investors are beginning to worry the capital outflows may make things even worse. , after theinflux question which energy companies can end up in bankruptcy in 2016. ♪ stephanie: welcome. it's tuesday morning. we are here in new york city, you are watching "bloomberg go." i'm stephanie ruhle. david: i'm david westin. now oil is a little bit. stephanie: in the game of oil production, supply demand, kabuki theater, we continue to see producing nations really start to play a game with us. as soon as we get a signal the production could get halted, whether we're talking iran, saudi arabia, russia, because he

is serious spike. oil is already on the rise. i'm not going to say i trusted, we have been to the stands before. there's a lot more news we have to cover. another snow day for federal government workers in washington, d.c.. offices will be closed while the city digs out from the blizzard. air travel is slowly getting back to normal. fewer flights were canceled yesterday. theident obama has banned use of solitary confinement for juveniles and federal prisons. the washington post says the president says solitary confinement can lead to devastating -- imitating compensators -- devastating consequences. in denmark, the parliament is expected to let police these valuables worth more than $5,000 from refugees seeking asylum. $1500 from refugees seeking asylum. danish citizens must sell assets

before getting welfare. our 2400 journalists and more than 150 news markets around the world, i'm vonnie quinn. it's now with matt miller. aig, breaking news from they are going to ipo a 20% guarantorhe mortgage united guaranty is a first up towards completing the exit of that business area aig also announced $3.6 billion in new costs to fill a reserve shortfall. shares are up 1.7% in the premarket. this will prove -- this will probably give us some role of trading. we watched the shares for you. stephanie: one of the reasons we are seeing this is a response to carl icahn. ,he head of the aig meeting could one say that aig is disrupting itself? you have carl with his foot basically on the ceos throat. what have you done for me lately? not enough. this has to be assumed in response to that.

will the market feel like it's enough? hancock, the ceo, has to boost returns. he's trying to save his job. activist investing has gotten a lot more serious. he is being attention, the stock is up. we have a lot of earnings today. let's go through a couple of the big companies out with earnings. out with gamble came an estimate beating $.98. the ng is the beat, we haven't had a lot of trading the premarket. , it's the year to date been a tough market. that's not bad for 2016. down 3%. procter & gamble. let me go through the rest of the earnings. dupont came out with its biggest loss since 2008. if you adjust for a number of costs, it actually had a profit per share of the seven cents. that beats the street estimate of 26%. -- 27%.

not a lot of trading in the premarket. you can see your to date, it had a much more difficult time than procter & gamble and a pot down 20% after pulling off the biggest merger of all time in the chemicals industry. johnson & johnson meeting with q4 earnings of $1.44. we were looking for $1.42. johnson & johnson shares down 6% year to date. still waiting for premarket trade there. finally, coach earnings are out this morning. second-quarter eps, $.61. sales were 1.27%. [no audio]

matt: that's on the s&p right now. there was a violent snap in crude morning, down 3%. it turned around and recovered, and i you see it up 1% at $30 and $.63 a barrel. -- $30.63 a barrel. saudi arabia coming to an agreement possibly for a cut there. it really drives the oil market. screen ofw you a full all the asian indexes i'm looking at. we have massive moves. csi 300, 6%the down, the shenzhen at 7%. huge drops in asia overnight, which led to real volatility around the globe. adding oil, it's anybody's guess as to what happens. stephanie: another bit of news to break in the corporate world. it speaks to what you were

mentioning with aig. peter hancock, the ceo, taking action at a time when activist investors are on their heels. lockheed martin saying they are separating, they're going to be combining their i.t. and tech service units with lighters. --leidos.ther seeing more ceos take a deep dive and try and improve operations and bottom line. this is another way we are seeing that. it's still early to tell. lockheed shares are trading down slightly off of this news. david: that just came across the wire, this is a reverse morris trust, a specific way of selling something without having to pay the taxes on it. stockolders will get some at a chunk of cash, a $1.5 billion. it sounds like lucky did not want to be in the i.t. business anymore. -- it seems like lockheed did not want to be in the i.t. business anymore. stephanie: this is what ceos should be doing.

tightening up their game, looking at what they have in the coffers and thinking how can i tighten the screws as much as possible. the last thing they want is a carl icahn or david einhorn. david: a core business they can make money off of. stephanie: in the premarket, slightly down. matt: i'd love to hear more about that trust, david, and what that means. lockheed shareholders will get the majority of this business. as they spin off that tech business, that use the word combined. that is corporate speak for buy. they're basically going to buy this business. david: if lockheed took it all in pat -- in cash, they have to pay taxes. this way, that doesn't happen. should mention, we were opining on the motivations of peter hancock. we don't have to do that. ceoy, peter hancock, aig will be sitting down with our own betty liu at 10:00 a.m. a big day for aig, the right day

tasks are hancock what exactly is doing. we're going to take you overseas to china with the shanghai composite plunge. 615% on concert -- 6.5% on concerns that capital could accelerate. --en zone robin ganguly bloomberg's own robin ganguly joins us. it's far more retail focus that we see here in the states. robin: what can i say, stephanie? we are heading into the year of the monkey. ware monkeying around at the beginning. 6.5%,ore serious note, investors are really concerned about stability in the market. their ability to protect policy. you can't to drive overnight 70%,wing costs to 68%, sell on shore banks, restrict their onshore you on business and expect people to have confidence in the free market.

that's the main problem. there's a lack of confidence in anything, any chinese assets. david: in the bloomberg news report, it said there was $1 trillionpital -- that flowed out of china. are these new numbers? robin: yes. this is our colleagues at bloomberg intelligence. they have come up with this estimate of $1 trillion, that's about six or seven times the amount of capital that left china in 2014. this illustrates the huge turnaround. chinese assets are finally beginning to trade like emerging market assets. stable, they were a haven in asia, a haven in emerging markets. now all this turmoil, since the august 11 devaluation saying they will allow market forces a greater say, going back on the words of the speak. it is creating a lot of turmoil,

a lack of confidence. that is why so much of capital is flowing out of china. david: i want to illustrate that with a chart from the bloomberg right now. if you take a look. in blue, i have the u.n. -- the yuan. this is the devaluation robin was talking about in august. in white, we have capital flows in china. matt: as a gets lower, money is coming out under the zero line. it's getting to be dramatic. we were talking this morning about the fact that a lot of the wealthy chinese are buying property around the world. that is boosting prices in real estate. we focus on that later. do you see capital outflows? do you see evidence of that we were walking around? robin: definitely. the problem is, when the imf on november 30 said the chinese -- in 2016, that

insinuates that will be greater fraying of capital controls. up of capital controls. we have the estimate of $1 trillion flowing into chinese assets over five years. there is also this pent-up desire for investors in china to take their money overseas. you have to really be careful about how much money is going to flow overseas. see capital controls, you $1 trillion flow out an estimated $1 trillion in 2015. controls are used further, it could be the year of the monkey. david: that is bloomberg's robin kong.y in hong today is the first fomc meeting since the fed raise rates just in december. will we hear a tinge of regret? that's coming up next on "bloomberg go." ♪

vonnie: welcome back to "bloomberg go." president obama wants to make it easier for businesses to offer retirement plans to workers. firms toallow small join together to form retirement plans, which would reduce the mystery of cost and compliance issues. -- admin straight of cost and come -- administrative costs and compliance issues. disney and --ing for workers came on temporary visas.

hcl and cognizant say they comply with u.s. laws. billionaire john paulson is using his personal fortune to back stock investment losses. he's had to cut assets by more than half. is using his own investments as additional collateral for the firm's credit line from hsbc. that's a bloomberg business flash. david: thanks, vonnie. i think it's actually stephanie. stephanie: i appreciate that. with barryn off ritholtz next to me. up.s what, giddy the fomc is meeting for the first time since they raise rates in december. it in the turmoil we've seen in the last few weeks, we are obviously asking the question -- did they move too soon? take a look at what they said in davos.

made a mistake, growth is disappointed, inflation will go lower than higher. now you have turmoil. certainly, they cannot do four hikes, barges off the table, made by june. -- maybe by june. they're going to do something, but there is something from the fed means we don't hike in march. maybe in june. tracy: -- stephanie: is noteworthy as those comments are, only he has assured opened with two buttons, while the rest of us were completely buttoned up. as i mentioned, barry ritholtz is here with our friend brendan greeley, who we haven't seen in a while. brendan: you were busy in nightclubs at davos. stephanie: i was working.

and carl riccadonna. let's throw it in the middle of the pot. janet yellen. what's going to happen? did she raised too soon? >> i don't think she raised too soon. the fed has a dual mandate, it has nothing to do with the stability of overseas markets. we have been an emergency footing as zero four seven, almost eight years. all the fed is looking to do is get off the emergency footing and do so in a way that is least disruptive as possible. are they going to raise now, no. are there more races coming this year? probably. is it going to be three or four? no one knows. carl: it's not going to be three or four. the fed doesn't want to show buyers remorse or show signs of regret. they want to telegraph this was the right decision, they can

hence of downside risks to the economy, but there's really no benefit for them to dial back those four rate hikes they were penciling and as of december. if you look at the futures, the next rate increase coming possibly as late as september. they wait until that market sentiment shifts back, and then they can say we will do less. and that it will be a surprise to the market, and that has some cachet. david: janet yellen says she is data dependent. she doesn't say she is only partially due to dependent. part of what's going on is the strength of the dollar and foreign markets. of the data is what's going on with inflation. stephanie: did you just talk about yourself in the third person? brendan: the brendan. then you will know that i have arrived. the brendan wants to take a look at inflation data. fed has developed a case of the however's. they say the things we have come

to expect. at the downturn in inflation, it's obviously consequence of lower oil prices. however, we been seeing more and more however's, recently. they are worried that topline inflation expectations by the general population, by business owners, have lost their anger. we are seeing a lot more people talking about inflation anchors. william dudley gave a speech in january, he said when you look at the university of michigan consumer sentiment survey, is lower than it has ever been. let lower expectations of topline inflation. when expectations are lower, that wreaks havoc in your down the line. true with market sentiment. the st. louis fed pointing out market sentiment is very low. lower than it has been historically. haveeal question is, inflation expectations slipped their anchor? barry: the fed has been lowering

expectations as measured by the university of michigan. stephanie: don't talk university of michigan. core cpi and december, we finally end of the year above the fed's inflation target. we were 2.1%. this was a hollow victory for the fed. this is all -- almost predominantly due to rent pressures. the rent is two. high. darn high. stephanie: we get to go to commercial. brendan greeley, carl riccadonna, thank you. we make it very haircut during the break. y awe may get barr haircut. stick around, you are watching "bloomberg go." we are hoping for grain markets with oil heading in the right direction. ♪

stephanie: you're watching "bloomberg go." johnson & johnson fourth quarter estimates boosted by drug blockbusters. with us now is dominic caruso, chief financial officer. 3000 job cuts in the medical device division recently. i was not going to help you, going forward -- how is that going to help you going forward? dominic: you are referring to the restructuring we just announced. we think that restructuring is the right step to take to position the business. we are strengthening our go to market models and free up some resources that can be reinvested in the business to drive growth. we think it's the right move for this business. david: please take us through the relative growth in the three

main areas. because you've had some disparate growth levels there. dominic: sure. i couple of things. we have some acquisitions in investors that cloud the picture. to give you a perspective on it, our pharmaceutical business overall is about 11% growth. that's very strong. we did divest a product line early in the year which reduces that growth rate a little bit. about 11% in pharma. in the consumer business again, excluding acquisition to investors, about 4.2% growth. nice growth. medical device business, lower growth, about two point 5%, excluding acquisitions and investors. stephanie: in terms of specific drugs, what are you betting on? eli lilly and pfizer are making great strides. a strong fromve simple business, a big pipeline. we just announced we plan to file 10 new products by 2019,

billionwhich have a $1 potential. the first of those that we just got approval for recently is an important product for multiple myeloma, which we think will be a big success. stephanie: given how global your business is, what's the impact of the strong dollar? the 2015, it's been a negative impact on sales around 7.5%. we are projecting based on current rates that impact would be as low as 1.5% going into 2016. david: you have the event of a strong balance sheet. what are you going to do with that cash? i know you have a stock buyback program, but that's not going to consume it all. you have a strong balance sheet, and are always looking for ways to deploy capital in a way that creates value for shareholders. we pay a healthy dividend, always looking for acquisitions to bolster growth. we will do that at the right price on the right time. we are patient. in the meantime, we return cash to shareholders like you just our $10 billion

share buyback we are currently executing on. stephanie: what is your take on china? how bad is the economic slowdown? have seen a slowdown in china. review china as a long-term play. demographicsh the there, that plays well with vehemence need for health care, that plays well for a business. perspective, china represents currently only about 5% of our sales. so any immediate slowdown or short-term economic conditions will not have a significant impact on business. david: dominic caruso, johnson & johnson ceo. thank you for joining us. more on the fed in the markets coming up next on "bloomberg go." stephanie: we have to give a shout out for new jersey. ♪ the only way to get better is to challenge yourself,

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

we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. stephanie: -- david: welcome back to "bloomberg go." futures are up slightly, and we thejoined once again by

economists barry ritholtz. let's get started with vonnie quinn. vonnie: thank you. a new poll shows donald trump dominating the field of republican presidential candidates. the new cnn or see national poll, 21 -- 41% back to trump. is a 20%, alluz of the candidates are single digits. in texas, a abortion activist has been indicted by a grand jury. he is charged with tampering with the government records. the videos accused planned parenthood of illegally selling fetal body parts. plan parenthood was cleared of wrongdoing. it may be a little while before things are back to normal on the east coast. 48 hours after the blizzard, travel is still a mess. airlines delayed or canceled more than 2500 flights. many schools are still closed. in washington, d.c., federal

government officers remain shut by morebal news powered than 150 news bureaus around the world. i'm vonnie quinn. breaking news with matt miller. matt: sprint and 3m right now. let me give you sprint. the company sees full-year adjusted at 9.5 to $10 billion. total net additions in the quarter were hundred $91,000. was $1.9 billion. the question is what going -- what is sprint going to do about its workforce? you want to watch sprint for job cuts. the company has already said it plans to cut 2500 jobs as part of a plan to cut $2.5 billion. if you type in sprint or any company on your bloomberg gominal and then type in oss , you can see a depressing chart of when the company has cut jobs as far as the run of its share price as well. i got that up on my terminal if

you want to take a look at that. meanwhile, 3m had fourth-quarter adjusted eps of $1.66. was $1.62.e these are beating estimates. sprint was gaining in the premarket, 3m ginny in the premarket as well. futures as you guys been mentioning today are up right now. we are seeing positive moves in the u.s. market. even as you had this huge tumble and chinese markets overnight. stephanie: i want to take you back to sprint right now. we are seeing the default risk, credit default swap in five years widen out 1.3 times on this negative credit outlook. we are also seeing the short interest in sprint hit an all-time high, 20 times the average daily volume. that's very big. it's not just this as negative news and we are not feeling it in sprints, we are more than not feeling it. you are seeing major investors at this point really saying this

isn't working. i can hear jon ledger of t-mobile cackling somewhere at this moment. touted screw for years. their ceo has only been in that seat maybe year and a half. it's a tough road. david: this is nothing new for sprint. for sure.t's there are only so many companies who can aggressively pick up market share. it's a zero-sum game. cap and is like verizon have been the winners in the space. sprint, not so much. got seven cells, three buys, sprint news to turn it around. barry: there's a huge short interest in this. they do own spectrum, they do own valuable assets. you never know when someone is going to come along and say this is cheap enough that we could pick this up. at $2.72, that's not exactly where i would want to be short. stephanie: m&a is the killer for all short-sellers. single digits is a tough

place to play on the short side. stephanie: it's time for the morning must-read. our team is traveling back from london today, the gulfstream hasn't hit yet. so barry is providing our morning must-read. i believe you are the one who penned it. this time of year, every is. the market likes this candidate, the market doesn't like this candidate. these polls are why the market is having volatility. when you look at it, it's just the worst form of demagoguery and market analysis there is. viewers can spell demagoguery while i share my favorite quote from various peace. i repeatedly heard and read the same silliness. the market is tanking because of the rise in wildly and protectable donald trump on the right side, and socialist bernie sanders on the left. i can say as far as the market is concerned, the whole political horse race and even

the election itself is more or less meaningless. let's break this down. s,st week in. most -- in davo the fear of donald trump was everywhere. is that just talk as far as the market goes? barry: a lot of it is just talk. strip everything away, strip trimmed --mbast, trump is a moderate democrat with his policies. ignore what he is saying to the base. all the things that he is talking about, we are not going to build a wall or deport 14 million people. we are not going to have a $10 trillion tax cut. all of these things are great talking points on the stump. but there's essentially zero chance of any of it happening. david: taken away from the personal. the range of uncertainty in the selection seems pretty good. side, sanders on one

donald trump on the other. apart from voting on candidates, can you take down to zero the chance that people are hesitant? barry: let's look at bernie sanders. hypothetically, in some alternative universe, bernie sanders is elected president of the united states with a republican congress and the republican senate. what is he going to get past? a fairlyrget obama is moderate democrat, and he barely was able to get anything through the republican congress. nothing is going to happen with standards. let's step way back. the big thing we need to focus on is when markets are doing well, it's because the economy is doing well, people have jobs, they are seeing wage increases. consumers are spending, and profits are high. favorends to work to the of either the incumbent party or the status quo. this has been a sort of lumpy, even recovery. there are lots of pockets of discontent.

some people are finding resonance with what trump is saying, some people are finding resonance with what sanders is saying. but those really are not what is driving the overall market. stephanie: both of those caps who are supporting donald trump and bernie sanders are really unhappy. and they are unhappy about our economy. matt: i just wanted to ask if there's any kind of stockholders almanac view on what markets do in election years. if you look at the last four cycles, you can see that we were up at the end of 99, we were up at the end. basically the clinton elections. did i just say clinton? the two bush elections. 2008, we were up again. it looks like three quarters of the time we finish election nears going up, at least the trend is going up. bottom line is corporate profits are doing

well, that works in the favor of your -- of either the incumbent or the status quo. rate is falling and they're just turning negative primarily due to energy, that tends to work to challengers. there's also another issue of the past eight years has been the highest in partisan rancor, the worst sort of gridlock. this has been six years of do-nothing congress. i think the public in general are just tired of it. the whole idea about hope and change, the electorate is seeming to say we really want to change induced the, and if the traditional politicians can get it done, -- can't get it done, we will go to an outsider. david: if it's not politicians, it's oil. as we speak, branches up, debbie tias up a bit under 1% this morning after a rock said saudi iraq saidnow morph -- saudi arabia is now more

flexible. blas is here. -- >> didn't give any details with the flex ability months. i remain very skeptical that actually we have seen any movements to what the production cap. what we're hearing for what we're hearing -- saudi arabia says it will not cut for others to take its market share to make room for iran, and russian the saying they can survive this crisis and it will give way for opec to move. david: one thing that would cut supply is if energy companies had trouble and had to cut back production because they were going out of business or had to restructure. where is the leverage situation right now in energy producers? javier: i think you are right. we canend of the year,

see some thing actual from opec, because we can see u.s. production coming down because shale producers have gotten in trouble. the best indicator is not the price of oil at $30, but the level of the known investment-grade of u.s. energy companies is trading right now is close to 20%. in 19.7, it's the highest in 20 years, it's higher than the financial crisis in 2008, 2009. that's a very good indicator of pain in the industry. these companies are not going to be able to raise more into the market. and when they run out of cash, we will see a significant drop in u.s. production. when we look at some of these countries that are a little tight for cash, iran, -- can theyussia really afford to stop producing oil, even at $30? are they going to actually cut back production?

i assume they are going to need the money more than they need the supplies in the ground. javier: those companies try to maximize reduction to try and read every dollar. so far, these countries need to stop and think -- is a good to sell to barrels of oil at $30 or better to sell may be a barrel and a half of oil may be at $50 a barrel. i take in account the production and actually making more money, i think that consideration is going on right now in many opec countries. i think one of the most interesting comments this morning from the oil ministers of opec came from the minister of finance and acting will minister of kuwait. they are using for planning purposes for 2016, and oil price of $25. that's still you what opec is thinking. david: at 25 dollars, there are some companies that will not be able to afford to stay in business.

be specific, gives examples of some of the most leveraged people who will have to say uncle first. can survive,il companies like exxon or chevron will be able to continue raising and is going to be painful but they will survive. if you look at u.s. shale producers, that's where we are going to see the pain. you think about companies at this company, five years ago aboutad a total debt of 1.5 times. today, more than four times. his company is highly leveraged. the losses are mounting. i think companies are going to have a very hard time with $30 will remaining for the rest of the year. stephanie: frequent mack brown -- freeport-mcmoran has a lot of volatility. return, we have got to talk apple. set to report first quarter earnings after the bell today.

what can we expect? buying opportunity, selling opportunity? our houses look like apple stores. there's got to be value in that. there you go. this mightthe green, be the second worst anywhere we've seen in history, but maybe, just maybe, that's turning around. ♪

david: welcome back to "bloomberg go." apples shares of taken a beating, falling more than 11% since the company's last earnings report. as because of concerns that iphone sales may have suddenly dropped off. we know how important those art apple. the company is set to report first quarter earnings after the bell today.

giles coming overseas technology coverage for bloomberg news joins us. give us a little bit of a preview on what we should expect from or look for. tom: the things to keep in mind for apple, you got to look iphone sales first and foremost. they cap for 66% of the total revenue of the company. there have been concerns about production being cut back. concerns about demand going to 2016, our people holding off, is the market saturated? our people waiting for the iphone seven? how robust as demand in china, another big factor. and finally, the outlook for 2016. david: haven't we seen this movie for? apple come surging back. is this different? tom: it's a little early, you have to wait until september, 2016, to we get a big iphone. and how iterative or revolutionaries that going to

be? that's something we don't have a lot of insight to. there is a drop off after the holiday season. so yes, early 2016 will be a little bit bleaker than the christmas season. the problem is, how bad was the christmas season? has it been saturated? stephanie: let's look at apple at all the money they have. back in december, for we saw apple and the rest of the world take a lay down, in 2016, this could be the m&a year for apple. possibly buying gopro, tesla, box. look at apple's dna. they never make huge acquisitions. it's always these small, strategic acquisitions that will fit. like beads. take wee: we didn't would see massive companies like tesla -- remember, gopro was the darling of darlings with that

handsome ceo when they went public. in that story has changed. tom: gopro is a one trick pony. they have a single camera, they are great if you want to leave out of a plane or run laps at white rock with matt miller. but where else is the rest of the innovation? hearing on what a mess the iwatch was. but we see sales of swiss watches, they have been in freefall. i wonder if that's a coincidence that the iwatch comes out in the swiss watch manufacturing -- i'm old school. i like a swiss timepiece. but apparently the next generation could care less. stephanie: the next generation doesn't wear watches at all. it's the iphone, it is your watch. stephanie: they we're --barry: they will wear a fitbit. david: is another way to tie them into the ecosystem. i will answer calls and listen to music on my watch. really going to

change the game for them. it's making an impact, they are doing well. apple talks how they like what's going on with the smart watch. but it hasn't really changed the conversation. and buying gopro, that's not going to change the conversation either. even if they did it, it wouldn't cost that much, no sweat. it doesn't really change the fundamental story. this is fascinating. you can see this on bloomberg with anr. this is the stock price and white. it continues to come down. 10% year to date. meanwhile, analyst recommendations continue to go up. there are 85% buys now. as they raise the recommendations, they are lowering their price targets. so the street as saying by the stock, but it's going to be worth a little bit less than we previously had thought. these guys are looking pretty far ahead. they're looking at new products that supposedly are coming down the pike. the apple car, anything we hear on that, nothing we're going to hear it today.

in the coming months, that is something a lot of people are going to want to hear. matt: didn't ahead of the project is leave? barry: what does that tell you about how soon we are going to see an apple car? stephanie: one employee. tom: it's a pretty big project. barry: it's not something that's going to happen in the next year, it's further down the pipeline. do accelerate, do form partnerships? that is something that apple will rely on. tom: put their software into the cars, not make the cars themselves. that keepsrumor coming back, time and time again. it's a lot for them to swallow. stephanie: look at the equity markets. things keep getting cheaper. tom giles joining us, and barry, we are not letting it go just yet. when we come back, we take a look at walmart. they came, they saw, they conquered, now they are leaving town. the impact of the big-box chains new strategy. we have that next.

let's take a quick look at futures, in the green, the s&p down, the nasdaq on the green. we are looking at these gains. in general, this is being driven by oil. oil taking a nice leg up today in the equity markets. the argument has been that oil in equities are moving in line. we like it when that movement is headed up. you are watching "bloomberg go." ♪

stephanie: in today's star wars, wars, we're talking about walmart shifting away from supers that -- small stores to focus on supercenters. announcing it will close all 100 to express stores.

shannon pettypiece joins us now. we know doug macmillan has a new strategy. this is big. shannon: it's really big for the towns they're leaving. we've known for decades what happens when walmart comes into account. they put pressure on small mom-and-pop businesses, sometimes writing the local hardware store, grocery store, pharmacy out of business. usually walmart stated. you would have the walmart to go to your food and medicine. in now, the company is starting to close stores. doug macmillan has indicated he is going to be thinking more thoughtfully about what stores they want and what stores they don't. now we get to see what happens when walmart leaves town. in some of these towns, it's really not pretty. walmart with some of the small stores came into small towns in texas and north carolina and georgia in a matter of months in some cases, the local grocery store and pharmacy were out of business. now with walmart leading, you have a town with no grocery store and no pharmacy. david: was this a matter of the express idea just not working or retail being under siege and it was about time to go in? shannon: walmart says it's not

anything but a shift in strategy. saying we are going to focus on bread-and-butter, what we do best, the grocery stores and fees medium-sized grocery store type chains that they have been operating out of. they said it's not something that's going to be part of our strategy. it was a quick about-face for walmart's started opening smaller stores in 2011. they came into these towns over the past five years and then all of a sudden, in a matter of months, reversed course and said we are out of town. have been highly criticized in the last six months, at a time when activists are knocking on retailer stores, you saw david einhorn with terry lundgren and macy's. have bigger mistake does the walton heavily -- multifamily have? shannon: the walton's control the majority of this company. unlike a lot of big retailers, walmart has some time. the family is very involved in the company and the board. the ceo isions that making, you can guarantee the

ball family has signed off on those. as long as the ball family is happy, the ceo will have some time to get his job done into what he needs to do. david: have a over expanded? barry: are we saturated? go to three, can home depots, five minutes in any direction. as walmart done that? shannon: walmart says 90% of americans live within 10 minutes of a walmart. of the reasons they were opening new stores was the u.s. sales growth was going and they were saying where can i put another supercenter? andd: shannon pettypiece barry ritholtz. thank you for being with us. the central bank begins its two day meeting on "bloomberg go." ♪

david: the fed's next move, when policymakers start meeting today, i much of an effect will market volatility have on them? chinese stocks plunge as investors worried that capital

of lows will increase. and behind closed doors as greece struggles to survive a mountain of debt. from yanis for focus -- yanis varoufakis. ♪ welcome to "bloomberg go." i'm david weston. stephanie: i'm stephanie ruhle. -- asited as i'm he excited as i am to hear from excited tots -- i'm hear from brendan greeley. -- stephanie: many times he rides motorcycles. you know doesn't write a

motorcycle but does play a fiddle, vonnie quinn. vonnie: less icon in iowa, bernie sanders took part in a town hall for the democratic presidential candidates. he said he is confident voters will back his plan for single-payer medical coverage. bernie sanders: it is time in my view, for us to have adverse to take on the insurance companies, and provide health care to all people at an affordable cost. vonnie: the iowa caucuses are next monday. it may be a while before things are back to normal on the east coast. 48 hours after the blizzard, travel is still a mess. airlines delayed or canceled more than 2800 flights. many schools are still closed. in washington, d.c., federal offices remain shut today. so our schools and d.c., baltimore, philadelphia. in southern california, officials issued a message and

hit movies as they hunt for three escaped inmates. police say family, friends, or gang members are hiding the inmates. they been on the run since bringing out an orange county jail on friday. howard my more than 150 news bureaus around the world. and vonnie quinn. now to matt on the markets. matt: let's look at what happened in china overnight. you can see the shanghai, down 6.4%. other markets there are down more than 7%. that spooked markets around the world. european markets initially were down further. right now, the live dax trade is only off by 25%. the reason you don't see a -- oil isp in europe the reason. we had a 3% drop in crude, and all of a sudden, a violent turn around. crude was gaining for most of the morning, or at least the morning i considered since the show started. $30 anow, it's down to

barrel, $20 a barrel. that's why we had gains in u.s. futures. the stake a look at u.s. futures right now. not the strength of gains we saw when crude was up at the high of the day. but it is still green across the board on futures in the u.s.. theings have been beating street estimates. it's not a fantastic story. procter & gamble, for example, the estimates by cutting costs and raising prices. this, ia great chart on recommend checking out her story on the terminal or on the web. cuttingbe just by costs. these are cost-cutting stories, where johnson & johnson is selling more of its arthritis and other drugs. johnson & johnson is looking more at an organic growth story, and the rest of the companies out with earnings today are really looking at a cost-cutting story. david: thanks, matt. as we have said, the fomc is meeting today.

that's for the first time since they raise rates in december. four furthercted rate hikes. 2016 follow market seems to have done that work for them already. financial conditions of tightened material buyer estimations, the economic equivalent of four rate hikes, just coming from volatility. now we talked to what's going on with the fed great brandon, you are the expert. it's going to be behind closed doors. here's what we are looking for. barry: deutsche bank --dominic: --brendan: they did all this work to find out what we already knew to be true, which was that december was a dovish hike. they gave lots and lots of dovish signals, and they hiked anyways. s?vid: competition linguist

brendan: how dovish are they feeling on what's not going to be a hiking meeting? what i'm looking for that statement -- how were they are about inflation. this is one of the things we haven't seen. if we can bring up the chart we were talking about earlier, one of the things we have been looking at is central bankers are looking beyond the top light inflation to core inflation. they are not seeing the inflation they want. one of the things we've seen in the grain is what we had -- that is consumer inflation expectations from the university of michigan survey. william dudley at the new york fed is looking at that and saying it's lower than it has ever been. it's possible that inflation expectations may have lost their anchor. when you look at the market, jim bullard of the st. louis fed was talking about that. you are seeing more and more in open speeches is they are worried that it's not just about the price of oil. it's inflation expectations they

lost control of. stephanie: one of the great things about working for pimco is you get to be at the beach. futuresm looking at fed are pricing in a hike until september of 2016. rich: janet yellen likes to say the fed is data dependent. the data has been soft, not only globally, but in the u.s.. we get a gdp report on friday. obviously, march is looking less likely than it did several weeks ago. we don't want to overreact to this. the underlying u.s. economy is growing at about 2%. to look through short-term volatility. if this persists throughout the year, they won't be able to look at it. , as a john micklethwait practical limit to what they can do this time around. how much of a looking across the atlantic?

mark: they're looking at the idea that deflation is something he wants to kill. janet yellen has always been driven by that idea that inflation is painful and deflation is a killer. he live with that. i think with a will probably do is try to look through this volatility, there's no real getting around the fact that inflation isn't really taking off. that pushes you back out, i think. stephanie: matt. matt: we were having our argument about this earlier. carl riccadonna was the loudest among us. i'm looking at the average joe in this country looks at cpi, and if you talk to the average joe, he also says, where she also says that prices are higher, regardless of what the fed will tell you or what we on bloomberg tv say. climb above 2% when we are also worried about

inflation expectations going the other way? rich: we have two economies. a service economy in a good economy. goods inflation is negative and has been for some time. the services economy, which is the bigger part, does have higher inflation rates. the other thing of course as well as the feds preferred pce measure is a little bit more of a longish's concept. the cgi is easier to understand. the challenge the fed may face in coming months and years is that those two indexes can and do diverge. the feds measure is lagging behind, you do get into a situation where can medications get more challenging. stephanie: productivity and growth are two things we're trying desperately to focus on. many are criticizing the measures used. our own charlie rose talked to mom el-erian last night. take a look. there is no doubt that the road we are on now which has been artificially supported by central banks, we have brought growth from the future and financial investment from the future, that's going to end

within the next few years. the exact time is very hard. i can see is lasting more than three years. this is from someone who believed in the new normal, the concept that we could have a low growth world forever. i don't think we can anymore. david: let's come back to today and tomorrow. market: three years is just far enough out that in three years, we will all be dead. david: or at least will have forgotten what you protected. let's connect to the practicalities. what is the best and what is the worst? what is dovish and what is hawkish? actually see we some thing about inflation expectations, meaning they are really worried about deflation. this is what we saw for mario draghi yesterday, speaking to a german audience saying no, seriously, we have to take this seriously. orthey don't talk about core inflation anchors, if they don't

talk about expectations, if they don't use the word credibility, which we saw last time, that means they aren't as worried about it as i'm suspecting from the outside. brendan: they have to thread a needle. they are not going to do anything, but they are setting up to medication for the rest of the year. if they are too gloomy, they risk making itself the filling. they want -- making it self fulfilling. we want to give themselves the option to hike in march. stephanie: wordsmithing talent. doesn't that blow your mind that janet yellen's job is really to oversee the country, for the economy, what it means to regular americans? brendan: this is what central banking is. those who can, hike, those who can't, communicate. central bankers have a doing that for a long time. what janet yellen needs to do is try and talk this lineup. you can see the expectations for

a rate increase have flatlined. obviously for the january meeting. that is a no go at this point. futures are pricing in the possibility, over 50% possibility of a rate hike until september. at least you have the probability of a cut act on the single digits. , during theber tailspin of the markets in the first two weeks of the year, the probability of a cut for this meeting was up at 10%. stephanie: best janet yellen stalks. we always let our boss talk. mark: i bet janet yellen will come up with some new word which will completely bewitch brendan greeley. it will be something along the lines of prudence or some new word, and we will all start becoming completely accessed by this word. that's the way what she is generally operated. stephanie: super caliph adolescent. i will emerge tomorrow with a new word.

at what extent does she have to think about option alley -- optionality. from day one, she said her remarkable run. every meeting is live, and yet so far, she has been able, through the rhetoric that stephanie just mentioned, the wordsmithing, to sort of get her committee to support her. and yet give yourself the option. mark: i bet she looked up the word indecision and then coming up with robust indecision. >> every time she gets a word she likes -- stephanie: if you didn't think fed meetings weren't sexy enough , we are working in the the source. thank you for joining us. cleary --ned brendan

when and really -- brendan greeley. and we dig into the chart that terrifies emerging markets. let's stick a quick look at features, not up, not down, but flat. slightly in the green, which i like. there's really not much happening. a moment of indecision as more and more investors sit and scratch their heads and wait for fed minutes. you are watching "bloomberg go." ♪

stephanie: welcome back. you are watching "bloomberg go." if you're wondering why

investors seem so worried about china, and the rest of the emerging world, consider this. companies there have piled on more risk than at any point in the last decade. we are talking leverage, baby. for more, let's bring in mark --mana's anita jimena zuniga. traditionally, when we look at emerging markets, there is less leverage than regular corporate america. why do we pile the risk of the fact that it's in the emerging world? that's not the case today? this is the aggregate balance sheet of emerging markets. thenare more levered companies in developing markets, despite the fact that they are operating at a more volatile market.

mark: i know that's an old logic. mark: that levered to be ok if there are a lot of growth of 11 to build up their equity. the growth is slowing. david: it's also to some extent the result of aggressive monetary policy that makes money cheap and people looking for high yields. jimena: one of the emerging markets that was one of the main risks highlighted by the imf in its most recent economic outlook. one of the analysis they connected was to determine why it had increased so much. that's really quadrupled in the last 10 years. 2004nt from $4 trillion in two over $18 trillion in 2014. they determined that what was driving that increasing emerging-market corporate was the fact that financial conditions were so lax, it can storage -- encouraged firms to borrow.

and now there's a greater risk. david: how much of this dollar is denominated? mark: a lot more is dollar-denominated. means as the dollar get stronger, these debts become part of the service. this is exactly the reason why you should be frightened of emerging markets if you are an investor. that level of debt increasing, we see it in every previous emerging-market crisis, it's always the dollar denomination aspect and it's the fact that people of overleveraged when they think the world is going to continue convincing themselves that this time it's different. stephanie: how did this happen with this -- this time it's different? the developed world is not corrected the mistakes they made in the past. what joke to the emerging markets miss? jimena: emerging marketsjimena: were thinking that conditions are very strong, growth would

continue. i think a lot of firms and governments were perhaps not brilliant enough. they assumed the growth has gone crisis before 2008, 2009 to 4% in 2015. that's a big line. that in a lothows of ratios like emerging markets, corporate debt to gdp ratios that went from less than 50% over 70% in emerging markets. even sovereigns, although they have behaved a little better than emerging corporate. david: this is lumping all emerging-market companies together. is there a variation of leverage from company -- from country to country? mark: i did look at china, china has more leverage. if emerging markets on average have about $.90 of debt for dollar of common equity, in china, it's more than one dollar. more than one to one. world, in my part of the

china has increased its corporate debt over 20%, but all the other mainland economies, brazil, mexico, she late, -- e, with the exception of argentina which was secluded. david: that's mark whitehouse and jimena zuniga. when we come back, we tell you the top stories "bloomberg go." on. ♪

stephanie: -- david: welcome back. you are watching "bloomberg go." now to look at the top stories.

with the top five, led by the vicks. -- vix. paulson pledges personal holdings to back his firm after assets fall. he's a very well-known hedge fund manager who got the subprime short trade right in a very big way. it was founded 13 years prior, mostly focused on the merger arm. had paulson is saying we've lumping returns, investors are feeling uncomfortable. so he is backstopping this with his own fortune. he's busily sending the message -- be patient. i believe in these investments. he's very long puerto rico, hard assets, real estate in puerto rico. he's not going to turn around his investments. he is saying just waited out with a. in 2008 when so many investors were forced to sell, if they had just held on, they would've

crusted in 2009. john paulson is sending that message. i think it's quite interesting. you have this element of the rockstar is hedge fund manager. the fact that he can come out and say this stuff and people immediately pay attention, including us. it's a big deal. david: you feel a lot better with someone putting their own money behind it. stephanie: it's one of the core things we have seen. people don't want to invest in the fund unless the manager has skin in the game. fund: this is a hedge manager in china who has returned 6200% of his pic so far. turn in this year. he used to be a factory worker, it was long when the market was going up, he got out in may or june, he was short when the market was -- this is the next ordinary story. even i love the quote -- while i go down, i.e. often like ants.

he has kept on betting. a former factory worker. on this particular one, notwithstanding all of his brilliance, he does have that slight element of a bull market thing. a guy from the factory becomes a huge hit. he may be the warren buffett or john paulson. it could be bull market this is the moment arrogance. more could be extraordinary. david: or it could be symptomatically the larger issue with retail investors in the stock market. so many people going in and essentially gambling. john, your story. john: this is one to do is shale, with private equity coming in effectively to try and help keep shale going alive. it's a tiny bit, a very small amount, a bit like having an airbnb in your house. they are renting out the room and bringing in ivan equity to finance shale fields. if they got good property, good land just keep it taking over,

perhaps waiting for the oil price to come back. stephanie: like it -- david: like a timeshare. john: the endless inventive nature of capitalism. stephanie: the fall has to do with the price of oil. if you can wait out this cycle, there is some light at the end of this tunnel. the question is, can pes they view? -- save you? john: they think they will drive oil down briefly to clear out the markets. and then they think we will come back up. stephanie: i'm going to ask if b&b, or --n a nice twitter shares of taken a beating. ♪

stephanie: you are watching bloomberg . lucky us, bloomberg editor in chief as with us.

we had the good fortune of spending last week in davos we. will give you highlights. let's get you some first word news. vonnie: a meeting today highlighted the long-standing little-known relationship between the vatican and iran. 40 -- president had a minute meeting with pope francis. he asked the pope to trade for him. the vatican said iran should play a role in fighting terrorism. the islamic state has set up an operations command to plan more terrorism attacks in europe. as according to the eu crime-fighting agency. the agency says the islamic state wants to carry out more attacks similar to the one in paris that killed 130 people. the prime minister of malaysia of allegations that he stole almost $700 million. the attorney general said that money appeared in a private account and was donated by the saudi really -- royal family. the question now is why was he given the money? bloomberg news power 24 hours a

day by 150 journalists around the world. i'm vonnie quinn. matt: i want to show you a couple stocks are moving. some interesting stories this morning. coming out with its fifth quarterly loss after $4.1 billion in charges. a quarterly loss after adjustments was only two cents a share. they were looking for $.18 a share in losses. freeport-mcmoran up 6.6%. if you look at my terminal, i want to show you that freeport-mcmoran incurred 500 stocks last year. .he fourth worst performer freeport-mcmoran is a big loser. that could be one of the reasons people are getting in. note amazon was the second-best performer of last year. i will come back to that in one second. take a look at sprint right now. sprint actually came out with numbers that were better than had been anticipated, both on

the earnings front and on additions as far as customers are concerned. this is a company that we were talking about an hour morning meeting this morning that has $31 billion in debt. again, if you look at my terminal, you can see the dd i.s. function. masses --company with massive amounts of leverage. you can see when it is becoming do. a lot for the softbank telephone operator. cut at this, this company costs in order to be the street estimates for profits. the shares are up 1.7% in the free market. i want to come back to amazon. there are a number of notes on amazon today saying the losses this year to date are overdone. $700, $6.94. -- $694. it has come down to $602. bernstein and pacific crest and

other analysts have been saying it has been overdone and the company will do better when it comes out with earnings on thursday and the street is expect them. stephanie: thank you. as i mentioned, last week, we rocked the world economic forum in davos. john, i want to point out you had some of the most extraordinary panels when we were there including some of the most powerful. i wish i could say people in banking, but indeed, it was the men. the bank of america ceo and blackstone ceo. you were discussing everything. regulation and the state of u.s. banks. , phil,, what moment brian, steve, what stood out the most? end, there was a civilized discussion between steve schwarzman and the euro regulator. the basic argument was shorts and was saying i don't invest. i don't get into anything which you regulate. i want to stay out of banks.

that is how i make my money. the reply was yes, but, the reason why we have to regulate banks is because banks cost taxpayers a lot of money. that element of friction between the capitalism trying to push forward and on the other side the regulators saying we also have to pick up the bill is very interesting. the other bit is the whole element -- everyone is looking, everyone is thinking what are the areas where silicon valley can come and begin to push into the areas where we are worried about? is a goatee money transfer? currencies? any of these areas? it ties into the first debate. maybe regulators are giving silicon valley a slightly easier and then the others. had a discussion on bank of america on syntactic or let's look at that. >> i come at it and say what does it really do? the intimacy of the distributed power of the smartphone in the hands of a person is so

different from anything we face in our business careers. the ability to communicate real-time, the ability to transact real-time, i think it will take a long time for regulation to fully understand that as it will take a long time for us to understand it. if you look at our customers, we have 19 million mobilephone bankers, 30 million computer bankers. the amount of volume on those devices is over 30% a year. stephanie: really embracing syntec, when you look at the big banks, it is a buzzword like we heard from retail companies, getting all over digital. they missed that boat. our banks like bank of america, are they really and it? john: two things have happened. there has been a change in the rhetoric. it really does matter. jamie dimon and others suddenly switching from regulation to saying syntec is the next bit. as brian was saying, they are trained to get involved into it. they have is they

don't come with all of the accumulated costs, all of the accumulated elements and regulation. behind it, there is a big issue about how easy it is to persuade people to change banks. would david give of his checking account to go to one of these new people? maybe not. would you take foreign currency through it? yes.bly, it is those kinds of areas people are pushing. the phone is the key. stephanie: phil winters weighed in on standard chartered. take a look. phil: ultimately, if we do our jobs well, servicing customers, helping them manage their data, restore value, these are things that are enduring in terms of the role of a bank. betec applications will introduced to that process. of course, there is a disruptive element. that's attractive element will challenge regulators along the way. in many ways, we at standard chartered art thinking about syntactic as almost the app

store where we have a front end and we have to protect that all the time. anid: stephanie asked important question. do the banks get it when it comes to syntec? even if they get it, what technology did in publishing and what it is doing in video media is it reduces the barrier to entry so there are a lot more competitors. at illuminates geography. a real challenge from them. suddenly, the idea that you can get money and services that you never thought -- in some ways, finance is one of the most sticky areas. you have geographic clusters, wall street, the city of london. finances are used to being in the same place. some elements of what people are is trying toec challenge it. it is still incredible he small, but like all of these things, it acts on the edge. i have an inkling that this is an area where the europeans might be ahead of the americans. that is the strange bit. spanish banks, british banks,

there are ones which are beginning to experiment with new ways of getting money to people. stephanie: experimentation in media is different than money. one of the reasons we care so much about the fdic is because we are protected. are people really willing to have their money somewhere in the cloud? somewhere in the ether merely connected to their phone? : you would trust me, stephanie. no, i think you're right. for regulators, there is a serious, academic thing. on the one hand, they want to encourage things. on the other, they do want to this advantage the people were more regulated. you don't want to end up with stephanie ruhle -- believe you and me. stephanie: think about the greek economy. greeks are still keeping money under the mattress is. they don't even want to go into a bank. if they are not come to bow at regular to banks, come on. at africa. mobile money. david: india. bangladesh.

time to turn to another big bank. matt miller is good to take us there. matt: thank you very much, david. we talking tech and advertising as morgan stanley analyst brian novak. i want to start with a shift you are seeing in the advertising landscape. how is it and who are the winners here? brian: this topic dovetails well from the fintech topic in that there is a disruptive force in the way online advertising is being taught. we are shifting away from direct salespeople, people buying advertising to programmatic at buying. that means that online advertising is increasingly being bought through machine and automated options. to the point where in 2015, 40 4% of overall online advertising dollars were bought through this -- these machines. we see that going to 70% by 2020. the biggest two winners are

facebook and google which make up 65% of this overall market within advertising tech. matt: facebook is a winner, it is a behemoth. what about a company like twitter which is substantially smaller but has been having serious issues really? brian: layer under way on twitter. -- we are under way on twitter. they are still having issues monetizing their user base and growing their user base. i think the growing power of the scale that they are seeing at facebook and google, both through this advertising tech technology and everything bills -- everything else they are doing to monetize their platform is taking dollars away from other players and from twitter. in many ways, as concentration in advertising dollars toward the big two players, facebook and google, is in some ways making life harder on twitter. matt: you are overweight on yahoo! if i'm not mistaken. where do you see the opportunity there? brian: we are overweight.

i think the biggest opportunity is for yahoo! to re-look at how to manage that business. we see a lot of opportunity for potential cost reductions and restructuring were there has been press reports that the company could be said to reduce its headcount by 20%. we think that would materially increase. the thing we are looking for yahoo! heading into earnings next week is an outlook on their strategic vision into 2016 and 2017 and how they are going to optimize that space and grow that topline in this environment. matt: amazon seating earnings coming up on thursday. we were highlighting the stock earlier that had fallen from an all-time high of $700 a share down to $600. where do you see for thursday? i know you like this stock. brian: very bullish on amazon into thursday night. we think there is a strong topline trend and profitability trend that will continue into 2016.

the big two trends we look at on amazon are same-store sales. we analyze amazon as a retailer. the long-term average growth for amazon same-store sales is about 10%. those numbers are now accelerated to 27% growth largely because of prime. amazon is in the business of behavior modification and getting people to spend more and more. that is what is happening and it is leading to bigger topline and driving profitability higher. we think amazon says up well. matt: let me bring you back. oh. i watched the men in the high castle. a lot of people are now using amazon as a media content provider. can they capitalize in the ad tech trend that you are seeing help of google and facebook? brian: i love men in high castle. it is a great show. amazon has never been focused on the advertising business as much as you would think. they have experimented with advertising products on a platform, but they have never had an idea of taking the advertising and using the data off the platform.

i think because they like to retail dust control the retail transaction and point that it is one of the scenarios where amazon's annual advertising revenue is only about $700 million on a platform. if they ever took all of their purchase data, because they have the walmart equivalent of data online, and decided to use that on other websites, there would be advertiser demand. for now, they are not focused on that. they want to keep people buying things in their ecosystem and control that. matt: thank you for joining us. brian novak from morgan stanley. he is very bullish on amazon going into earnings on thursday. on, he still is underway twitter. i know goldman sachs just put out a continued by on twitter even though they say the risk has been raised with continued management turnover. to point: i just want out the news we got last week. i love it when there are buyers and sellers, that is what makes markets. david einhorn, known activist investor, short seller, has come

out. he is specifically short amazon, short netflix. these are two names you really see a short public interest in. important to note that. finally, a big investor saying he just paid, show me the money. david: coming up next, we talked our favorite subject. wall street. ceos and big banks got there face/last week. we will talk about that on bloomberg .

vonnie: welcome back to bloomberg . here is your latest bloomberg business flash.

aig will take its mortgage interest of public and will sell an advisor network. carl icahn has been pressuring aig to break up so that it can boost returns. billionaire john colson is setting to use his personal fortune on a hedge fund firm. they have cut assets by more than half. he is using his own investment as additional collateral for the firm's credit line. new figures show amazon prime reaches more than 1/5 of american adults. prime is atirm says 54 million members at the end of last year. that means nearly half of u.s. households have prime. amazon prime gives customers free shipping and access to video. that is your latest bloomberg business flash. stephanie: not make, i am not an amazon primer. i was never a netflix user intel

met convinced me and i became a huge orange is the new black fan. we have to move on. wall street ceos getting their pay packages cut. they may need free ship that shipping. andman sachs cut pay by 4% james morgan state was/7% -- slashed 7%. now, let's put it in perspective, we're not talking about zero bonus. are not talking about a change in lifestyle. they are still safely in the $20 million club. slashes of four and 7% is modest. her compensation board saying we have to be at least somewhat mindful for how business will look. that is how you saw gorman shakeout. jamie dimon, on the other hand, got 35% pay increase to what he $7 million. stephanie: what did jpmorgan do? hugh: they beat the index by nine points. stephanie: isn't this what we

want? delly want to see ceo compensation tied to the performance? john: it has to be relative stock performance. there is no reason why you are be carried up for this. if you outperform compared to the index, you should get paid. we have to accept there is a of market happenings. it is hard. somebody would pay him quite a lot of money to run something else. david: this is almost not at all about the money. these people are wealthy individuals. it is about bragging rights with their buddies. hugh: it is about ego. it is about paycheck. it is about what it shows about the job you did in the previous year. if you are an ms shareholder down 18% in 2015, and you see gorman is down 7% and you're still getting paid a nexus of $20 million, that won't sit well

with you. stephanie: how is it reflected in what the rank and file were paid? variedxtremely throughout trading. it depended on whether you were in equities, fixed income, how your company get a rope your jpmorgan, for instance, they were heroes for keeping their bonus pool flat. stephanie: heroes to their employees? hugh: exactly. argument, the ceos did better than their employees. david: did morgan stanley cut their bonus pool overall? hugh: we don't know yet. david: the ego thing counts. that might be the most powerful motivator for ceos. john: it is like a football manager. , a run these companies football, regardless on which side of the atlantic you're on, if you are the guy managing the team, you get all of the praise when it is going well and you get dumped on when they go badly. this is part of the thing. ego is, we can all agree, part of running an investment bank. stephanie: you are taking a huge

amount of risk they are it when you become a middle manager at a bank, you are now assuming the risk of those who said anything. it would make sense that the leader of the organization would get more of a bump in the rank-and-file. if you are the rank-and-file, you want to see that your leader is still an alpha male or off a person. -- or alpha person. stephanie: i appreciate that. it -- several years ago when morgan stanley was getting kicked, if we are not making money, don't pay me. thank you for talking about wall street pay. now we have to take you to greece. greece buto today, the austerity party take office to it since then, the referendum, reelections, and a bailout package, we are no going to london where our own guy johnson is joined by the former greece minister who said no to austerity.

guy: thank you very much, stephanie. int time we spoke, we are your office in the finance ministry in athens. it is one year the anniversary this week. any regrets as you look back on what happened during that period as to what was handled with credit? >> plenty. we failed. we were elected with a mandate to reboot the greek economy. a fiscal recon solvation fact -- recon unfortunately, the other side, the lenders were not interested in having a rational discussion we felt to convince them. the problem is that given that we are continuing along the path of the field program, greece is continuing to seek -- sink deeper into the inflationary spiral. we missed this chance quarterly, creditors, lenders, the eu, we

miss this great opportunity to stabilize greece and take it off the headlines. so you're how to have a program on greece again. saying isyou are giving seacrest no chance of facing death fixing greece. yanis: god and his angels cannot fix greece. guy:. and his angels are not in charge. yanis: the point i'm making is even with god and his angels in charge, it can be done. let's be practical. -- it can't be done. can a broken economy like greece be mended by pushing every good and service to the 28% bound? can we possibly fathom recovery when businesses, small, medium, and large, were forced in the last couple of months of 2015 to prepay 100% of their corporate tax for 2016 in 2015? this is what you do to a company if you want to crash it, not if

you wanted to recover after eight years of permanent recession of continuing drops in nominal gdp. guy: the debate tonight is on the pension reform of greece. the creditor say you need to go through. his alexis tsipras on the wrong side of that debate? yanis: he knows exactly what needs to did he done except the already capitulated. funds that's older capitalization depleted completely in 2012 one it was form out, when the pension -- funds were forced to hold up the greek government bonds and where herrick at, pension funds have a double whammy. , then hit byaircut the recession. the number of people working, in work, and contributing to the pension fence -- funds crashed. you cannot mend -- the expansion will system simply by cutting

further. further cuts of the imf, for , belt-tightening, with lead to a further declining in aggregate demand and economic activity which would reduce employment further and reduced contributions to the pension fund. we need to arrest this crisis. you cannot do it simply by cutting. alexis tsipras knows that. guy: he is pursuing this at this point in time because he is that she knows it is time to read -- review money. he capitulated to a series of policies that he knows were failing that were pushed upon him who -- from people who knew they were failing. guy: what is he doing? is what we have been doing for five years and greece. extending and pretending. pretending that the insolvency of the greek state and of the banking sector can be overcome thatw loans and measures shrink national income. that cannot work. it cannot work.

everybody knows this. i had a remarkable conversation with someone high up when i was in the ministry. i won't name names, but the essence is simple. this person said to me, i agree with you. this problem can't work. we are committed to it politically. so you regain credibility as the government of greece. you have to accept it. i thought, oh my god. here i am being told that the economic program that can work must be embraced. this is what is happening to europe and the imf are constantly in denial. guy: will greece get the review money? will pension reform be possible? when summing is unsustainable -- anis: yes, but remember, this is not money for greece. this is expanding and pretending. expecting one of its markets and putting it in another pretty greek state -- the greek state borrows. this is not greece.

this is not money that goes into some kind of investment for recovery. the money will be given because they want to pay themselves. this is spending and pretending exercise that we are witnessing. pension funds will be cut. pensions will be cut. this is not a reform. taking a meat cleaver and cutting is not reform. surgery is reform. what we needed in greece was to find a way of putting together policies, social security policies and rationalization of funds. together with the development strategy involving private days -- privatization and using public assets of the state as collateral in order to make a homegrown investment stream into these capital assets in order to her -- improve their value and to bring all of this together so that profits from these investments of the state can be utilized in order to

recapitalize pension funds while at the same time i would be in -- but notducing touch the lowest of the tensions which is now what is going to be touched. we should be doing opposite of what we are doing. guy: but this is what is happening. you said it is extend and pretend. all parties are playing the game at the moment. the reason why we had a crisis was greece decided -- that the music was going to stop. is: the reason we are having a terrible crisis is that in 2010, the parties in the imf decided to cover up a bankruptcy and treated as a liquidity problem. that is why greece is in this. someone said we don't think this is sustainable. yanis: that isn't sustainable.

there is not a single economist i know who believes this is sustainable. it is a tragedy that we keep extending and pretending the situation. guy: one visit stopping sustainable again? yanis: human when will go back to report? -- you mean when? the economics is definitely going to lead to another failure in greece. exactly one it will happen, it is impossible to predict. it will happen. no doubt about that. let's be practical. guy: i know you said it was impossible. next year, how long would you give it? can't see stability, even with this bad equilibrium and deteriorating equilibrium being maintained for more than a few months. people are suffering increasing -- increasingly every day. europe is fragmenting increasingly as a result of the policies that are being applied in greece and transferred to portugal and elsewhere. you have to understand one thing.

this was my experience. there has been no serious debate about who to stabilize the greek economy. why? because collateral damage in a broader game between paris and berlin. they have not worked out what they want to do with the eurozone. the eurozone is not sustainable. the french national budget is that which berlin has its eyes set up on. greece is not going to be allowed to be stabilized until and unless the two great powers of europe work things out amongst themselves. guy: let's leave greece for a moment. you set up a new organization, a for-leaning organization the question people are asking on cells in london, have you had a conversation with jeremy corbyn in the labour party? is: my view, unlike many of britaintriots is that is essential for the european union and for us, who are interested in democratizing the

european union, who do not accept brussels, it would be a tragedy if we do not have this conversation. we are in communication with the labour party. in communication with a green party and lots of people in britain including conservatives who want with us to create an escape from this dreadful dilemma, false start, between either accepting democracy freezone that we have more fragmentation. retreating to nationstates here there must be a third, better way. we are in communication with many people in this country. guy: you're in conversation with jeremy corbyn? yanis: i'm not point to mention details. the communication is quite productive. as always, a pleasure. thank you very much indeed for your time. foreign -- former greek finance minister. back to you, david.

david: that was guy johnson in london with young surfactants. -- i think that was an extraordinary interview. what was your reaction? john: one was that he has one big thing wrong in one big thing the big thing he is wrong is the idea that greece to need to change. pensions in greece were outrageous. people could retire in their early 50's on virtually full pay. it was part of the public sector which she did very little to reform. the only good thing he could have done was introduce a petition into the. he didn't do that. what he had right is that everyone into this can down the road. he is right about the fact that it has a lot to do with france and germany and that something is coming. happening inhat is europe, you have the programs of greece, portugal, and this added edge of migration. a lot of those migrants are coming up through greece. things are not looking particularly good at the moment. stephanie: is that because we are talking the eu or investors?

they just need the greek economy to do well enough to stumble along but they don't actually care about the greek people. people -- thethe accusation of people like varoufakis will always make her the energy to forgive greece and save, let's start again. let's treat it like a company, that is what is happening for each time, we have ended up with a choice between doing nothing or doing another slight fix it. they have done too many fix it. you're just trying to see it in portugal. people are getting angry. people have been out of work for a long time you're there are a lot of frustrated young people. even if they haven't led by weree like varoufakis largely to blame for a lot of these problems. stephanie: this is an extra ordinary morning. it is always an honor to have you. what an interview. guy johnson, phenomenal. our own bloomberg editor and chief. and i'm taking a look, it is 9:03. david: time for our third

minute. we are 26 minutes and 15 seconds away from the opening bell in new york. fascinating interview by guy johnson good that get a check in the market with matt miller. matt: if you are just waking up and tuning in, you have to see the real obstruction done overnight in china. half $1 trillion of market cap was wiped out. the shanghai, down 6.5%. european markets followed with drops. have since turned around. here, you see a live trade of the dax that has been down and now it is up .25%. the reason is a turnaround we saw in crude futures. take a look at the marks contracts for wc i. it was down 3% only came into work but it is since turned around and risen because of talk , reports that the saudi's are in talk, possibly, to cut some production. what they say and what they do as far as production cuts, historically, there is a gap there.

right now, oil of 2% and $30 and 87 cents a barrel. that drives up stock around the world where they are trading in cash life. they correlation has been so strong. take a look at futures here. a strong correlation between u.s. futures and oil, as well. right now, s&p futures of .4%. we are seeing doubt many contracts up 61 points, may 4% gain on the nasdaq -- .4% gain on the nasdaq, as well. haveng at the terminal, i this function assures the seasonality of breakdowns of market movers by months. right now, we are in 2016. this is an average. 2016, january down a .2%. the worst january we have seen since 2009. if we get improvements today, we will move up there a little bit. actually, it is january 26. i don't see us beating 2008. i think we will stay in the level. i also want to show you, because there is so much talk about the .ed, a terminal function, ec os

if use is to with fed funds futures, you can see were the rate toxpect go. right now, it is very interesting. futures are pricing in no chance of a move in march. economist are saying, as you can see from the chart, that there is a rate between 0.5% and 0.7%. that is a very interesting look. people like joe over at deutsche bank, people like people and nih global. they are expecting a higher rate in march. even with the turmoil we have seen in markets. now, over to vonnie quinn with first word. vonnie: thank you so much. claiming responsibility for bombings that killed 25 people today in syria. the state-run news agency says a government tech point was targeted. folks ending to and -- looking to end serious civil war will resume friday in geneva.

video attacking plant parenthood, the people .esponsible are indicted a texas grand jury says planned parenthood did nothing wrong. they are accused with tampering with government records, a felony. federal armed services and washington, d.c. are closed again because of the big snowstorm. used in seaboard travel is gradually returning to normal after more than 2500 fights were canceled or delayed. dayal news 24 hours a powered by 2400 journalists and more than 150 bureaus around the world. i am vonnie quinn. stephanie: while we are in new york city, i can hear people in buffalo gasping and laughing saying, it is just another tuesday. you not just give stories of weather, the three stories that matter to markets. with us, our coanchor, lisa abramowicz and priscilla, the global -- ladies, welcome.

nothing better than three women on this set. i love it. david: i don't mind it a bit. stephanie: how about number one? china stocks. we have to cover china. tumbling to the lowest level in 13 months. outflowncern, capital will accelerate as the company -- the shanghai composite closed down 6.4%, not a pretty picture. priscilla, what do you make of this? we are seeing is there is concern in the markets that china can't engineer this soft landing. some of their intervention, people are now tired of it. let's kind of get to a level where we need to get. i think it is a market repricing their expectations. stephanie: this also raises questions is china committed to propping up the value of the shanghai composite? which seems to be what they were trying to do. how much money do they have left

given their foreign currency reserves that have been heavily depleted? they have $3 trillion but how quickly are they willing to go through that? david: john just left, but he does an interview with vice president lee saying he would do whatever it took to probably market. now, we got up and it is down 6.4%. stephanie: the question is, do they have the ability? they may have the intention but to the action heavy firepower? david: we will find up your let's turn to the number two story about transactions going on. lockheed martin announced it is separating its information systems and global solution division and will combine that unit with engineering company a $5 billion deal appeared this morning, the reported profits that the analyst estimates. what do you make of this, persona? -- priscilla? ofy are time off one part the company emerging with another slick and focus on those things? priscilla: what you are seeing across the markets and in fixed income markets is that companies

need to find a way to continue to get topline growth. with slow economic growth, one of the things they are looking to build is are there different strategic moves they can make? barring to do share buybacks. all of these are strategies the companies are undertaking to find out other ways. can you call share buyback anything related to growth? priscilla: if you're trying to keep up your multiple and stock price earnings growth, even if you're not getting topline revenue growth, is where we are seeing that. we are seeing the ability of that to work diminish as we go through time. that is what you're seeing and the stock market. a correction in your expectations of what companies can achieve. stephanie: let's get you number three, aig plan to return $25 billion to shareholders over the next two years. ceo peter hancock spoke on a call earlier this morning. peter: as far as the wretched -- divestitures are concerned, there are no sacred cows.

we look at all of our business is to the lens of what they create more value if they were in the hands of someone other than ourselves? if so, what is the most efficient way to make that divestiture? stephanie: clearly, hancock is facing pressure. we know who from, carl icahn. he wants them to break into three separate companies. at this point, if you are peter hancock, are you just following carl icahn's orders because you have no other choice? hope that one would would not be the whole driver of corporate strategy. lisa may have an opinion on that. out,: i just want to point if you go to the htf function, you can see carl icahn on sleep with 4%. it is interesting be -- 3.4%. you can click on them here and pull up a graph of his holdings, how they have increased over time. in green, then in white, you see aig, how it share prices decrease over time. it -- he has lost money on this.

if you pull up his portfolio, looking specifically at carl icahn's portfolio, and look at the effect of aig in his financial holdings on the portfolio, they are tiny. here, you see carl icahn associate folios. this little sliver here is aig. it is only worth .7% of all of his holdings. stephanie: that doesn't mean he doesn't care. think about how spoken he has been. david: the discussion a stephanie just had, mr. hancock a be moving toward carl icahn but he has a long way to go before he goes all the way. asscilla: he is not going far saying we do not want to be too big to the -- to fail. they are not going away and that is what he wants. icahnnot just carl calling for those changes. on the call, analysts were aggressive. we are not getting a clear plan of what one-run p what is it? what are you doing? stephanie: the heat is on. david: more of that story coming. coming up at 10:00 a.m. on

bloomberg tv, an interview with aig ceo peter hancock. autonomy is that? -- how timely is that? right now, futures are in the green. we will see .5%. that is not too bad. 25% from thep up overnight low. dow futures were down 170 and are now up 60. i love this, david. david: we love green. up next, we take a look at what is moving up and down in free market trading as we come back on bloomberg .

vonnie: welcome back to

bloomberg . here is your latest bloomberg business/. prompted of a driver for to recall nearly 400,000 ranger pickups. the airbags need to be asked. the defective airbags have led to widespread recalls. the housing market is still on a roll. home prices in 20 u.s. cities rose 5.8% in the year that ended november. the home price index says that is the fastest pace in a host a year-and-a-half. disney records say the company is legally replaced u.s. employees with immigrants. they are suing disney and to global consulting companies. the workers came to the u.s. on temporary visas. say they comply with u.s. laws. that is the latest bloomberg business flash. matt: i want to give you a couple stocks to watch this mine. sprint is an interesting company. we haven't talking about it. it is very highly leveraged. almost $32 billion in debt.

earnings released this morning show sprint has more cash balance then had been estimated, giving it more time and also added more customers. you can see sprint shares -- only a three dollar stock, but up 21% in the free market. big move there. lockheed martin also a stock that we have been focused on because of the breaking stories that it is going to spin off its i.t. tech business and purchase or combine with the tech business. down 3%ase, the stock right now. it will hold 55% of the business. investors don't seem thrilled with the terms of this. finally, procter & gamble. you can see the shares trading up almost 2% in the free market. better thanhad estimated earnings because of cost cuts. also, because of price increases. this is where it gets fascinating with procter & gamble. it has had volume drops that you

can see from the bloomberg news story i have pulled out. . by -- it has a great chart in it. i can't make as chart myself. i don't know how to make this chart. she has done a great job showing the volume losses and price increases that are offsetting that. i would recommend going to your terminal or the website, bloomberg.com, and checking that out. investors are anxiously awaiting apple's next earnings report. we will give you a preview and we come back next. stay with us here on bloomberg .

david: sprint shares are soaring in the premarket after reported third-quarter earnings that beat analyst estimates. the company is still losing money and it added fewer new

monthly subscribers than people expected. it is limiting 7% of its staff as a plan to cut $2.5 billion in costs which will not be enough. just how important is it to credit markets broadly for this company to survive and thrive? bloomberg editor at large is in san francisco. priscilla and lisa are here with us. take us through this. lisa: this is the most actively bond market.n the bonds are popping in response to the fact that they do have more cash reserves then people were expecting. it does look like they are not going to default imminently. their bonds dropped more than 39% in some cases. pricewise last year. after being downgraded, after going through more cash than people were expecting, and this is a company that is one of the biggest issuers in the high-yield bond market. accounting for 2% of the $1.3 trillion u.s. market.

it is a massively indebted company. finally, it was one of the leaders of the markets outside of the energy sector last year in september when it was downgraded. more people were expecting by the running agencies. stephanie: what does this mountain of that main? highlyla: they are leveraged, but wanted reasons you see them try down so much as they are so liquid. they are 2% of the market. liquidity is a driver in and of itself. you are sprint, it is unfortunate you have such big issues. those bonds are in a multibillion's. you are the guy who sells them first because -- who gets solved first because you're the only option. priscilla: exactly right. cory: 7 billion and the next three years. no accident they have to keep her he is in. one of the issues as well as on the positive side of the balance sheet. the value of the spectrum they have yet to deploy is unclear. great value to

that. until that gets the point, whether or not they can fall back into a system where there is another buyout -- and there is no fire out there, the tallies they have is diminished, indeed. matt: i just wanted to point out the debt distribution. this is a function i'm sure priscilla and lisa are familiar with. it is a great chart that shows you just how much of their $32 billion debt is coming to in the next couple years. they have a big revolver open, but this is $2 billion, $3 billion, $4 billion in debt coming due between now and 2024. it goes out all the way to 2040. they really do oh a lot of money. guys --e: this israel, this is real, guys. matt: if you are worried about puerto rico -- stephanie: sprint has more customers and puerto rico. david: let's go back to cory

johnson on the west coast. we want to talk about one of her favorite subjects, apple. we will get to the earnings announcement at the end of the market today. what are we expecting? do want to ignore the most obvious thing which is the production of iphone sales that will end in june. everyone knows it is a big issue. apple is in the midst of a big transition were have gone from this world's like over were participating in smartphone growth upwards of 40% across the industry three or four years ago. now, we are looking at single-digit growth for the industry. maybe they can grow faster than that. apple has to go through a transition where they become more like a service and less like a hardware slinger. the declining service of the ipad, they growth and market share of the mac, the question of growth on the iphone maps a bigger trend about moving more toward a service oriented company through subscription to the latest iphone or through other things like music and other services they can offer. i think those are the long-term issues regular cash flow

that might benefit apple that investors will be looking for. stephanie: you think service oriented company makes me think service-oriented economy. tim cook has been outspoken up he is bulled about the china opportunity. what does that mean now that we are in a serious slowdown? china is 21% of sales for apple on an annual basis incredible considering where they were a few years ago. essentially zero. their growth and china has been a growth throughout angiography as much as growing within a country. now, they are looking at year-over-year, they will see in slot -- they will see slowing growth in china regardless of what is going on in the economy. david: you are describing a fundamental shift in apple. they were always selling their gadgets. what are the services that we take that slack up? cory: the interesting thing is the way to have established a deal. a customer can subscribe to a latest iphone, have a monthly charge that includes the hardware with their cell phone

bill. it guarantees them the next iphone. what that does is locksley money into the iowa's operating system. it means they are likely never to switch onto android or anything appeared -- it locks them onto the apple operating system. it suggest that people will have a monthly apple bill. in some cases, it will include music, some cases, it won't. some cases it will be the watch and phone, sometimes just a phone. it would be like a cable bill. that changes the dynamics around free cash flow generation for a company and how long you can discount those numbers. stephanie: i have a monthly apple bill. i feel like i buy a new apple products every month. cory johnson, thank you, priscilla, you're sticking with us. when we come back, we're talking more about the fed meeting ticking off in d.c. today.

stephanie: you are watching "bloomberg ." less then 30 seconds from opening bell. futures in the green.

the fomc beginning it two day since raising rates in december today. we are asking how much will the china slowdown and market worries dominated the conversation. braving the elements, lisa abramowicz and priscilla hancock still with us. janet yellen says she is data dependent. last summer, christine lagarde said janet yellen, across the pond, we are suffering. but janet yellen looked at the jobs number and said we are raising. changed frome has their perspective. globally, picture has not changed that much. we are still dealing with deflation. in hindsight, it will probably end up as i policy mistake. whether they admit to that is doubtful. for now, they will stick to the

script. perhaps the more data dependent like.- than they would if they change spare to win, it would be in march or later. >> what data are they paying attention to? just u.s. or around the world at places like china to europe whether it makes sense? >> the only did they are dependent on is employment. that is the thing they have focused on more than anything else. rightly so. if you have substantial wage inflation, you will have a problem down the road. but the rest of the economy is not as strong. you look at the industrial ,ector, energy, materials transportation. all of them showing signs of weakness. it is a question on if the fed will pay attention to those sectors above and beyond single really focusing on employment.

david: priscilla, what would you like them to do? "priscilla is awesome." [laughter] priscilla: that would be nice. they cannot do much. yes, they can stress data dependency. they can soften their view of the economic investment. they should do that. i think they mentioned the fact that they look at international development. in september, we saw that they backed away because of international development of volatility. they will comment on inflation -- i hope they do. to go int is hard march, but i think the event -- i think the fed has set the bar inset high for us not to go

march. there are willing to accept a little volatility. the market once to say they will not go in march. i do not think the fed is there. is a problem. the economy in the u.s. is showing significant signs of stress. if they ignore it, they do so at their peril. >> will we see another round of 20. easinground of quantitative eas? on a globalngs basis have not changed much. the employment picked up at stresses we were dealing with are still with us. therefore, tightening because employment looks good and inflation is going off a cliff. priscilla: we are not seeing the pressure on wages. there is the question that

people are staying in jobs because they want health insurance. i think you could see easing. go the u.s.re economy is stronger than it was during the financial crisis? krishna: of course. the growth rate is 2%. it is not as though we are not growing. we do not have the inflationary pressures we need for the fed to come down hard. priscilla: among those are wage pressures. is driven high-yield by energy prices, largely. but what may look at the capital structure, those who want to step back into the market are looking more favorably at high it is a matter of being high above the water. will that trend continue? krishna: corporate spreads are

very wide. we all talk about it a lot. corporaterelative to fundamentals and offer good value. but the likelihood that corporate bond spreads tighten significantly in the face of potential fed tightening is small. i think they offer good value, but you have to be a long-term investor and you have to make sure that at some point, your expectation is that the fed will get off its high horse. stephanie: how long is long-term? accepting hiss losses, telling investors i will put my own dough behind this. that tells me there are investors who look at this market like in 2008 and 2009. does it look similar? krishna: first, we do not have the same level of destress.

asthe recovery would not be substantial. we are dealing with a potential slowdown in the economy. by the end of the year, the fed tightening starts dating -- fading. if you want to be long-term, take a two to three-year view. that gives us value. >> should the economy deteriorate, does the fed have more? krishna: the fed can do a lot. about it a lot, and that can have impact. because the rates are at zero, saying that the fed cannot do anything is not giving them credit. they have lots of tools and communication is an important tool. they can make a world of difference. >> i do not think they are

inclined to do that in the short run. krishna: yes. david: thank you, priscilla, for being with us. krishna will stay with us. we are coming up on seven minutes into the trading day. let's go to matt miller. screenreen across the after the big slump yesterday. the s&p adding 13. up 142.jones industrial gaining not as much. just about half as much as the major indices. the nasdaq up 4/10 of 1%. this illustrates that point. worsttocks the second gainer. because all industry groups are up. health care is the worst -- the smallest gain or.

energy, utilities, financials are the biggest winners. it is about the price of crude. oil was down this morning and has turned back up. oil up 1.4%. it is still a gain as there is talk of saudi arabia having talks about the possibility of inking about a production cut. -- of thinking about a production cut. too not want to make it concrete. dupont, 3m,gamble, storiese cost cutting or price raising stories. dupont unchanged now, but beating as it shifts sales away from medical devices. i want to take a look at some carl icahn moves.

a small stock that carl icahn has a big stake in, freeport- mcmoran copper. spinoff andg a getting closer to that 20% ipo suggested that icahn to spin off. so gaining traction in a battle he has been losing. today not a bad day for him. go to abigail doolittle, because she is looking at another stock index carl icahn has significant holding. abigail: apple not in the green. down nearly 1%. the bake earnings announcement for the holiday -- the bake big earningsnt --

announcement highly anticipated. we will see whether -- we have a slew of analysts questioning the near-term but positive on the long term. when there is a consensus opinion, you also see some sort of take surprise in volatility. stephanie: things to abigail doolittle at the nasdaq. when we come back, we are talking luxury real estate. we are seeing chinese, russian buyers. why high-end homes are feeling the heat. you are watching "bloomberg ." ♪

vonnie: welcome back. twitter's top managers are holding a retreat to discuss the company's future. twitter's stock has fallen 57% the last year and it was downgraded by goldman sachs. reporting lower than forecast earnings. the company dealing with weak demand for its agriculture products. to letnt obama wants small businesses pool their offer plans so they can

retirement. the president will include his idea in his upcoming budget. that is the latest bloomberg business flash. david: case-shiller came out with their numbers. earnings rose 5%. but there was one part of the real estate market that is not doing so hot. that is luxury. the economic woes from china to south america seem to be dampening sales. joining us is leonard steinberg, president of congress. krishna and lisa are still with us. we hear the bloom is off the roads in places like new york and miami. yet, butit is not bad a reality check has set in. seeing a germanic level of price adjustments, mostly on prices that -- we are seeing a dramatic level of price

adjustments. essentially more than one buyer, which is healthy. so is this because the dollar has strengthened so much? leonard: the mood of the market is everything. so on the high-end luxury, the buyer is more driven by the mood than the money. wall street and the wealthy are interconnected. when you saw issues in china in late summer, that immediately impact of the chatter. since the year began, we have seen a correction around 10%. that impacts the mood of the market. but we are early into the year. given the substantial volume of price adjustments, they are mostly on crazy prices. stephanie: how about luxury real estate used to park cash?

super high-end buyers will always want extraordinary properties to live in. but we saw chinese and russian buyers buying apartments just to park cash. i think that market is a wait and see. something to be said about the resale yen's real estate -- about the resilience of real estate as an asset class. in some countries, where you have seen traumatic drops -- dramatic drops in their currency, real estate seems to be a wise investment. the wealthy are speculating it is a better territory than people who do not have the money to speculate. lisa: what are you talking about the price range with altra high-end - ultra high-end?

misused luxury is a word. luxury is a rich and noble -- is a regional prospect. luxury in different cities starts in different price points. in manhattan, people think it is above $5 million. above that and above $10 million, you will have areas of corrections. but the millennial audience is looking for under $3 million. stephanie: and bidding wars are still happening there. to keep thiss fair up her from the u.s. housing market. housing is probably one of the theets of strength and economy. consumer employment is better. interest rates are lower. prices have come back.

if you talk to builders, there is decent strength in the regular u.s. housing market. if that crashes, then we will have a problem. stephanie: so crocs we are miami. for -- like in 2006, 2007, it was the super high-end market that cracked. but back it was a window into the rest of the housing market. things: there are two that were going on back then there are not happening now. in the regular housing market, there is not a speculative bubble. people are not buying to slip their properties. what it showed is that when that stopped, whoever is speculating would be looking to get out. we are not there yet. the strength of the u.s. housing market depends on whether all of these people who have been in multi family and living with setr parents, will they

their own families of and buy a new house. were seeingt, we progress. if that stops, we will have a problem. new u.s.ere is a treasury regulation that prevents people from being anonymous eyes they buy these 100 million -- eyes they buy these $100 million homes. does this have an impact? leonard: it will be so fractional as to be insignificant. one thing different is that the banks have been more tough in lending practices. if you look at what it takes for a wealthy person to obtain a mortgage, it is not easy. that will help with the market. stephanie: how? are people at that level markers dependent -- at that level mortgage dependent? thatrd: the volume of cash

exists in the market is extraordinary. think the point of mortgages and banks is important. the conditions in the mortgage market is not anywhere close to where they were in 2006 and 2007. it is the least of our worries. stephanie: what is your biggest worry? krishna: that people get scared and stop buying new houses. because they get worried about about the fact that the economy is slowing. that is the biggest risk. david: leonard steinberg her, the president of congress. krishna memani is staying with us. when we come back, the top moments of our program. ♪

stephanie: you are watching "bloomberg ." the dow and s&p rebounding. oil jumping 2%. let's take a look at some of today's conversations. >> the underlying u.s. economy is growing about 2%. the fed is tempted to look through short-term volatility. but if this persists, they will not be able to look are what. >> china is a long-term play. with the demographics, the immensity of health care plays well for our business. china represents only 5% of our sales. slowdown ore short-term economic conditions will not have a significant impact. can adidate for a gain -- broken economy like this, can we

found them recovery, when businesses where forest in the last couple of months to a pre-pay percent of their corporate tax for 2016 in 2015? you wanted to recover after eight years of permanent recession. but beforeo go, that, final thoughts from krishna memani. look at theyou markets, there are tremendous values being created. investor, a long-term the key word is "long-term." two-putted three years. in that timeframe, -- two to three years. need anear term, you catalyst.

the only catalyst mario draghi approved is the central banks. beyond that, we will not have significant turnaround to drive markets higher. i am looking for the fed to try to call down -- calm down the markets. two to three make calls when you need to be paid at the end of the year? krishna: our investors are long-term. are decent companies that have been thrown out with the bathwater. they gave tremendous value. you see what carl icahn is doing. there are plenty of value plays in the market. >> do you think a non-activist investor should get out? krishna: no. there are plenty of value opportunities. if you are a long-term investor, there is tremendous value.

>> last spring, there were distressed investors who thought mlps looked good, but they kept going down. somena: true, but at point, it stops. stephanie: it is called bankruptcy. krishna: for bankruptcy, you need the operating performance of the company to interior eight significantly. that has not happened. it is concern about oil and about potential troubles. stephanie: time for an iron gut. krishna memani and thank you to our lisa abramowicz. tomorrow, we have an exclusive interview. ♪

a.m. in new york 11:00 p.m. in hong kong. welcome to "bloomberg markets."

♪ from bloomberg world headquarters, good morning. i am matt miller. an hour into the trading day, u.s. markets are mostly higher. but there was carnage in asia pay the shanghai composite plunged more than 6%. so our fears of a china contagion coming to an end? aig will return $25 billion to shareholders. his this move enough to silence criticism? apple said to report earnings after the bell. down 13% the past year. can apple regain momentum and keep iphone sales growing? skt's head to the markets