy, set against the fact that it costs $30 rather than $50 to top off with gasoline or whatever it is. that is the point about spending the lower gasoline dividend. there is a market issue, so long as the credit is available, that is fine. if the credit choked off, i think that would be a major problem. i don't see the credit being choked off anytime soon. we can get into the high-yield market later. that is a market which has its issues. at the moment they appear to be contained to energy companies and companies active in emerges markets -- in emerging markets. stephanie: in defense of the market, don't we all have our issues?

those are the three stories that matter most. guess what matters to me? futures are currently in the green. next we will take a look at the companies moving up in moving down in premarket trading. i have a feeling it is apple too. we have more bloomberg go to cover, 20 minutes from the market open. ♪

vonnie: welcome back. -- california officials rejected proposed engine repair yesterday. the chief will meet with u.s. regulators to explain how it can make repairs after cheating on

pollutions tests. accused of trying to rig a global interest rate will be tried in london. they work for barclays and deutsche bank. all six deny wrongdoing. they are charged with trying to manipulate offer rates. amazon is quietly building what analysts say looks like its own delivery coming. of a french parcel service will be completed within three months and some think amazon will make a similar acquisition in the u.s. matt: we are looking at futures that are up across the board. dow jones many contracts up 93 points. s&p futures getting about two thirds of 1% for what could be the third day of gains in u.s. equity markets. let's take a look at what else is going on as far a stocks. i have been focused on car stocks. general motors is boosting its share buyback to $9 billion from

$5 billion, also raising its dividends and profit outlook. that has been received well by the market. yesterday ford said after the close of the market that it is going to issue an additional $1 billion supplemental dividend going to have record profit again this year as well. margins will be shrinking in the u.s. or may shrink and that is why you see the market reacting poorly. microsoft, morgan stanley upgrading microsoft to an overweight because of the advancements microsoft has made in the cloud and the amount of business being done. time warner, also an interesting stock. a new york post reports apple may be a player as far as taking time warner out. the new york post also said telephone and fox could be bidders for time warner are some of the businesses it may spin off. i will to take a look at qualcomm. goldman sachs and susquehanna both happy about improved sale

situation at qualcomm. 2.3%.e a gain of two point michael mckee's interview wit wh tom fault, stay tuned. ♪

jonathan: good morning. we are about 13 minutes away from the open in new york city. stocks, dow jones futures up 106 point. s&p futures up. could we get a second day of gains? it is always about the crude market it seems in 2016. wti, up 2.34%. below $30 per barrel for the first time since december 2003. if we have the currency board in

there, bring it up quickly. dollar yuan stable. kimberly-clark is among the world's largest manufacturers of personal hair care this personal and hair care products. michael mckee in dallas is sitting down with kimberly clarke ceo. michael: energy prices are falling and that cuts production costs but the strong dollar is weighing on sales. somebody who has to deal with that, cameron leclerc, one of careca's biggest personal companies i'm here with the chief executive officer, thomas faulk. you are one of the world's largest personal care companies -- mostagine you sold of your sales are overseas. i'm wondering, you're told analyst you expect a 10% hit to sales of the dollar.

2.5% hit profits. what are you doing to ease that pressure? what can companies do as 2016 begins? thomas: if you look at our 2015 results, our guidance was more aret currency is about 10% you to hit the profits was more like 25%. you have translation and transaction. despite that, in your opening it you said it is the best of times and worst of times. i think i will go with the best. we have had pretty good organic growth and we are winning in the local market and driving innovation. i tell our teams, i want you to improve the shape of the business and local market. improve our market share, our margins where you can. if the currency cause of the size of it to be different, as long as we are winning in local markets at the end of the day i think we will be in good shape. michael: you did put in place a cost-cutting program.

thomas: i think cost-cutting is a way of life for business. we call it productivity. how do we buy better? how do we do a better job of negotiating? ideas that help make our products work better and cost less. had we drive waste out of our processes? how do we carry that all the way through our system? that has to be an ongoing way of life. we have been able to ramp cost savings up which is offset some of the currency drags. that will be an ongoing program for us. michael: does that also mean jobs? are we seeing the dollar cost american workers their livelihood? thomas: not so much in our space. we have to make our products free much where we sell them. we make pretty much all of the products for american moms in the u.s. the products that serve chinese moms in china. you cannot ship products very far because they are pretty

bulky. if you ever filled up the back of your car with a big box of diapers, you probably know what i'm talking about. logistics is a big factor and forces us to manufacture close to the market. michael: you were able to raise prices in 2015. is the global economy strong enough? the u.s. economy strong enough to be more aggressive with price increases this year? thomas: where you saw a big currency hits, places like russia where you had a 60% evaluation. brazil when you had a 50% devaluation. a lot of run materials are dollar-based so those materials got more expensive. that drove pricing in those local markets which factored into our results. in the developed markets, like in the u.s., as you see commodities come down there is probably not going to be a lot .f price increase going forward i know you talked to rob kaplan

earlier and i think the fed is not seeing big inflationary pressures. i think that is why they are able to take rates up. michael: you have a big presence in china and emerging markets. how'd you see the global economy in 2016? is china something for corporate america to worry about the way wall street is concerned? thomas: i am bullishthomas: on china. we have a great team, a strong track record the last several years of growing at 20 plus percent. good organic growth in those markets. i think you're still seeing gdp per capita grow which means more people are entering the middle class and can afford products like ours. we are still seeing double-digit category growth. we had innovation on top of that . we expanded into more cities in china and that has been able to fuel growth at a higher level. there is no question that the emerging markets are slowing down but we still are bullish on our growth prospects in that part of the world. michael: what is your focus for

2016? will you be looking at acquisitions? brazil. hypermarkets in people say you might be a candidate. thomas: we have so many great growth opportunities to be able to take out the rest of the world. today, most of the business for us is in the u.s.. yet the demographics in emerging markets are tilting more toward an aging population. they are going to need solutions like depend and poise. we are really focused on driving our organic growth opportunities. if we come across in organic tuck ins we will take a look at those but i do not want that to distract us from taking advantage of organic growth because i think that is the best way to create shared that -- shareholder value. we usually do not comment on takeover rumors but we have a great business in brazil. we took share leadership in

diapers. we are the fastest-growing part of the adult incontinence section. it brazilian team is rocking on their own strategy and they have a great innovation plan in 2016. michael: thank you very much. ,eo of kimberly-clark headquartered in dallas, texas. back to you on bloomberg radio and bloomberg television, streaming on bloomberg.com. david: bloomberg economics editor michael mckee. he has been talking with thomas faulk. all the things we talked about from the point of view of a company. a strong dollar, low oil prices, which helps them on manufacturing, they are bullish on china. it was interesting. stephanie: what do you think? jim: i think he underplayed the beneficial impact on raw materials. he talked a lot about currency

which clearly is painful for a global company in emerging markets. rome it too real costs. .lso put -- wall material costs technological change must be able to help them. on china, they are right in the middle of the peace that should be growing in china. jonathan: here is a company -- if you have a consumer facing company, you need to be in china, bottom line. stephanie: for the good of all -- because of all the humans. jonathan: all of the humans that have not been consuming. stephanie: all of the humans that need undergarments. jonathan: if you are managing money it is a different call to make, is it not? jim: it isjim:. there's going to be a lot of short-term volatility as we have seen with china, partly because of the uncertainties around government policy. partly because of the speculative retail nature of the chinese equity market.

i think it is going to be if you're managing money. if you're a fundamental value investor, there are a traction to in some areas. i thought kimberly-clark were getting onto some of them. inyou're an expert manufacturing capital goods, maybe not so good to be doing that to china. david: so many numbers, we do not focus up on how many people by number are going into the middle class every year. ther a rocky and, what will high-yield market look like in 2016? ♪

jonathan: good morning. "bloomberg

." s&p 500 futures up 16 points. the nasdaq, yesterday, snapping the eight-day losing streak. nasdaq futures up 33 points. a lot of happy people. stephanie, they always look so happy ringing about. stephanie: that is the american dream. how about that -- the cowboy, pbr the professional bull riders association, in town. a talent agency that has got into the content business -- they bought pbr. i, for one, would love to see him ride the bull. jonathan: what a week. a couple days of gains, and we cannot forget the first 5, 6, trading days. what is the first lesson for you, jim?

jim: part was the market overreacted. the chinese system is not that big of an equity market. it is entirely, for practical purposes, chinese investors. the international impact of the market, its connectedness, is not as great as many others. the thin market at the beginning of the year led to much too much .f a reaction i take some consolation in that and provide support in the fact that today, the chinese market's down big, but wall street seems poised for a big opening. david: i wonder if that does not suggest it was not a reaction to the stock market, and actually a reaction to the yuan, and the chinese government management, or mismanagement, or uncertain management. jim: if you look over the last

managedhs, it was against a basket, where the euro is a big component. i think there was a misunderstanding of the significance of the u.n. move. it is not about currency wars. i believe the chinese when they say that. it is about managing the currencies so they can cope with capital outflows -- a lot of capital outflows -- wealthy chinese taking their money offshore -- but it is not about creating cheap exports for china. they cannot do that anymore. jonathan: most would agree with you, but on the currency, yesterday -- yes, there has been a misunderstanding, it is against a basket, but there is the daily fix, the additional layer, it should not be what we are saying either. it is a little more nuanced, isn't it? the offshore market i found fascinating.

was it monday, when it went up 20%? i think that is a bear squeeze on some of the hedge funds borrowing the yuan. i think they were trying to stoke too much selling and .rading of the yuan i suspect -- it is something i am more certain of -- a lot of this volatility arises within market activities, market structures that are inherently volatile. we have to get used to it. stephanie: volatile in terms that they are complex. it does not mean if you have a good company and they make money, your stock will go up. bed inelds fell out of december. many said this was a precursor, telling you what will happen in 2016, but quietly, while we are focused on equity slowdowns, we see improvements in high yields. help us understand this nuance, this disconnect.

new thingsare two going on in the high-young market. the first is the impending bankruptcies, defaults, downgrades, particularly in the resource sector. now, that is not all of the high-end yield market. at its peak, it was about 25% of the high-yield market. you are going to see, i believe, quite a bit of downgrades and defaults in that area. however, i still expected to be somewhat isolated to that area. i do not see it spreading to the market. jonathan: let's talk about the broader market. high-you took a beating. a lot of that is energy. fine. we have a recession in manufacturing. services is just ok. can you have that disconnect the rest of the year or is that resolved one way or the other? jim: i think you can have the disconnect because the recession in manufacturing -- a lot of it is about technology.

there was a report about what you get from your cell phone and how much those functions would have cost 20 years ago. it was a lot of money. so, you're getting a lot more for your money. i think that actually leads to and him most inevitable continued manufacturing recession. services have to build up. i think that is happening. we also see some of the gasoline dividend getting spent. that was the general motors point. i think there are lots of reasons to be optimistic about the services sector in the developed world, particularly in the u.s.. stephanie: last night president obama said -- didn't look at the quote right, i won't -- something along the lines of people who say the american economy is in decline is peddling fiction. david: that is exactly right. word for word. stephanie: peddling fiction? jim: that might be an exaggeration.

they might just be mistaken. let's assume the motivation is correct. let's assume they are mistaken. there is growth that i would advocate is underreported in economic numbers. there is a boom in energy production in the u.s.. that is something we can take to the mall and spent. stephanie: take the mall and spend, except no one has. a half, gasnd prices are down -- everyone is going to the mall. jim: it has not happened yet. david: the numbers are different -- about 47 -- 40% is being saved. jim: and household debt is being paid down, in contrast to other times when you get toward the market peak. we have been paying down debt. numbers are evidence that some people will start to spend it. i agree with you, you have not been taking it to the mall yet, stephanie. there has been caution, as david

said, the paying down of debt. i believe that works with the system. i believe slow growth is somewhat sustainable and, actually, for various reasons around the world, be the market-leading source of growth. jonathan: i want to tie this together -- wti at $30 a barrel. the bankruptcies that have not happened. the booming the u.s. economy, and if you say there isn't one, you are peddling fiction. one of the reasons for the boom in the u.s. economy has been a boom in energy. you cannot understand that fact. it is a fact. production has doubled. not because there are bankruptcies, there are a lot of companies that hedged through 2015. those hedges come off in 2016. that is when we will see a lot of pain. that is an industry that is not very good for the u.s. economy. do we see that as net positive? jim: just think, jonathan, what happens when a company like that

goes bankrupt. it has debt. i do not mean the one that was interviewed earlier. any company, if they go bankrupt, they have to service the debt best they can, keep production going. in other words, i do not believe production will come down as fast as many people think, either in oil, or, indeed, in metals, globally. i think you end up in a situation, for at least some companies, they are no longer producing for the equity holders, but for the creditors, but it still happens and still comes through in the economy, albeit at a lower price, which is still, kind of, good for the consumers. david: we are eight minutes into the trading day. we check in with matt to see what is going on in the market in new york. matt: not huge gains, but the s&p 500 up eight points. looku look at the map to at which industries are leading, which are losing. alwaysnteresting -- i

find it interesting to see consumer staples and discretionary next to each other. it is a play on the consumer, or a lack thereof. consumer staples is a defensive stock. i would not think so about discretionary. in any case, the most interesting take away is that energy and material stocks are leading the way. so, with this slight rebound that we see in oil, and it is up $31.66, that iso boosting the companies that are related -- almost any company related to energy and oil is up right now. if you take a look -- sorry. this is over one year. i meant to go one-day charts. ok, it has been rough over 12 months, for sure, but all three of these companies are gaining right now. the entire energy sector is up, except for coal. coal is having a problem, where it looks like peabody -- except for peabody. they are gaining. we saw arch coal file for

bankruptcy. that cause concern. it looks like the rest of the industry is bringing it up. look at the carmakers. a very interesting dichotomy was going on. well, this was one year again. day,nt to show you in one gm is gaining today. substantial gain. 3%. ford is down today. a substantial drop as well. even though ford said they will give an additional $1 billion supplemental dividend, general motors is raising its dividend, raising its profit outlook. general motors is raising its outlook in general for the car industry. ford did the same, but said margins were going to come down in the u.s.. that was concerning. maybe 9.5% this year. three quarters of 2015 was up over 10% for ford margins. it is famous because of the margins for the f1 50. one-dayt -- yes, a

chart for microsoft. a gain because it has been upgraded to an overweight at morgan stanley, saying its strength in the cloud will help at this year. let's go to abigail doolittle at the nasdaq looking at apple. hey, -- abigail: hey, matt, welcome back from detroit. apple is back, currently on positive news around the iphone in china. specifically, analysts in the government are estimating non-android sales in china rose last year, and if this proves true, when the company reports earnings, it will go against the prevailing negative sentiment on the iphone that has taken the stock down sharply in recent weeks to levels last seen in october, 2014. the next question is whether the buying support will now send the stocks higher. stephanie: thank you to abigail doolittle, joining us from the nasdaq. next, more from our partner's

erik schatzker interview with book filled asset manager' ♪

vonnie: welcome back to "bloomberg ." the is sellingin taketo take over for -- to over. michael dell could be in position for $4 billion. "the wall street journal" says he might make that much from the government repurchase of airwaves. he owns airwaves the sec wants

to resell to wireless operators. stephanie: well, you may have never heard of brookfield asset management. as i said earlier, it sounds like assisted living, but it is the world's second largest asset manager, only behind blackstone. estate,us on real renewable energy, and infrastructure. of course, who would be game to talk to a toronto native company, our own favorite canadian, erik schatzker, who sat down with ceo bruce flatt. welcome back, my brother. erik: don't you love talking to contrarians -- a look at market volatility and say what is the big deal? they look at the declines we saw last week and see opportunity. bruce flatt is a contrarian. when we sat down, i asked him how -- what he felt about what we have seen over the last six months in china, brazil, markets

around the world? mr. flatt: we are finding significant money to put into assets. they want to own tangible assets. what investors in the stock markets get confused with is the daily movements of stock prices confuse them all about the underlying asset value -- confuse them about the underlying asset value that is there. for investors, from time to time it is good to have market access, and from time to time it is not, because those prices vary, and it often does not have anything to do with the underlying fundamentals, which we are always trying to see through. that is really -- today, you are seeing where real asset companies in the stock markets are not trading as well as they were over the last while, but the fundamentals are still very good around the world, and there is a very robust amount of money wanting to go to work and be put to work in real assets.

erik: does that mean that public market real estate is undervalued or cheap? mr. flatt: i think he will see more privatization around the world -- infrastructure, pipelines, and real estate businesses --as that transition changes. , do you feelow more comfortable buying or selling? mr. flatt: we are always doing both. erik: i know. mr. flatt: the reason we are in four businesses, and 30 countries, is there is always somewhere that does not have enough money, and what we try to do with our global funds is move the money to the locations where there are opportunities available. we arethe point of always investing and we are always selling, there are places in the world today where we are putting money, and places in the world where we are selling. although until the last six months, and even today, we are

not -- even though we love the united states and it is the largest market for investment, and we're always buying things because we have $100 billion of assets in the united states, we seller ofly a net assets in the notice states because many have matured and done well over the last five years. erik: and you are a net buyer where? brazil, india, europe,. -- europe. we are a net buyer in infrastructure and commodities. we are a net buyer in anything that is out of favor. erik: which is contrarian. value investors are contrarian investors -- we are always trying to find those spots around the world. erik: if you look around the globe, then, what is irrational? mr. flatt: i would have said up

until the last while the stock markets in some pockets were getting highly valued. a lot of the technology theanies seem to have valuations that not a lot of fundamental analysis would have justified. a lot of those have come down. and there was some portions real up,ts that were getting bid but that has toned down the last six months. erik: you know what the ceo of a thatcompany would say -- is bruce flatt, he runs a property company in toronto and new york city, what does he know about market valuation? mr. flatt: off technology companies, he is right. i know very little, but when i said is there is no fundamental analysis. we are as it people. he might be right in his analysis. goes, bethe saying greedy when others are fearful, be fearful when others are greedy.

that is where bruce flatt lives. you hate it, he loves it. you hate result -- the country is a basket case -- he is buying it. the chinese market is selling off. bruce flatt feels great about putting brookfield money to work long term in china where they can reap investment returns over 10, 20, and maybe even 30 years. david: it is actually value investing. luxury of taking a long-term view because there is market of real estate that is reliable and that can count in a positive and negative way. we are a big real estate oo.ager, t some said you want to cash in. you can't. that helps people in many cases, because they had to hold through a bad time when i like panicking. by the time they could sell, the problem was over, -- when they felt like panicking. by the time they could sell, the problem was over. sometimes that can protect

people from a stick that i like what he says about real estate. i am less keen about his comments on infrastructure. erik: how so? jim: i think one of the problems with infrastructure is a technological change point. use of infrastructure is going to change. i think we know that. one of my favorite quotes on infrastructure came from one of our clients, who is one of the world's biggest investors in infrastructure, and in a fairly lengthy conversation he said to me "we don't want to be caught in the canals of the 21st century/" remember the history of the canals in the northeast and england -- they were built at great expense and obsolete by about 1830. mr. flatt: it is funny you should bring it up -- i asked him about it. renewable energy, solar technology, wind, autonomous cars -- how will that change their views of things like highways, for example, or the power industry. he said, of course, it is going to change, but it will take 25 years for these changes to really bear fruit.

they are comfortable -- and furthermore, you are still going to need some of those assets. transmission lines, for example, highways -- they are still going to be here. jim: that is true, but i think 25 years might be a little too long. technology is changing quite a lot. as you said, a noble energy -- energy has changed to generated locally in small doses. that changes the transmission requirements. david: there you have it. the last word for now. thank you. terrific interview. really enjoyable. next, we will take a look at some of today's top moments on "bloomberg ." ♪

time whereit is that we look back at some of today's conversations. >> i would be surprised if the world economy can comfortably ithstand four hikes, and think that basically, markets

agree with me, and that is why despite the statements that are being made, markets are not expecting four hikes. as a monetary policy maker, you have to watch these policy moves, but you have to realize they may or may not reflect what is going on in the underlying economy in the united states. is alatt: what we are bunch of value investors who happen to raise funds, and because of our balance sheet scale and size, and the discretionary money that we have -- we are 100% of the investment capital. at every are still market we operate. >> in the future, the market of choice will be the u.s.. the banking system, the legal system is much better to deal with than it is in iraq. how do you know you will get that oil -- here, you know you

will get the oil. what a morning of interviews. let's look at the equity market. stocks are trading how after the first half -- half hour of the session. the dow is up by 26 points. stephanie, what a morning. stephanie: that is going to be it. thank you for joining us. are you going to buy a powerball ticket? jim: i did not. stephanie: i better get one. ughan, thank you. tomorrow, it has to be about the markets and maybe my powerball win. we will see you then. ♪

betty: it is an :00 a.m. in new york, 3:00 p.m. in london, and 11:00 p.m. in hong kong.

welcome to bloomberg markets. from bloomberg world headquarters in new york, good morning. i am betty liu. here is a we are watching. we are a half hour into the trading session and stocks are joining the global rebound in stock markets after china's latest numbers supporting views of a stabilizing economy. and what do policymakers think about the rates? we will hear from former treasury secretary larry summers robertlas fed president kaplan. i will be talking to the ceo of pharmaceutical giant eli lilly on drug price hikes and research on break to treatments for diabetes and alzheimer's. a lot in the pipeline. we are about a half hour into the trading session. julie hyman has the latest. julie, it looks ca