iran's president is in italy, where he has post session jobbing lists -- post sanction shopping lists that includes airliners and cars. welcome to "bloomberg ." i am david westin. stephanie: i am stephanie ruhle. welcome home. we spent last weekend davos. this man, planes, trains, automobiles. what time do you get in your house last night? david: 8:30, 9:00. p.m., and where is he now? right here. the former managing director at black rock and now a finance professor at columbia business

school. and the head of commodities research. we are going to put you to work. between hedge fund performance in oil prices, let's get you some first word news. i have missed you, vonnie quinn. vonnie: i missed you guys, but i was watching of course on tv. it is going to take a while for the east coast to recover from the blizzard that dubbed two feet of snow. thousands of flights were canceled. stocks, bonds, and commodities prices will be open in new york. joined aloomberg has plan for and independent run for the presidency, according to "the new york times." he told friends he would be willing to spend at least $1 billion on the campaign. thes majority owner of parent of bloomberg news. it will be denver versus carolina in the super bowl. a 22-point conversion would have tied the game, and they beat the

patriots 22-18. he is the older score to back his team to the big game. arizona 49th-15. super bowl 50 is february 7 in santa clara, california. i am vonnie quinn. markets now with matt miller. matt: we have some breaking news to kick it off. johnson controls is going to merge with tai:. johnson -- with tyco. buying tyco.ols is it is a cash and stock's deal. johnson is going to spin off its automotive feeding business, merging with the last vestige of that broken off company.

is in the premarket, up 15%. johnson controls is unchanged and untreated last time i checked. -- ais a premarket change premarket trade, a big jump. also we are getting earnings out meetsalliburton, which for the 20th time in the last 20 nine quarters. this is a company that has only missed once in seven years. it came out with earnings of $.31 per share adjusted -- actually, it is unadjusted. versusd $.31 per share $.24. revenue was just in doubt -- was just about in line to do we were looking for 5.11. just about in-line there. you can see halliburton year to date down 11%. the stock is down about 30%. let's take a look at futures right now. we are looking at losses across the board. onan markets were up

optimism that we are going to see more central-bank you hadion, and then european markets falling as oil fell. s&p futures down five points right now. here is nymex crude. it was up earlier. saudi aramco continuing thestments, and i have correlation of oil and the s&p. the correlation here -- we are in march, june, september, and it climbs up. we are right now correlated that 0.5, 0.6. one of the perfect correlations, this is the highest level we have seen in terms of an oil correlation, since 2012. as oil goes right now, ladies and gentlemen, so go the markets. tyco, halliburton, crude oil, prices go after posting the biggest two-day

rally since 2008, stocks in talke clearly route -- about the correlation between stocks and oil prices. one of the biggest takeaways i would say david and i had last week, so many people said oil prices are clearly headed in one --ection, but you will see think about all the big industries and consumers this is going to help her and when? our economists believe there are several quarters it will take for this to pass through. we have had all of these changes in foreign exchange, so the dollar has continued to strengthen your it it hurts u.s. exporters and it has hurt demand for oil in china and other emerging markets. the other thing to take into account is that we have had a lot of subsidies that had been removed over the last couple of months. taxes are changing. the pastor of lower oil to the consumer has been muted in many different places around the world.

and his been more -- it has recovered through much more in the united states, but has not been as much. the other thing to cake into account is that when we see this high correlation between oil and the stock markets, it is important to understand what is causing it because they can be the same thing. isentangling what correlation and causation -- what is going on now is that oil is moving up and down in relation with the stock market because it is a demand-side issue that is driving both oil and the stock market. when it is a supply-side issue, it is affecting the oil market, then we can see that correlation start to break down. we have also seen a lot of economists reversing position on the impact of declining oil. the traditional thought is that it is a tax cut because people are spending less money. -- accounted for 2.5% fracking itself accounted for 3.5% of all gdp growth.

.3 percent 2.8% total of gdp. when that grinds down to almost when there are 200 days of not being used, people are spending 20 million bucks and still punching holes in the ground, so the supplies there are if the demand makes it worthwhile. people have reassessed the importance of fracking and realizing the u.s. is a domestic producer. this oil price is hurting our gdp. david: michael, supply, demand, or both? -- itl: what we have seen is both to what we have seen since the middle or the beginning of december is even though we were coming into this timeframe frame during q1 where iran is coming back, the market

has known about this for quite some time. it is difficult to disentangle the man and supply. when you look at what the trend has been -- to disentangle demand and supply. when you look at what the trend has been for the past eight quarters, we have not the verged much in the demand for crude, but we have to verged quite a bit from the physical supply of crude. there is no are -- there is more oil supply and that is continued through 2016. stephanie: nobody has a crystal ball, but it seems more people are weighing in on where they think oil prices is going, and investors are dying for that answer. spoke toean colleague pierre on to run -- >> my best guess is that we are bottoming pretty much now. we are not going to go back, but

i believe we will probably go to to $50, and probably up , higher afterar 2018. david: if you go to $50 a barrel, you have to get demand up, not just supply down. the extension to which subsidies are coming up in some countries, taxes are going on, and china in the last 24 hours ago have indicated they will not be stimulating demand for gasoline. >> the real estate sector in china is collapsing. what we have to pay attention to is that drivers are going to get out on the road and at a higher rate last year than this year. so the thing we have to take into account is that the demand-side is going to continue pricespurred by these low bubbles, rating and drilling activity is down. as we get into the end of the year, the market is going to

tighten and the balance titans, and that brings us back up, in our view -- and the balance s, and that brings us back up, in our view. stephanie: it is making people concerned. >> absolutely. the russians are concerned. , the saudi arabian monetary authority, sold off $100 billion worth of joe in total. -- of dough in total. norway, you're seeing it in the netherlands, in -- it is 55%lity is, it oil countries we are setting aside money for when the oil ran out. it is occurring on a different schedule.

the other 45% order of magnitude is china and asia. -- this is air own steady $6.3 trillion buyer who is not in the market and is arguably on the other side of the market selling. everyone thinks of them as being bombs and infrastructure. it is not true. when you look at what they hold, they hold equities, a much broader range of investment. so the selling is across the board. david: we are talking about the correlation between oil and equities. the most liquid assets these companies have our equities. that is possible that contributed. it is impossible to disentangle what is causing what right now. what we find in our research is that as the business cycle turns, goes up and down, everything is reacting to that and the oil is being taken as a sign of economic growth in the world. so whenever we have seen

industrial production delinked from the trends, we see oil prices go up with production higher or lower as oil prices go down, as equities. we think it will be back up to 45 by the end of the year. stephanie: what is going to get us there? >> over the course of the next three quarters, you will see the impact of all of this less drilling activity in the united states. that is going to be a big contributor to seeing this turnaround. also the market has a bit of a rational exuberance about iran's return. we will see a strong return in the next two to three months as they sort out their insurance issues, and we get more and more tankers out on the water. but it is going to be hard to sustain that level of impact. what we saw this year is opec increasing its production, last year increasing its production. we think those are temporary and that opec's contribution to global supply in 2017 and 2018

will not be nearly as high. that will require higher prices and more investment to make up for that gap that is left open. david: that is michael:. -- that is michael cohen. and we will have more on the 9:00 a.m. with julian emanuel. next, as his country emerges isolation,ational iranian president rouhani makes his way to europe. ♪

matt: welk -- vonnie: welcome back to "bloomberg ." johnson is merging with tyco international. it will own about 56% of the new company. tyco makes commercial security systems. the new company will be based in ireland, where taxes are still do. there is a shakeup at twitter. leaving,executives are including the engineering chief. twitter stock has lost half its value in the last year. russia's economy strength -- rank by the most since to that -- russia's economy shrank by the most since 2009. the russian ruble has lost more than 7% against the u.s. dollar this year. david? david: in today's global go, we had to rome three hossein rouhani arrives in italy today on the first stop of the mightan tour, where he

sign deals. i have to confess, i had not focused on this part. there is a lot of money that will be freed up because of the deal with iran, so he has a big checkbook, doesn't he? alessandra: absolutely, and everybody is getting a part of that. italy, you usually think of fashion, but a huge part of italian exports and manufacturing is in steel. energy, oil services. iran'sr that italy was biggest trading partner before sanctions were tightened in 2011. that is why he is starting here. he has already met with the president. 120 people,on is of so this is serious business he is trying to do. tomorrow -- tonight he will be eating with several italian businessmen. italy's biggest

oil maker. and possibly with the shipping companies and that kind of industry. and then from italy, he will move on to france. he is going all out those with the numbers of the delegation in with the countries he is visiting, which are key trading partners. david: he is also going to france to talk to airbus, isn't he? tell us about that deal. alessandra: that's right, and that is a huge deal. what we understand, it is going to be a deal with airbus for 114 jets, and then it is likely he may sign deals with joe and renault, carmakers. aat will give us breath of fresh air with the french auto industry. there is more to this than just oil when you think of iran. that is why the delegation is so big.

we have people door stepping right now, and they say the cars are endless because the cars are coming in, coming in from different parts of europe. david: do you have a sense of when he could have the jets from airbus? alessandra: we are not sure very keen on is this deal, and i think that is one of the main parts of his european trend. that is alessandra millionaire aceh -- that is alessandra in rome. tells us to expect more closures. that is coming up next on "bloomberg ." ♪

stephanie: welcome back. you are watching "bloomberg ." time for one of my favorite

funds.s -- hedge among the many things we discussed was the future of the hedge fund industry. take a look at what gary cohn had to say. there is a natural aging out of some of the earlier hedge funds into the industry. the question to me is, is the second generation going to take over some of the early hedge funds? i do not know, but this is a guess -- there will probably be fewer hedge funds at the end of 2016 than there were at the beginning. stephanie: besides the 3rd avenue, getting killed, how about the massive funds who made a ton of money over the years? will we see more shift to saying we are going to hang it up and go to more to family office style? you go to stan druckenmiller, and one of the deal, that at high

wave occurred. now you look at someone like a ray dalio, lewis bacon, you can see a lot of movement in that. part of the challenge -- where i think the numeric numbers are going to collapse is where these people who have played tagalong have been driven, basically bias, taking 20% of the mark, 20% of a prophets in many cases with nothing but market return driving your action performance. stephanie: you basically mean all of those guys who are high-yield mortgage traders at banks saying i do not like what i am getting paid here and i will start my own fund. now that it is hard to generate output, they realize this hedge fund is not so easy? foggy a: not as -- bio: the mortgage guys can go rates up or rates down

through the guys that are really going to get caught are the activist investor guys, the event driven guys. if we look at the correlation, if you look at the correlation -- activist investor hedge funds and the s&p, the correlation is 0.85, so incredibly high. if you go back five years in two months, where the s&p has been down more than 1% where the average activist has not been down, at some point what we are seeing is a sharp rotation out of those activist -- or should we call it so-called activists? and rotating into more market mutual strategies. potentially the mortgage-backed rates. the biggest launches that have been out there have been global macro launches. that make no sense to last year we were talking with guys -- mike no regrets shut it down. shut it down.ratz

is a generational shift were a lot more people are doing it. david: where are they going to go now? if hedge funds are not the place to go, where is the place to go now? fabio: everyone's hope is private equity. that is -- that what you cannot get redemption. suddenly the friend who quit and was a big hitter -- it does not look so much. edward eisler and's, a big hero, , that when buster now he is launching a macro fund and has raised a couple billion dollars. he has gotten another chance, but that does not happen very often. if you are good and doing something that is non-core related -- scott benson has raised $4.5 billion for a new global macro fund. ask yourself, is the demand for non-correlated assets going to -- a lot ofor down

the trades they have seen previously, they are seen as hedge fund returns. private equity firms have learned their lesson. five years ago when they were rushing to build hedge fund strategies, clearly they did not do well under carlisle, and clearly those equity firm said hedge funds are not for us. buyo: and they tended to desks off of them. david: thank you very much for joining us. ♪

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watch discovery. record this. voila. remotes, come out from the cushions, you are back! the x1 voice remote is here. stephanie: welcome, david: there is some blue in the sky. was in londonid

while we were here shoveling our way out of new york city. it is only beautiful the day after it snows because the sun reflect so bart for tomorrow it rains -- but tomorrow when it rains, that will be a mess. here is first word news. mid-atlantic is coming back to life after the blizzard. in washington, the federal government will because closed today in the house is canceled votes. on the financial markets more than two feet of snow fell in some places. 12,000 flights canceled over for days. a powerful earthquake rattled alaska over the weekend. there were no injuries before homes were destroyed. it was a magnitude 71. .1. in, the prime minister marked

one year in office with another crisis. they are heading to the showdown with creditors over their social security reforms and he wants taxpayers to raise contributions while not cutting primary pensions. global news 24 hours or day. david: tom is joining us from london. all together in davis and talking about your morning must-read? tom: it was written up by larry hathaway. he joined as earlier. goal of thethe economic forum to talk about the changes in our industrial processes. it's a quotation over at the euro and the russian ruble.

that was the big juror attempted in davis. i'm not sure it was so successful. ross -- davos. here is another -- he went on to say there has never been a time of greater promise or greater peril. there is great talk of innovation and the next generation and next chapter but those companies might want to turn the page. how can you when you look at act the prices? many of those companies shift into survival mode. david: they are reluctant to make the capital investments. insights that i

think is important and how does plays over to emerging markets, and i heard some real optimism about how emerging markets will and thence their own processes, they don't need the industrial revolution of the united kingdom to move forward. they will figure it out themselves. tech will beeen cost-effective but people don't necessarily think of it that way. our industry is doing well and the company talking well and it's in the current social responsibility and it has to move to the core businesses. david: also talking about the violence in your quote. i am from flint, michigan which is going through a time. there was a revolution in the auto industry, there was real violence. it's great to have progress but

some -- but some people don't get included. tom: that's an extremely important point. , remember clearly years ago 40-50 years ago, the old gm, watching though whistle at the flint factory and you hear the roar. the doors open at the factory in everybody races across the field to the bars lined up like docs ducks/ i don't know what we plays that with four large of america. stephanie: you and i sat down with john chambers, chairman of cisco who is a guy who has been ahead of the curve in terms of the internet of things and investing in technology. i believe that the future of our country is based on innovation. every company, every country, every city, every person will

have to be a technology organization. i think making a digital strategy for our country like every other major country in the world will be in our future but it's missing completely. stephanie: i love what he has to say. presidential candidate addressing this? when you look at americans, they are frustrated and wages are not being increased. of his you make sentiment and how this is in order to move forward? that will so obvious catch up with us quickly. i agree that there is not much going on in terms of handing america digital experience. my guess is one day it will catch up instantly as we catch up with many other countries. stephanie: amazing that the united states needs to catch up.

candidatesamazing no are talking about it, it's not even on the agenda. get growthe we will of we don't get that innovation. is not on the agenda of those vote in the primaries. it's the idea that there is a part of america and many other countries being absolutely left behind. it will be a social good for everyone to give them digital access. to me it's a no-brainer. at least of the consumer label -- level. stephanie: we need to start considering it a business necessity. when you coming home? tom: i am leaving right after radio. what i am most word about is getting from jfk into the city. that will be the hardest. that last mile will be the hardest part of that. david: i did it last night and the streets were clear. tom: we may take the gulfstream

into teterboro. i wish i had that gulfstream. stephanie: let's take a look at markets. europe in stocks halted their rally after seeing the biggest two-day surge since 2000 11 and u.s. features are falling after capping their biggest advance in three-month. darren goldberg is this now. -- wolfsburg. understand, are these rallies fundamental or technical? >> right now, they are technical. we had a selloff and was driven by high yield and credit. if there is no liquidity in a high-yield market, you'll go to drs tod sell your sp help your books. oil is not helping. back that up.

it's not a fundamental move it when there is no liquidity in the high-yield market, you see investors showed the same names they were in high-yield but do it as a look to buy, not of you in the market? >> that's correct, if you want a view of the market, you look at earnings and they are not bad. not as robust as last year. there is lots of headmans. what is there that might get over it equity markets? >> i think we'll start to see isail sales go hire which driven by lower oil this is. people have been waiting for that and it has not happened but it will happen. you are starting to see the prices are now dollars so it's not for dollars anymore the wephanie: how long before see a fundamental bifurcation in corporate america? we have seen companies that maybe have not done so well are

finding the right prizing the great companies are getting killed it just last week, we saw so many ceos saying look at my earnings, look at my growth and somehow i am in the dumper with everyone else. when will i see investors say there is great value? >> there is still a lot of unknowns on whether the fed will raise rates are times were one time. this week, we will probably get no action from the fed and that will take one of the expected table.off the then you will get into the election season and once the primaries get decided them at one person representing the for thes and one republicans, these uncertainties will become more certain and we get to see where china is in all of this. are they at 6% growth rate or more? certainty and it did not hurt that super mario

said maybe we will do more. if janet yellin does not raise rates, what does that mean for the equity markets? if she does, we are doing well. if she doesn't, it could mean we are reversing and she could come back with a safety net. >> you are not sure what you will get because the knee-jerk reaction is things are less well and people will sell the equity market. they are acknowledging that the market is not ready for an interest rate hike. on the flip side, if you have a weaker dollar and you see in europe strengthen, that will. help u.s. corporate and their earnings plot says 4 but the rest of the market says 2. why not just price that in? a lot of people would say the

fed is not a good forecaster . this place view that of a kind of take their own guess at things. theou look historically, fed has gotten in front of the u.s. election. this chart shows the right line is the fed funds rate. it was stuck at zero for a long time and they raise rates here coincideses -- and it with net income. over the last five years, we have had some growth but it has not been tremendous. but little s&p net income, all the money they have made, a of 2009limb from march but a drop here which could be concerning.

these flags are quantitative easing. raisingt done, the fed and earnings growth not a strong, cambodia , the s&p 500, continue to rise? >> i think we are in analogous time frame. the european crisis is the analogy and what it did for us in the equity markets and what china is today. there's the growth fear out of china. people are resetting what is the real growth rate going forward and what is the earnings? matt: we had this drop after 2011. we qe3. stephanie: that mean from the market perspective, we are waiting for things to get so bad that the central bank will come in and do whatever it takes? francine: david: this is like talking about the punch bowl. >> i don't think we have to wait 10, we just need

time. we need the oil and credit market get settled. -ninethe next six months, that will happen and hope has something to do with this. bring ituts and you back to a median price of $60, that does a significant amount to the credit market and the s&p 500 is right now following the credit market. tom farley told us it could take months for the ipo market to recover and start to see companies go public? >> i agree. 6-9 months. that was a good job. david: thanks for being here and do come back. earnings wereton

out in a close look at the numbers and the impact of the wild ride of oil.

stephanie: you are watching "bloomberg " with markets giving back at the end of rally. all the major indices are down. the markets don't like it. we saw that my's rise in

oil last week, it is taking a turn. when you get noise out of saudi arabia that production is not going to drop and they will continue to invest, it underscores that supply is outweighing demand on the market does not like it. we will cover that and more. it's markets day. david: oil and equities keep moving together. another country experiencing and is russia which shrank by the most in their economy since last year. it was three point 7% decline. the russian ruble has lost more than 20% against the u.s. dollar last month. federal health inspectors found deficiencies at the blood testing lab in california. another setback for the company regarded as the highest file startups in silicon valley that suingks -- 10 years after

philip morris, the trial opens today in boston and the smokers are the company could have made safer product's but didn't. they want philip morris to pay for lung cancer screenings. halliburton reported a fourth-quarter net loss of $28 million or three cents per share which is the second largest services company in the whole world. andrew cosgrove has gone through the numbers with us. i guess they beat earnings-per-share and messed a little bit on revenue? >> that's correct. , in northight spots america bay out and on the margin side. they are operating nearby breakeven levels in the third quarter because they are carrying about 400 basis extras points of cost in lieu of the bakers hughes acquisition. little bit of lumpiness but the other take away is that they outperformed

schlumberger shay in north america and international. they performed well over the course of 215. 2015. stephanie: will we move momentum plays? there is a definite divergence in oil services. have the large, big technology leaders that are going to benefit in this environment and come out stronger on the other end because they will take market share and have strong balance sheets. smaller the other players do not really have those financial resources to make it through. it will be interesting how long the downturn lasts. that will act as the guidepost for how many companies don't make it to the other side. david: where is the baker hughes

deal? it's behind schedule from where they originally intended on closing it at the end of last year. asy said they can go as late april 5 it could extend beyond that. part is that they are determined and willing to do whatever they possibly can to get the deal to go through. theye end of the day, become a play on north america and they will be the first ones to benefit as the recovery progresses. stephanie: thanks for joining us this morning. the city of manhattan was quiet on saturday due to the mayor's travel shutdown, you have to see matt miller.

in bronxville, new york, there is some fun in the blizzard to be had. it was done in such a controlled way. stephanie: that's our own little snow angel, matt miller. what kind of truck do you drive? a ford f1 50 raptor. came and picked me up at home. matt: any time. do you need a ride in, david? markets are in the green and we continue to follow the markets and the futures are not headed in the right direction. when we come back, we'll take a look at american express and what they are doing for their investors. ♪

stephanie: welcome back. week, we were all about big market moves and berkshire hathaway saw its american express investment lose billion dollars. warren buffett can still make his credit card demand. it is it a decline in fourth-quarter profits. we have to take a look inside. with dan shulman

who is now leading paypal. many people are starting to look at american express. what have they done for me lately? another analyst said we are dealing with a new world and analysts say they will not make their profit margin target anymore. there was another billion-dollar restructuring and i have not gotten any new innovative technology. shares in onex month. berkshire hathaway owns 151 million shares of american express. they are the biggest shareholders makes you wonder how they let the costco deal fall apart. you can do this on a bloomberg terminal.

take a look at up a chart of what they are holding. this is a look at friday in you can see financials were in the red due to american express, down 1% in that one day. 12.1%.n to though warren buffett's shares have fallen, berkshire hathaway only spent one point $28 billion to buy those shares -- 1.28 billion dollars to buy those shares. stephanie: what did you learn from dan shaman? david: there is a fight between the online purchasing and the point of sale.

stephanie: let's look at this clip. >> for the first time ever on black friday, more shopped online and with their mobile phones than shopped in store. amount of tremendous secular tailwind around movement of cash to digital. there is an explosion of mobile phones as well. all the power of a bank branch in the palm of your hands. there is a tremendous amount of tailwind behind us and we have a lot to execute on. thehanie: we are moving to experienced economy. that was a big theme in innovators last week. express were the first to offer those one-of-a-kind experiences if you use that card. that idea has run away from them.

i don't think american express came up with that discussion with dan shulman. stephanie: making an investment now for american express in abouting -- it is all deep research and development investing. that is hard to do when you got shareholder pressure. you've got to have long-term holders. david: you have to have money in there. matt: he has done well with consumer discretionary stocks. everybody has been hiding there.

i wonder what amex will do to change this. seem to have offered anything in electronic payments. don't know how they lost the deal with costco but that was it. huge. news on mcdonald's -- earnings in an looks like fourth-quarter earnings per share are at $1.31. the street was looking for one dollar to deep sense of that appears to be a beat. there isee of adjustment of fourth-quarter revenue is at $6 billion. 3.6 billion dollars. onpxonald's was beating and revenue. basic global stills was a boost of 5%. we were looking for 3.2%. more people are getting big macs in the first quarter -- in the

fourth quarter. salesks like u.s. comps 7%.eased five and we were looking for 2.7%. stephanie: is it more people buying big macs? when was the see eo position taken? it they arer ago serving breakfast all day and of limited the menu items. i knew i was a kid they needed to do that. quarter, they should 1% growth in the u.s. and earnings. it was the first time in two years so if this is true, five and 7%, they had a lot of down quarters. stephanie: i don't know when we get a shake shack earnings but

of mcdonald's is doing this, i would love to know how shake shack is doing. they need growth. earned to shake shack. forget their big competitor to play. -- chip play. - chipotle. matt: it's a $14 million company. worth $14 is still billion. it's significantly bigger. are a shareholder, it doesn't matter how big the company is, you want the share price to go in the right direction. that's true for mcdonald's and shake shack.

you are now watching the second hour of "bloomberg ." david: we will have a better second hour. we get started with first word news. vonnie: it will take several days for the east coast to get back to normal after a storm dumped more than two feet of almost all thousand flights canceled. opencial markets will be but federal government offices in washington will stay closed. at least 31 people have died in slip -- in snow related deaths. new video released by islamic state shows they are carrying out terrorist attacks. all nine militants seen in the videoed died in the paris attacks or in the aftermath and seven of them were seen shooting or beheading captives. in detroit, judgments or hearing the end of sick

outs from teachers. they are unhappy with a and working conditions. global news, 20 hours a day, powered by eric t 400 journalists in 150 new centers around the world can matt: we %.e seeing drops of only 0.254 saudi arabia say they will continue their capital spending. any idea that we had bottomed, saudi arabia seems to want to drive the price of oil down. looking at the 10 year yield, buyers are in bonds and running for cover in the yield it down a little bit.

it's 2.03. thatis another place continued its march higher. 04 per troy ants. ounce. halliburton numbers beat because they have only missed one time in the last seven years. they had $.31 adjusted. stilln see the shares are down 2.25%. i've got the baker hughes recounts and halliburton has an but itvices company cannot make money if the chart looks like this over the last five years. gs being taken out of service, 2000. co and johnson controls, it looks like that acquisition has

been announced. johnson controls will use the word merge. johnson controls shareholders will own 56% of the company. both shares are up in the market but tyco is up about 10%. stephanie: we have to break this deal down. we will do that. david: first will go to china. china shares are ending moderately higher. jack horrific in his harvest. let's play some of what we heard last week. >> there is a lot of optimism in the market. the stock market reaction, i don't know what has driven that.

the absolute growth rate may be lower -- lower but in a company that size, it cannot grow double digits forever. we remain very optimistic about it. people continue to travel and it's a growing economy. stephanie: when you break this down, people say china is growing but the rate at which we have seen the growth, we are waiting to see for the production is or where is income? people will start spending but we will not desert we have not seen that yet. people are getting concerned there is a real disconnect. >> i don't think they will end up in niger and situation. the country is moving from industrial to services. they are not creating jobs in the industrial sector.

the whole world is not creating jobs in the industrial sector. part of that was led by china because it was a big producer for everyone but we don't need capital goods. and chinaing services is already 50% services and there are people moving into the city but they are taking services jobs. they are not taking industrial jobs. how much pain due investors have to take before a successful turn in the economy? you have the largest economies that are connected this currency that is quasi-fixed. as the dollar has gone up, the yuan has gone up. some say it's overvalued by 20%.

the economy is transitioning and that's all well and good. the yuan needs to find its equilibrium. as the people's bank of china tries to smooth the slide, it is spending for exchange reserves and that's a form of tightening. the fed wants to tighten and that combination has created some stress in the market like we saw last summer and the first few weeks of this year. >> the economy is gradually slowing down.

i am optimistic. david: they built up their surplus account and it's going down. you can see it in the numbers and i may take action in the next few months to deal with that. >> do i believe they will end up devaluing the currency? i do. it took most western countries quite a few recessions. we cannot expect perfection. not hear from did larry fink is he said he was confident they would not devalue the yuan. the currency has become

overvalued because it's tied to the u.s. dollar which has not rallied a lot because the u.s. fed is the only major central bank in the world that has a tightening bias. it's an impossible trinity idea were you cannot have independent monetary policy. with free movement of capital at the same time. there is a form of tightening of liquidity conditions and that is what is plaguing the market. from my perspective, the currency wants to come down and it has and the chinese already devalued last august and what we saw in november and december and january is more of a stealth the valuation. in november, policymakers said the currency needs to go lower.

i don't think there is a lot of debate that the currency needs to come down. how does it come down? it a massive devaluation? i don't think that is likely because that's too disorderly. will it be a slowed evaluation with as little disorder and volatility as possible. that's what everybody is hoping for. devalue are not devalue? >> not devalue. i think the currency will go down as they try to adjust it being tied to a basket of major currencies. i doubt think we are on a big devaluation path and i don't think there will be. it's not necessarily good for consumers. the devaluation will simply lead to more currency wars. i'll think it's in their interest to devalue.

you are working overtime. will talk about johnson controls and tyco coming up. stephanie: sorry about the patriots last night. ♪

vonnie: there is a shakeup in the executive ranks at. the company is trying to revise -- at twitter. the largest backing provider, halliburton posted a loss. job cuts in the

write-downs of asset values. they have tried to sell off antitrustwin over concerns and gas prices in the u.s. have plunged to their lowest level in seven years. gas has fallen $.14 per gallon in average $1.91. today we look at the johnson controls/tyco agreement combined. jeff mccracken joins us. >> johnson controls has been trying to change a lot it they have about half their business which is auto supplies. they are spinning that out so that -- so there goes half the business. the deal with tyco will allow them to domicile in ireland and they will become a home /offices/home building building type of services providing refrigeration or electrical systems and then

security systems when they get tyco. they will become a clear industrial company. david: who is running the deal? this is matt miller steve, he doesn't believe mergers exist. mergewhy would you write when clearly johnson controls will by tyco. >> i don't disagree with you. put caphen disney cities abc, they said it was a merger. it's to be nice to the people they are buying. that's the simple answer. >> it's politically correct language that's all. >> some companies put it in their statement and others are more clear. cio will run the combined company going forward. this started falling up back in

2001-2002. it was always seen as a good place to go if you are an industrial company. headquarters in ireland already and the deal will take a few months to get through antitrust approval. it's another inversion and there no evidence that it is ending anytime soon. >> i think they will keep going. in the meantime, johnson controls is making a major shift in the mix of its business. we look at this company from 10 years ago and they were beginning to develop in the building area with what i call climate change related stuff which will likely grow fast. the auto parts businesses on the heart and to get out of.

the asian market will beat up on their suppliers. >> in the long run, who will need auto parts? weird moving toward -- we are moving toward driverless cars. stephanie: thank you so much. wehave to take a break and are talking about markets being in the red. mcdonald's is in the agreement shares rising. this a sign that the final round is parking? remember stephen easterbrook was an inside guy. you are watching "bloomberg ."

matt: welcome back. oil prices are in the red after the biggest today rally in more than seven years. 1% on the close on friday after the february contract expired. here to discuss the next move is the senior vice president at ambrosino brothers. what do you make of the downtime? too to the saudi/aramco statement? bei think oil will susceptible to that. the big bounce lastly comes off that low we saw at $27.50. saw some people dipping their to go in the oil waters after seeing a huge move lower. i think it's important to keep volatility3+.

it saw a little bit of a down take on the up trade late last week which suggests that maybe this move to the downside might stall for the time being. we have a federal reserve meeting this week and have some key data points in the united states and will have continued supply and oil and that will dictate the trade moving forward. the momentum trade lower might be stalled. what do you think about the correlation between oil and stocks? >> it's a match made in heaven. equities are moving lower based on the move and energy but when you take the federal reserve money away for the equity market, it has to go lower. equities are kind of a double-edged sword of you are looking for reasons it is going awn but energy being lower is key to that mode. matt: thanks so much for joining us. stephanie: are you guys hungry?

asonald's shares are rising the company reported strong fourth-quarter earnings. joining us to talk about the big analyst. stephens is it all about all-day breakfast? >> it seems that's the story in the u.s.. that's the biggest game quarterly for them in a >> long time. it is giving excitement to customers in my nana been there in a while. stephanie: i hate to use this technical term but duh. what took them so long? >> i think the consumer has been trying for for a while it's not only all-day breakfast but they are doing something with consumers wanted this for a while. the brand buzz was coupled with a successful sandwich item.

there were couple of things that lead to great and david: muchtle has not had success, does that help mcdonald's? >> a little bit. when she rarely uses 30% of its sales you have to assume a decent amount -- when chipotle loses 30% of its sales, you have to think that mcdonald's get some of that. >> what about a new ceo? the menu change seems to be a big thing. >> i think that's the biggest thing. working, it's's clearly all-day breakfast and a really energizing of the culture

and mcdonald's. as far as the menu, there is talk of innovation and product's. things are happening that have not happened in years. chipotle for a small amount but the overall story is the inflection point where they aren't is difficult not to own this stock. stephanie: is mac donald's taking business and their competitors or could any of this have to do it people spending less money and maybe they are going from fast cash fast food? could this hurt more expensive restaurants? we have been arguing that what we have seen in terms of strength in the burger space is not necessarily a stagnant pie. we are seeing great numbers from franchisees in all fast food. great menu and out

platforms. i think they are taking share from casual dining. casual dining has slowed down. this will be a great place to be. david: what about the full calorie/low-calorie issue? how big a factor is that? >> i think it will be small. it is a category that's played up in the media. in terms of the core consumer to mcdonald's, it's very small. david: thank you very much for joining us. more coming up next. a will talk about oil as measure of the u.s. economy. >> ♪

david: we are halfway through and we will get started with a e quinn.n and vonni

theie: it's taking mid-atlantic to get back to normal after a big snowstorm. thousand flights were canceled over four days. police in southern california are looking for three escapees from an orange county prison. think that theo fled 15 hours before their absence was noticed friday night. the prisoners cut steel bars and made ropes with bedsheets. sanctions have been lifted, iran is emerging from its national isolation and the president of iran is expected to sign contracts with a number of countries including airbus and a renault. i want to give you a look

at a couple of stocks that are moving this morning. it in all time low and continues to fall lower after news that it lost for key executives. jack dorsey said they want to take time off. we talking about an important product. is also a report they will get an amex executive over there to help them. i'm not sure she has done well with amex to begin with. caterpillar, goldman sachs is saying to facilities in shares and they are cutting their price target. is now $51 because of concern about the global economy and the effect on. mcdonald's is doing well in the premarket after beating on every level, 5.7%.

you can see mcdonald's shares are up percent and i want to kimberly-clark. shey are the maker of luv' diapers. they had disappointing earnings on the eps side and the revenue side in the shares are down. there it is. it's time for the morning meeting what we did when we hear wiki banks are looking at. joining us now is michael hansen. we love to play with our wirp function at bloomberg which shows the futures market and the odds of a rate increase. we don't see a rate increase or a possibility until september.

do you think that's too late? the market is surprisingly some mystic on the likelihood of fed rate hike. i think it works out to one year3+.ase for the i think we will likely. see the fed going sooner than that provided the data holds up we are in the midst of a very data dependent fed. we will would be that get modestly above trend growth and continued improvement in labor and inflation. but byy not dramatic june is our base case you might get that next rate hike but it depends on the data. matt: we are getting jeep this week and the estimate is for growth of only 08%. what kind of recovery do you see. ? >> we will deftly have a soft

fourth-quarter, maybe 6/10. the inventory correction will not persist for next year. there is more data for the consumer has been softer. the broader backup is not that bad. i don't think best beginning of a weak trend. we're looking at 21% growth on a whole next year which compares both h and of about one and 7%. we have enough growth to help inflation gradually come back up and the labor market to show further declines in the unintended rate. that should get the fed continuing on a gradual hiking cycle. if that doesn't pan out, we will have to reconsider. matt: so you don't expect a negative feedback loop? you talk about job creation, i think about the jobs we are losing in south dakota.

dakota, they are an extremely small share of the overall employment sure. the fact that we have seen the industrial side in manufacturing or mining where job growth is maybe flat, it has been more than offset by something like 230,000 jobs on average in the past year month in the services sector. that remains strong. it's not nearly as exposed to get her jeep phases. it's still our view that the drop in energy is a net positive for the u.s. economy and consumers. drag onee a near-term the structures investment side of oil is continue to be low. it's a fair question where we're

monitoring that closely. tolth effects take a while cap of confidence could kick it more play. in the view of the fed and our view, there still time to look for the data and see how things will turn out. i don't think the fed will react to the weakness in the stock market itself but it to meaningful downside risks going forward to matt: the last time we had a january does bad with 2009 and we ended up well. you expect the interest rate increases this year and you think june is most likely but march is still alive meeting? now, the 4 -- the fed can afford to be patient. i'm not sure this is the right forum where the fed has the luxury of remaining somewhat patient.

inflation is still slow to pick up so we could get a dovish message. the fed will not make it very clear that the march meeting is off the table. i think it remains a live meeting and the focus from understanding for the fed stands the less this meeting and more janet yellen's congressional testimony. matt: thank you so much. goldman sachs president jerry coleman talked to stephanie and said it was time to sell treasuries. morgan stanley is bullish on fisheries. this highlights the difference of up in on the oil impact on the economy. joining us for moore is lisa abramowitz. jack rifkin is still with us. what is the cause of the diversions of the views and treasuries? goldman sachs is saying that

people are overestimating oil and using oil to much as a proxy for global slowing. that's not really the case because of oil remains low enough for long enough, you will an accelerating effect in the economy. theally it's good for economy when oil prices declined but the problem is, it's not just oil, it's not that simple. there is an interesting story today on the bluebird rental about how -- on the bloomberg terminal how emerging-market companies is to their cash on a balance sheet by the most in a decade because they are not spending it on development or new infrastructure or new growth. this is bad for the economy. stephanie: this is one of the biggest risks coming out of davos. companies are moving to the survival mode. confusing the

supply/demand picture and oil and saying there is a slowdown in the global the time because no one is consuming oil. i think that's wrong. people selling equities based on the lower oil is have it wrong. david: is this all about oil? >> what's going on is a lot about oil but gary is right. as the reason for saying the economy is slowing is the wrong thing. we are in a supply/demand situation. i think it's affecting sovereign wealth funds. they have fiscal budget is to make in some of the emerging markets are basically cutting back and raising cash. others have to meet fiscal budgets and they are selling out of their sovereign wealth funds. that's part of what's going on. oil itself is not an issue here, i don't think. it's a country issue but it is

not an economic issue, per se. think it's too simplistic that the present oil determine whether rates go up or down. >> weather benchmark treasuries will gain or lose value. even if oil recovers, i don't see how u.s. treasuries will rally now given what's going on in europe and the fact of the outlook is deteriorating so much. stephanie: hold on a second. there is business confidence numbers that came out that was negative and inflation numbers were lower than expected. i think we are seeing more investment in europe and people seem to like that mario draghi has them on a slow and steady and i think investors are interested more in europe. >> they should be because valuations are low. of some growths there. if you look at individual major

developed countries like spain, there is a little happening in italy and germany's doing fine, i don't think we are looking at europe being a problem here. >> my point was that the yields are treasuryow yields going to rise that much given the fact that the blood negative yielding debt has expanded? you say it's going to go through a diversions. >> depending what we see with inflation numbers. in the second half of the year, that will not surprise people. that its fans were surprised last night. the super bowl is set. of thecam newton carolina panthers to v did the arizona cardinals on the panthers will take on the denver bank owes -- broncos.

the two touchdowns and ran for two others. that's what i call him superman. the six guysne of in history to win the heisman and possibly win and the and a big day for peyton manning, one of the oldest quarterbacks in the game. david: two generations of quarterbacks in the super bowl . this is peyton manning's fourth trip to the big game. instagram going from her back to dad. he is married to his college sweetheart. versus tomnning brady, two of the oldest quarterbacks in the game. lost, when tom brady you saw his face of the end of the game, he was crestfallen. david: i am a michigan man so i always root for tom brady did matt: i downs.

-- i doubt. n't.i do have you ever seen cam newton and a bowtie? we will talk about their coming aboutt -- we will talk their coming up next. let's look at futures,. everything is in the red. go out and go a big mac -- go get a big mac. ♪

vonnie: here is the latest --

the second largest shareholder all of the dragon has given them a monster concrete and provide a full account -- shareholder of a volkswagen has given them three months to come claim. taz light is aiming to a factory in china by midyear. the automaker's checking locations and looking for a partner. not hite in china are with high duties on imports. shakeup --a major yet another shakeup at twitter, losing for top executives and shares are down 5% in the premarket and daughter has lost half its value in for months -- there -- but are dashed her

twitter has lost half of its executives in 4 months. product in revenue and sales. i think we have the new ceo jack dorsey who was a cofounder trying to find a management team he believes can reignite the growth of this country. we are simply talking about user growth. the user growth has stalled out at slightly over 300 million users. competitors like facebook and others that big growth numbers. they really need user growth or revenue growth? >> where the company has fallen down his a have not monetize what they've got. they have this wonderful

database and they have not figured out how to monetize that. bring inre going to people from american express, i don't think that will help. they need someone who understands monetizing the digital world. it's hard to believe that they miss this. i just don't get it. stephanie: sometimes we see a company take up eating and shares jump on speculation that they convey it -- that they can be a takeover target. could they be taken over? >> this is something that thinkingnvestors are about and google gets talked about a lot because this be a small act used -- acquisition for google. it does not have a real social solution. extent they feel the need to get into social, twitter

would be a smoker to get in. don't they have people put in the places that are being vacated? stephanie: jack dorsey has been a cofounder. i think it's a combination of forced resignations and people leaving. we see this in the valley all the time with start up tech companies. when the momentum slows in the stock price goes down, it's a most impossible to retain key executives who were there for one reason and that is to see the growth in their option value. they are not for the salary or bonus. it's almost impossible to maintain talent. we saw it at yahoo! and we're seeing it at twitter. stephanie: doesn't this go against the mantra of silicon

valley? there has not been the innovation that they've needed to take advantage of having completed as part of a thing. stephanie: you just got extra credit. david: thanks very much. davos, top ceos from and how it might affect their bottom line? down about half a percentage point. oil is down a little bit more, about 2% and mouth and 7%. stephanie: on a week when we got a lot of earnings. will vc see investors go back to fundamental buying? we will be back. ♪

stephanie: we asked some of the top ceos in davos about the

2016 elections and the biggest factors that could impact their business. , consumernce confidence -- we've got a largely healed consumer. are they willing to engage back in the economy? from a corporate perspective, our companies willing to invest in research and development. these are things we have not seen a few years. >> number one, it should be education and that applies to income inequality which have in the united states and the world. the technology world and the availability has change of a have to talk about how to ize the education system. what i care about as an

american citizen is a real problem of the inability of start out life to do better. this is a big issue. social mobility has gone down in the united states. to think about creating a country again were every single person has the chance to be the world bank president or president of the united states. get people running for president in both parties to start talking about the fundamental economics of this country. the economics are is that our economic system is being choked to death by an explosive regulatory system. thehen you listen to presidential candidates, they don't about a lot today. it doesn't have substance. when you look at the economy, we should look at tax policy and make sure the tax policy is set up to encourage investment in the united states.

right now it's encouraging investment abroad. >> we are getting caught up in the symptoms and not the causes of the problems. we should get the fed out. a political agenda to by congress or the president but i think the fed has caused some of the overreach in assets that are unwinding. out of thathey get the better we will pay. stephanie: depaul -- despite having candidates taking swings at wall street, was the most important thing that will affect the election >>? the most of them think of infrastructure. if we got someone would use to rebuild a decaying infrastructure in this country, you can forget about this other stuff. that would change the economy. it would be money going into the economy and it would set us up

for what i would call the next revolution. stephanie: why hasn't president obama done that? >> it has been what he wanted to do but there hasn't been a real backing in congress for that money to be spent. david: how can you explain that to the american people? allt's difficult because you can explain to the american people now has to do with social issues, not what we need to cut the country and make it great. stephanie: you are one of our best, jack rifkin, thank you for joining us. much more on the markets ahead. emanuel from ubs and we will look at futures in the red. ♪

david: we are just about 30 minutes and 25 seconds away from the opening bell here in new york city . welcome to "bloomberg ." stephanie: we have a lot to

cover. the markets are in the red. and ouroined by lisa guest host of the hour, julian emanuel. we have a lot to dig into. let's get you a little bit of news. how about the first word news with vonnie quinn. the islamic state threatening the lives of businessmen and the french state in a new video. it was posted on the militant islamic website. it shows seven of the paris attackers shooting are beheading captives. deaths are now blamed on the storms that clobbered the eastern seaboard. totals needed or top records from the gulf coast to new england. 12,000 flights were canceled. all federal offices in washington, d.c. are closer they've could some bay area homeowners think they will come out ahead to matter who wins. rentals for the big game are

going for big bucks. some homes are going for $10,000 a night that visitors will depend on for the big game. markets now with matt. matt: futures down across the board here. we are seeing about a half percent loss as little as an hour ago. take a look at oil. oil was up when we went to bed last night and then turned down on saudi arabia statements that they will increase. capx. where are investors hiding? they're going to the perceived safety of government debt. if you look at the tenure, you can see investors lying and pushing the yield down to 2.02. they are also hiding out in gold. the precious metal continuing its climb up. finally, i want to take a look

at the euro here. it is gaining some strength against the dollar. the dollar showing a big slide, a leg down, read about an hour ago. at 1.0 seeing the euro 832. stephanie: it is time now for the three stories that matter to markets now. the firstgive you one. as matt just mentioned, u.s. crude is down around 3.5% today as saudi arabia and oil is saying it is maintaining its investment in oil and natural gas products. translation -- they are not stopping production anytime soon. crude soared on thursday and friday, the most since last august. tone forhat the town financial markets. what do you make of this? the correlation between oil and stocks has been incredibly tight the last couple of months. it is investors viewing oil as a weakness.economic

you can argue that there is certainly an element of demand here, but clearly saudi and others are keeping pressure on the supply. clear at entirely as message as the markets are interpreting it is right now. lisa: i saw that sandridge was set theo potentially stage for a bankruptcy. shale and gas producer and they're probably going to be the next one to go. their bonds have been going down dramatically in price. the real effect of oil prices aaying low will have at least negative effect on the economy with these companies going out of business. perhaps the longer term will be positive. there is that detrimental affect that does affect economic growth in the u.s. certainly. stephanie: and a positive affect on lots of industries and the consumer. last week, everyone we spoke to was leading with -- think about the very negative impact.

it's the impact for producers and the rest of the economy. julian: this is what the markets have overlooked. it is a cognitive timing issue. we have looked past in instances where you have had oil price declines in the mid-1980's and 1990's. the consumer did not spend right away with that savings similarly as the have not gone wholly into spending this time. what happened was is there is a lag. the problem is that the lag has met with the wall of china's uncertainty, political uncertainty, and i do not think we can discount the importance of political uncertainty. there's obviously an escalation of violence at the end of the year. it's a wonderys, that consumers are eggs confident as they are. larry i go back to what cohen said. we use oil as a surrogate for how the economy is going. thing with china.

a lot of services do not require a lot of oil. maybe it is not a surrogate for global growth at all. julian: to a certain extent, but the fact is that it is not just china that is transforming the economy. transforming and frustration of the economist -- how do you measure consumption? it is difficult to measure what's being bought off internet , ridesharing, room sharing, all these things that do not have a way to measure accurately. lisa: a circular economy. david: let's go to the second story -- russia. --s fall is shrugging down dragon down the currency of the russian ruble. it's selling all the 31 measured counterparts today. u.s.trading up against the dollar and new data shows the russian economy contracted the most since 2009 last year. the government says gross summative product fell 3.7%. putin is having a pretty rough time of it and it's pretty much

oil. julian: no question. it's a very oil dependent economy, but in a way, he seems to have exercised a lot of his sort of distractive means with respect to the public in terms of what he has done the last year. it could be that there is sufficient pressure and there could be some sort of move with the u.s.. david: he has got inflation. there's pretty good inflation going on inside russia. the cost of oil keeps going down. what can you do? does he have to cut back fiscally and get cuts on the benefits people are getting? julian: it's a difficult situation. it's probably going to be some sort of structural reform, but things like that take time. lisa: to our point though in our discussion about oil and how it's not a good proxy for the economy and how there could be positive effects -- david: at least not a perfect

one. "bloomberg ." the leverage in ahas come into this country like russia that has a whole lot of debt outstanding. lisa: there are other highly dependent countries going back up and that will have a dampening effect on the economy for a longer time before the shakeout happens in oil prices can be a positive. stephanie: if you are a we spoke tost week the president and ceo of resolve , the biggest aluminum maker on the planet. it seems to be the man or the woman with the most cash on the balance sheet and force m&a on the entire sector could end up being a long-term positive. if you are a smaller midsize guy getting choked out here, if you have got the staying power and you have that cash on your balance sheet long-term, you could end up being a real big winner. julian: absolutely. we saw this throughout the early and mid-1990's when commodities

were essentially and the depressed state. the strong handed survived and the most operatives running the major commodity companies are a function of that environment and remember that environment and know what to do to survive. stephanie: i have to give you number three. shares of johnson control and tyco are up in premarket trading after johnson control agreed to combine, not takeover, tyco international. --would move tyco controls johnson controls to ireland where corporate tax rates are lower. johnson controls shares have just turned negative. does the surprising or is it already -- this surprise you or is it already priced in? julian: clearly the pressure on a day like today in the industrial sector with oil weakening the way it is, that has been the markets mindset recently. what this really shows you is

that m&a is not dead. stephanie: nor our inversions. jack lew can come out with a letter saying i do not like inversions. if they are legal, corporate america is going to do it. of thesefter enough deals, we could actually be setting the stage for a meaningful discussion on tax reform in 2017, which is where we need to go. lisa: i would agree. honestly right now in this environment, companies do not have that many options to boost revenue outside of cost cutting or they have destined traded -- demonstrated cost-cutting. they're going to look for that tax cut or any extra amount of money they can raise. why wouldn't they? stephanie: which is the job of the ceo. david: we set up the rules and they're playing by the rules and that we are shocked they're playing by the rules. julian: the other important thing to know is that in an environment like this where stocks are falling back and there is volatility, ceos are looking at the volatility and taking advantage of it

opportunistically and that's the support for the equity market. david: that seems to be going on here. aversion, it'sax part of the johnson controls business, which is the building control part of it, which is the growth business with what is going on at tyco. stephanie: job cuts are not give negative thing. -- are not a negative thing. it's the reason people like 3g so much. just because jobs are cut, doesn't mean it's a bad thing. it's a bad thing if you're one of the people that lost your job, but operational excellence -- it's ok to streamline the company. julian: it is. we are living in a story times, of incredible change and are going to be dislocations. you look at a deal like this and ask her speaks to the potential for flexibility in the u.s. economy. people are going to be redeployed.

you look at the numbers and the job situation is good in this country right now. david: a little creative destruction right there. those of the stories that matter to markets right now. futures are trading down, but next, we will look to see how far they are down. they are holding pretty steady down half a percent. stephanie: if you look, we are getting more and more earnings. there is a positive picture in the u.s. markets. this shows how connected we are globally. china, europe, oil prices pushing future markets down. it is tougher for the u.s. economy to pull its way for equities to show green here. david: we will see. tomorrow is another day. stephanie: 20 minutes away from the market opening, come on green, let's go. ♪

vonnie: welcome back to "bloomberg ." i vonnie quinn. tesla is looking to open a factory by midyear. the automaker is looking for a site and a partner. cars made in china are not hit with a high government charges on imports. some marvelous smokers are getting their day in court. the class-action trial against phi philip morris opens in boston. the company could've made a safer product, but didn't. they want philip morris to pay for a cancer screening. helton is launching a low-budget travel campaign called true. more than 100 locations are set to open. that is our latest bloomberg business flash. now to markets with matt. matt: a couple of stocks moved

by goldman sachs calls. is caterpillar. goldman sachs says that is a cell and cuts its price target on the stock. it had been $67. goldman sachs is saying to sell the stock because it is only worth $51. commodity prices fall around the world. aldman sachs is also raising stop to a conviction by p that is mattel, the maker of barbie dolls and hot wheel cars. says the stock is worth $36 a share. it believes in the new ceos ability to reinvigorate the barbie sales. whenl has suffered a loss it lost the license to produce disney's "frozen" toys, being produced by hasbro. twitter losing for top executives or top officers who run things like product in revenue. you can see twitter stock down

5%, falling to another all-time low at 1695. finally, i want to talk about mcdonald's and grubhub. mcdonald's beat estimates across the board. 5.7% same-store sales growth for the u.s. and 5% globally. they are also going to finish buying back $30 billion in shares. the stock is up 3% almost in the premarket trading. grubhub of 9%. it posted for lemay fourth-quarter revenue that was on the high end of the scale and is ok to buy back on a much dollar scale -- smaller scale. both of those stocks moving up right now. we will take a closer look at mcdonald's earnings next on "bloomberg ." ♪

david: welcome back to "bloomberg ." up in premarket trading after posting its best quarterly growth in almost four years. were field byl -- the decision to serve breakfast all day long. joining us on the phone is jack russo and has a buy recommendation on mcdonald's shares. julian emanuel is still with us. mr. russo, tell us about mcdonald's and what is going on there. a good quarter that they reported here this morning. it was the december quarter. the overall same-store sale number was up 5% in the u.s. and the same-store sales number was up about 6%. those numbers were better than expected. the company is benefiting from the rollout of all-day

breakfast. it's easier comparisons to last year. i think they are executing at a better level -- the drive through times are faster and the company is improving its position in the market. stephanie: positive news across the board at mcdonald's. how long do you think this could last or will mcdonald's, like every other equity out there, it pushed to the broader market? mcdonald's toause us is a symbol of taking a very simple idea and causing a transformation. if you think about it, you have only been serving breakfast all day for a few months now. this would appear to have longer length. i would question i like to know, was there commentary with respect to cannibalization of the standard offerings at mcdonald's or was that not an issue? stephanie: good question. jack: what was that again? stephanie: cannibalization. are we seeing more people walk

into mcdonald's in the afternoon and five micmacs or are the same people going to mcdonald's and ordering in a mike matheny instead of a big mac? jack: i think they are seeing customers they have not seen for a long time. i think they said about 25% of the total customer base regarding the all-day breakfast is new and has not visited the chain in a month or two. overall, they're getting folks there not seen in a long time. matt: let me ask you about the revenue over time. david asked if americans changing eating habits are affecting mcdonald's revenue. if you look over the last 10 years, i know it's a long chart, but the growth kind of evened out in 2010-2011 and it appeared to be coming back down now. was that it? was that the heyday of mcdonald's or can they do something else to change and boost revenue besides serving us pancakes for dinner? jack: i think they will slowly

get the many of more and more in line with what people want in terms of health and wellness and eating right. you have got to remember and love their core customers are folks with middle to lower incomes that may not care as much about health and wellness and are just looking for value. think the chain overall -- you have seen their menu kind of change over time toward more health and wellness items and i think he will continue to see that overtime. onphanie: do you have a view mcdonald's setting a target to return $30 billion in buybacks to shareholders in 2016? jack: it's a good idea for them. their capital spending needs are not going up tremendously going forward. they are using more and more of a franchise model for their store base. as a result, the returning of more free cash flow overall to shareholders. you'll see the dividend evident from this and the share purchases in the next year or so.

it's a good plan and assigned the company has matured and throwing out plenty of cash. lisa: all-day breakfast is only been around since october. how long will this really offer a boost to mcdonald's? jack: i think he will continue to see it work for a couple of more quarters. it may not be as strong as it was in the december quarter that was just reported. i think you'll continue to see a boost. get newf they can customers and the restaurants that have not seen for a while, that could really build some longevity here and keep the positive momentum going at this company. stephanie: the guest count actually fell again -- down 3% in the u.s., 2.3% globally. both of these declines were a big improvement to where we work in 2014, which was down 4% across the board. is it fair to say they are having a huge improvement or just better than where they have been, which has been disastrous? jack: the comparisons to last

year were pretty easy. they are seeing an improvement, but what that shows you, too, is that the sales improvement -- a lot of that came from a higher average check, which is the benefit of having all-day breakfast. david: this also is great and we have been talking about the united states could how exposed are they on foreign exchange? worth as much not in dollars. jack: the foreign exchange was pretty large. overall, i think it was $.50 for a company that aren't this year -- earned this year about $4.80. a lot of the multinational companies are seeing this right now. long-term, there is a huge benefit to doing business with some of these markets, but there are risks involved, geopolitical risks, and right now we are seeing currency risks. stephanie: edward jones's jack's russo.

let's pull back for a moment. from your perspective, here we are, we are a month into the year. clearly an awful start to the year. , long-termestors investors start to take a turn and go along with the names they care about? julian: we think it started. stephanie: this week? julian: we think it started last week. you'll not get the one day, this is a capitulation, all hands up kind of episode simply because volatility excels is not spiked to the degree that we saw last august c. it is a process. you have to see some side of an identifiable bottom and we have seen enough fear there, with obviously more news out of saudi and iran coming on screen to where the potential for forming a bottom has begun there as well. stephanie: what is the message to the market if janet yellen does not raise? thatn: we are cognizant

there are international developments worth monitoring, we are data dependent, and we are still considering raising because we expect the economy to stay strong. stephanie: it does not mean the u.s. economy is hurting. it simply means we have to pay attention to the rest of the world, which could be an argument to go along on u.s. equities. julian: that's right. i would agree with that. we have not talked much about the experience not that far up. people i talk to are pretty scared. stephanie: we did not just have a massive blizzard in new york this weekend. we could be seeing a perfect storm in the markets. we will give you that and more when we return. ♪

stephanie: you are watching "bloomberg ." we are back from the world economic forum where world leaders could maybe save the problems in the markets -- in

the red across the board. smt, dow, nasdaq futures, we have some outliers. we have good news out of mcdonald's, but the markets do not seem to like it. thing in theq bell. you know those millennials and their airbnb loving ways. we are looking at the nice see. julian emanuel is with us. lisa abramowicz is with us. we are in a perfect storm scenario for markets. i don't like that. i am a house optimist. when you bring negative guests on, it really cuts me short. you better have a real strong case for this. julian: we do to the blizzard that hit the east coast on friday and saturday was actually be equivalent to the financial blizzard that hit the first week. essentially china accelerated. there were obviously issues in the equity markets with the it breaker system.

there was trading in the first week that was weaker than expected, calling to potential policy areerror. and we think saudi is floating the idea of iranco. we think it's the kind of thing that caused the psychology to turn toward recession and there is not going to be a recession in the u.s. this year. lisa: what will happen to change that psychology? andan: prices move essentially we are going to see economic data over the next couple of weeks that are going to show that the 88% of the economy that is nonmanufacturing is quite strong and that we might not get growth in the mid to high twos as economist believe right now, but we are not going into recession. lisa: let's say we get that data, amazing data of the u.s.. will the fed not have an

extensive to hike early, causing a negative effect on markets? stephanie: will it have a negative effect on markets? it was present obama and his state of the union address and made many arguments about how strong the u.s. economy is doing. number of people last week who said, yes, globally things are tough, but if you take a snapshot of where we came from in the financial crisis to where we are now, there is a positive picture. there is a positive story to be told. julian: no question, but when you look at it, we think that janet yellen has some of the same lineage that bernanke had. wholef that was this notion of not tightening prematurely as the fed did in the great depression in 1937. at the end of the day, we think they are going to be very cognizant of that. that you would see, ay expect to

dramatic flattening of the yield curve, you suddenly have not seen it yet. lisa: has the u.s. economy grown enough to sustain current asset prices without the backing a federal reserve stimulus? julian: we are seeing that process involved. we would argue that when you think of valuations and you think of the potential for earnings to grow this year, and we are looking for growth. we do not think you need massive growth. we think you need a return to growth to benefit the psychology. stephanie: could we be making the argument investors are taking a breather? we've got apple, ebay, johnson and johnson. these are companies that many people have in their core portfolios. ahead of those earnings, investors could simply be saying, i'm going to hold off on putting more money to work and let's see where these numbers shake out. entirely possible. if you look at it, the other people taking a breather in general is corporate a mcafee we p in the buyback blackout eriod.

you will see support in the market that has been a very material source of support over the last several years. david: that growth has been driven by the u.s. concern. that is where it has to come from. has to get topline growth. we are not seen that yet. julian: i would go back to what i said earlier. -- the oildends dividends, we cannot give up on the spending of the oil dividend. david: it is a quite a while now. julian: because we have had these other issues could china became this massive issue. politics -- we have to acknowledge that it's been a distracting and divisive issue. if anything, when we go to the iowa caucus on february 1, at least that will be the beginning of the process of winnowing down this great uncertainty that is really a maximum now. stephanie: you are seeing some hit with bads get news. jpmorgan, american express, and caterpillar all got downgraded today. we are starting to see more of this year.

i'm not saying analyst woke up and took us to fundamentals, but in some cases, it seems that wi ay. momentum kept driving equity prices high. those analysts who are bearish on the market that carried out. now finally, we are looking at the financials in many of these copies. julian: i would argue that we are looking at them kind of in the rearview mirror. the fundamentals were not that different a couple months ago. stock prices were higher and the public became the least bullish it has been since the low end of march of 2009. lisa: what i'm struggling with -- my colleague had a great story about how ipos are the slow space's year to start your since 2009. companies are having trouble raising cash and equity markets and the accelerating debt markets, which are absolutely steep right now. how's that going to bolster sentiment of investors and companies are unable to raise

money in stocks or whatever? stephanie: if you look at companies have issued debt since the beginning of the year, bank of america and goldman sachs have brought high-yield deals that were well oversubscribed. they are not going from part to 104 on the first day, but they are seeing positive action and strong companies. just last week, we spoke to the cofounder of canyon, who says, listen, you want to be in high yield. ify set taken a beating, but you look at strong companies, it is high up on the capital structure. goldman told tom keene that an hour ago. julian: it is also worth pointing out that part of this inansing, adjustment process markets is that we have heard talks of the unicorns being marked down in the private market. --part of the fee through that is part of the fee through to a softer ipo market.

m&a is there and it will be support of markets and the financial industry in general. lisa: i do not see how markets will keep rallying as the credit cycle turns and default rates go up. isian: so the question here are we at the tipping point where energy is going to cause contagion to the rest of the credit markets? that is really the key. if you believe as we do that there is not likely to be a recession, yes, things are the samebut by token, the market has done the tightening the fed would of done anyway. at the end of the day, without a recession, there is a glide pad to higher prices given the fact that valuations have come in as much as they have. david: your analysis is based on the ascension that it will not go much past oil. julian: it is based on the biggest assumption that the consumer stays robust. we have virtually no signs of that diminishing.

as mentioned, we think that those who have written off the oil dividend may be premature. david: thanks, julie. we want to take where the stocks are at with matt. matt: stocks are down across the board, but not huge drops considering where we are coming from. the s&p down five points. the dow down 71. keep in mind that this comes after the best back-to-back games that we have seen since october. seven out of the last nine trading days had gains. even though it has been a rough start to the year, it has kind of recovered to some extent. take a look at my terminal and i , thed up the function seasonality for the s&p index. this is a graph of months and years. we just heard lisa compare this another 2009 comparison. we are down 7% so far in january. 2009 was down 8.5%.

of2009, we close the year 23.5 percent. if this were 2009, you should definitely be long on this market. what has been the weight and holding us down has really been oil and a tighter correlation. we see it continue to tighten up now. oil is down 3% with $31 twice as a barrel. natural gas down at two dollars and nine cents. tod futures rising right now 11 06.300. on the plus side, you have mcdonald's, which is worth more than 5% of the dow jones industrial average, rising today because mcdonald's had earnings that were better than the street was looking for. it is want to finish $30 billion worth of buybacks. mcdonald's up 2.5% in early trading. halliburton, although it beat on

earnings and missed slightly on revenue, actually down right now. legter taking another lower, down another 7% at 16.60 a share. let's go to abigail doolittle where she has the latest on whole foods. abigail: whole foods is trading lower this morning after the capital markets downgraded shares to an underperform the neutral on negative price perception. foodsts there thinks hold is "an innovation and leader in retail foods." valuation is a risk as the copy tries to start a multi-your turnaround. it could come at a cost even as whole foods has dropped 40% over the last 12 months. stephanie: thank you, abigail doolittle. i've imagine a different price. uber pricing -- over the thatnd, there was a ruling

uber was not permitted to have mega search pricing. the funny part is that there were note ubers on the street. where is uber? 4.3 times -- that's a big ones in on a day where there is no snow and all the streets are clearing, that's a big number. 4.3. it is supply and demand could you have the type and that 4.3 -- agree, agree, agree. next in today's value proposition, we should talk about how you are getting to work today. uber, subway, drive, maybe just a home or work remotely. we are going to talk value propositions and why investors may be clean to cash in the struggle at times. -- turbulent times. stick around. you are watching "bloomberg ." ♪

julian: welcome back to "bloomberg ." vonnie: here's the latest bloomberg business flash could ford will shut down operations in indonesia at the end of the year. they see no path to increase sales or profits in those markets. ford has accused japan's government of protecting domestic brands. volkswagen second largest shareholders has given the automaker three months to come clean. the leader of the german space once answers and the companies pollution cheating scandal. lower saxony owns 1/5 of ew. gas prices are at a seven-year low. one industry analyst says the industry average is $1.91. that is her latest bloomberg

business flash. could itanks so much is time for today's value proposition. we zero on a controversial issue that people are talking about. we are asking lisa abramowicz and julian ameren you is cash the best hedge right now? this is something that came up quite a bit at dowavos. is is cash where people are fleeing to? julian: in some ways, it's a rational response. instead of spending money in the high-yield market or equity market, which is expensive right now, volatility is high, but not quite high, but cash is good because it gives you the flexibility once you work through your fears and emotional angst that you can put it to work. stephanie: lastly, we sat down with the cofounder of came in. one of the most successful high yield funds out there.

we asked way they're doing it. take a look. >> we are running 20% cash and one of our funds and we do caesar's and in clear channel. those are longer going situations. more generally, the issue is the following. when markets are like this, you cannot predict with certainty. if you have liquidity and you are not leveraged, which we you take offn situation selectively. when things get even more interesting, you can be more aggressive. it innie: to put perspective, 20% is a lot for them. it's not at their negative on the market, they just think the market is going down further. they're going to be buying several months from the. canyon has crushed it. lisa: how nice to have that luxury could i'm concerned about

the pension plans and some of these investors that really need to generate 7% income, a percent income. i've heard anecdotally that they have boosted their cash allocations to the highest and a long time. they cannot necessarily afford to earn nothing. yes, jeff gun lock says this is a time for capital preservation. at the same time, some people have to go somewhere. by earning nothing, they are actually losing. stephanie: you are better served earning nothing been losing money. that is what got some investors in trouble in 2008. of 2015.tly at the end if you do not have the investing principles or the gumption to be in a product like high-yield, you should not be and it just because you are not getting enough in the treasury market. julian: it also speaks to why volatility can work both ways in an environment like this. thehave a lot of people on sidelines in cash and you see the psychology begin to heal

itself as we believe it started to slowly with last wednesday's reversal. you really could get a rush into the markets as the data begins to get better, as the fed begins to reinforce the knowledge that they are not going to make a policy error. david: we will see if you are right. it strikes me that this is not the first time we have heard about keeping your powder dry. if you have been here in december, now's the time to be in cash. this is not a new phenomenon. positive ishe palm o that is not a time to sell but maintain your cash. those are two different pictures. lisa: if someone does not have a big cash stash, should they go out and sell what they have to generate some cash? probably not, right? withstephanie: david sat down the men from bridgewater and

asked if cash stalls investment problems? you have banks were they are no longer cushioning excess markets by buying inventory could take a look. i diversified asset goes down is when cash is the best-performing asset. that is why the fed needs to prevent that. if cash outperforms the real economy and outperforms, you got a problem. that is bridgewater tsonga there's a problem when cash is the best place to be. julian: in that set of circumstances, it is normally very temporary. you have had it for an extended time in 2008 and we see that there is not the same set of circumstances. at some point, as psychology begins to heal itself, cash is actually fuel to support asset prices. lisa: honestly though, after some years of stimulus, to have everything quietly deflating and cast performing well, it's a

vote toward dis-inflationary environment, which is not practically good for consumer confidence. julian: i think that's another very important issue. people talked about china spreading deflation and we have come down from $140 a barrel to $26 a barrel. it is really difficult to argue, but we did hear talk of near zero dollar oil last week, which is part of the healing process. in general, it is difficult to argue. you've only got $26 more to go. you have already come down 75%. david: julian emmanuel and lisa abramowicz are staying with us. next, a look at some of the highlights from today's program. ♪

stephanie: you are watching "bloomberg ." we are getting final thoughts from julian emmanuel and our own lisa abramowicz, and we've got to point out wednesday that we have got the fed preview coming up. look, work is at zero and from all the investors we spoke to last week and i look at my instant bloomberg today, it does not feel like anyone is expecting a rate hike. clearly the tone of the statement is going to be important. we are watching the markets. you think one of the reasons we are seeing some investors hit on the sidelines is because they do not know which way it's going to go? julian: there's a lot of data this couple of weeks. it's not just the fed. it's the set of manufacturing and nonmanufacturing isn. people really want to be reinforced of the notion that we are not headed into recession because there is real fear out there. stephanie: can the u.s. economy

actually separate itself from the global economy? what does it mean to be in a session when you have a growing, albeit slow u.s. economy? lisa: i would love to be of some of those conversations with the fed right now where they are saying, how can we change the conversation>? what tools we have left? right now they do not have a great deal confidence they could do something to bolster this market. julian: they have to remain flexible. they have said that they needed to remain flexible. literally since 2013. there's only so much you can do and the fact is that the market has done some of the tightening for it, for the fed. stephanie: i'm looking at this. short interest of alibaba surging to the highest in 14 months. shares fall 13%. do you remember the alibaba ipo? you cannot have it more people on that podium on the york stock exchange? let's take a look at my favorite

moments on the show. the highlights of today's program. spending $20 million in putting a cap on the whole and walking away because it's not worth it. they're still punching a hole in the ground soy supplies there. the demand meets to be worth your while. to your question, stephanie, the fracking and realizing that the u.s. is a domestic producer and this oil prices hurting us. it's hurting our gdp. >> there's still a lot of unknowns and whether the fed is going to raise rates four times, three times, two times, one-time pick what we are realizing is that this week is that we will get no action from the fed and that will take one of the expected raises off the table. you will start to get to the election season. once the primaries get decided and we have one person representing the democrats and one person representing the republicans, i think some of these uncertainties begin to become more certain and we also get to see where is china and all this. are they at a 6% growth rate,

6.8% growth rate like they came out with last week? all these things -- we need more certainty. it did not hurt but super mario came out and said maybe we will come back in march and do more. stephanie: there you have it. what's your final thought, my friend? julian: what we have seen in january is essentially a bull market and negativity. of theinto the beginning year, maybe it was warranted for a few days w/.. we believe that as we get into february that the economic statistics will warn a less negativity that we are seeing now. stephanie: i'm going to push for a turnaround could we have to leave it there. julian a manual release of brahma it's, that does it for us. -- julian a manual and lisa abramowicz, that does it for us. you tomorrow. ♪

betty: it is 10:00 in new york and 11:00 p.m. in hong kong, welcome to bloomberg markets. ♪

good morning, here is what we are watching at this hour, we are half an hour into the trading session, shares are lower along with the rest of europe. oil prices resuming their slide after the saudi and announced they would continue investing in energy products. , iran'sin rome president in rome to finalize billions of dollars in deals following the lifting of sanctions in europe. as twitter shakeup ceo announcing his departure -- announcing the departure of four key executives. shares continue to sink. ♪ let's head to the market desk where we have the latest on this decline. we got out of the