see how the turmoil affects policymakers. and come up at the cumberland l. of europe's largest banks is looking to south america for profit. ♪ david: welcome to "bloomberg ." stephanie: i want to have a positive morning, but i'm looking suntan there and apple down. if to kick it up with some special guests. the hour, alsoor david kirkpatrick. we have to talk apple earnings. we have to put that in perspective, apple.

let's get some first word news, hopefully good news of vonnie quinn. vonnie: i will do my best. the leaders of the armed group occupied in oregon have been arrested in a violent standoff. it were headed to a community meeting whenever stop by fbi agents. shooting broke out, one of the protesters was killed, another was wounded. secretary of state john kerry faced a hard sell in beijing today trying to get china to support sanctions on north korea after the nuclear test last month. china has been reluctant to anything that would destabilize the regime. donald trump said he is been treated unfairly by fox news and will not be in the debate. instead, he will be at a fundraiser for veterans.

new 24 hours a day covered by more than women hundred 50 news peers around the world. let's check in on market stuff. matt: some breaking news, united technologies is that with some numbers that beat on the bottom line. dollarssed by a billion on sales. $14.3 billion with the quarterly sales figure put out by united technologies. you can see year to date they stand about 11% they make everything from fire extinguishers to helicopters. conditioners,, very diversified conglomerate. but the missing big-time on the sales front. even thoughng down asian markets traded up. third day in a row we break that cycle of correlation. s&p futures down, the dow futures down, nasdaq futures

down. one of the computing factors is that oil has come back down. yesterday it turned around, right now it is down at 39 a barrel. then there was concern about apple. take a look at apple in the premarket. it beat as far as earnings were justrned -- it's missed slightly on the iphone sales figure. iphones74.8 million were sold it was looking for 75 million. not a huge miss. the important part is that they 53 billion dollars in revenue for the current quarter. that is below the $55.5 billion forecasted on the street. even though apple beat on its revenue forecast 80% of the time since we started collecting data. take a look at revenue growth.

this is just the growth over the last seven years or so. you can see it has and then come back. the other concern is that if you take a look at my terminal, i mapped out over the last few years iphone sales compared to total sales. 2012,n see here, in iphone sales made up half of the total sales. that was just three years ago. of totalakeup 2/3 sales post offense for the bigger concern to there is a dip in iphone sales. i have so much data on apple, i am super excited. david: we would try to get to as much of it as we can. first, we want to pick up with apple and ceo tim cook. he spoke about how the global economic slowdown is affecting his company. are seeing extreme

conditions, unlike anything they've ever experienced before. brazil,rkets including russia, japan, canada, southeast asia, and the euro zone have been impacted by slowing economic growth, following commodity prices and weakening currencies. david: i want to start this discussion with the question of how much is macroeconomic -- he referred to that repeatedly. how much is at macroeconomic and how much is just not in a new progress -- product? of it iswould say more macroeconomic. they're doing fairly nicely with the watch based on what we can tell. is a tough economic environment especially the fact that they grew 14% in china even though china is in difficult straight right now economically is impressive to me. company remains spectacular in its management capabilities. they grew 14% in that

quarter, the court before they grew 84% is the problem. it is like china slowing down, still growing but not as fast. they made 34,000 iphones entirer for the corridor. and sold them, that it's unbelievable. stephanie: help us understand when tim cook says with ever seen extreme conditions like this before, how could that be? from a global growth standpoint apple represents basically the global consumer. really it is the global consumer at the high end. if you look at their growth, a lot of that cannot afford an iphone with the vast majority of the chinese. they must make decisions of the want to go down that road. in the high and electronics buyer we are seeing that people

are saturated. the consumer globally is taking a bit of a pause. stephanie: will they be forced to change strategy? we often hear that apple never does this. they never do that, they don't make a big acquisitions. tim cook just said we of never seeing conditions like this. david: they are building a smaller, cheaper iphone. they only have 12% of the global smartphone market. david: they also talked about growing services. >> the cll the appointed comes out of the guy who created research kits which is apple's attempt to bring the health world into the phone world. apple knows that the future is an biology. well, andthy, and apple bluff to make a tradition

from the communications platform to being the center of a lifestyle platform that is biological. stephanie: beautiful idea, but as far as apple making that transition, they haven't done that. is a way longer opportunity than anything where talking about here. they do have this billion user installed base they talk about for a proudly yesterday. i think that is an asset people have been appreciated. problem, if there is a don't toas a company i them having a problem. if i had an investor may be at think it would be a problem. long-term, i think apple will go up as a company, and a stock. theopportunity is to be greatest hardware company that has ever existed. that is what they are. they master logistics and supply chains like no company ever has. : i think it is an amazing

distribution platform. where to go about the services, you on the consumer to the iphone basically. health, any sort of consumer engagement, if apple can figure out how to monetize that, the growth will return. i think they are in nature before efficient. they are in a great spot, their great products that they will recognizes. you don't need to be in a hurry to change. spot, thata great apple ecosystem that flows through our veins. david kirkpatrick, thank you so much for joining us. to today,n of course the policy statement is due out at 2:00 p.m. i want to bring in brendan greeley who joins us now in washington just before the lockup. know just yesterday we

talked about the careful word choices janet yellen will be working to today. what one we get from her? carl: it will be one of those meetings were in his wordsmithing supreme. what we don't get from them today we surely don't get a rate increase. i don't think we get any bold reassessment of the economy. the federal works and very fine and subtle measures. what they will do is attempt to drive distinction between their policy and what we heard from mario draghi last week. he said downside risk to the economy and more stimulus probably coming. the fed is going to say basically economic prospects have diminished, but the more stimulus is not coming because that would involve backtracking on the december lift off. they want to be very clear that no remorse over lift off and will try to lean into the markets that are now saying in a

straight greece -- extra rate increase coming in september which will be code language for we will deliver fewer than those for rate hikes we signaled in december. stephanie: how about decoding for us? brendan: we won't hear any regret. being the federal reserve means never having to say you're sorry. stephanie: i thought that's what being married is? that is 100% not what being married is. i am focused on gradual. i think that will be a very big deal, gradual changes. thing not committed to an we will just watch what happens. if gradual becomes leisurely, sedate, that is summoned to pay attention to. minute the last meeting and they said in those minutes that they had lingering

about two things -- transition in china and the effect of the strong dollar on emerging markets. a month half past come or the biggest macroeconomic stories? china's tough transition and an even stronger trade in the dollar. they are really looking at exports and worried about that. i want to see what their languages like when looking outside the borders. were on the record as saying we think it is a one and done. i don't see there is any reason for the fed to do something at they had to do something. you can see it in the numbers of companies that sell globally, we aren't worried about inflation globally. we have a really strong dollar largest trading partners are still and qe. i think the fed is kind of hemmed in here. i don't think they will be

aggressive, don't they do anything for the rest of the year. brendan mentioned code language, these are two that i am watching for. these the changes that describe growth of the december meeting as being moderate. below 1% iny to be the fourth quarter. 2%. drags year growth below the fed has never raise rates when growth was below 2%. that is when you worry but stall speed. it is a very different dynamic. the fed will not be back in play until they have confidence that the gdp is back above 2%. consumer spending, business investors both described as solvent not likely to be repeated this time around. david: that is where we will leave it for now. stephanie: mushy, mushy is the word we're on the lookout for. jeff solomon will be

staying with us. a special fed edition of bloomberg markets coming up at 2:00 p.m. up next, we hear from the .hairman of the largest lender how close it is in brazil and the latest on capital position. andre looking at futures futures are down. it doesn't look like an update so far. stephanie: it is still early.

stephanie: you are watching are lookinggo>," we

at european markets read across the board. we're thinking by janet yellen never before we seen the fed make decisions based on global data. when you think about the slowdown across the world it is tough not to notice the bleed across the world. is exactly where we are going. more from europe today. we focus on the euro zone's whicht lender, santander some profit wiped out the last quarter. chairman and about teen told francine lacqua exclusively that the bank is to meeting its goals. we have delivered on everything we said we would do a year ago. one, the strength of the underlying results, david: francine is joining us now from london with more. court of theecent

banks begin easing investor concerns. francine: you are right. task, shehas a huge is been in charge of the bank for the last six months. she rarely speaks to the press and really gives tv interviews. her point was if you exclude a , this isese charges the concern for the u.k. are stronger. we spoke to investors and they say that the underlying business is a little bit stronger. the capital is above 10%. if you look at the challenges , this is a huge bank that is exposed to retail and the emerging markets. they have a large presence in brazil. they are being affected by the commodity rout. it was a disappointment over on

but have a listen. chairman botin: it could be difficult for the next couple of years. brazil is much more than just commodities and exports to china. brazil exports to china is still 2% of gdp. it is 45% of gdp and it's become -- braziltitive with has an industry. i believe strongly that brazil will come out of this stronger. they're trying to reassure the markets that brazil will be tough and the longer-term will benefit. it seems that as she is trying to change this huge bank, emerging markets are working against her. stephanie: where's the standard capital raising? francine: this is the big question that overhangs over the share price. this was what investors wanted to know about.

there has been so much pressure that she will have to raise capital. she did this exercise last january. i asked her three times are you sure, absolutely certain that you will not have to raise capital? she said in no uncertain terms of this is not on the table. she looks at the underlying basis. she said capital has increased it little bit so she is sticking to the target of 11% capital by 2018. stephanie: our own francine lacqua, fantastic interview. one that you rarely get. would be issuing any stock after the earnings miss. when we come back we have to talk etf. are they posing major risks to investors? what jeffnd out solomon thinks about this liquidity problem next. before we go, let's look at

priceline down. priceline feeling the pressure, feeling the heat. ♪

stephanie: you are watching i get to be in," charge with me to talking the high fixed incomes. david: we're in trouble. stephanie: never. 300% since 2009. . popularity,des in are there vulnerable sectors being overlooked? jeff solomon is with us, that number is misleading. even exist before

that. there freely come out of nowhere. a sudden explosion in growth, it was a new product. many people are looking at the high and saying there was just liquidity here. jeff: that is really the issue in my opinion. etf's are structured products that will ride liquidity. -- provide liquidity. and covertbonds bonds have been much more difficult and more expensive for individual investors to access in their portfolios. provided a way to get yield. part of the growth in fixed income has been a function of the fact that investors are look for yield and don't want to do the credit work associated with individual bonds. these were to do that is etf. all of that is very good, the challenges when you have so much

of it that it begin to dominate the market. investors spooked by rate rises all of a sudden everybody's making the same investment decision across the board at the same time. you can get liquidity mismatch is with the underlying doesn't rate as much as the edf. david: has that ever happened? stephanie: mathis breaking news. matt: shell wins approval to buy bg group. it got in 3% of the voters needed. -- it is her of the voters. it -- 83% of the voters. right now down 1.7%. bg group you can see jumping a little bit of a spike. that is only up a little bit right now. bgll wins approval to buy group. let's turn back briefly

to the problem in about etf. have we seen that problem in the marketplace? jeff: we haven't seen that en masse, just episodically. last summer, and particular in august when we had some ill liquidity in the fixed income market. get etf's trying to strike prices when they cannot get underlying execution. the big problem is that mismatch is what investors could get hurt. david: you're staying with us, i'm happy to say. coming up, banks under pressure. ♪ 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: you are watching "bloomberg ," we're watching the markets clearly in the red. fourth quarter profit margins

margin shrank as the company ticket charge of a cool 900 dollars no last quarter. we don't like to take charges like that one growth around the world is on the decline. welcome back. they're having a big morning. jeff solomon is with us and guess who is back from london? only, tom keene. amazing, new york city's in researcher versus -- in this stunning. it is just stunning. you have to going to appreciate how bad it is. larry summers was screaming about it. he is right, it is shocking when you come back. stephanie: i think it is the greatest city in the world and i will take it potholes and all. oregon militants were

occupying an animal refuge are under arrest. in on their way to a community meeting. shots were fired, and what are the supporters was killed. in cleveland, the six police officers are fired for their role in a shooting that killed two unarmed black men. more than 100 shots were fired after high-speed chase. and the supreme court has been asked to put the brakes on the dministration's clean air plan. global news 24 hours today powered by our newsrooms around the world. matt: first off we're breaking news from boeing. 1.60 versus estimates

-- as right as revenue goes come have been missing today. bowing to revenue in the fourth quarter was 23.5 -- the us military 3.6 we will call that -- the estimate was 23.6. boeing now with earnings and we are still waiting to see if that company will cut its 777 production. in the premarket, apple down in the premarket, a lot of companies missing on the revenues. that is weighing on futures. david: futures are down a bit at least this far. time for our morning must-read. been a great china watcher and looking at flows of capital. he has a tour de force.

this is off what he observed in davos. martin wolf on the elites. it is an absolutely superb these. -- he's. -- piece. there is a u.k. view and a lot of what we heard abroad about the political process but much more about this idea of elites removed from domestic politics. david: a lot of dissatisfaction on part of the working class around the world. we have seen this before, ronald reagan faced this. reagan had a policy. he had the tax cut policy, what is the policy? tom: the policy is to turner on

wages and job growth that that hasn't happened. might chart from two years ago is all that you need to see that wage growth has gone nowhere. jeff: bouldering is a great example. facing topline challenges -- boeing is a great example. facing topline challenges. that is a fundamental problem. to talk about wage growth, but you can't figure out how to do it unless the court company is really driving -- savings have got up within a little bit of wage growth that we got. the result the confidence behind it. jeff: but that is not surprising. the u.s. consumer was effectively bankrupt in 2008. we are facing 10 years of repairing personal balance sheet. generationt the new

people are much better appreciating for what it means to save a. long-term that is pretty healthy it just means in the near-term it will be harder to drive global growth. stephanie: don't you take it as a positive? if you're saying the u.s. --nomy which is encrypted was just bankrupted. tom: we are seeing a bit of savings you want the savings there's no question about that. doesn't getel it that to nominal gdp. david: i want to come back to martin wolf peace. it is a dissatisfaction and anger. wage growth is not a policy, that is a result. as you look at the candidates, who is coming forward with a policy to say this is how we can get the country growing? stephanie: a long-term foreign policy doesn't work for

campaign. david: but ronald reagan did. tom: but we await that. recenthinking but the primaries and moving to carolina, but beyond the convention. we become focused in the second week of october is maybe where we begin -- jeff: right now we're still in the primary phrase so people are catering to their fringes. say after super tuesday live a better idea of the candidates are likely to be, especially on the candidate side. i think you'll see a rush for the middle -- at least i hope you will see a rush of the middle. people continue to cater to their bases. the bases are generally disinfected in every election cycle and even more so here. and do not elite

speak for the vast majority of americans. that allows for -- stephanie: where does this matter? jeff: that allows folks i donald trump to come out of nowhere and strike a chord. this historying in to deconstruct a populist court other than the can cater to a specific group of people who are disaffected. stephanie: we have to go back to europe. shares of rbs are down. $5.2ank took a surprise billion hit to the value of its assets. richard joins us from london. what is happening at rbs? four people working at a place like rbs are the sibley saying what -- simply saying what gives? richard: the bank continues to

astound its critics. it is continuing to see the impact of various restructuring programs. also regulatory investigation particularly in the united states. into as an investigation buyout and mortgage backed securities which is taking a 1.5 billion pound charge which is still on but the u.k. taxpayers the end of the day. david: if they own it, how do they proceed this? richard: this is the gradual cutback of this bank. for the u.k. to get its money back double come not -- that will come not from that butter will take its time. tom: i think that it's a terrific perspective on just staying the path.

80%?: they own what something like that. i wonder if those that take this long if this were in private hands. i wonder if private shareholders would stay still. : every country dealt with the aftermath of the financial crisis slightly different. we took the problem out of the bank hands and brought it on to the fed balance sheet where it is not visible to most investors. in theuldn't do that bank of england. this is why we continue to see qe and stephen the yield curve. epen the yield curve. in the middle innings in the u.k. and europe in terms of repairing the banking system. the mechanism that the ecb has is very different.

they also have double any of sovereign debt issues. it will continue to be slow growth and qe in europe for the for seeable future. this is in keeping with bank balance sheets long-term. on hanie: if we stay banking system i'm looking at the headline out of bank of america. more expense cutting and more job cutting. what the hell that banks look like an 2005, 2006? here on round 762 of expensive job cuts. jeff: i think the dirty little secret of the big banks is that they made a ton of money trading proprietary. that is the biggest margin difference they have. infrastructure you have to have and it is extremely low margin. thatyou have dodd-frank said you can't make money trading proprietary or providing liquidity now they're doing what

they're supposed to be doing. they have to cut and every other area to deal with the fact that i have a single digit margin business and no growth. perspective,erent every company has as many people as they can afford. you're coming in and your bottom line is growing you are hiring people. tom: all of this was predicted. he thought long and hard about where we're going in talks but utility banking. we coming towards utility banking. stephanie: when you think about the money banks made in cross trading and i mismatch why aren't hedge funds making all that money? part of it was these massive balance sheets. he didn't have to worry about investors, but also information flow. when hedge funds trade they're sitting in an office. when banks -- the market

information that was coming across their desk was massive. that accounted for a whole lot of payout. when you look of the drive for growth, i still believe that it is misguided. it might've been able to deal with the fact that businesses thatreaching asset levels might not have the negative basis traits. it would just a way to boost profits before the big reversal. they stayed the course and within the knitting and said were not going to have a lot of growth. they don't do that in a model where he could paid a bonus. nobody does a three-year outlook at a bank. jeff: they have one now, they better. david: thank you very much are being with us. tom, thank you for being with us. next we take a close look at health care earnings and what we could expect from drug pricing.

a recordrugmaker had quarter. now let's check shares. there are a lot of the downs today. one of the worst years for steelmakers. there it is, down almost 7%. ♪

vonnie: welcome back to "bloomberg ." given ability to make its biggest acquisition. help united technology

post fourth-quarter profits that beat estimates. they're contending with a big jet engine program. plus, that is a slowdown in the oldest elevator business in china. stanford is number one when it comes to annual donations. harvard was second on that list. the top 20 schools accounted for 29% of total donations. matt: take a look at apple shares. the company came out with earnings that beat the street, and also came out with revenue that slightly missed. down 4% in, apple is the premarket. very interesting that the iphone with such8% of sales a permanent place and a lions and share of the company's profit. sold 74.8 million

and we were looking for 75 million they sold them for more money. you can see that we have had a steady climb back up to basically the levels of q1 in 2014. they ended their first quarter in december. there are many interesting stats on apple today. they made $1 billion a week over the last week. they also had sales in the quarter that were bigger than any of the foreign to 50 companies in the s&p for the whole year. they made more money in the fourth quarter was all but for companies in the whole year. stephanie: it is really important to put that in perspective.

david and i were talking about this. i almost compare it to the abc apple in terms of -- i need to go to mc hammer but you can't touch this. i don't get credit for that? the other interesting comparison is the price-earnings ratio between those stocks. matt:ma looking at apple and google here. david: i think it is 11 times. alphabet is like 37 times. for six and aaits half times. has $218 billion in cash. david: some of it is not in the united states. stephanie: i got no quote for quoting mc hammer -- credit for quoting mc hammer.

david: now you move from apple iogen, isr stock, b trading higher. anthem had fourth-quarter earnings it missed estimates. true armstrong joins us now. drew armstrong joins us now. they are not making as much money per subscriber. a huge issue for insurers taking premium dollars and spending it on medical care. where are your medical costs going? a worrying trend in the fourth quarter that they saw is that medical costs seem to be going up. despite the fact that i didn't get the flu this year, that is always a big driver possibly trend out there were going in the right direction. for them, medical costs are rising in the fourth quarter which doesn't seem to be good

news. stephanie: you said you think the consumerization of health care is a big trend. drew: as we've seen with obamacare, it is the latest in a long line of changes where in the cost structure for health care on to the individual. you are having to make choices to be theiris going insurer. there were so much more choice now. the challenge of anthems people want the best health care for the best price. that is a huge issue. bring about a fascinating point come with all these people who have in obamacare and have high detectable's. -- deductibles. after these people are blown to the out-of-pocket spending anthem is fully on the hook. consumer you get the

paying out-of-pocket the guys will go down. know, they will trip try to get thel best for the least cost. that means premium care with high cost. how will you drive top revenue growth if you can't provide secondary or purchase jerry -- tertiary care. i want the best care for the least price. i don't know how that rationalizes. stephanie: that takes us to drugs and drug pricing. outperformed. we are seeing so much criticism over drug pricing. biogen, i think we are talking about.

they have this drug that is in multiple sclerosis drug. stunk for thes last few quarters. they fired workforce this year and said they have to turn this around. they have all these clinical trials they need to pay off. they grew substantially over a year before. stock is up this morning. it looks like their plan is going pretty well. investors are responding. stephanie: analysts say it has more to go. 41% above the current trading price. buy, no have it as a sales right now. when we come back we get final thoughts from jeff. in the next hour, barry diller with his take on the realignment of his business.

that is on our way out. here is a quick look across assets. that is a messy picture. ♪

stephanie: welcome back to "bloomberg ," we have final thoughts. notwithstanding, a lot of these stocks are trading at discounts. the big stocks, this is basically future earnings in a meaningful way. for the most part, brokerage firms are healthy businesses. are seeingyou healthy businesses, we seeing $5 billion fines. the core businesses are actually healthy. the smaller banks, we came to

grips with the fact that we're in a low growth environment. i think there will be consolidation space. smalll continue to see firms continue to roll up. that there is room for the consolidation to go. stephanie: does that mean you are in the market? jeff: i would say we are the acquiring side. we are on the market all the time talking to other people. stephanie: they go. -- there you go. thank you for joining us. ♪ 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: will he said that the next interest rate hike on hold? later today competency health impact market turmoil is having. okcupidm and tinder and

-- we will be speaking with the company chairman, their retailer. in chinade his name but he can't go back to the country. what is next for carson block? we will be asking. ♪ stephanie: welcome back, this is the second hour of "bloomberg ." erik: i am david westin andrew on to welcome a retailer, the chairman of iac and expedia. he has had a remarkable career. and go to welcome you vonnie quinn for the first word. vonnie: the leaders of the armed group in oregon are now under arrest. leader andpped the

several followers while they were on their way to a community meeting. shots were fired and one of the supporters were killed. john kerry could get china to see things his way on north korea. china resisted the appeal to impose sanctions on north korea following the nuclear bomb test this month. movesis opposed to any that may destabilize the regime of kim jong-un. genevaks will begin in for negotiations to end the civil war -- it has been held off due to a discussion over which groups will participate. one of russia's terms is that can stay in-assad power until the new elections are held. global news 24 hours a day. i am vonnie quinn. now to matt miller on the

markets. matt: asian markets rallied. u.s. futures are down. so breaking the correlation for the third day in a row -- futures are down about 10 points. dow jones are down about 100 points after a gain in the cash yesterday. one of the reasons is oil. it turned around and has been down almost 3%. another one of the reasons is that a lot of companies are missing on the sales side in earnings today. missed, justarely by a few hundred million dollars. did blue the earnings per-share figure. can see how partially the market is punishing these companies today for missing on revenue. another one. by one on the ats line

penny but missing on revenue by $1 billion. and hadat on earnings the most profitable quarter of any company in corporate history at more than $18 billion, more than $1 billion a week but it commenced slightly on revenue. and it missed very slightly on iphone sales. 75 but looking for still, they are down 4%. quarterake this current where they are predicting a sales drop of 8% and you shrink the margins, you will still make $17 billion. stephanie: that is what is extraordinary. is austinn -- that powers talk. later today, we will get a look inside the mind of policymakers.

the fomc is releasing a statement at 2:00 and brendan greeley is in the hood. is the fed paying attention to markets in the same way we are? brendan: they are not supposed to but they definitely are. one of the things they pointed out is the effect of the strong trade weighted dollar on trade. we noticed this in september that net exports were soft. when we look at what happens in the global market, that is absolutely what happens and one of the reasons that is driving at is the strong trade weighted dollar. they are looking at markets.

jim bollard told us last year that the fed doesn't like to make decisive moves in a time of high volatility. they like things to settle down and then make a move. we don't expect them to make a move. fact that there is volatility in the market means that we may not get decisive market language. that was -- david: that was run in greeley. we will have a special edition of bloomberg markets on tv and radio. now i want to turn to barry diller. you ran programming at a tender age. you created the fox channel which everybody thought couldn't be done. and now you are the chair of iac and expedia. fed, yourout the business has reached into consumers. what are you learning about consumers in the united states globe elite that the fed should listen to? of all the people, the fed should listen to me but what we are seeing in the u.s. at iac

that all thes processes are doing well. some are doing really well and none are doing badly. u.s., in terms of traveled there is weakness in western europe and certainly in places -- trouble in paris is not back but it will be. it will come back. i don't see anything in any single sector that we look at that you would say no to. stephanie: with the exception of market participants who are going to wait for every breath out of janet yellen's mouth -- do you pay attention? barry: i have paid more attention this morning and i have all year. stephanie: boom. right there. they are wasting their

time. david: is the growth continuing the same or is it tapering off? barry: no, it is not tapering off. bumps and hits and things get thrown but if you just took a line through it all, there really is no worry. especially if you think of it in terms trading -- terms of trading. i mean sales, costs. stephanie: bump and grind it takes us to tender. can you take us to your business? the third time is not as funny. which restructuring is that? the one that was

announced in the last two days. barry: we have been restructuring the company in the last 20 years. you pass through the evolutions and we spun off one of our match.com, into a separate company. that facilitated us to decide what remains. is not forto do this external purposes. it isn't for how you show it to the world but it is for how you function internally and how you manage. so continuing to streamline make sense. stephanie: jack welch just put out a piece saying i comanaging is underestimated. i haven't got that as an accusation in my life for not

micromanaging stephanie:. -- micromanaging. stephanie: ceos are under attack from activists. well, the issue of sitting on cash? we are certainly all cash flush. cash is not the issue. the issue is opportunity. at some point, we have to get it down. we can't have its it there forever. it sit there forever. match.com, you still own majority interest. barry: 85%. david: what are you hoping for but the greatest growth? say, 3-5 years is

a bimbo answer. interested in home services and home advising. tech we are now being one to organize the now most organize will part of the internet. how to get people to come and when do they come to fix that -- all of the services that you need. and figuring that out, which has taken them 10 years, it is not a young company. it has taken them that long to close the circle to be able to on a smartphone say, what do you want? and have it delivered to you efficiently. i like that business a lot. stephanie: how do you capture the attention and loyalty of

consumers? r now, whenind consumers are low -- how do you keep interest? barry: match.com has been around for 15 years. and the brand is growing strong. so loyalty, it is obvious. way,arn loyalty -- either loyalty is thin. but to the extent you can get loyalty, to have a direct relationship and you serve them, then you have loyalty. and even then it is gone tomorrow. inid: how much turn is there match.com? barry: the interesting thing about match.com is that people

go off because they find somebody to be with and then, are,tions being what they it turns to tears and they come back. have peoplently leaving and coming back depending on their conditions. -- vimeo: the meal competitor to netflix where you have to keep pouring more content -- barry: that is not what it is. it is not a competitor to netflix. subscription video. so, that is not what vimeo is. it is a platform. a platform for professionals to shoot a video, people who want

to distribute videos themselves -- it is a platform to get that out in the cleanest and most high-quality way. a grab youtube which is cats competing -- but vimeo has no advertising and is high-quality. so it is not a competitor with netflix. of cats.: a montage very diller, you are staying with us for the hour. -- barry diller, you are staying with us for the hour. you are watching "bloomberg ." ♪

stephanie: welcome back, you are watching "bloomberg ." lucky us, we are here with barry diller. you mentioned home advising and how much you like it. early it this year, you try to acquire angie's list. it didn't go through. are there other properties? barry: sure. stephanie: like what? barry: you must be joking. stephanie: the market is getting cheaper. that weor us, we think are the leaders in that market that so we want to

go as fast as we can to consolidate as much as we can. it is possible that the big ,layers, amazon and the like going into thune's services -- it is harder than most people think. but if there are companies out do somewhatn similar things on some scale, we are interested. and we think it would be more efficient. stephanie: you must be thrilled to see the start up companies -- barry: it was stuff made up in a room. it is easy to say your company is worth $12 billion but it isn't because somebody is actually buying and selling it at that level. what you're doing is buying or getting delusion. in other words, if i have a sell 10%nd i want to

of it, i can tell you that my evaluation is specific. stephanie: there is no liquidity. barry: it is all made up in a room and it is all false. and buyers and sellers up to a point -- this point has almost come -- have said that it doesn't matter. it doesn't matter what price we have to pay. you have built more than one incredible business largely through acquisitions. take us through your disciplines of acquiring? is it topline growth? what things are you interested in? cost savings? what do you look at? barry: the first interest is not deal related. i don't care about the deal. is, is it a good

idea? is it practical for us? do we make sense in that good idea? it is an area that we don't know anything about, can we learn it? once we get to the point where we are asking -- is it a good idea? and it can't be too educated. stephanie: that is a problem janet yellen has. help us understand how you decide what a good idea is. i'm guessing 10 years ago, you didn't say dating websites, they are going to be the next big thing? barry: of course i did. match.com as a tiny

little thing in dallas for nothing. it was 15 years, maybe? i thought, what a great idea. stephanie: and today, what do you think is a great idea? barry: please. a lot of the things that our really is doing have good ideas. it does come down with everything. it comes down to how you hear. what does instinct tell you? because anybody can look at a serious figure and data. but you never have enough information to make a good decision. since you don't have enough information to make a decision -- for instance in the entertainment industry, no one knows anything, so what you've , what is something that

interests you? david: you have a successful -- are you looking for acquisitions to take it over? we spent about $6 billion last year at expedia acquiring. expedia has grown enormously. it is truly travel through technology. when you think about that, that was a great idea. -- it was one of our first acquisitions. september 11. stephanie: how much does the success of airbnb affect

expedia? barry: not that much. we just bought airbnb's competitor. they have done a great job and they will continue to grow. market,shared economy --ther it is what homeaway that area will continue but it is finite. i don't think it really hurts hotels. hotels will hurt hotels. hotels go in cycles. and there has been an increase in supply. david: we are delighted that we will have barry diller here with us for the entire hour. he saw the future of digital. ofwill get his take on some the biggest public companies in media today.

coming up next on "bloomberg ." ♪ matt: oil prices are sliding once again going back down to about $30 a barrel after data showed the global glut was even worse. ginong me now is bob hyatt . let me ask about yesterday's talk at saudi arabia may possibly consider cutting production? >> not at this point. there has been a lot of talk jobbingl prices and them in the way they used to job rates. i think that is what is going on here. they are making more barrels

then in 2013 and they don't have that much more capacity in terms of quality oil that can be shipped overseas. so they don't have any choice but to maintain. it isn't something they will get involved in conversations with. they know that prices can go a lot lower from here. matt: so what should we expect to stop this? is there anything that can bring the parties -- the price of oil back up russian mark -- back up? the fed seems to be in the way of economic growth. that is a problem when you see global growth slowing. have refineries going into turn around -- i know this is a crowded trade and some of the snap back can be up to 10% but

this is one of those things that can be a perfect storm. having said that, i expect six months from now for oil to stabilize but it won't stabilize much above $45. matt: thank you very much. that was from the cme in chicago. now let's take a look at some of the movers. we are an hour ahead of the starting bell. fedex says it will ride back shares worth about $3.2 billion. that is up to 25 million shares. that is boosting fedex now. we should be looking -- analysts were looking at a loss of $.18, a

wider loss then had been anticipated. the only is one of company stories that should get attention today because it forecasts a lower revenue than what they were looking for in this quarter. iphone sales shrunk and they missed estimates. that is hurting apple in the free market and is dragging down futures at large. here we seewith oil s&p futures down. dow futures are down 78 points. we are going to get much more with barry diller after the break.

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voila. remotes, come out from the cushions, you are back! the x1 voice remote is here. david: welcome back to "bloomberg ." .e are here with barry diller thank you for being with us.

we will start with the first word news. iranian president will be in france today. he is scheduled to meet with the french president. he also signed a deal to buy planes from airbus. the united nations is criticizing denmark's parliament for -- valuables from refugees to pay for housing and food. they say the refugees should be treated with compassion and aspect. and dozens of holocaust survivors gather today in auschwitz. they marked the anniversary of the day the soviet forces liberated them. global news 24 hours a day powered by our 2400 journalists. i am vonnie quinn. the markets now with matt. matt: the premarket is down

because apple forecasts only $40 billion in the next quarter. there are concerns that iphones have slumped in sales. iphone sales growth has fallen but i want to show you something. talking about china on the conference call overnight -- i want to show you china growth. the total revenue growth for thee has a big jump up to $230 billion in revenue. here you see china growth and it is not bad. they have doubled 2015 over fiscal 2014. so the china growth is very interesting for apple. one of the things you are seeing an far of the 15% drop in apple

shares over the last month is a general exit from tech shares. if you take a look at the spider tech epf, you can see that going on. xl k and this is the price up there. outflows.l anything below this white line is outflows. andnvestors are getting out that is one of the things that is weighing on apple shares today. they made over $1 billion a week in net profits. stephanie: when you look at apple, some people say it is untouchable and others say they are in trouble. what do you think? look, apple has been a very product company. the thing is that the iphone -- a great device -- there is a finite number of them.

it has to flow. why wouldn't it? grow to the skies. that is just the reality. i mean, to worry about them? to react? stephanie: do they need to make a big acquisition of a media company in order to keep growing? barry: they have a ton of cash and they are starting to get back to shareholders. the thing is, to buy a media company or to make a big acquisition, they are a hard company. they have services but i don't know. i would be really skeptical. in momentaryp sales but if they went off and did something with a deal that

,ooks like desperation or like oh my god, we don't believe in our ability to make new products, then i would worry. stephanie: why is that desperation? m&a is the name of the game for many companies. barry: it is if you do it for acquisition benefits. we are talking about a different kind of desperation. yahoo!. david: would you buy yahoo! at this point? barry: no. do i think there is value in yahoo!? sure. it lines up with some of our businesses. but the thing is, it has had a 10 year rough ride. it is absolutely not playing for dead. of wearst the amount

and tear that you would have to go through -- it is just not worth a candle unless, essentially, you got it at such a discounted price. if you woke up tomorrow and you were the ceo of yahoo!, what would you do? barry: don't ask you that. stephanie: can they stand alone? barry: sure. they have 500 million people or so coursing through them. if you can't make it through that and something is wrong. stephanie: that is what i think about twitter. they have millions of people and they can't find their groove. are just starting to get revenue from it. they do have revenue. -- i don't know what the valuation is because i don't pay attention.

i don't follow it. whatat they have to do and they are doing is making the product easier for normal people to use. that is not that easy. david: is their biggest problem a growth in subscribers or users or revenue? barry: you have to continue -- look. they are not at the point that facebook is at, to say the least. facebook has enough subscribers and viewers to last them a century. but that is not true for twitter. they have gone past their market value so investors are telling us something. barry: what do investors know? that doesn't jive for me. understand.elp us you need investors. barry: investors will believe in

your company went the trailing facts, and they have to trail for a while, particularly if you have been in the barrel. if that happens, then it takes time. time will tell. amazon aref astounding. from the ferry first hour of the first day, what amazon and jeff bezos have said is that they're going to build infrastructure to serve customers. and they don't care about anything else. so it is an endless time of investment. jeff bezos will be the richest 5-7on in the world within years. david: how can it be endless

without and the day? at some point you have to make money off of it. people say, they need to make money. barry: they do make money. their capital is very good. david: but they reinvest all of it. barry: that is why it will be modestly the most valuable companies in the world. that's why. insane attention to pleasing the customer at whatever it costs. their amazon prime is genius. stephanie: at the cost of all retail? if jeff bezos is going to be the richest man in the world and we have seen the retail industry blast -- does that mean it is the death of all other retailers? barry: no. something doesn't have to die for something else to live. i want to come back to

the cats. let's talk about youtube. google and youtube. it is huge. why can't they make that into a successful business? barry: i think they see it. they are not dopes. they really look at it as a search business. and it has evolved from a search business to a media business and there is a big difference between those two. eventually, i think they do get it. but other players in that time have an ability to swim through which is why i think that platform, over time, is going to be a large platform for video. stephanie: given the size of google, in terms of advertising,

can they put pressure on their partners? barry: can they put pressure? [laughter] barry: all of us search in the land of google. it is ok. -- treat them well. if you don't, the serfdom rise up. stephanie: and google is the partner. is, you don'tple want to talk to an apple partner. they get decimated. they have been in the large-scale business of google for 10 years. pay google about $1

billion a year and we receive about $1 billion a year. they are a very good partner. , theye of their position do have the market and they are the leverage. us,generally speaking, for they have been good. david: not unique to you, other that theyhave said need them more than they need you. that is the most minimalist way to say that. but truthful. we just made a new deal with google. we have probably had five-year deals or something like that. we just did it about four or

five months ago. took a year and three quarters. david: wow. when you look at companies, iconic companies like ibm and microsoft, how do they get relevant? how do they get the desired factor back in the businesses? because that is something you have never lost. barry: i don't know. ibm has no relationship to me. i don't understand it at all. microsoft, i probably do understand. they are an incredibly simple company and have they lost the zeitgeist? of course they have, it can't last forever. new life and

liveliness happening in microsoft. when we come back, we are talking about the business of media. what should cable do as customers cut cords? we are going to take a look at futures and they are down 4.25%. ♪

david: welcome back to "bloomberg ." barry diller is here from iac. watchy you don't

television but cable is going through dramatic changes. future for the broadcast networks and the cable companies? stephanie: wow. david: how much creation and how much destruction? barry: equal amounts of both. closed systems inc. medications for close to 100 years. radio was actually open meaning there were thousands of radio stations and then they got consolidated into networks and the systems were closed. we had those systems up until 5-7 years ago. when you could get video another way. so once that happened and those systems began to break up, and i don't mean break up and get thrown away -- they are not going away. but when that happens you get

creative destruction. that is typical. it is great for people on the outside because they have another route to the markets that they have never had. now, that has consequences. companies will adapt and do things and some will survive and some won't. it is unbelievably healthy for the consumer. bob iger was on, from disney, and he admits that it is changing. barry: he is hardly a dope. david: no. and he says there are other things they're bringing online to replace. you don't have to replace, they are not going anywhere. that doable?

with movies and theme parks? what is theu ask best balance company that is actually not totally susceptible to all of these rushing's around, it is disney. it is disney because of its brand and merchandising and parks and because of its ownership of characters and no technological change is going to destroy. owns the: disney brands and characters and themes but away from disney, it is about content. if you are a content creator, is this not the best moment? barry: no. presume thatet's

we aren't just saying, can you get paid a fair worked a wage. whatever. they are working for the man. so they do ok. but if you are a content creator in the old sense, you could create empires based upon what jim brooks did with the simpsons. it went very well. what those days are ended. because netflix and amazon are buying all the rights worldwide out front. they -- neither of them have anything to do with ratings. so matt -- so no matter how big of a hit you are, you can only go so far.

so you can get the job but production companies essentially don't exist anymore. david: let's talk about a company like viacom. split, theyand cbs thought that viacom was the growth. what went wrong at viacom? barry: i don't know i, i can't tell you. when i look at something like fox, their powers and viewership, how does that company turn the page? barry: ok. so? we also have empire.

challenges.out the next 10 years will bring more challenges than the last 10 years. the last 10 years were not that interesting. so the next 10 years will have real changes. but with the fact that it is now no longer a totally -- system, changes are going to happen. that is opportunity for some. stephanie: why weren't there big changes? 10 years ago, you watched must-see tv on thursday night but now -- barry: there were no fundamental changes. cable viewership was essentially steady. so nothing galvanizing happened. -- untilard the word recently because there was no

alternative. what happened is, when you can get video through an alternative distribution system, the buttont, where you as a -- when you think of it in miracle terms -- you press a button, there is no different no distance between you and the consumer. it was just coming online and it is phenomenal. if areo had worked it out -- barry: here is the thing. ariel was a wedge. all i wanted to do was give the centricity to folks. it was a wedge to do so. it happened anyway. stephanie: the splinter is still

there. barry: it was going to happen but i just wanted it to happen faster. i thought it would change the centricity. i said, get it over with. get it open. closed and nobody can get it open -- then it is open. nothing lasts forever. stephanie: no, you don't want to own it. it is shortsighted. you cannot of the more traditional media world which grew bigger and bigger. as you look at any of the businesses, can they make that shift over to another world or have they lost to the netflix's of the world? barry: they can. of course they can. it is not going to be as neat

and and was ordered a gain as it was. if i was them -- like hbo, the same way. they started to late and it may not matter. toernet now has the ability produce their own and that is what they are doing. and they are getting out of buying legacy programming. why wouldn't they? economico whatever was but the gain is gone. david: they don't need the traditional companies the way they did years ago. essentiallyxisted to run movies that the movie companies all got money from. that is how hbo began. now, they don't care about movies. stephanie: they do care about content. barry: they can't buy it.

david: we cannot let you go without asking about donald trump. you have a candidate in this race? spoken to him't in 30 years and i would literally cross the street to avoid him. june,ly do believe may, gerald to paraphrase ford, our long national nightmare will be over. stephanie: what if it's not? barry: it is. stephanie: there is no way he becomes the president? barry: zero. he won't be in the general. david: then why is hillary clinton -- who you have supported, why is she against

bernie sanders? this is not plausible. all, what i of think he is doing is healthy. i don't think it is realistic, it istely realistic -- realistic to have a real revolution. if you say, i will take this and i will control the congress -- that is a revolution. now, it is a wonderful enveloping cry about inequality. , look at: barry diller his high school picture. i have to show it. ♪

30 minutes andre a few seconds away from the opening bell. stephanie: if you thought we

just hit the high note and it was going downhill, you were wrong. we are joined by lisa abramowicz. usually remote. be the new jersey native, carson block. have a lot to cover but first we will give you first word news. vonnie: authorities are stealing off the federal reserve in oregon. one of the antigovernment protesters was killed and eight were arrested overnight at a traffic stop. of cleveland's police -- firing oneng hundred 37 shells at their car after a high-speed chase. global news 24 hours a day powered by 2400 journalists around the world. matt: i want to take a quick

look at futures. we are down across the board. we were off earlier at the dow jones futures were of more than 100 but are now down only 52. asian markets were up overnight at the problem is that apple came out with earnings. you can see that apple shares are down 3% and they missed on revenue and iphone sales. only $53forecast billion in sales for this current quarter. $55.5ere looking for billion. so that is weighing on the broader market. also weighing down is the crude price. although it has turned around here. to $30.85 a barrel. but the turnaround is if you look at brent, the global benchmark for oil.

it was positive for a moment but now it is down two thirds of 1%. leadr strength has really to lower oil prices and you can see the dollar turned down here about .5%, that is why you see the turnaround in crude and rent. -- and brent. and where are investors going today? they are selling bonds. stephanie: it is time for the four stories that matter to the markets. special one toe you because china is your jam. china to limit offshore spending. the pboc has not given guidance and then. what do you make of that? weaken china wants to

its currency but the key is to do it on a gentle slope as opposed to letting the market rip it down. so a lot of this is political. the government doesn't want to make it obvious that it wants to weaken the currency, so as to maintain a good relationship with trading partners reality shows that they do need the currency to move down. they will do it over the next 18-24 months. stephanie: one thing that was a bright spot was alibaba. andipo was rainbows unicorns around the world. is this a company to look at? carson: from my perspective, it is impossible to tell what the financial statements are and whether they are genuine. i saw investors lined up around when the for this ipo disclosure they gave was so for.

oneidea that they have business unit was a joke. stephanie: so you blame the investors for not demanding more? carson: absolutely. as a result there isn't enough detail out there for guys like me to analyze. say, people have been questioning chinese data for a long time. is there anything the government could do at this point to shore their credibility? carson: it is funny you mention that because they just locked up the head of the statistics. [laughter] like, locked him up. didn't fire him. locked him up. david: the person who is and forble for this part of the corruption investigation -- he is now in jail. stephanie: amazing. carson: let's call a spade a spade. arrests are not

because some people are corrupt and others are not. these are purges. who knows why the head of the statistics bureau was locked up. maybe because the statistics weren't manipulated enough to show a clear picture? [laughter] stephanie: that is a whole other level. david: it doesn't make you feel better. have wonderedd i for years what economists actually talk about this. david: so the number two story we want to bring in is apple trading down in premarket trading. they have been heard by a strong dollar and slowing growth in china. apple is feeling the pain of a strong u.s. dollar and that comes with the central bank talking about raising rates which would further strengthen the dollar. any of the stories about whole are reflective of the economy in general.

it is the u.s. dollar being high which is a headwind. a lot of what apple is saying is a microcosm of the economy. carson: right. i don't know if you follow peter thiel but one of the things that is interesting is that if you look at the cash on balance sheets for companies like apple and google, it implies that there is not a lot of innovation that can really take place. especially with google. they threw a lot of money into strange things but it is a fraction of what they have. so the postulate is that there is not that much more innovation that these companies are capable of. i don't have a view personally, it is just a personal thought. stephanie: but when peter thiel back things like it coin, these are free options. carson: they are free options but there is a problem of scale.

when you get to be so beall -- so big, what do you do to move the needle? i think we have seen that the past year. companies have blown up the cause of accounting issues or guys in my field questioning what they do. when you get to a certain size, how do you growth the bottom line? apple, as far as i know, doesn't play around with the numbers but it is interesting. all right, i will give you a number three. bank of america ceo has always been outspoken and he is taking matters into his own hand to increase pressure to lower spending. to upsetts could lead in the market. brian moynihan has already said

cut jobs this year. what do you make of that? carson: i don't know tom but i know of him. he is one of the sharpest executives on the street. it has obviously been hard combining bank of america and merrill but it seems like they gotten a lot of the tough stuff out of the way. david: it isn't just bank of america. it is morgan stanley. lisa: do you think revenues will ever come back? carson: they will come back but who knows when? market is the obviously in a strange place. my perspective, valuations are stretched and when you look at the credit markets, it is returned less risk from my perspective. and i think that is finally working its way into the system. a day when this rebounds but i'm not a macro guy

and i wouldn't speculate on when this would happen. stephanie: research is something you know well. does research provide any value -- because south side research -- carson: i think banks would like to exit south side research. understand what the long side is thinking. what are we missing? is an easy way of helping us figure out whether there is something we are missing. stephanie: do you get paid for it? carson: with commissions. but for most investors who are long oriented, the research is biased and it is not great in most cases. stephanie: there you go. david: the mergers and acquisitions happening in the -- shell has one shareholder approval to make the this oilcquisition in

slump. they say this will boost cash flow while bg's growing production will bolster output. this is interesting to me. ands watching the argument i thought there might be an issue with the deal. i'm sorry. matt: you asked me to look that up before. there is a great function in bloomberg, it shows you all of the deals that are active right now and you can pick on them and i fixed the bg-shall because we are talking about it and you are right. throughout ind august and the downturn that we saw in august has gotten tighter as we approach the deal. so i would love to hear more about this.

involvednow if you're in any arbitrage at all, but it seems like you could make money? that i haves rare played into the arms situation. there are some interesting arms situations in the china stock world right now. bg-shell is not something i follow closely. -- was very candid that he a company investment ell and he doesn't think it will work out well. lisa: this is what people have been waiting for. when will there be capitulation on one side or the other? that is when the bottom will be found when there is an f and the day and enough players who get

out. then we can move forward. carson: yes. thesis is, what are the assets that they are buying? assets? bg's for me, that is unknowable. lisa: absolutely. who knows where it is going to go. are the stories that matter to the markets right now. futures are still in the red. last time i checked they were down about .5%. how are they? s&p is down about .75%. oil is down again today. we have seen that consistently. next we look at market movers on "bloomberg ." ♪

vonnie: back. i am vonnie quinn. -- cyber growth is slowing at the second largest iteless carrier at&t decided would treat customers with the discounts. earnings matched estimates. toyota is the world's best-selling automaker for the fourth straight year. books like back after its emissions scandal. and chase bank customers will soon be able to withdraw money with their smartphones. they are upgrading the atms and they can access cash with a touch of a button. that is the business flash. markets now with matt miller. ist: aside from apple, which a huge story, we have others.

boeing is out with earnings that that beach by a lot but missed revenue slightly. and that doesn't look at something the market is willing to forgive. boeing is down 5.5%. there is a story that they will have to cut production. earnings are down by $1.52. will the market was looking for this team $.3 billion. virex signatures, elevators, air conditioners -- a broad array in this company which i find interesting. numbersut out revenue for one of the drugs that it makes. the market likes it and it is up

5.5%. biogenic is doing well in today's trade. david? more with carson block. right now we are taking a look at oil. is that where it is? no. it is down -- stephanie: it is moving back up slightly. ♪

stephanie: welcome back, you are watching "bloomberg ." we have carson block in the house, he became famous for shoring chinese stocks.

but -- has grown more than. how it to take a look at has fared and what he has done. give us eight. we cannot with our recommendation at position five days after the s&p had informed us that it was investment grade. it was under a credit watch for a two notch downgrade which we of s&pit is a result investors on the lack of credit quality of this company. it has more leverage than it should. s&p affirmed them and now they have gone to judges -- gone two notches down? what does that say about smp? carson: yeah. you rarely see credit watch for

a two not downgrade. has real problems dealing with the complexity of the financial and the accounting. stephanie: that is a problem. how much does a stock have to go down for you to be viewed as a success? carson: it really is case-by-case. in certain instances, if zero, it could be fraud. if we were down more than 30 or it would be a great short. lisa: how do you execute a short? carson: in what way? lisa: how do you express your views? are you short selling stock? carson: yes.

sometimes we will be in the credit. we shorted the credit a few years ago with standard credit bank. it turned out to be a really nice trade for us. so we do focus on the stock. matt: i wonder if a trade can get too crowded? alibaba, the company has had a tough time and on the orange line you can see the shortage over the last few months rising up to a higher level. shortedbelieve you have the stock. can it get too crowded? and you can't get in? carson: yes, we had a lot of concerns when we shorted into mobile a few years ago. .hat short was so crowded

and the concern that i had showsg at that trade massive short covering down and 10% or 15%, and that was something that really scared me for that reason. stephanie: it is down 75% since you went short though it did work out. know what you think about american tower. carson: being right and making money are not the same things. isfor us, the intersection ready high. but in a and p, it is research. if anybody wants to give me kraft about that, i don't read the reports online. there is fantastic research and we were right about the financial engineering and the currency. stephanie: then why didn't the trade work? $30 billionas a

market cap at the time. and the market doesn't always agree. and i think that is important. we are not magicians. we put out research in the if they think it is good, the stock will go down. is the famous european corporate raider -- he has had a difficult time convincing investors of his strategy and i believe that you have been long for almost a year. it is down 70% in that time. do you hear them going long? for finding those opportunities easier? carson: it is important for how to understand how we look at short. we are not trying to predict the future at muddy waters.

we look backwards at the information the company put out -- are these materially reflective of the economic reality of the business? numbers anday these statements, there are issues with that. but -- is looking at the financial structure. this was similar to our short analysis. david: are you going to start your own hedge fund? carson: yes, we commenced managing funds at the end of last year. so activist shortselling initially and over the medium of the long-term, we will transition into longside activism. stephanie: how long will the lockup before investors? you are saying this matters to

the hedge fund investors who demand liquidity. carson: i would love to get into the discussion but there are highly regulated areas and i can't comment. stephanie: how are you going to maintain your thesis if you have investors who want liquidity? carson: situation by situation but the bottom line is that risk management -- you always have to manage a risk. investoru worry about liquidity, you have to worry about that too. back,nie: when we come iphones flails maybe slowing but apple still made a record profit. ♪

stephanie: you are watching ." we are talking apple. apple earnings having so many investors really scratching their heads.

apple, the massive numbers and what this company produces with the kind of dough they're making for the opening markets not liking it. they don't like anything this morning. that they'll is opening and already we are in the red in new york. all eyes are on oil. this is asee that week when we are getting earnings from so many big companies and people do not like it. carson block is an the house with us and cory johnson from san francisco, our west coast editor at large. when you look at the kind of do apple makes, the margin, still pretty extraordinary but tim cook's comments on to extreme conditions like that they may have seen. it has people worry. corey: it is interesting times for apple. you have one company that is very successful, especially in the last 100 years, fantastic success on every possible metric with the growth, huge profits,

lots of free cash flow, money to pay dividends and buy back shares, global dominance in a product category in terms of profitability, if not market share, and the slowing growth is the story that leads today. and the slowing growth in the singular product that they have come to be, apple and iphone. the 1% growth in iphone sales comes off of eight 57% year-over-year revenue growth and it is a story. we have a tech stock that is not growing. david: that is the question. is it still a gross stock? corey: as a value stock, it is pretty cheap. pace --t growing at the it is the pace of the growth that is disconcerting. one of the ways you could look at that is imagined a product cycle, say they are at the tail end of their iphone 6 cycle and as they get to the iphone 7 cycle, maybe things will pick

up, but that could be too generous. you have a company whose main product company, and a product they depend on so much, 66% of revenue is from the iphone. the watch is an attachment of the iphone. with such great dependence on the iphone for revenue, it really is most of the shooting. stephanie: what do you think? people weret of concerned after steve jobs. this is a great company, a solvent company. i do not know if they will be able to match the growth numbers of yesteryear, but i think they will do pretty well. corey, why do people look at iphone sales as discretionary goods? when people got telephones in the 1950's, they did not say it was discretionary. i have to be honest, my iphone is one of my core necessities. corey: we spend more, i spent

more time with my iphone and anyone else. they are more important than our spouses, perhaps. stephanie: that is original. your: it depends on relationship with your opponents boss. i think one of the things carson prefers to is this is a fantastic company but it is about the growth number. a lot of the growth number for apple over the last four years has been the expansion of geography and adding the earlier into the cycle, so the cycle has become more frontloaded. the chief example is china. apple has over 20% of the last year from china. those of china revenues abuse to be at the tail end of the spectrum, if at all. the last twoin quarters comes from china early in the cycle. they do not have that later sales growth to sell into, so there still getting those revenues. they are getting them early, which may be better.

carson and i spent a lot of time looking at companies who try to manage earnings and put numbers in the back end and apple has taken those profits are earlier in the cycle. that means the iphone 7 cycle will be very important and it means to slow down and the sales of the iphone 6 cycle as a get to the 20th month of the iphone 6s plus, but it was so frontloaded that the iphone 7 will be more important. the best growth for apple may be in the past. stephanie: carson, how concerned are you about the intent focus on the iphone and their sales rather than apple pay, rather than icar, all the other inventions they try to get off the ground? expert onam not an apple, but i think some of the other items you mentioned his right to be the mask noise. they are throwing something against the wall to see what sticks. they have the cash to do that.

pcs, and there, is everything else. it is critical. i do know that any of the products you mentioned are really going to be the products from which they are able to take the next leap, but i think they will figure it out sooner or later, if it is not those products. david: corey, you have a busy day because after the bell, we get earnings from facebook, ebay, coming what you are looking for? am so easily excited, david. i think facebook is a fast-moving company because they have been able to manage enormous change and growth with underlying technology that works seamlessly for the customers. when you look at the struggles of twitter, another shakeup this week in the management team, a look at the fantastic growth, user growth still at facebook and so much bigger than what twitter will become, it looks like.

facebook is having fantastic numbers. there is another company like apple that is going off boatloads of cash, spending tons of money on unimaginable sums in r&d and it is growing. i'm not speaking of the valuation of the stock, but it is a company to marvel when you look at how much they invest, how fast they are growing and their ability to add users, even if they are bigger than anything in the arena, and monetize users at better rates. stephanie: carson, you might not the tech guy, boatloads of cash have been making its way to your part of the world and fun -- in terms of fundraising for startups. what is the climate there really like? is this the year your neighbors will be dead unicorns everywhere? us,on: so many of especially at my firm, since we are generally short, but so many people in san francisco are really hoping that the tech thing starts to unwind.

obviously, this would not include people in tech. [laughter] stephanie: i'm like, well, not everybody. carson: it is not even the biggest employer in san francisco. stephanie: really? carson: health care is. stephanie: five pay or numbers? -- by pay or numbers? carson: numbers. i think what is really interesting about this cycle in bc is that not that many companies have exited i ipo -- by ipo. you had all these large players come in like mutual funds thinking they can play bc, what are they thinking if there is not a clear path to ipo? to that point, a lot of the way the fields are being done, the are done -- we know the numbers but we don't know the terms. we are seeing these companies go public.

they were ratchet deals. those late rounds had an almost guaranteed return. the next round above them, lowering ipo, with a valuation, they would get boatloads of shares. for example in the square deal, when the deal was priced at about 30% below the last round, the investors got a bunch more shares. when the stock popped, they had to return on investment that would have been down, so the terms matter a lot of the companies to get out the door. i think carson is right heard we have not had a single tech ipo in the month of january and we probably will not get one this week and there has been a slow down because evaluations are so stretched at private levels. >> it is monopoly money. david: we are talking to tom farley and he said it was hard to do and i feel right now. thank you, corey. stephanie: but these companies are not even lined up. we had to point that out. david: that is true. it has been kind of ponzi.

carson: one round to another. david: i want to say thank you to carson block or muddy waters. it has been great. nine minutes into the trading day. matt, what is going on? market, but index is down across the board. s and p losing about six points, the dow jones giving up 113. tech sort of in the middle, down 23 on the nasdaq. if you take a look at my imap, you can see which industry groups are gaining and losing. it is consumer staples on health care that are the only winners right now, so kind of the defensive play there. unfortunately, for investors, apple is not the consumer staple, even if it isn't stephanie's household. take a look at crude. the consumer staple but in has its own industry sector and down loss.han 1%, at 37 cent that is dragging on markets.

of course, apple. missing on revenue, missing on iphone sales, disappointing on their forward guidance for revenue. apple right now is down about five percent. it is the biggest point loser on the s&p 500. the second biggest is boeing, they came out with better than estimated etf. basically, in line revenue, but it said it will earn 815 to 835 this year, so as much as a 35 this year, they're looking for 942, so it missed on its outlook by a margin. that is why boeing is down almost 8%. let's go to abigail doolittle live at the nasdaq. one winner at the open. abigail: biogenic on one of the big winners at the nasdaq at the open. the biotech giant reported a great fourth quarter, beating estimates. they made $4.50, up 20% from last year. they had a record quarter, but

were really stands out -- but what really stands out is that the management team was at the health conference recently, giving cautious commentary and it appears to have sandbagged and the stock is up big today. it is still down about 40% from last year's peak. david: thank you. "bloomberg ," does the fed risk being humiliated by markets of the raise rates again? ♪

welcome back. here is your latest business

flash. european union says auto emission tests test should be tougher. proposals are a reaction to volkswagen's cheating scandal. they went independent testing and more screening on roads instead of labs. members of the european parliament will debate the changes. their debt is dropping the plan to merge. were going to buy them from $4.6 million and media general owns tv stations. stanford beats hybrid in the donation race. stanford took in a record $1.6 billion. harvard was second with $1.1 billion. they collected 29% of donations. that is your bloomberg business flash. stephanie: thank you. this afternoon, we learn about the fed sinking for the next fed and there are differing views in the financial community about what specifically janet yellen should do.

this week, ceo jeff garlock said "the fed really needs to dial down the rhetoric or the markets will humiliate them with further declines." saidy, morgan stanley ceo something different. change means you cut rates, i would be stunned. >> does she have to hold off? byi think should be driven unemployment continuing to maintain levels. we may have couple had a long unemployment. by the way, that is extraordinary. also, inflation getting to 2% with those raised rates. stephanie: there you go. to clearly different views. here is carl riccadonna. back again. carl: we had to look at the middle road. i don't think the federal backtrack unless things get

it is not worse, but appropriate for them to be raising rates in the current advisory -- the current environment. it is below 2% and 2% is cruising speed for the u.s. economy. if we dip the low 2%, we are more formidable to recession. we will find that we are below 2% only get gdp numbers this friday. the fed has to acknowledge a ,ore bleak economic landscape but to write off rate increases, they do not get much benefit from doing that because the market is already saying that the next fed increase comes in december, so they just wait to weather the storm of it before acknowledging that they will be less aggressive. david: to what extent will the fed be looking at these corporate earnings? i believe it has never happened in history that the fed has raised rates going into declining corporate earnings. carl: the fed does not want to be too responsive to market variations, however, they do

want to see where the rubber meets the road in terms of theory and practice. they have these great ideas that and the look of the macroeconomy, but they want to be confirming that that is what is seen in the real world. that is why they focus on industry anecdotes and when they see profitability stumbling, that is a troubling omen for them and that will weigh on businesses hiring decisions and investment decisions later on, which is why they cannot say business investment is solid like in december. stephanie: doesn't janet yellen have to pick your poison? if you focus on global macro or you do not. priceyou focus on's stability, so you look at global growth, which is slower than previously projected and you say, how does that impact the u.s.? it impacts the u.s. a lot differently than it does the eurozone, and that is why janet yellen will become a little bit less optimistic on the economy, whereas mario draghi came a lot

less optimistic. >> we are talking about .25 percentage point that they raised rates. what have been the biggest fx from that race right -- the biggest effects from the rate rise? carl: it does not do a whole lot unless it looks like a whole lot more are following that, so if the fed is careless with the guidance, which i don't think they have been, but if the fed signals they will raise rates several times in the year ahead, then that contributes to the stronger dollar. it is not just that 25 basis point move, but the change in overall financial conditions which have become more restrictive to the move in the dollar. the janet yellen fed is much more sensitive to currency development than prior beds. matt: if i can just illustrate the markets. this is with the equity market things about the rate increase.

here is the pe ratio s&p 500 going back 25 years. you can see this blue line, that is the 25 year average. here is the.com bubble and we got way over valued and we came down. this is a financial crisis, we came down to a low, but at the end of 2015, we got above this 25 year average on oe they should -- te ratios, so a stronger valuation. we now come down the beginning of january, back down below, not quite half the standard deviation below the 25 year average. by the way, this is a great chart that hillary put together. david: i was going to say it is really interesting. i am not saying janet yellen is looking at this chart, but remember when they talked about irrational exuberance? carl: janet yellen is focused on fair valuations in the market and other factors, but to matt's

point, i would say this chart is as much about the repricing of the global growth output with china, keyword being china, as much if not more than the impact of couple of freight increases on the fed. >> be said that this fed is more concerned or aware of currency fluctuations and other feds -- than other feds in the past. how much is what the fed is looking at the currency situation globally more than rising yield? carl: absolutely. thet yellen passed march late expectations of the fed lift off because of the headwinds hitting the u.s. economy from the strong dollar. it is not so much that they are more aware of currency fluctuations, but they are more cognizant of the impact on the macroeconomy from the strong dollar, and that is very evident in the manufacturing sector, which is on the brink of tilting into recession. thank you. carl riccadonna, the bloomberg intelligence chief u.s. economist.

tune into a special edition of bloomberg markets at 2:00 eastern time, anchored by scarlet fu, who will be joined by tom and mike mckee, and it will be on b radio. next, a look at the highlights from today's broadcast. let's take a look at some of the down movers. ♪

stephanie: you are watching "bloomberg ," and we watching markets. read across the board, whether there chuck -- red across board, whether we are talking china, s&p 500, dow jones or nasdaq. we do not like to see this kind of response, i should not say we, at the corporate does not

and those involved in equities. let's get you a look back on today's program in gotta go. >> i think apple represents basically the global consumer, and it is really the global consumer at the high-end, so if you look at their growth in china, a lot of but is focused on the high of the market. the vast majority of the chinese cannot before the iphone, so apple has to make decisions on if they want to go down scale. we are on the record to say it toone and done, but they had do something last year and now it does not. i think what you are seeing is a micro challenge of what they have, which is people want the best care for the least price. >> what we are seeing in the u.s., expedia and out our transaction and advertising businesses, they are all doing well. some are doing really well, none are doing badly. from the very first hour of the first day, what amazon's jeff

bezos has said is, we are going to the old infrastructure to serve customers, and we do not care about anything else. >> the market does not always agree, and i think that is important. guys who do it i do, we are not magicians. we put our research and information not in the market and if they think it is good, the stock will go down. there was carson block. now it is a chance first to share what we will be talking about from today's show. today, it has got to be barry's two separate points. when he was talking about relationships as a partner to google and also "all of us are served in the land of google," speaking to the power of google and the power they have versus their partners, versus the market. i had to share one other quote. when he was talking jeff bezos and amazon, his prediction that

jeff bezos is going to be the richest man in the world, anybody doubting amazon, saying, when will they think about marginal profits, think about this. david: lisa? lisa: i am stuck by carson rights comment that being does not necessarily mean making money. i think that is a poignant idea and one that people have taken to heart. stephanie: being right does not mean you win the argument. matt? matt: i thought it was interesting that barry says he does not think netflix will have real competition. he thinks netflix globally will remain alone. stephanie: "orange is the new black," a good show. and this is a good show, lisa, to our. -- thank you. ♪

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markets." bloomberg world headquarters in new york, good morning. i am betty liu. we are watching this hour, does the fed followed the markets? howstors are waiting to see much turmoil is affecting policy makers when they decide on interest rates today. the end of an era at apple. they're forecasting sales will fall for the first time in more than one decade. shares are seeing their worst trading date since august, the biggest decline. what does that say about our appetite for more iphones? oil is paring back to earlier losses. however, the government grade report -- may report that the supply glut we have seen has gotten worse. let's head to the market desk where julie hyman has making use on the housing markets. julie: it is the sole piece of economic data